Wednesday, 25 June 2014

The Fictional Scenario Behind BDCP Jobs Claims

The LA Times and now some other sources have quoted me criticizing the BDCP’s claim of a million jobs protected by building the tunnels, because it is based on a “fictional scenario.”  These press reports do not explain why I said it is a fictional scenario, so I will do it here.

The jobs claims from BDCP are divided into 2 parts, as shown in this BDCP infographic.

The first part are those created by the direct spending on implementing the BDCP (building the tunnels and habitat).  This part of the analysis is well-done and estimates 155,090 years of employment, primarily from construction.

The fictional scenario is the second part: the claim of nearly 1 million jobs (years of employment) from water supply reliability.  The calculation depends on 3 far-fetched assumptions, all of which must be true to generate the level of water shortages that drive this kind of job impact.

  1. Water agencies don’t invest in any new alternative water supplies for the next 60 years beyond what is under construction today, and there is virtually no increase in active conservation beyond current levels.  The Brattle Group says alternatives are speculative.  I guess it is speculative to assume that water agencies would do anything crazy like actually follow their own board-approved investment plans!  Metropolitan’s own long-range plan specifically lays out what they would do over decades to ensure no water shortages even if there is no Delta solution and environmental regulations cut water supplies further.  It only takes this one ridiculous assumption to make it a fictional water shortage scenario, but wait there’s more.
  2. Water demand in Southern California urban areas grows by 20% over the next few decades, even though there has been no growth in demand for the past 20 years.  This projection uses outdated and inflated population growth forecasts instead of following California law and using the Department of Finance population forecast as is required for state level planning activities.  Population growth is expected to be slower and development more dense in the future than it has been in the past 20 years of flat demand.  These types of water demand growth forecasts have been made by the water industry for decades to rationalize big projects and they have always been wrong.  This one is no different.
  3. Increased environmental regulation reduces Delta water exports by another 25%, as soon as 2025.  I guess they think the Environmental Water Caucus or Restore the Delta will be running the State Water Project control room in a decade.  Of course, the shortage wouldn’t happen even if the state implemented these advocates’ “Responsible Exports Plan”, because their plan calls for large investments in alternative water supplies and conservation with the money not spent on BDCP (see assumptions 1&2 above).  Although I increasingly think this “Responsbile Exports Plan” is the best plan on the table, it is wildly speculative to assume that is the current direction of policy.  The current, much less protective levels of regulation are under attack in Congress and the courts, often by the same interests promoting the BDCP.     
Finally, I will note that the good part of the analysis that estimates 155,090 jobs (years of employment) is not very impressive given the cost.  If you divide by the $25 billion cost of BDCP, that amounts to only 6.2 jobs per $1 million of public spending.  Anyone familiar with employment multipliers should recognize that is an incredibly low total of employment for that level of spending.  The bottom line is that spending billions on imported tunneling machines and converting farmland to marsh just doesn’t produce that much job bang for the buck.

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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