Asymmetrical Information

Well, a little company called Enron had some impact on the CA economy...

Trivial in relationship to the overall problem, which is the extremely high volatility of very progressive systems, combined with an unprecedented reliance on capital gains. The biggest problem is the collapse of the tech bubble, after the California government spent the hell out of the surplus.

I don't have the foggiest clue what's causing Amtrak's money problems, but I suspect it isn't low ridership, at least around the New York-Washington area. The times I've taken the train (and at some pretty odd hours), the train's been pretty full.

Sample bias. Outside the Boston-Washington circuit, it loses money hand over fist because there's virtually no demand.

"Oh. My. God."?? You are surprised!?

A politician wants to create makework jobs?

A politician proposes more political control of the economy and less private?

A politician blames another politician for his own problems?

A politician shows no understanding at all of basic microeconomics?

Nothing to see here. Move along.

The biggest problem is the collapse of the tech bubble, after the California government spent the hell out of the surplus.

The loss from capital gains revenue is a component of the problem, but excess spending isn't.

Real per capita total spending, which adjusts for both population growth and inflation, has averaged 1.9 percent annually since 1990-91.

During the rest of the decade, however, spending grew relatively rapidly—averaging 5.8 percent per year for all spending and 8.9 percent for General Fund spending.

As this points out, the deficit is almost entirely due to the unbelievably huge drop in revenue.

The road and airport systems get some significant subsidies too. They should still junk the long-distance routes and turn into a short-hop system between population centers, but the difference between the demands and support we make of the system are the problem, not anything inherent in rail/Amtrak itself.

Jane is correct. While Enron did its damage thnaks largely to this Governor and his cronies, that wouldn't more than a minor setback if not for the wide-eyed fantasy belief that the sky was the limit for the dot.bombs and the sky was endless.

All too many forget that in the previous election Davis touted that Californians were being terribly underserved and vowed to hire 40,000+ new employees at the state level. On that promise he made good, so now we have 40,000+ useless bureacrats drawing salaries and extremely difficult to get rid of.

It horrifies me to think that the swing vote in my state is comprised of people who think becoming a government bureaucrat is high ambition.

I bet he favored bailing United Airlines out too!!! The Amtrak of the Air

Interesting chart, J.M., but it doesn't seem to prove what you want it to prove. The last five data points show year-to-year changes of +12.5%, +9%, +23%, +10%, and -15%. Even after that last huge drop, revenues have increased roughly 41% in 5 years, which is far far more than what would be needed to cover inflation plus increases in population. It looks like California has in fact been spending revenues like the proverbial drunken sailor.

Can we have a moment of perspective here?

California is $35 BILLION dollars in debt. That's bigger than ALL OTHER STATE DEFICITS COMBINED.

Grey Davis is the last person I would ever listen to on financial matters.

Now, how to be a lying cheating overspending sack of feces, THAT would be a lesson he could give...

Wait a minute -- if they're losing money hand over fist outside the Northeast, why do they have service in those areas?

Davis' ignorance should suprise no one.

> Wait a minute -- if they're losing money hand over fist outside the Northeast, why do they have service in those areas?

Because there are Congress-critters from places outside the Northeast and for some reason, folks like passenger trains, but not enough to charge riders what they cost to run.

BTW - Does Amtrak cover its capital costs in the Northeast?

In addition to highways and Amtrak, Davis also proposed to build "a job-creating engine of growth" by paying farmers to feed their cattle with subsidized bread, and by digging a really big hole in the ground.

Hmmm: "paying farmers to feed their cattle with subsidized bread" sounds like what one of my cousins did a few years back. He signed up for a Pepperidge Farms franchise in a small town in the Midwest. Sales were poor, since most townspeople bought on price rather than quality. He was soon stuck with a garage full of fancy cookies, crackers, and loaves of bread that could not be returned or legally sold since they had passed their sell-by dates. One of his brothers took pity on him and gave him a nickel each for the packages of stale stuff to feed them to his pigs. The pigs didn't mind much, but would just as soon have had their their usual slops.

