CommentsABRAMS ANALYSIS—1. “It’s the economy, stupid.” Although Hillary ignored Bill’s central truth in American politics, “It’s the economy, Stupid,” Trump made it his raison d'être. Meanwhile, the economic follies of Obama-Geithner, which cost Hillary the White House, were wildly successful in Los Angeles. What are the implications of our overwhelmingly embracing Measures JJJ, HHH, and M?
- The Politics of Revenge.
The Politics of Revenge arose because the American people had already suffered the economic follies of Obama-Geithner. While the “deplorables” lacked the sophistication to understand what had happened, they had a predatory buffoon to supply a host of bogus answers. “It’s the illegals. It’s ObamaCare. It’s crooked Hillary.”
As a demagogue, Trump was brilliant since he took Obama’s Hope Campaign from 2008, dusted it off, proclaiming that he’d make America Great Again. “Hope” and “Make America Great” are Tweedledum and Tweedledee. In brief, Trump ran on the concept, “It’s the economy, Stupid,” while Hillary ran on, “Keep the status quo.”
- Measures JJJ, HHH, Measure M Are More Obama-Geithner Economic Foolishness.
The essence of Obama-Geithner’s economy policy was to let the working class go bankrupt while giving trillions of dollars to Wall Street. With Measures JJJ, HHH and M, Garcetti adopted the same destructive policies. He will continue the eradication of rent-controlled housing which continues to swell the ranks of the homeless, while diverting hundreds of billions of tax dollars to a handful of wealthy land owners and international construction companies. In other words, in Los Angeles the systematic transfer of wealth from the 99% to the 1% will continue unabated.
- Measures JJJ, HHH and M Are Based Ignorance and Hubris.
When any business or any society spends money, those expenses need to increase the overall wealth of that society or business. A major consideration is whether that business or city is incurring significant future liabilities that will gobble up all the benefits. Let’s look at the subway beneath the Sepulveda Pass.
Leaving aside its construction costs, inherent in any subway or light rail system are never ending maintenance and operational (personnel) costs. When a business sells a product, it does not want to have to spend more money 5, 10, 20, 20 or 50 years from now as a result of that product. Once the bottle of ketchup is sold, Heinz wants to pocket the profit and never, ever spend another penny on that bottle.
As of this writing, Takata, the manufacturer of the lethal air bags, is preparing to file for bankruptcy. Defective air bags, like defective mass transit, contain the poison pill of economic disaster. Subways and fixed rail systems, unlike products such as ketchup and air bags, are guaranteed to have horrendously huge ongoing liabilities which will mount as time passes. Thus, we could have averted the evil decree had we voted down JJJ, HHH and Measure M.
- The Forces are Set in Motion and the Clock is Ticking.
NYC runs an $8 billion deficit each year for its subway-light rail system despite its being the best run system in the nation. In addition, the NYC system grew logically from the nature of NYC’s century old housing pattern and immutable geography. Extraordinarily dense Manhattan, which is the only reason that the system functions, is only 2.5 miles wide with the Hudson River on one side and the East River on the other. That’s the width of Franklin Avenue to Santa Monica Boulevard. Density along the Hollywood-Sunset corridor, in order to reduce the subway deficit, will create a congestion barrier the length of Hollywood. As the nation’s largest circular urban area, it is mathematically impossible for LA to ever have a functional fixed-rail system.
The bottom line is that a subway-fixed rail system will provide no long-term benefit to the Los Angeles economy, and its future deficits will swallow future city budgets, leaving Los Angeles broke.
We could try Washington D.C.’s approach and not spend money on maintenance, which will result in the closure of the system. By the time that Angelenos realize that the maintenance and personnel costs exceed the City’s capacity to pay, it will not only have to close significant portions of the system, but it will still have to pay the overbearing Union pensions. While Angelenos are currently screaming that the City’s pension deficit is too high, they have just voted to increase the future deficit by tens of billions of dollars.
We have not scratched the surface of the economic disaster that Angelenos have brought upon themselves with Measures JJJ, HHH and M.
- Suppliers Do Not Set Demand.
Garcetti’s own economic adviser, Christopher Thornberg of Beacon Economics, told Garcetti back in 2013 that he should stop trying to pick winners and looser in business. Garcetti ignored this sound advice. He is completely wedded to the notion that a centralized, politburo style planning agency can make better decisions than a regulated Supply and Demand economy. Garcetti is dedicated to eradicating rent-controlled housing and to dictating to poor people where they shall live.
