# Spain's HSR & Deficit



## City of Miami (Jul 14, 2012)

We constantly hear about the debt crisis in Spain and in the past have heard about the fantastic HSR system built by Spain with money that they did not have. I wonder to what extent that construction contributes to the current fiasco. I also wonder if information on that point is pertinent to CA, TX & FL at the present time. Apologies if this has already been covered ad nauseam; if so please direct me to the info.


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## Paulus (Jul 14, 2012)

It's not a contributing factor; Spanish debt (as percentage of GDP) was 36.2% at beginning of economic crash and is currently 72.1% (less than that of Germany). Texas' plans are privately backed and don't look to be getting public financing, Florida doesn't have any plans anymore but would have essentially gotten it for free (mixture of federal and private funding). California is somewhat of an odd man out in that it can contribute (which makes the apparent refusal of an offer by SNCF to finance and build it all the more appalling), but the major problems are structural issues (Prop 13 and 98).


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## George Harris (Jul 14, 2012)

Numbers rather than percentage increase in debt would be nice. That is, what is the debt in billions, what is the cost of the HSR in billions. I have a sneaky feeling that the HSR cost would be a drop in the bucket in comparison to the total. Most national budgets contain a few large sacred cows that need to be the starting point to any serious reduction in government outgo. Transportation system spending is usually not one of them.


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## leemell (Jul 14, 2012)

Paulus said:


> It's not a contributing factor; Spanish debt (as percentage of GDP) was 36.2% at beginning of economic crash and is currently 72.1% (less than that of Germany). Texas' plans are privately backed and don't look to be getting public financing, Florida doesn't have any plans anymore but would have essentially gotten it for free (mixture of federal and private funding). California is somewhat of an odd man out in that it can contribute (which makes the apparent refusal of an offer by SNCF to finance and build it all the more appalling), but the major problems are structural issues (Prop 13 and 98).


SNCF's offer had some serious drawbacks including ethics and some of their design ideas. E.g., "Sources familiar with the proposal have made it clear that *SNCF was looking for a competitive advantage in getting the HSR contract*, and in doing so submitted a proposal that *violated state law *and was not worthy of further discussion. Most significantly, the SNCF proposal would have required the state to provide the company with a revenue guarantee. As has been made extremely clear by HSR critics and opponents in recent years, that is *a clear violation of AB 3034 which explicitly forbids a revenue guarantee*. Other factors weighed heavily in the Authority's decision ... to reject the SNCF proposal, which was not detailed and lacked key specifics. One of the keys for the Authority was the SNCF suggestion that an Interstate 5 alignment be used. The Authority believed, reasonably, that this would reduce ridership significantly by *bypassing the at least 2 million residents of the San Joaquin Valley* and therefore jeopardize operating revenues. That bypass proposal *also violates AB 3034*."There really was nothing appalling about it.

Prop. 13 saved my house in the late '70s because property taxes were running away very rapidly. The year after it passed, my property taxes would have surpassed my income taxes had it not passed. The legislature was doing nothing about it probably because they were the recipients of the tax revenues. As Speaker Jesse Unhruh said "Money is the mothers milk of politics."


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## Anderson (Jul 14, 2012)

leemell said:


> Paulus said:
> 
> 
> > It's not a contributing factor; Spanish debt (as percentage of GDP) was 36.2% at beginning of economic crash and is currently 72.1% (less than that of Germany). Texas' plans are privately backed and don't look to be getting public financing, Florida doesn't have any plans anymore but would have essentially gotten it for free (mixture of federal and private funding). California is somewhat of an odd man out in that it can contribute (which makes the apparent refusal of an offer by SNCF to finance and build it all the more appalling), but the major problems are structural issues (Prop 13 and 98).
> ...


Well, as opposed to the CAHSR proposal which will presumably more or less be a state agency funded out of taxpayer dollars to make up any gap in operating expenses once it gets going. As we all know, making sure that a transportation agency can cover its operating expenses is _entirely_ different in function than a revenue guarantee.

To be fair, I don't know about the nuances of the law out there or of the proposal itself, but it seems that in a case like this it is AB3034 that is the problem, particularly if the private sector can cut through a substantial deal of the EIS-related red tape and other consultations that federally-funded programs inevitably get buried in.


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## afigg (Jul 14, 2012)

George Harris said:


> Numbers rather than percentage increase in debt would be nice. That is, what is the debt in billions, what is the cost of the HSR in billions. I have a sneaky feeling that the HSR cost would be a drop in the bucket in comparison to the total. Most national budgets contain a few large sacred cows that need to be the starting point to any serious reduction in government outgo. Transportation system spending is usually not one of them.