I normally defer to Megan's judgment on economic matters, but I'll go out on a limb here and say that my cousin's plan was not a good one, and neither is Davis's.

Just to give the local perspective on the California budget mess, the SF Chronicle did an online poll a few weeks back. The subject was how to balance the budget and the choices were: tax greedy energy companies, tax the internet, hike taxes on the rich, and two others which I believe were also taxes. The idea of cutting any spending did not even enter anyone's mind.

Of course, this is San Fran, but you get the idea.

Regarding Enron, Jane is right, it is a drop in the bucket AND mostly it just gamed the rules the California lawmakers wrote. Davis' decision to sign long term energy contracts at the absolute peak of prices was extremely expensive for us. And his failure to address the crisis before businesses were harmed by the high prices was fairly god-awful, too.

Ow ow ow ow. Thanks for reminding me. So much thanks. And Davis just won re-election too. Thanks thanks thanks for reminding me.

Behold, yet more signs that Happy Days Are Here Again.

--Erich, California inmate^H^H^H resident.

Jason - "As this points out, the deficit is almost entirely due to the unbelievably huge drop in revenue." OK, just maybe I'll buy that for 15 billion - now explain the other 23.

Or just explain these two sentences -
"Real per capita total spending, which adjusts for both population growth and inflation, has averaged 1.9 percent annually since 1990-91.
During the rest of the decade, however, spending grew relatively rapidly—averaging 5.8 percent per year for all spending and 8.9 percent for General Fund spending."
What is "the rest of the decade"? 92-99? How does per-capita spending only go up under 2%/year, but simultaneously almost 6%?

Well, I never took economics in school. Oh, maybe it is like the "horrible" Christmas spending retailers moaned about - sales went up a bit more than 10% from the previous year, but this was poor performance because the projection had been for a bit over 11%.

Oh yeah, AMTRAK. Yeah, the broke one. The Feds took over because the private roads were losing so much money they were threatening to shut down passenger service. But then the Feds got out from under by "privatising", sorta like the Post Office. Never was expected to be self-supporting, even rail freight has big troubles, but somehow using newby appointed managers instead of experienced railroaders was supposed to keep costs down. Yep.

Teh projected $35B deficit over the next 18 months in California does not include a single dollar of electricity-related expenditures, all of which are to be paid by the utilities.

Enron has absolutely nothing, zero, nada, zilch, to do with the California budget crisis.

Gray Davis is California's most incompetent governor since the end of the 19th Century. Since he was the chief of staff of the next runner-up, Jerry Brown, there is obviously the beginning of a theory ...

Amtrak is a government enterprise. It bleeds money and it always will.

But the trains are not empty. Try getting a last minute reservation on those empty western cross-country trains on a non-winter weekend and you will be very disappointed. They are usually jammed full. The problem is a cost structure for rail rental, labor, rolling stock, maintenance, and service that exists to serve political purposes.

The Northeast routes do make an operating profit but they do not cover gold-plated capital costs. The western (west of Chicago) routes all lose money. Remember that Amtrak was created so the feds could do a giant giveaway to freight railroads by giving up the right of passenger trains to first priority on the best rail lines. Now Amtrak pays for second rate access. Labor costs are crazy; the staff and service are good but there's just too much for profitable operation. Rolling stock has to be built to federal standards that would smash any private company and meet safety standards in crashes that would doom any other form of transportation. Giant, heavy rolling stock makes rails wear faster and costs much more to operate and maintain, then it prohibits high speed operation and makes our botique trains incompatible with mass produced european models. And there is more and more and more. Like any government agency Amtrak primarily exists to dole out pork and not to provide efficent service.

To some extent all transit is like that. Airlines are better because there is some private operation, but airports and landing slots are public. Air Traffic Control is public and pilots are trained mostly on the public dime. And the regulation involved in that has ensured that the air passenger industry as a whole has lost billions and billions on the net over the last twenty years. Nobody sane thinks we should shut that industry down or stop its subsidies.

And the motorcar industry loses hundreds of billions even in a good year if we subtract out its subsidies.

For some reason transportation is special and we do and will continue to subsidize it in all its forms for the forseeable future. We could do a better job privatizing Amtrak operations and subsidizing private operators, though.

