Tag Archives: California Politics

From Athens to Sacramento: Austerity Coming to America

As the Greek people have painfully experienced, you cannot “austere” yourself out of a budget crisis. It only makes the crisis worse: higher taxes destroy the tax base and spending cuts increase government’s net drain of resources out of the economy. The result is that fewer people work, more people qualify for welfare programs – and government spending ends up growing while tax revenues go down.

The only way to solve the budget crisis created by a welfare state is – surprise – to do away with the welfare state. This can be done; it takes hard work and dedication on behalf of us and our elected officials, but it can be done. So far, though, not a single welfare state in Europe, and not a single U.S. state, has been willing to step up to the plate and be the first to reform away the welfare state. Instead, Europe’s political leadership is going deeper and deeper into panic mode, relying as they are on budget cuts and tax increases to save their morbidly obese, fiscally unsustainable welfare states.

So far America has been saved from the austerity flu. But don’t bet your job on us being able to keep it that way. Some states are already resorting to policies reminiscent of austerity, and one of them has already entered the downward spiral that hurled Greece into full-fledged fiscal and political turmoil.

That state is California. The Golden State has wrestled with budget problems for many years, and Governor Brown was elected on promises to finally solve the problems. However, his strategy was the same old, same old: modest spending cuts and modest increases in some taxes. (He even accepted microscopic tax “cuts” by allowing a minor, temporary sales tax increase to expire.) Predictably, his strategy has not worked. As shown by an article in The Washington Post, The Golden State is now in even deeper budget trouble than it was before Jerry Brown got (back) into the gubernatorial mansion:

California’s budget deficit has swelled to a projected $16 billion — much larger than had been predicted just months ago — and will force severe cuts to schools and public safety if voters fail to approve tax increases in November, Gov. Jerry Brown said Saturday. The Democratic governor said the shortfall grew from $9.2 billion in January in part because tax collections have not come in as high as expected and the economy isn’t growing as fast as hoped for.

Part of the reason for this problem is of course that the governor and his staff joined the Democrats in the state legislature in an overly joyous forecast of how the Obama administration’s policies – including the nonsensical and totally wasteful stimulus bill – would put the economy back on a growth path. But part of the problem is also that the Democrats in California will try to save the welfare state at any and all cost. Thereby they allow themselves to completely ignore the very problem that caused the crisis in the first place: the welfare state.

But even worse is the fact that the solution they are applying – a very mild version of austerity – is now driving the state budget deeper into the deficit ditch.

In short: the medicine is killing the patient.

The austerity policies applied in California are supposed to increase tax revenues through higher taxes and cut government spending through – yes – spending cuts. But what austerity-minded politicians like Governor Brown do not understand is that the economy responds to austerity policies just like it responds to all kinds of economic policies. Tax increases discourage productive, private-sector economic activity; in combination with spending cuts, the tax hikes actually increase the government’s drainage of resources from the economy.

As a result, private-sector business activity is reduced or its growth rate is significantly reduced. Fewer people pay taxes and more people apply for the entitlements that the welfare state provides. Predictably, this is exactly what is happening in California. As shown by data provided by state controller John Chiang, tax revenues are lower while welfare-state spending is considerably higher this year than California’s politicians foresaw last year when they enacted the first round of Governor Brown’s austerity policies.

An analysis of the controller report for the period July 2011 to April 2012 shows a rise in two of the best short-term indicators of welfare-state spending:

  • Medical Assistance Programs spending has increased almost a quarter of a billion dollars more than even the Brown administration predicted it would under the recession; and
  • Social Services spending was hit hard by spending cuts and predicted to fall by $346 million; in reality, spending is almost $200 million above the budget target.

At the same time, tax revenues are coming in below target. During the period July 2011-April 2012 the state of California took in $73.5 billion in tax revenues. The forecast for the same period this year was $69.1 billion; the actual number is $65.6 billion. In other words, the state’s tax revenues are more than five percent below what the governor and his Democrat fellows in the state legislature needed in order to protect their welfare state from further cuts.

As is evident from these numbers and from the article in the Washington Post, the Sacramento statists have failed. The reason is not that they did not cut spending and raise taxes enough – the reason is that they combined spending cuts with tax increases. With this combination government takes more from the economy each year and gives less and less back. It is like government is trying to sell a new 2011 car at 2013 prices one year and a new 2010 car at 2014 prices the next year.

One of the most obvious reasons why austerity won’t work in California is that the state has a small and, relatively speaking, shrinking tax base. From the peak of the business cycle in 2007 to the 2011 California lost 1,028,000 private sector jobs. This was partly due to the national recession, partly due to California’s business-unfriendly policies. As of March 2012 The Golden State had fewer private sector jobs than it had in March of 2003, when the state was still suffering from the Millennium Recession.

During the same period, the state has increased its spending paid for with in-state tax revenues by 40 percent. In other words, the state is expecting each privately employed Californian to be able to pay $140 in 2012 for every $100 he paid in taxes in 2003. Yet his income has increased by far less: for every $100 a private-sector employee earned in 2003 he earns approximately $120 in 2012.

Where does the state government expect to get the remaining $20 from?

Looking again at California’s employment numbers, we find that there are fewer people working in Californa’s private sector in March of ’12 than even in March of 2000. Yet the state legislature has not downsized its government to 2000 levels. The state has 12 percent more employees now than it had in 2000; in fact, the state government had as many employees in March 2012 as it had in March of 2007.

It is unlikely that Governor Brown will realize what he is doing to his state in time to save it. To do so, he would have to abandon his policies of combining spending cuts with tax increases. Instead, he would have to:

  • Combine spending cuts with tax cuts;
  • Make the spending cuts structural so that they phase out, and eventually eliminate, entitlement programs; and
  • Cut taxes in such a way that people can take care of themselves instead of relying on government.

It is very unlikely that he will do this. More likely, Governor Brown will press on with his austerity policies: higher taxes and less spending. The result will be a continued erosion of the tax base. Not only will businesses refrain from expanding, but there will be close-downs and an escalating migration of productive citizens and businesses out of the state.

In 2009 California had a net migration loss to the other states of 87,000 people. The largest destinations for outbound Californians were states with notably lower taxes. Among the most attractive were no-income-tax states like Texas, Washington and Nevada. These numbers, which are the latest available, are likely to be significantly higher for more recent years.

California still has the chance to get out of the austerity spiral. But time is running out. If Governor Brown does not take the right steps and put his state on the right track, his austerity policies will put the entire nation’s economy in jeopardy. The consequences for all of us would be devastating.

California: From Golden State to Welfare State

While we are witnessing the unfolding fiscal disaster that the welfare state has brought upon Europe, we have our own version of this crisis in progress in the United States. The gaping hole in the federal budget is the best known element of the American version of the welfare state crisis, but the situation is almost as bad in many states.

The most notorious among the troubled states is California. Its budget problems go back many years and include such absurd practices as “paying” bills, and even tax refunds, with IOUs. But even though it is a serious enough matter when a state government cannot pay its bills, the worst part of the California mess is that no one seems to dare speak out about what is truly behind the Golden State’s chronic fiscal trouble.

The welfare state.

California’s budget mess is as simple as anything can be. The state government has made spending promises – handed out entitlements – which it is now notoriously unable to keep up with. From health care to welfare; from public union benefits to education; the lawmakers in Sacramento have piled on promises up and above what taxpayers can keep up with.

Over the past 25 years the California state government has increased its total spending (including General, Federal and Other Funds) by 6.8 percent per year, on average. During that same time the state GDP grew by 5.5 percent per year (both numbers adjusted for inflation).

Let us stop and ponder for a moment what these bone-dry numbers actually mean. GDP is the source of all tax revenues a government can get their hands on. It is the sum total of all our incomes and therefore the base for income taxes, sales taxes, user taxes, gasoline taxes, payroll taxes… Even property taxes are paid out of current income. Since your current income is part of GDP, this means that property taxes are paid out of GDP as well.

You don’t have to have a Ph.D. in economics to figure out that when the ultimate tax base, GDP, grows at 5.5 percent per year, and total government spending grows at 6.8 percent per year, government will run eventually run out of taxpayers’ money. This is precisely what the state lawmakers in California have allowed to happen. For some time, they have put off going to taxpayers for more money by asking instead that Uncle Sam sends more cash to Sacramento. But now that the federal government is in deep fiscal trouble and can be expected to turn off the cash faucet, California’s budget problems are about to go from bad to worse.

Predictably, the legislators in Sacramento are now in budget panic mode, scrambling to rein in a budget they have allowed to run amok for more than two decades.

Half of all state spending in California goes to three items in the budget: Medicaid (or MediCal), cash assistance (or “welfare”) and public education. Since 1985 two of these items have, on average, grown faster than the state GDP: Medicaid has increased at 10.7 percent per year and public education has gone up at 6.5 percent per year.

Each time legislators in Sacramento passed a budget that expanded welfare-state spending faster than the state’s economy was growing, they knowingly contributed to the fiscal problems that are now haunting taxpayers in California. The compounded effect of this decades-long streak of spendoholism is now coming back to haunt them. This year’s legislative battle to piece together a budget for The Golden State is tougher than it has been in many years. For the first time since California’s classis Proposition 13 tax reform, the state’s elected officials are facing resistance to higher taxes. They now have to learn how to restrain spending.

The problem with that is, of course, that 25+ years of lavish government spending has allowed the people of California to take effort-free entitlements for granted. The welfare state has created a large tenderfoot population who cries foul at the sight of even the smallest aberration in state spending.

Some of the tenderfeet do not think twice about using children in their protests:

Students at Elk Grove Elementary School joined kids from San Francisco to Los Angeles to blow bubbles Thursday in protest of state budget cuts to education. The “This Budget Blows” protest, organized by the parent organization Educate Our State, coincided with the March 15 deadline for school districts to issue preliminary layoff notices to educators. Nine empty chairs at Elk Grove Elementary represented the nine teachers at that school that were given pink slips.

To the defense of Governor Brown, he has been tough on the budget from the day he got (back) into the Governor’s mansion in 2010. He has actually been able to put brakes on the General Fund:

Largely through spending cuts, Brown and the Legislature have reduced the state’s structural deficit by roughly two thirds, to an estimated $9.2 billion at the start of the year. General fund spending as a percentage of the state’s economy, according to the governor, has dropped to levels last seen in the 1972-73 fiscal year. More than 15,000 positions have been eliminated from state government.

It is important to keep in mind, though, that these spending “cuts” for the most part consist of deferred increases in spending. They put a lid on expansions of government spending programs – but they do not do anything about the underlying problem.

The welfare state.

Each entitlement program that the government spends money on, comes with a formula that defines:

  • Who is eligible;
  • How much money (such as cash assistance) or in-kind services (health care or education) each eligible person should get; and
  • Under what conditions a person is no longer eligible.

When people become eligible they adjust their lives to that eligibility. A cash assistance recipient, or someone who is eligible for food stamps, expects to get a certain amount of money each month from government. A family who is entitled to public education for their children (i.e., all of us who have school-age kids) will expect government to continue to deliver that service as promised.

Being dependent on a tax-paid, work-free entitlement is comfortable. The longer people are dependent, the more comfortable they get with consuming the entitlement. Every prospect of a cut becomes an imminent threat to that comfort. When government starts cutting entitlement spending, the first reaction among entitlement consumers is to demand that government continues to deliver as promised.

This is particularly obvious when it comes to public education. Taxpayers who consume public education for their children still pay the same taxes as they did before the budget cuts went into effect. After the cuts, government delivers a reduced-quality product for the same price.

As much as it is wrong that people demand to be allowed to continue to consume entitlements, there is a point in the protests against panic-driven budget cuts. If government makes a promise, the right thing to do is to keep that promise.

The legislative error is not in the budget cuts, but in the very existence of the welfare state and its entitlements. These entitlements have given California chronic fiscal bronchitis – perpetual budget problems – against which the state legislators are prescribing marginal, annual budget cuts. But that medicine won’t work: it does not treat the underlying problem, namely the very existence of the welfare state. On the contrary, the budget cuts that are planned and have gone into effect in California are in fact designed to save the welfare state. After 25 years of growing entitlement spending faster than the state’s tax base, the lawmakers in Sacramento have teamed up with the governor to try to rein in the welfare state and make it fit what taxpayers can be expected to keep up with.

This is a losing strategy. The cost of an entitlement program is, again, defined by eligibility rules that are independent of what taxpayers are able to pay. Nowhere in Medicaid does it say that people can enroll and get services provided that taxpayers can afford to pay for them. Naturally so: the very definition of the welfare state is to give people what ideologues and politicians say that people have the right to, period.

California’s decline from the Golden State to the Entitlement State was a long, slow process. Ideologically charged politicians are fighting a panic-driven battle against the very behemoth that caused the state’s decline in the first place. They are going to lose that battle. California is heading for a Greek situation.

Unless, of course, Californians wake up and realize that the only solution is to eliminate the welfare state. If they do, the Entitlement State can once again become the Golden State.

Bill to Ban Self-Serve Alcohol Sales in California Lands on Governor's Desk

Brown Encouraged to Sign AB 183 to Help Reduce State’s Annual $38.4 Billion in Alcohol-Related Harm

Senate Members Applauded for Voting Yes to Reduce Youth Access to Alcohol

SAN FRANCISCO, Sept. 12, 2011 /PRNewswire-USNewswire/ — Alcohol Justice (formerly Marin Institute) is calling on California Governor Jerry Brown to quickly sign AB 183 to ban alcohol sales through self-serve checkout machines in California. The bill, authored by Assembly Member Fiona Ma (D-San Francisco), passed through the state Senate last week on a vote of 21 to 16 with 3 abstentions.

“We thank the Senators who voted yes on AB 183 and now ask the Governor to take quick action and sign it into law,” stated Michael Scippa, Public Affairs Director at Alcohol Justice. “The rise in self-serve checkout lanes in California stores that sell alcoholic beverages is creating a recipe for disaster. Easy access to alcohol is a key driver of underage drinking, which in turn causes violent crime, car crashes, and high-risk sex.”

Research over the past few years from UCLA and San Diego State University shows that self-checkout machines failed to operate properly almost 10% of the time when alcohol was scanned, and that up to 32% of the time students were not asked to show ID. Moreover, Metro United Methodist Urban Ministry found that young people were able to “game” the self-checkout system almost 70% of the time, by scanning a 12-pack of soda and bagging a 12-pack of beer. Also, self-serve checkout machines do not prevent already intoxicated adults form purchasing more alcohol.

“Unfortunately the main opponents of this bill, the California Chamber of Commerce and state grocer associations, chose to ignore the evidence-based data,” stated Jorge Castillo, Alcohol Justice Advocacy & Outreach Manager. They attempted to characterize the measure as a self-serving  ‘union-sponsored bill,’ but really only succeeded in showing their true colors – protecting profits instead of public health and safety.”

A broad alliance of supporters for AB 183 includes MADD, Consumer Federation of California, California Council on Alcohol Problems (CalCap), Lutheran Office of Public Policy – California, California Police Chiefs, Alcohol Justice, California Narcotic Officers Association, Metro United Methodist Urban Ministry, California’s Police Officers (PORAC), California Professional Firefighters, and other organizations throughout the state.  They campaigned for passage through the legislature and are now asking the Governor to sign AB 183 to protect youth and help reduce alcohol-related harm in California – a catastrophic annual $38.4 billion dollar drain on the state.

“In California we don’t allow ‘vending machine’ sales of dangerous products, like tobacco, spray paint, many drugs, guns and ammo,” added Scippa. “We should not allow the sale of alcohol, the most dangerous and abused drug of all, in any manner other than a face to face encounter with a trained clerk.  AB 183 will accomplish that as soon as the Governor signs it into law. We ask him to do it soon .”

To take action and send a message to Governor Brown, go to: http://bit.ly/nGzjyO

For more information on the dangers of self-serve alcohol sales, go to: http://bit.ly/nC0jnU

SOURCE Alcohol Justice

Babysitter Bill for the Nanny State

The powers that be in the government of Californiastan are addicts.  They are not addicted to drugs or alcohol or Dancing With the Stars (not all, anyway).  They are addicted to lawmaking.  They are addicted to laws.  The People’s Republic of California is a state with a full time legislature made up of a never-ending stream of “your money is our money” liberal Democrats.  With a $162/day per diem to exploit and no “real world” jobs to return to, our representatives have little else to do than sit around and make busywork for themselves.  That busywork nearly always translates into… you guessed it – more laws.  Want to be remembered in the annals of state history in perpetuity?  Get your name on a law and get it passed.  Want to have a tangible accomplishment to point to when as you half-heartedly campaign for a nearly surefire reelection against the latest fake Republican?  Get your name on a law and get it passed.  Want something to rub in your older brother’s face (you know, the one with the hot, semi-famous wife, 2 soccer star kids and 8 bedroom pad in Beverly Hills) at family gatherings?  Get your name….oh you get the idea.

San Fransisco has banned Happy Meals, Santa Monica has banned plastic bags, the legislature is already debating a bill to require hotels to use fitted sheets, and now the fine representatives of California introduce the “Babysitter Bill”.   AB889 is a bill supposedly designed to “extend basic, humane labor protections to thousands of nannies, caregivers, and house-cleaners.”, according to the bill’s co-sponsor (with Assemblyman V.Manuel Perez) Tom Ammiano.  The pending bill would require any domestic caregiver or worker over the age of 18 to be paid minimum wage, meal breaks and 15 minute rest breaks every two- four hours.  Yes, folks, you read that right.  When this bill passes, and it will because they all do here in Californiastan, you’re date nights will get a lot more expensive if you prefer to have adults watch your precious children.

Amy Wilson, communications director for Perez claims the scope of the bill has been greatly exaggerated. “AB 889 has nothing to do with babysitters,” says Wilson. “Unfortunately a press release from one of the bill’s critics was depicted as a news article on the Internet and it has been picked up and repeated by others who have not bothered to do the fact checking.”  She says the bill does not specifically include babysitters under the age of 18 and calling it the “Babysitter Bill”, as many have labeled it, is misleading.  But is it misleading?  Certainly this bill still leaves parents with the option of hiring a teenager to babysit, but what about during the day?  So far, school hasn’t been banned in California, so unless that changes, many parents are going to be left looking for adults to care for their children during normal working hours.  AB889 means they will need to look for TWO adults to care for their children: one main caretaker and another who will agree to come over only every two hours for 15 at a time plus one meal break, as to relieve the main caretaker.  TWO nannies!  Oh yes, and you’ll also need to keep paperwork for all this care-taking, because parents will be required to pay for workman’s comp insurance as well.  It’s the bill that keeps on giving!

Some of you parents may already be saying to yourselves, “That’s fine.  This is California and under-the-table (illegal) labor is not hard to find.  I’ll hire a Mexican “guest worker” and be done with it”.  Not so fast.  Yesterday Dept of Labor Secretary Hilda Solis signed an agreement with Latin American countries to protect the “rights” of illegal workers in the U.S.  That means that your “guest” nannies and housekeepers must be afforded typical workplace amenities and now have every right to walk off the job and report you to the authorities without any fear of repercussions like arrest or deportation.

The bill’s sponsors assert that it helps Californians, but its not hard to see that it actually is the opposite of helpful.  One needn’t be a genius to understand that a bill like this will result in families hiring LESS babysitting and domestic services, not more.  Who wants to fill out time cards and workman’s comp forms just to enjoy an afternoon alone at the mall?  Working families will be forced to give up jobs in order to stay home or will simply leave the state, which seems more likely.  As a matter of fact, with the California Dream Act passing today, it seems like legislators in this state are doing their level best to make sure as many productive, working people as possible leave, taking their tax dollars with them.  One would think that a state with a 25 billion dollar budget shortfall would be trying to woo back working taxpayers and make life easier for those that have chosen to stay and pay.  But this is Californiastan…the land that common sense forgot.

Some of America’s Infrastructure has Made in China Stamped on it?

With unemployment in California at 11.9% why on earth would they want to “outsource” the easiest jobs that can be created – construction jobs? The U.S. