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The late Glenn Frey’s song about the international drug trade, “Smuggler’s Blues,” contains a phrase that resonates in politics as well:
“It’s the lure of easy money, it’s got a very strong appeal.”
Politicians are habitually lured by easy money, which is defined as money they can spend without directly taxing their constituents, but somebody eventually has to pay.
A current example is the booty from the state’s quarterly auctions of greenhouse gas emissions. The state assumes that those auctions will generate about $2.5 billion a year and legally, the money is to be spent only on projects and services that reduce those emissions.
In practice, however, the money is frequently spent on what can only be described as pork barrel items, including, most recently, appropriations that benefit particular interest groups and constituencies to persuade enough legislators to vote for extension of the cap-and-trade auctions for another decade.
A quarter of the auction money is dedicated to Gov. Jerry Brown’s pet bullet train project even though the Legislature’s own budget analyst, Mac Taylor, has advised that it will, if anything, increase emissions during its construction. And by the High-Speed Rail Authority’s own data, even if fully constructed, it would reduce automotive travel by only 1 percent.
But it’s easy money because it doesn’t directly tax Californians, although it inevitably raises prices of commodities to which it is applied, such as automotive fuel.
Cap-and-trade auction proceeds, however, are just one example of how easy money tempts those in political office.
Another is promising new benefits whose financial burden won’t come due until those involved are long gone from office, such as public employee pensions.
California’s once-healthy public pension funds are now flirting with insolvency as their ever-rising benefit payouts outstrip pension fund earnings and their “unfunded liability” debts, already hundreds of billions of dollars, continue to increase.
Federal aid is another form of easy money, asking Uncle Sam, in essence, to borrow money and give it to state and local officials to be spent.
And then there are bonds, which borrow money that can be spent immediately, but whose repayment will be stretched out for decades.
Tens of billions of dollars in additional state bonds will either be on the table when the Legislature returns this month from its summer recess or are proposed in pending ballot initiatives. All purport to address some pressing public need, but some would narrowly benefit particular interest groups.
One of the most questionable is a proposed $8.4 billion water bond written by Jerry Meral, a one-time environmental activist and former state water official, that would, among other things, partially finance repairs to Oroville Dam’s main spillway, which collapsed last winter with near-catastrophic effects.
The bond, if approved by voters, would be repaid from the state’s general fund, which means Californians’ income, sales and other taxes would be spent on repairs.
There are some general public benefits from Oroville, such as recreation and flood control, but its chief function is to store and deliver water for water districts in the San Joaquin Valley and Southern California.
A recently released, exhaustive study by a team of top-flight engineers concluded that the spillway failed because of faulty design, construction and maintenance and underscored reports that upkeep was neglected because those downstream water districts balked at paying for it.
If that’s the case, they should pay for repairs, not the state’s taxpayers via the easy money of a bond issue.