Thursday, 10 February 2011

A new term for subsidy

The latest Sac Bee op-ed promoting a peripheral canal (written by an infrastructure construction firm) contains a remarkable sentence.

At a time when public dollars are at a premium, all funding options should be on the table, including incentives for encouraging private investment.
Huh? Public dollars are at a premium…so we need “incentives”.  That doesn’t sound like it will cost taxpayers any money does it, but I haven’t seen too many incentives that aren’t taxpayer subsidies.

I also think they missed the mark on this statement.
It’s safe to say the biggest roadblocks facing any potential solutions to the Delta’s problems aren’t related to engineering. We have the technical know-how. It’s governance.
The roadblock isn’t governance, it’s finance. The water package put in a governance structure that will easily lead to their dual conveyance solution if they can figure out a way to pay for it.

If this project cost one or two billion it would be built, and we could afford to operate it in the environmentally friendly way that has been so alluring to many environmentalists. If that was the case, I would support it.

But it costs a heck of a lot more than that ($15 billion is the latest I have heard), and there are very good reasons to question whether the benefits (both private and public) exceed the costs. There may be more cost-effective ways to cope with the risks, and those who would benefit from these projects have been known to exagerrate the calamities that could result, while ignoring the very real calamities that will result from redirecting billions of public dollars in this direction.  Despite hundreds of millions on research and consultants, the one obvious research project you don’t see is a cost-benefit analysis on the proposed conveyance. Why not?

All the evidence I have seen suggests that paying for this tunnel is going to require forgetting about one of the co-equal goals, the environment, an enormous taxpayer subsidy, and very likely both taxpayer subsidies and relaxed environmental protections.

Recent events have shown taxpayers are pretty disgusted with “bailouts.” So, policy makers should be sure that any incentives in the form of public financing have terms at least as stringent as those given to Wall Street and GM, including reasonable interest rates and payback periods, and a taxpayer equity stake in the enterprises.

(minor edits Thursday at 10 P.M.)

About the Author

Ethan Jacob

Author & Editor

I am Ethan Jacob Executive Director of the Center for Business and Policy Research at the University of the Pacific, where I have a joint faculty appointment in the Eberhardt School of Business and the Public Policy Program in the McGeorge School of Law..

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