Dr. Weevil, I think my father once tried burning oranges to heat the house. If memory serves, they didn't burn very well.

Its important to remember that wasted resources are funny only in small doses.

And on a more serious note, no, you can't "just ignore it".

The NY Times gets echoed to every paper, just about, in the US, if not the world. Most of them will run the story as the NYT did - and as such, deliberate, staggering, unjournalistic bias like that SHOULD be noted, and the NYT at least should be aware and admit to it (that is, if it is, in fact, their intent). But they deny such bias. Now, if it were, in fact, something they were proud of, why would they deny they have such a bias?

How can you defend such bias, when it turns a news story into a political, factually incorrect attack?

Addison

(errr.. my browser is apparently going very nuts here, that was in reply to the NYT story.. sorry folks... *scratches head*)

Amtrack loses money because no passenger rail system makes money. The Euro RR's don't make money on their passengers either, but that is part of the national ethos there except when Britrail got privatized and, mirable dictu, it lost money also as well as letting the tracks go to hell thereby killing a few passengers. Sound familiar?

I would deny that Amtrak has competent employees. OK maybe a few, but very few. I also take issue with saying the trains run empty. Maybe in the 70's they did. Almost all routes run full to capacity now, how did they accomplish this? By cancelling and forcing people to use a single time. I personally think we should let Amtrak SINK. its a waste of taxdollars and the Airlines could use the money.

What the hell? Look at the chart: *after* the tech crash, revenues are lower than they were in 1991!

Or just explain these two sentences -
"Real per capita total spending, which adjusts for both population growth and inflation, has averaged 1.9 percent annually since 1990-91.
During the rest of the decade, however, spending grew relatively rapidly—averaging 5.8 percent per year for all spending and 8.9 percent for General Fund spending."
What is "the rest of the decade"? 92-99? How does per-capita spending only go up under 2%/year, but simultaneously almost 6%?

The 1.9% number is per-capita spending growth post-91. The 5.8% & 8.9% numbers are raw gains, not adjusted for population growth.

This says CA's average per-capita income growth during the 1990s was 1.4%. Throw in that this number includes the recession years 90-91, while the 1.9% post-91 number doesn't, and California's problem isn't out of control spending. It's that revenues this year are lower than they were a decade ago.

Whoops, on second inspection, revenue isn't lower now than it was in 91; than chart is annual growth rates. Still, it's 15% lower this year than last.

J.M.:

Look at the chart your damned self (sorry, Jane). The labels on the left side show that it is not a chart of total revenues, it is a chart of percent changes in revenues from year to year, which is an entirely different thing. It is incredibly misleading to assume that the one is the same as the other.

If it were total revenues, it would not be labeled in percents instead of billions: note the "25%" at the upper left. And it would not go below zero. Are you saying that California revenues are now -15 of some unit or other? I don't think it's possible that this year's revenues are actually negative. The chart says that revenues are 15% less than the previous year, which sounds about right to me. It also shows that incomes have gone from 10 to 2 in one year. It is not possible that actual income of Californians has dropped by 80% in one year without us having heard about it. (Some dot-commers, yes: but not the whole state.) I do think it's quite likely that the increase in income from year to year was 10% and is now 2%.

The statement "Look at the chart: *after* the tech crash, revenues are lower than they were in 1991" is therefore absolute hogwash. As I said, revenues are up 41% over the last five years even after the crash. The arithmetic to compound year-to-year changes of +12.5%, +9%, +23%, +10%, and -15% is very simple. Just multiply 100 x 1.125 x 1.09 x 1.23 x 1.1 x .85. Your computer should have a calculator to do that for you. If you go back to 1991 you'll find that the increase in revenues is even larger, but the adjustment for inflation and population growth would also increase.

In sum, you don't have a clue as to what your own chart means, and you should stop acting like a child trying to argue with the grownups.

Just for the record, my comment was written before I saw J.M.'s comment beginning "Whoops". I stand by it anyway.

Touchy touchy.

Its no accident that that chart is so misleading. Gov. Davis is pulling more fast ones by the hour.

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