Monday, July 28, 2014

CONSERVATIVE ECONOMICS STRIKES AGAIN




FIRST, I NEED TO GIVE CREDIT TO THE SOURCE of my material, Dave Cieslewicz, former mayor of Madison, WI, in an article he wrote on 7/24/14 at http://m.isthmus.com/article.php?article=43235, in case you want to read the whole thing.  The point of this blog is to highlight some of the facts presented by Mr. Cieslewicz and make some comments on them.

The title of his article is You thought Wisconsin losing high-speed rail was bad? It actually just got worse.  Its subject matter, in reality, is the success of Conservative economic principles, or the lack thereof.  Mr. Cieslewicz uses the case of a high speed rail line to illustrate his case.  The essential facts are thus:
  • In 2009, then Gov. Jim Doyle joined forces with Milwaukee Mayor Tom Barrett to convince train manufacturer Talgo to locate in Milwaukee. The city of Milwaukee invested $10 million for site improvements at the old Tower Automotive plant in a neighborhood that needed the jobs and the reinvestment. 
  • Wisconsin ordered two trains for the state-sponsored Milwaukee to Chicago Hiawatha service. In addition, Talgo had an order for two trains for use in Oregon and Washington that would also be built in Milwaukee.
  • Gov. Doyle then secured $810 million in federal stimulus money to build higher-speed rail from Chicago to Milwaukee to Madison with the promise of eventually connecting the line to the Twin Cities
  • Those train sets would have been built in Milwaukee too.

In 2010, Milwaukee mayor Barrett competed with Tea Partyer Scott Walker, Milwaukee's County Executive, the Wisconsin's governor's office.  Walker pitted the two largest cities in Wisconsin, Madison and Milwaukee, against the rest of the state by running against the already in place train plan, which he portrayed as a boondoggle, as did Florida governor Rick Scott. And just like Florida, Scott Walker won, and the trains lost as he quickly moved to kill the Milwaukee to Madison part of the project.  But, he claimed to support upgrades to the Hiawatha line. Walker, however, was soon pressured by his Tea Party legislators to renege on on even the Hiawatha trains; which he did.  So, what were the the ramifications of this "looking after the citizens economic interests"?
  • Talgo was already well along in the construction of two sets of trains to serve that line. 
  • The state has already paid Talgo $40 million for those trains
  • The state paid another $12 million to other vendors, for a total cost so far of $52 million.
  • Talgo, rightly, filed a claim against the state for an additional $66 million in unpaid invoices and other losses due to the state defaulting on the contract. Even though the state is clearly at fault they nevertheless recently denied the claim and an unnecessary and expensive formal lawsuit is most certainly in its future.
In addition:
  • In May 2014, the completed trains were unceremoniously moved from the now abandoned Milwaukee Talgo plant to Indiana, for possible use there. 
  • Illinois is paying for an extension of Amtrak service to Rockford, and plans are in place to extend that to Dubuque. From there it's not hard to imagine completing the line to the Twin Cities (see above) and bypassing Wisconsin altogether.
The rational was:
  • Walker claimed that he opposed the 100% federally funded train because of the annual operating costs to the state, which amounted to around $7 million/yr
  • Now the state is on the line for as much as $118 million, which is 17 years of operations (longer if you take into consideration the time value money) for which Wisconsin will have received nothing at all except lost opportunity!
What was given up to "save Wisconsin from this boondoggle"?
  • Bringing new business and tax revenues into Wisconsin
  • Revitalizing a crumbling part of one of Wisconsin's major cities
  • Jobs both in the Milwaukee plant and all along the routes the train would have traveled
  • Growth in those rural places where stops were planned, at least based on the experience of other similar projects, including Madison itself
  • Advertisement about Wisconsin joining the 21st Century with a high-speed rail which would probably bring in new business to outlying areas that would combine the low cost of rural construction and operation combined with access to population centers for employees (Wisconsin now ranks 37 out of 50 in job creation.

This is just one example out of many where uber-Right-wing Conservatives have taken control of the governorship and state houses and applied their brand of economics.  The same has happened in Florida, where I live, and Rick Scott is now trying to walk-back on much of the same kind of damage he did in order to save his reelection bid.  Sam Brownback, governor of Kansas, is a similar story except he has so alienated his own Party, the non-Right-wing element has revolted and is either supporting his Democratic opponent or, finding that to distasteful, simply withholding their support of Brownback.

Research I have conducted supports Mr. Cieslewicz single data point.  In looking over the history of major economic downturns in American history, the smallest of which was the 2008 Great Recession, when the economic theory promulgated by Conservatives (or today's Republicans) simply doesn't work; it naturally leads to the frequent major boom-bust cycles so prevalent from 1780 through 1933.  It should be noted that moderate Republicans like Eisenhower, Nixon, and Ford and dropped the Classical economic school Conservatives are so enamored with and ended up supporting a somewhat conservative version of what today's Democrats prefer.  I suppose one can find one success story where a Scott Walker type governor has actually improved his state's economic standing in recent years, but I can't think of one.

Dave Cieslewicz is the former mayor of Madison. He blogs as Citizen Dave.

Moderate in the House also writes as My Esoteric at myesoteric,hubpages.com