The primary cause of the financial crisis and economic problems in Spain was the private sector - a housing bubble with significant overbuilding of residences and office buildings. The government has been running up debt to shore up the banks and the economy. While there were excesses in the public sector construction with construction of too many airports that are now white elephants, Spain's public sector debt was among the lowest of the major European economies when the US financial crash spread world wide in 2008. Easy to google the basic info.


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## George Harris (Jul 14, 2012)

afigg said:


> George Harris said:
> 
> 
> > Numbers rather than percentage increase in debt would be nice. That is, what is the debt in billions, what is the cost of the HSR in billions. I have a sneaky feeling that the HSR cost would be a drop in the bucket in comparison to the total. Most national budgets contain a few large sacred cows that need to be the starting point to any serious reduction in government outgo. Transportation system spending is usually not one of them.
> ...


Part I bolded sounds very familiar for the US. The US also has quite a few examples of excesses in public sector construction. One close at hand is the replacement of the Oakland side of the San Francisco Bay Bridge. An outstanding example of "form over function" at great cost done with imported steel at that, adding nothing to traffic capacity to replace a bridge that, yes was suffering, some of it a few design deficiencies which were not really deficiencies at the tiem it was built, but mostly from lack of maintenance of critical items, all of which could have been overcome for a cost that would probably be less than 1% of the replacement.


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## Devil's Advocate (Jul 14, 2012)

afigg said:


> The primary cause of the financial crisis and economic problems in Spain was the private sector - a housing bubble with significant overbuilding of residences and office buildings. The government has been running up debt to shore up the banks and the economy. While there were excesses in the public sector construction with construction of too many airports that are now white elephants, Spain's public sector debt was among the lowest of the major European economies when the US financial crash spread world wide in 2008.


That's what I've read as well.



George Harris said:


> The US also has quite a few examples of excesses in public sector construction. One close at hand is the replacement of the Oakland side of the San Francisco Bay Bridge. An outstanding example of "form over function" at great cost done with imported steel at that, adding nothing to traffic capacity to replace a bridge that, yes was suffering, some of it a few design deficiencies which were not really deficiencies at the tiem it was built, but mostly from lack of maintenance of critical items, all of which could have been overcome for a cost that would probably be less than 1% of the replacement.


There are very few excesses of public expenses that do not have one or more politically active private sector businesses at the other end of the equation. We blame the government for being taken without ever blaming the thieves who profited from the outcome.


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## Anderson (Jul 15, 2012)

Another point , if I may: Correlation and causation are two different things here. I would note a reasonable correlation between states with major, serious public sector passenger rail initiatives and those with major budget problems (MI, IL, NY, CA, etc.) The wacky exceptions at the moment are VA and NC. FL doesn't qualify because AAF is more or less private sector.

The point is that regardless of whether there is a causal link here, there is definitely some degree of correlation, and that _is_ a likely political problem...particularly if the biggest program gets hitched to a state to go bust (i.e. CA).


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## George Harris (Jul 31, 2012)

Texas Sunset said:


> There are very few excesses of public expenses that do not have one or more politically active private sector businesses at the other end of the equation. We blame the government for being taken without ever blaming the thieves who profited from the outcome.


Examples, please.


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## Trogdor (Aug 1, 2012)

George Harris said:


> Texas Sunset said:
> 
> 
> > There are very few excesses of public expenses that do not have one or more politically active private sector businesses at the other end of the equation. We blame the government for being taken without ever blaming the thieves who profited from the outcome.
> ...


The entire military-industrial complex, for one.


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## DET63 (Aug 10, 2012)

Texas Sunset said:


> afigg said:
> 
> 
> > The primary cause of the financial crisis and economic problems in Spain was the private sector - a housing bubble with significant overbuilding of residences and office buildings. The government has been running up debt to shore up the banks and the economy. While there were excesses in the public sector construction with construction of too many airports that are now white elephants, Spain's public sector debt was among the lowest of the major European economies when the US financial crash spread world wide in 2008.
> ...


In the case of the Bay Bridge, total BS. Mayors of Oakland and San Francisco (Jerry--now Governor--in Oakland; Willie in SF) argued about the design of the thing, with certain parties arguing for a "signature" span--totally irrelevant to its function, and totally apart from profits for the contractors.


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