Two ideas

In the state Capitol, the conventional wisdom, what is politically possible, has bankrupted the state and put its most vital water resource, the Sacramento-San Joaquin Delta, in so much peril that the only solution this wisdom can imagine is a peripheral canal.
 
Here are two unconventional ideas floating around outside the Capitol. That neither of them appear to be politically possible inside the Capitol is in itself an excellent argument for their consideration – not immediate adoption, but more careful consideration than the current attention being given to trying to float another $20-billion bond initiative for a peripheral canal in a state that now enjoys the worst bond rating in the nation, meanwhile slashing health and social services and education budgets in a state with more than 11-percent unemployment, the highest foreclosure numbers in the nation and a public education system nearly as bad as its bond rating.
 
Badlands Journal editorial board
 
 
7-14-09
CounterPunch.com
How the Sun Could Shine Again in California
From Golden State to Subprime State
By ELLEN BROWN
http://www.counterpunch.com/brown07142009.html
Four Wall Street banks, which received $15-25 billion each from the taxpayers, have rejected California’s IOUs because the State is supposedly a bad credit risk. The bailed out banks would seem to have a duty to lend a helping hand, but they say they don’t want to delay an agreement on further austerity measures. State legislators are not bowing quickly to the pressure, but what is the alternative?
In the latest twist to the California budget saga, Citigroup, Wells Fargo, and JPMorgan Chase (which each got $25 billion in bailout money from the taxpayers) and Bank of America (which got $15 billion) have refused California’s request for a loan to tide it over until October. Until the State can get things sorted out, it has started paying its creditors in IOUs (“I Owe You’s” or promises to pay bearing interest, technically called registered warrants). Its Wall Street creditors, however, have refused to take them. Why? The pot says the kettle is a poor credit risk!
California expects to need to issue only about $13 billion in IOUs through September, and all its Governor has asked for in the way of a loan from the federal government is a guarantee for $6 billion. Total loans, commitments and guarantees to rescue the financial sector and stem the credit crisis have been estimated at $12.8 trillion. But California has not been invited to the banquet. The total sum California needs to balance its budget is $26.3 billion. That is about the same sum given to Citigroup, Wells Fargo and JPMorgan in bailout money; and it is only about one-tenth the sum given to AIG, a mere insurance company. Corporations evidently trump States and their citizens in the eyes of the powers controlling the purse strings. California has a gross domestic product of $1.7 trillion annually and has been rated the world’s eighth largest economy. Its 38.3 million people are one-eighth of the nation’s population and a key catalyst for U.S. retail sales. When the California consumer base falters, businesses are shaken nationwide. If AIG and the other Wall Street welfare recipients are too big to fail, California is way too big to fail.
Fitch Rating Agency has downgraded California’s municipal bonds to junk bond status,triple B. Why? AIG and Lehman Brothers had A ratings right up until they declared bankruptcy. California has never defaulted on its bonds, and it cannot arbitrarily decide to default; the State Constitution mandates that debt principal and interest must be paid as promised. California bonds lost their triple A rating only when the municipal bond insurers (Ambac and MBIA) lost theirs. It was these insurers, not the State of California, that got into hot water gambling in derivatives. The State Attorney General has opined that California’s IOUs are valid and binding obligations of the State. In rejecting them, however, Wall Street may have ulterior motives. A lower credit rating can justify investors in demanding higher interest rates. The interest offered on the IOUs is substantially lower than the interest banks can get on triple B rated municipal bonds.
There may be deeper motives than that. Considering the enormous importance of the California economy to the country, and the relatively small sum it needs in loans, the refusal to support the State financially seems highly suspicious, especially when much more has been given to less creditworthy private institutions. The banks say they want to keep the pressure on California legislators to work it out among themselves, but what does that mean? The options are even higher taxes, even more cuts in services, or even more fire sales of public assets; in short, the sort of austerity measures expected of supplicants reduced to Third World debtor status. State legislators are understandably reluctant to crawl into that debt pit. Governor Schwarzenegger has refused to approve higher taxes, while Democratic leaders say further cuts in services could leave some Californians starving in the streets.
The Sun Could Shine Again on the Golden State
There is an alternative to that dark future, and perhaps it is to keep the public from waking up to it that arms are being twisted to accept the new burdens quickly. If Wall Street and the Feds won’t extend credit to California on reasonable terms, the State could simply walk away and create its own credit machine. California could put its revenues in its own state-owned bank and fan these “reserves” into many times their face value in loans, using the same “fractional reserve” system that private banks use. Many authorities have attested that banks simply create the money they lend on their books. Congressman Jerry Voorhis, writing in 1973, explained it like this:
“[F]or every $1 or $1.50 which people, or the government, deposit in a bank, the banking system can create out of thin air and by the stroke of a pen some $10 of checkbook money or demand deposits. It can lend all that $10 into circulation at interest just so long as it has the $1 or a little more in reserve to back it up.”
President Obama himself has acknowledged this “multiplier effect.” In a speech at Georgetown University on April 14, 2009, he said:
“[A]lthough there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks; where’s our bailout?,’ they ask, the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.”
If private banks can leverage deposits into multiple amounts of “credit” on their books, a state-owned bank could do the same thing, and return the profits to the public purse. One State already does this. North Dakota boasts the only state-owned bank in the nation. It is also one of only two states (along with Montana) that are currently able to meet their budgets. The Bank of North Dakota was established by the legislature in 1919 to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. By law, the State must deposit all its funds in the bank, and the State guarantees its deposits. The bank’s surplus profits are returned to the State’s coffers. The bank operates as a bankers’ bank, partnering with private banks to lend money to farmers, real estate developers, schools and small businesses. It makes 1% loans to startup farms, has a thriving student loan business, and purchases municipal bonds from public institutions.
North Dakota is not suffering from unemployment or feeling the pinch of the economic downturn. Rather, it sports the largest surplus it has ever had. If this isolated farming State can escape Wall Street’s credit crisis, the world’s eighth largest economy can do it too!
To sign a petition that will go electronically to Governor Schwarzenegger and to elected officials in your State, click here. You could also try faxing this article or a letter to Governor Schwarzenegger at 916-558-3160. See http://gov.ca.gov/interact#contact.
Ellen Hodgson Brown is the author of Web of Debt: the Shocking Truth About Our Money System and How We Can Break Free. She can be reached through her website.
 
7-11-09
IndyBay.com
Central Valley | Environment & Forest Defense
Tulare Lake Restoration – Fiction or Fact?...Steve Haze ( stevehaze007 [at] gmail.com )
A new alternative has emerged in the debate over water in the valley. This article argues that re-establishing Tulare Lake is the smart way to go.
Tulare Lake Restoration – Fiction or Fact?
http://www.indybay.org/newsitems/2009/07/11/18607139.php
Did you know that at one time the largest freshwater lake west of the Mississippi used to be right here in the San Joaquin Valley, just down Highway 41 heading from Fresno past Lemoore over to Kettleman City and Interstate 5? And, would you believe that at one time this lake covered over 500 square miles and contained almost as much fresh water as is now stored in all of the reservoirs in California today?
For many centuries Native Americans lived peacefully along its great shores and abundant waters full of fish and waterfowl using their handmade tule reed canoes to navigate its great expanse. Until the late 18th Century they continued to live rather peacefully around the lake during the Spanish Mission period of California. Then in 1848, gold was discovered and the great multitude of outsiders from throughout the world and America showed up to seek their fortunes along the Sierra Nevada Mountains.
Within a few decades, Americans were homesteading and began farming using the life giving and seemingly infinite waters cascading from those previously gold laden mountains. And slowly into the 20th century those waters became the new gold which made a desert bloom. But, it wasn’t long thereafter that the Tulare was drained of its precious liquid gold and the lake bottom itself was farmed. And yet, in spite of it having been drained of nearly 25 million acre feet of fresh water (1 acre foot is 326,000 gallons of water that covers the area of a football field 1 foot in depth) – with the dry lake bottom farmed primarily for cotton over these many decades – this great phantom still shows on maps in California as the Tulare Lake!
Why bring up another sad story of a great environmental calamity of such historic proportions? Doesn’t that story deserve to remain buried? In this day and age of water shortages, endangered species – such as the delta smelt; and prolonged drought – what about high farm worker unemployment, poor drinking water quality and our farming communities withering in the long hot dry days? Doesn’t it seem that there are very few options to solve these many pressing problems? Isn’t that the story that needs to be told?
There are those who continue to bang the drum of “build more dams” while using negative rhetoric such as “fish versus people” and “rural cleansing” and “destruction of our way of life”. The “Water Buffalos” such as the Kern County Water Agency (KCWA) and Westland Irrigation District (WID) demand that “their water” is given to them – regardless of the consequences to others – including the potential to create irreparable harm to farm workers, farmers and farming communities in other parts of the great Central Valley – such as the Sacramento – and within the Delta region most importantly. This does not matter even if it includes an environmental collapse – and massive costs to taxpayers of some of their major schemes to building more dams and create private water banks.
And, what about the question of environmental and economic justice for people in those same small rural farming communities? Amazingly, you would think that there is agreement that the best quality water in California would be made available for drinking to those underserved communities. However, the truth be known, 95% of the purest water in California that comes out of the southern Sierra Nevada mountains is laid on the land for crops – not for people first! Yet, to hear the argument from those same water buffalos – it’s always “fish versus people” as the premise. Is it possible that it is really an argument of “my crops and commodities first – versus those people”?
What is missing from the debate on water is knowing what the real numbers are – that is, how much water do we have (supply); and whether it can be used on a sustainable basis – and, how much flows into or outside the San Joaquin Valley region. Finally, is there a way to manage our needs for water (demand) in a much more effective and efficient manner. Did you know that some of the least expensive and best water is less than $50 dollars an acre foot – yet, bottled water which is unregulated can cost over $1 million dollars an acre foot, (I’ll be happy to do the math!)?
Also, another part of the debate is being aware of the fact that under the State Constitution, water belongs to all of the people of California as part of the Public Trust and for their benefit. Thus, there may be a “legal right” for those to use water for highest and best use – but, those rights are not in perpetuity and can be challenged at any time. Good examples of this include Mono Lake and Owens River on the eastern side of the Sierra Nevada. Each was successfully litigated and now being restored based upon the public Trust and Benefit. Another example includes the recent settlement of the San Joaquin River lawsuit that spanned 18 years – and, the agreement for restoration of the river and re-establishment of the historic salmon fisheries below Friant Dam down to the Merced River. What each of these success stories exemplifies is that there are ways to overcome technical, financial, legal and political hurdles – in order to re-establish multi-beneficial uses of the people’s California water. This illustrates the ability to comprehensively accommodate our drinking water needs for rural and urban communities; our needs to grow crops for food, fiber and timber – while simultaneously maintaining a healthy economy and environment.
The restoration of Tulare Lake can continue to take us down the right path towards economic and environmental sustainability. Just like the San Joaquin River below Friant Dam, precious remnants of this phantom lake remain. And, just like those of us involved in environmental and economic justice for our underserved communities as it relates to jobs, air quality, clean drinking water – or those involved in improving the natural environment for education, recreation, plants and animals – this modest restoration proposal can contribute greatly to those same positive outcomes of creating livable and sustainable communities within the San Joaquin Valley.
However, be forewarned – there is a political train leaving the station – and another attempt to keep things “business as usual” when it comes to how our water is managed by others. This means more dams – including massive surface storage on the San Joaquin River above Millerton Lake; private water banking schemes such as the significant expansion of KCWAs – and finally, the construction of a “Peripheral Canal” around the sensitive Delta farming region within the Central Valley. And of course, all of these massive proposals will be primarily paid through mega construction bonds which the people of California cannot afford. Yet, 99% of the benefits go back to those same Water Buffalos who have been leading nearly all of our local elected officials at all levels of government blindly off a fiscal and environmental cliff.
The restoration of Tulare Lake rather than a massive dam on the San Joaquin River is a pragmatic opportunity to bring back some amount of political sanity to our water woes here in the San Joaquin Valley. For starters, you can have twice the surface storage for 1/5th the cost – or 20 cents on the dollar. Could you imagine what can be done for less than $1 billion – versus $5 billion dollars as the water buffalos propose? And, other benefits include managing the flood waters from four rivers rather than just one for beneficial use! And, how about bringing pure mountain water for drinking to our small rural farming communities in the valley? That’s what Tulare Lake restoration could do! Or, why not create connections between existing canals such as the Friant-Kern down into the Tulare Lake so water can be moved more effectively – and cost efficiently? And finally, why not restore the lake for environmental and recreational benefits? Won’t that improve the quality of life for all of our farming communities as well – and move us in the direction of environmental and economic justice for the underserved?
The following chart highlights some of the most important benefits of restoring Tulare Lake:
Unfortunately, there’s not enough space to explain all of the financial, technical and environmental details on how this would all work. However, more information is available at the following web site: http://www.sjvwlf.org
 
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(Steve Haze is in his eighth year of working on water resource quality and quantity challenges in the San Joaquin River through the State of California’s CALFED Bay Delta Watershed Program. He is also the Program Director for the San Joaquin Valley Water Leadership Forum which is promoting alternative approaches to managing water resources within the region – including the restoration of Tulare Lake for surface and groundwater storage. More, details of the program and how you can help can be provided by contacting Steve at: 970-6320 – or via email at: stevehaze007 [at] gmail.com )
http://www.sjvwlf.org