We saw this folly in the 1950s and 1960s with Cabrini-Green in Chicago and Pruit-Igoe and Joseph Darst Apartments in St. Louis. (Disclosure: the author lived in Joseph Darst Apartments in the 1960s.) While the great welfare state can shove around poor people as if they had no minds of their own, such hubris results in social degradation, more poverty and high crime. Poor families want to live in nice homes in safe neighborhoods with decent schools. Garcetti, like Chicago and St. Louis, mandates Black Lung Projects near freeways with terrible schools and high crime.
We know that many poor people accept their fate, but we also know that the smarter and the more enterprising move away. Los Angeles is already experiencing the exodus of the educated, middle class Family Millennials. We also know that significant portions of the poorer Black and Mexican communities have already moved to the Inland Empire.
Nationally, removing any significant numbers of the undocumented families will further harm the economy. In their haze of racist ignorance, the anti-immigrant yahoos fail to understand that if we could remove even 5% of the population as “illegal,” we will have removed 5% of the consumers. No matter why a consumer base falls, the economic impact is the same. A store that operates on a 5% or less profit margin becomes economically imperiled. It has to cut back its purchases by 5%, but a 5% cut back by retailers can devastate the wholesalers. That touches off a downward spiral, affecting everyone.
- Population Decrease Results in The Reverse Multiplier Effect.
Since the City of LA is experiencing the flight of the middle class with its small population increase coming only from the birth rate, LA will suffer from the harmful impacts of the Reverse Multiplier Effect. This threat will be temporarily disguised by increased spending on high rises and subways. However, the mass transit and high rises which will be built are the main factors causing the exodus from Los Angeles. Within a few years, Los Angeles will find that the temporary spending that buoyed the economy also created the conditions which trash our tax base – at the very time we will need a stronger tax base to pay all of our debts. Some people may feel good while incurring heavy debt to live lavishly in Las Vegas for a few weeks, but when they return to Woodland Hills and have no money to pay the mortgage or to keep their SUVs, they won’t be so happy.
The short-term spending will benefit union workers, but at the same time, the added density will continue to drive the educated middle class away from the Los Angeles. Other workers who do not indirectly benefit from the construction will similarly look for parts of the nation which have more diversified economic bases. Garcetti seems to have selected high rise and mass transit construction to be Los Angeles’ salvation businesses. As shown above, a few years of this type of construction comes with unbearable taxes for maintenance and operations (union payments) in addition to our having to repay the hundreds of dollars we just spent passing JJJ, HHH and M.
- Why Subways Benefit NYC but Harm LA.
People ignore why the subway and light rail systems in NYC, Boston and Chicago reduce commute times. When the subways first came to NYC, walking or riding in a carriage were the main means of locomotion. Even today, the subways can be efficient compared to alternatives. No one may walk in LA, but no one drives themselves in Manhattan.
In Los Angeles, the subway or light rail are far slower for the citizens. The subway-light-rail stations are few and far between which means using them requires a significant walk. They are slow, especially the above ground light rail systems, which have to slow for so many street crossings. Generally, taking LA mass transit requires 170% more time than driving.
Thus, the NYC subway makes people more productive than alternative modes of transportation, while using LA’s subway-light rail system makes people far less productive. In fact, the Urban Institute found that subways and buses do not reduce the poverty rate, but on the contrary, giving the poor cars does reduce the poverty rate. Cars are far superior due to their flexibility, and hence, poor people with cars can actually get to the exact places where the jobs are located.
As noted in “Driving to Opportunity: Understanding the Links among Transportation Access, Residential Outcome,” published in March 2014 by Urban Institute (p ii), “Over time, households with automobiles experience less exposure to poverty and are less likely to return to high-poverty neighborhoods than those without car access.”
In other words, reliance on subways, fixed rail and buses in Los Angeles traps people into poverty, while owning a car allows them to drive away to better neighborhoods and jobs. A massive system of subways-and fixed-rail light lines will make Angelenos less productive and poorer, but in the meantime it will continue to shift the wealth from the 99% to the 1%.
(Part II will focus on the interplay between “corruptionism” and economic folly.)
(Richard Lee Abrams is a Los Angeles attorney. He can be reached at: [email protected]. Abrams views are his own and do not necessarily reflect the views of CityWatch.) Edited for CityWatch by Linda Abrams.
Don’t Overcomplicate the Election Analysis: As Bill Clinton said, ‘It’s the Economy, Stupid’
