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We have been keeping track, so to speak, of California’s vaunted “Bullet Train,” officially the state’s High-Speed Rail project. But as it turns out, “high speed” is something of a misnomer, as William Bigelow notes on Breitbart.

The first actual construction on the project is a viaduct over the Fresno River, nowhere near the Bay Area to Los Angeles route politicians used to sell the $69 billion project. This construction “will start three years after the date initially estimated by the rail authority.” The project faces financial obstacles, including “$2.2 billion in federal stimulus money that can only be used by the rail authority if it is spent before Sept. 30, 2017 on construction in the San Joaquin Valley. Any funds left unspent must be returned to the Federal Railroad Administration.” As taxpayers know, government agencies never leave funds unspent, and they will have to spend more.

As in Blazing Saddles, one thing stands in the way of the land they need: the rightful owners. As Bigelow observes, the state rail authority recently acknowledged legal possession “of only 257 of 1,079 properties that it requires for the first two construction sections.” The process has been so slow that actual construction has been delayed. And California High-Speed Rail Authority boss Jeff Morales admitted that this problem could bring about, yes, a “cost increase.” Morales is also on record that a high-speed rail line from the Bay Area to Los Angeles could have been built privately. That is something of a giveaway.

The bullet train is more about spending than transportation. California congressmen see it as a way to shore up their fortunes by spending money in their districts. That’s why the first stretch of the boondoggle is slated for the boondocks. The bullet train also gives politicians a way to expand government. So no surprise that the California High Speed Rail Authority serves as a soft landing spot for washed-up politicians such as board member Lynn Schenk, a former congresswoman and chief of staff for governor Gray Davis. California governor Jerry Brown, who appointed Schenk, sees the train as a legacy project, like the $25 billion tunnels he wants to build under the Sacramento-San Joaquin River Delta.

The bullet train, meanwhile, is supposed to be fully operational by 2028. California’s embattled taxpayers might ponder what high-tech advancements in transportation might occur before that time.

According to the latest projections issued by the Congressional Budget Office, the publicly-held portion of the U.S. national debt will rise from 74% of GDP at present to surpass 107% of GDP in 25 years. Bloomberg‘s Kasia Klimasinska describes the CBO’s findings:

U.S. government debt held by the public is expected to rise to 107 percent of the economy in 2040 from 74 percent this year, the Congressional Budget Office said, citing an aging population and rising health-care costs.

With debt “already unusually high” relative to gross domestic product, “further sustained increases could be especially harmful to economic growth,” the CBO said in a long-term fiscal report released Tuesday in Washington. “To put the federal budget on a sustainable path for the long term, lawmakers would have to make major changes to tax policies, spending policies, or both.”

The chart below shows the CBO’s lastest projections for the U.S. government’s revenues, spending and the portion of the national debt held by the public:

According to the CBO’s alternative fiscal scenario, the CBO projects that the portion of the national debt held by the public will exceed 250% by 2055 – the level at which the CBO believes the U.S. may enter a debt death spiral. That’s quite a difference that an additional 15 years makes for the projections based on the kinds of choices that U.S. politicians have made about spending in the past.

But that’s just the portion of the national debt held by the public. If you look at the U.S. government’s total public debt outstanding at the end of the first quarter of 2015, you’ll find that it is already 102.7% of the nation’s GDP.

After a government gets into trouble for racking up unsustainable levels of debt, how fast should it go about restoring its fiscal credibility? Should it seek to lessen its fiscal “pain” by spreading out spending cuts over a long period of time, or should it, in effect, rip the bandages off as quickly as possible, even though that action might mean more pain and even higher debt in the short term?

The Wall Street Journal reports on a new paper from the European Central Bank, which has had a lot of experience in recent years dealing with that exact situation:

A new paper published by European Central Bank economists argues that it is generally a good idea for countries that need to enact budget cuts and slash fiscal outlays to get it done quickly, as this can reduce the total fiscal pain and stabilize debt more quickly.

“Simulations using plausible assumptions suggest that frontloading consolidation reduces the total consolidation effort and stabilises the debt ratio more quickly, although it does imply larger short-term reductions in output,” write the authors in a paper.

The paper looks at the impact of fiscal consolidation on a country’s output, or what economists call the “fiscal multiplier.” The authors conclude that “even in the presence of a large fiscal multiplier, fiscal consolidation could initially lead to a higher debt ratio, but this effect will typically be reversed within a few years.”

Examples of countries that followed this strategy include: Estonia, Iceland, Ireland, Latvia, Lithuania and Slovakia, each of which enacted austerity programs that greatly emphasized cutting spending over increasing taxes. Each of these nations experienced short-term pain from their spending cuts, but each has since experienced robust economic growth.

Their economic-recovery experience contrasts considerably with the tax-hike-heavy austerity programs that were enacted in Spain, France and Greece.

AEI’s Jim Pethokoukis summarizes the lessons learned:

In other words, although austerity can have longer-term gains, don’t expect to avoid short-term pain through some sort of “cut to grow” or “expansionary austerity” mechanism. This very much syncs with recent research from economist Alberto Alesina, perhaps the most noted proponent of the idea that fiscal retrenchment can boost growth. In the paper “Austerity in 2009-2013?,” Alesina finds that austerity measures “based upon cuts in spending are much less costly, in terms of output losses, than those based upon tax increases.”

So if you are looking to cut debt, spending cuts hurt economic growth less than tax hikes. While both pull demand from the economy, one is less distorting of incentives to work, save, and invest. But there is some pain either way, one reason that fiscal austerity should be accompanied by offsetting monetary policy, as seems to have happened in the US in 2013.

In that last sentence, Pethokoukis is referring to the Federal Reserve’s implementation of its third series of Quantitative Easing (QE) measures, which successfully offset the small negative impact of U.S. federal government spending cuts and the much more negative impact of tax hikes that took effect in January 2013. Without QE, the U.S. economy would have experienced the same kind of recessions as did Spain, Greece and France in the years from 2010 through the present.

Which is to say that when a government’s fiscal solvency is at stake, the fastest path to curing the condition is to rip the bandages off as quickly as possible, the pain from which can be minimized by administering “anaesthesia” through monetary policy at the same time.

The question came up of which is bigger — the U.S. national debt or all other debt owed by Americans?

The answer, as best as we can determine with data through the end of 2014, is graphically presented below:

At the end of 2014, the total public debt outstanding for the U.S. government stood at $18.14 trillion. Adding up all the other categories of debt, and even adding in the total amount of money that individual U.S. states owe to their public employee pension funds, came to a total of $16.53 trillion.

So when it comes to racking up debt, the U.S. federal government beats both regular Americans and their state governments.

References

Federal Reserve Bank of New York. Household Debt and Credit Report, 2014-Q4.[Online Application]. Accessed 10 June 2015.

U.S. Treasury Department. Debt to the Penny and Who Holds It, as of December 31, 2014. [Online Application]. Accessed 10 June 2015.

State Budget Solutions. Promises Made, Promises Broken 2014: Unfunded Liabilities Hit $4.7 Trillion. [Online Article]. 12 November 2014.

As we have repeatedly noted, the stylish new eastern span of the San Francisco-Oakland Bay Bridge was 10 years in the making, a whopping $5 billion over budget, and yet riddled with safety issues. We have done our best to keep up with the problems, but they keep on coming.

As Jaxon Van Derbeken notes in the San Francisco Chronicle, about one-fourth of the steel rods that anchor the bridge’s town are in sleeves “flooded with corrosive salty water,” one of them up to five feet, and this was a critical threat” that compromises the very integrity of the new span. The 120 sleeves that encase the rods are designed to prevent damage from a major earthquake, which the Bay Area has had before and will doubtless experience again. As Van Derbeken observes, “salt is known to accelerate corrosion, which attacks metal over time and has been linked to numerous disasters,” such as the ruptured oil pipeline in Santa Barbara.

CalTrans boss Malcolm Dougherty told reporters the bridge’s foundation could never be fully watertight. But the bridge’s foundation structure has “sensitivity to water getting to some components,” therefore a solution was needed. This is the same Caltrans boss who in a 2014 Sacramento hearing said “the bridge is safe” so many times that then state senator Mark DeSaulnier asked him to stop. In the two hearings he chaired, DeSaulnier heard now Caltrans bosses, pushing to complete the project, compromised public safety by ignoring problems with welds, bolts, and rods. And they gagged and banished engineers, scientists and experts who had a problem with it. One whistleblower called for a criminal investigation, but that never took place. In effect, it was the bridge to no accountability, and that should come as no surprise.

During the hearings DeSaulnier let slip that his main problem with the safety issues was that they made people adverse to taxes, which in his view were needed for new infrastructure projects. DeSaulnier is now a member of Congress and he is sure to fit right in with the tax-and-spend squad.

When we surveyed the state of Social Security’s Disability Insurance program’s finances earlier this week, we didn’t realize that there would be breaking news regarding a high level of easily preventable waste in the program. Stephen Ohlemacher of the Associated Press reports:

Social Security overpaid disability beneficiaries by nearly $17 billion over the past decade, a government watchdog said Friday, raising alarms about the massive program just as it approaches the brink of insolvency.

Many payments went to people who earned too much money to qualify for benefits, or to those no longer disabled. Payments also went to people who had died or were in prison.

In all, nearly half of the 9 million people receiving disability payments were overpaid, according to the results of a 10-year study by the Social Security Administration’s inspector general.

The 9 million recipients of Social Security is an interesting number in the context of analysis recently provided at Political Calculations, which estimated that a little over 10 percent of that figure actually represents people who were effectively “dumped” into Social Security’s disability program after their long-term unemployment benefits ran out, as the disability insurance program’s eligibility requirements and oversight were apparently relaxed in the period following the December 2007 economic recession.

Ohlemacher goes on to quantify both how much money Social Security paid out in disability benefits in 2014 and also how much those who receive its disability benefits are paid annually:

Social Security paid out $142 billion in disability benefits last year. Unless Congress acts, the trust fund that supports the disability program will run dry sometime during the final three months of 2016, according to projections by the trustees who oversee Social Security. At that point, the program will collect only enough payroll taxes to pay 81 percent of benefits.

That would trigger an automatic 19 percent cut in benefit payments. The average monthly payment for a disabled worker is $1,165, or about $14,000 a year.

Doing some quick math, when Social Security’s Disability Insurance trust fund is fully depleted, as expected sometime in the final three months of 2016, the average monthly payment for a disabled worker would drop to $943.65, putting his or her annual income from the program at about $11,324 per year.

Something very similar will happen in less than 20 years when Social Security’s Old Age and Survivors Insurance Trust Fund is depleted. Only then, the cuts will be larger and will affect every American who receives Social Security benefits. Including people who are receiving Social Security benefits today, who can reasonably expect to live at least another 20 years, whose retirement benefits will then be cut by somewhere between 23 percent and 26 percent.

Alan Greenspan, who served as the chairman of the Federal Reserve from 1987 to early 2006, has an interesting perspective on Social Security’s Trust Funds:

Nicholas Ballasy of PJMedia reports:

Alan Greenspan, former chairman of the Federal Reserve, said a Social Security Trust Fund does not exist and that the U.S. is “way underestimating” the size of its national debt.

“The notion that we have a trust fund is nonsense – that trust fund has no meaning whatsoever except for the fact as an all private fund to benefit programs, if it runs out of money, you can only pay out in cash flows that come in but the probability that will happen is not particularly high,” Greenspan told the Fiscal Summit held by the Peter G. Peterson Foundation.

“That means the trust fund is a meaningless instrument that has no function … it’s exactly the same thing as current expenses.”

The Social Security and Medicare Trustees 2014 annual report said while legislation is needed to address all of Social Security’s financial imbalances, “the need has become most urgent with respect to the program’s disability insurance component. Lawmakers need to act soon to avoid automatic reductions in payments to DI beneficiaries in late 2016.”

Speaking of Social Security’s Disability Insurance (DI) Trust Fund, Political Calculations projects that the DI trust fund will be fully depleted either in October 2016 or shortly afterward:

That’s some nine years earlier than Social Security’s actuaries projected back in 2008, and four years earlier than they projected in 2009, just before the official end of the Great Recession. When the DI Trust Fund is depleted, under current law, the cash payments received by all the program’s beneficiaries will be reduced by roughly 20 percent.

The Bipartisan Policy Center has listed a number of the actions that President Obama proposed in his 2016 Budget to address the impending shortfall.

California state senators draw six-figure salaries plus gold-plated pensions, plus an impressive array of benefits that includes a car allowance. Some of those senators like to get drunk, and when they do, California taxpayers will now be footing the bill to drive them home. As Alexei Koseff and Jim Miller observe in the Sacramento Bee, the Senate “hired two part-time employees to provide late-night and early-morning rides for members while they are in Sacramento, a 24-hour service that follows high-profile drunken driving arrests involving lawmakers in recent years.”

The “special services assistants,” hired in February, work in the Senate Sergeant-at-Arms Office and get paid $2532 a month to provide “ground transportation” for senators. Senate bosses say it’s a “security issue,” but a man who turned down the job told the Bee reporters that the service was to give senators rides “just if they were drinking too much,” and a senate staffer confirmed that the intent of the service was to prevent drunk driving. Apparently these legislators lack the restraint to refrain from getting drunk in the first place. Once plastered, these politicians are apparently unable to call a cab or tap a non-drunk friend for a ride home.

As Koseff and Miller note, new Senate boss Kevin De Leon cut 39 administrative jobs last November, but apparently the needs of Senate drunks took precedent over further cuts. In recent years, four legislators have been busted for drunk driving, three on streets near the state capitol. One of those arrested on DUI charges was Senator Roy Ashburn, a Bakersfield Republican. The problem, however, goes beyond legislators.

In 2011, police arrested state Director of Finance Ana Matosantos for driving under the influence, and with her registration expired. “My decision to drive last night was reckless and irresponsible,” she said in a statement. “I accept full responsibility and there is no excuse for my actions.” Likewise, the decision to hire drivers for drunken senators is reckless and irresponsible. There is no excuse for it.

“Shutting the barn door after the horse has bolted” is an old American/English idiom that the Cambridge dictionary describes as meaning “to be so late in taking action to prevent something bad happening that the bad event has already happened.”

Who knew that the American and English farmers of yesteryear had such insight into the problems plaguing the modern day implementation of ObamaCare? Investor’s Business Daily describes a new chapter in the ongoing tragedy that is the implementation of President Obama’s Affordable Care Act (ACA) in “ObamaCare Exchanges Are a Model of Failure“:

Waste: After spending billions on state-run ObamaCare exchanges, the federal government is only now writing clear rules on how that money can be spent, while half of the exchanges head toward bankruptcy.

State-run exchanges were supposed to form the beating heart of ObamaCare. And the Obama administration dumped almost $5 billion in an effort to make it a reality.

The results have been a disaster.

Of the 37 states that received $2.1 billion in grants to establish an exchange, only 17 did so, and they got an additional $2.7 billion from the feds.

Of those 17, two went bankrupt in the first year. One of them, Oregon, had received a $60 million “early innovator grant.” Residents of those states now use the federal Healthcare.gov site.

But wait, it gets worse! IBD goes on to report that a number of the remaining states that still operate their own Affordable Care Act exchanges, such as California, Minnesota and Washington, may now be violating federal law in attempting to keep their ACA exchange “marketplaces” afloat:

A memo from Health and Human Services’ Inspector General Daniel Levinson warns that some of the remaining may be violating federal law in an effort to stay afloat.

ObamaCare told the states that they’d get plenty of federal money to help them set up their exchanges — but not run them. And starting this year, the state exchanges had to be self-financing — they had to pay their own way out of exchange fees or other funding sources.

Any federal grant money left over could be used only for things other than operations and maintenance.

As the IG explains, the rules on what these states can spend federal money on are vague, and as a result the exchanges “might have used, and might continue to use, establishment grant funds for operating expenses.”

Washington’s exchange, it found, has plans to spend $4 million of its remaining federal grant money on printing, postage and bank fees….

A memo from Health and Human Services’ Inspector General Daniel Levinson warns that some of the remaining may be violating federal law in an effort to stay afloat.

ObamaCare told the states that they’d get plenty of federal money to help them set up their exchanges — but not run them. And starting this year, the state exchanges had to be self-financing — they had to pay their own way out of exchange fees or other funding sources.

Any federal grant money left over could be used only for things other than operations and maintenance.

As the IG explains, the rules on what these states can spend federal money on are vague, and as a result the exchanges “might have used, and might continue to use, establishment grant funds for operating expenses.”

Washington’s exchange, it found, has plans to spend $4 million of its remaining federal grant money on printing, postage and bank fees.

The IG characterized this is “a significant matter” that requires “immediate attention.”

Which is why we’ll soon have clear rules written for how the funds established to set up and operate ObamaCare exchanges may be spent, just a little over five years after the Affordable Care Act became law and two years after its exchanges began operating. That’s some bureaucracy in action!

As this column has noted, Emily Bazar of the California Health Care Foundation’s Center for Health Reporting has been working three shifts documenting the abuses of Covered California, a wholly owned subsidiary of Obamacare. These abuses include a dysfunctional computer system that cost nearly $500 million, cancellation of health insurance without notice when people report changes in income, difficulties leaving Covered California when people go on Medicare, and so forth. For Bazar, this added up to “widespread consumer misery,” and as she now observes, the misery doesn’t stop when people die.

Covered California placed some enrollees in Medi-Cal, the state’s version of the federal Medicaid program. This scheme seeks repayment of many medical costs, primarily those incurred after age 55. “It’s called the Estate Recovery Program,” Bazar explains, “and under Obamacare it just got bigger and its reach broader.” Someone might not ever seek medical care under Medi-Cal, and never even see a doctor, but their family could face bills after they die. The state could seek recovery of premiums it paid to the plan. The federal government requires states to recoup certain costs from the estates of some Medicaid beneficiaries after they die. Trouble is, California is among 10 states that seek repayment beyond the federal minimum. Therefore, Bazar explains, your estate will be expected to pay back the value of ALL coverage you receive after 55. If the estate does not have sufficient assets, the state may require heirs to sign a “voluntary lien” on a home.

Obamacare “has raised the stakes significantly” with more than 3.5 million Californians joining Medi-Cal since January 2014, bringing total enrollment to 12.1 million people, one in four more than 55 years of age. By Bazar’s count, a full 80 percent of Medi-Cal enrollees are in managed care and subject to estate recovery. As she explains, “your post-death bill will automatically be based on the monthly payments made to your plan — whether you use any medical services or not.”

Some politicians believe this unfairly targets low-income seniors and seek a shield from recovery. Trouble is, Bazar notes, “Gov. Jerry Brown vetoed a similar measure last year.” So reform is unlikely, and Obamacare will be mounting a surge as the nation’s misery index.