STAR TREK REVISITED

When star treckers Kirk and Spock scoured the heavens in search of whatever, one question was never asked: What did space travel cost?  Now, fifty years since their debut, another such trek is about to begin.  This time, however, the price tag is the central feature.  Facebook founder Mark Zuckerberg and Russian venture capitalist Yuri Milner, both billionaires, with physicist Stephen Hawking in attendance, recently announced plans to explore the Alpha Centauri star system, located 4½ light years (26 trillion miles) distant.  Dubbed Breakthrough Starshot, its projected cost is $100 million to establish feasibility of the project, followed by far more to actually send spacecraft.

If ultimately successful, what will be accomplished?  Except for providing monumental ego satisfaction for the instigators, together with salaries for a lot of chosen people, it’s difficult to describe exactly how anyone will benefit.  A justification for the endeavor was offered by Dr. Hawking, who proclaimed “We commit to the next great leap into the cosmos because we are human and our nature is to fly.”  That may have applied to the Wright brothers’ 1903 undertaking, but it doesn’t seem to be a rational explanation for blowing hundreds of millions of dollars on an enterprise with no recognizable payoff.  And, of course, Breakthrough Starshot will be federally approved as a non-profit foundation, so the U.S. taxpayer will pick up a substantial part of the tab.

I’ll now digress by suggesting how $100 million might be applied to benefit society more meaningfully.  First off, we don’t spend it; rather, it’s safely invested so an earned income is available, in perpetuity, by laddering it into $25 million each of 5, 10, 20 and 30-year treasury bonds.  Under today’s interest rates this produces $1,950,000 annually.  And how will the cash be used?  Students having completed two years at community colleges with excellent grades in math, physics or chemistry, will be paid $10,000 in each of their junior and senior years while earning their physical sciences degrees.  Even at the current low interest rates, this will generate a couple hundred graduates per year.  If interest rates rise in the future, their numbers will increase.

A final thought: I concede that the prospect of a rocket ship into the cosmos is more titillating than graduates who excel.  This is why Breakthrough Starshot will probably proceed while scholarships to deserving students will never be considered.

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THE TRAIN TO NOWHERE

California’s high-speed rail project, initiated by a $9.95 billion bond issuance on Nov 4, 2008, has just switched to another track.  Originally scheduled for completion by 2019, the 400-mile system would convey passengers from Los Angeles to San Francisco in 2 hours and 40 minutes.  The most recent plan by the High-Speed Rail Authority (HSR) proposes the first segment be built between San Jose and the city of Shafter, population 17,000, 18 miles northwest of Bakersfield, with completion by 2025.

As for cost, HSR’s estimate for the entire project is $64 billion.  Actual committed funds to date are the original $9.95 billion bond issue, $3.5 billion from a federal stimulus plan and $500 million per year from state carbon cap-and-trade revenue.  The project is tens of billions of dollars short, with no prospects for additional monies.  Detractors of the rail plan contend the cost estimate is unrealistically low, will never attract the number of passengers predicted, and that if ever completed will function economically so to “eat future generations alive”

Despite the many objections, and the numerous studies which reveal fundamental defects in virtually aspect of the project, the bullet train is actually proceeding exactly as its sponsors anticipated.  Over the past seven years, untold sums of money have been paid to favored parties for planning, design, studies, environmental reports and the myriad of other boondoggles inherent when government funds flow. 

It’s been clear from the beginning that California high-speed rail could never be economically feasible, and all of its supporters, from Governor Brown on down, have known this from the onset.  However, its promotion will not end because of the extensive criticism it’s receiving from current Senate Transportation Committee hearings.  Neither will it be terminated for ominous predictions of disaster nor for any other setback it may experience.  As long as there are funds in the till to be passed around to politically connected contractors and construction unions, the efforts will continue.  Only when all the money is gone will the project end.

A final word: Government programs historically operate under-budgeted, not as planned, and rarely completed on time.  Welcome to the world of reality.

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

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15 DOLLARS PER HOUR

My state of California just joined the League of Benevolence by increasing the minimum wage all employers must pay their employees.  Titled the “Fair Wage Act of 2016,” the rate will periodically rise over the next five years from the current $10 to $15 per hour—a fifty percent increase. The asserted justification for the increase is one of fairness and humanity.  As one of its sponsors, Georgette Bradford, a member of Service Employees International Union (SEIU), said: “Low wages keep people trapped in a cycle of poverty . . . it is becoming harder and harder to survive in what is considered the richest state of our nation.  Our initiative intends to change all of that.”

Understandably, the increase is not without its critics.  Most controversial is the claim, somewhat substantiated, that instead of a wage increase, minimum wage employees will more often simply find themselves out of a job.  Nonetheless, the intense political pressure which propelled the legislation overrode all objections.

I pose a question: Why was SEIU one of the law’s principal sponsors?  It’s questionable whether a single union employee in the state earns less than $15 per hour.  Can it be the union is merely engaged in an humanitarian effort?  I think not; the real reason is far more pragmatic.  Ever since passage of the Fair Labor Standards Act of 1938, during the Franklin Roosevelt administration, union contracts in force throughout the nation increasingly contain provisions tying salaries to some multiple of the established minimum wage.  I’m advised, as an example, a California schoolteacher’s starting pay is set at double the minimum wage.  And inasmuch as few SEIU employees risk losing their jobs, the fact the wage of a destitute non-union worker may drop from $10 per hour to zero is a matter of little concern to anyone.

While we’re at it, there’s yet another benefit, in that union dues are normally set at a percentage of an employee’s pay.  Thus, as the minimum wage rises, so does the remuneration to the union hierarchy.  Three cheers for humanitarianism!

A final word: Neither business nor organized labor is a charitable endeavor.  Generally, payers want to minimize their payments, while recipients strive to maximize their income.  This is the normal state of affairs, with human nature in agreement.

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

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THE QUEST FOR DIVERSITY

The article’s title caught my attention: “Higher education falling behind on diversity.”  Its author, Mildred Garcia, president of California State University Fullerton, is a highly regarded educator with an impressive record of involvement.  I was eager to learn how diversity might improve higher education

The central features of Dr. Garcia ‘s views are clearly articulated.  The following excerpts describe her concerns: “Underrepresented groups continue to be impacted by inequitable access to academic success.”  “Since the majority of our students grew up in different cultures, navigating [the] path can prove difficult, leading to an ‘achievement gap’ between underrepresented students and their white peers.”  “[It is] our responsibility to ‘have diversity’ . . . it is paramount for social progress . . . for all students hoping to succeed in a rapidly evolving global society.”

I admit I’m unconvinced.  Dr. Garcia refers to inequitable access to academic success, but I interpret academic success as successfully completing a course of study by mastering the subject matter—a detail her article fails to address.  As for achievement gap, we must expect some students will perform better than others.  This is simply a matter of scholastic aptitude—another subject she ignores.  Finally, she stresses the importance of diversity as a measure of progress.  It seems, rather, that for an educator, learning should be foremost.  But the most glaring discord is her inference that education is a collective process, whereas, in reality it’s a singular endeavor.

One thing cannot be disputed: Mildred Garcia is the university president—not I.  Her attitudes obviously reflect what is now regarded by the educational establishment as fundamental.  I’m convinced that education, at all levels, is no longer devoted to the subject of learning, as it once was, but rather to involvement in the political process and revenue generation.  In short, it’s big business, exemplified by charter schools owned and operated by hedge funds, school luminaries with 6 and 7-figure salaries, and academic policies formulated under the guidance of union officials.

A final thought: The real problem with the universities is not diversity.  It’s that there are thousands of inept and unmotivated students who have no reason to be there.

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

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SETTING THE RECORD STRAIGHT

A new book, titled Evicted: Poverty and Profit in the American City, just hit the market.  Written by Harvard sociologist Matthew Desmond, this 432-page treatise describes in exquisite detail the day-to-day agonies of those persons who find themselves evicted from their homes by private landlords.  With his primary teaching and research interests devoted to urban sociology, poverty, race and ethnicity, Dr. Desmond is no stranger to the miseries of the poor.

One of the criticisms leveled at the evicting landlords was the claim that, in most cases, they collected rents constituting from 50 to 70 percent of the tenants’ monthly income, a situation which made late payment and eventual eviction inevitable.  This may well have been the case and, if so, reflects gross stupidity by the landlords.  As a long-time rental property owner, I’m keenly aware of the eviction process.  Here in California, any delinquent tenant who must be evicted will result in a four-month procedure, during which no rent is collected, together with fees costing at least a thousand dollars.  As a result, my property managers scrutinize each applicant closely to make certain they can comfortably afford the rent quoted.  Any landlord foolish enough to routinely accept tenants whose incomes are not equal to three or more times the scheduled rent, deserves to lose his shirt . . . and will.

There’s no doubt the author is a thorough researcher as well as a compassionate man.  However, his contention that government–subsidized housing vouchers should be available to all low-income families and that landlords be required to accept them, is a formula that could destroy rental housing.  His recognition of the blemishes of the dispossessed—unwise ways with money, drug and alcohol addiction, and casual attitudes toward birth control—to name just a few of the antisocial characteristics that chronic evictees display, explain why their presence turns many decently run apartment projects into uninhabitable slums.  Responsible landlords should be permitted to refuse admittance to persons whose personal habits would degrade the property.

My guess is Dr. Desmond does not now and never has owned a single parcel of rental property, nor does he understand the factors which dictate how well-run rentals must operate.  That’s probably not a required course at Harvard.

 

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

Click onto http://www.onthemoneytrail.net/

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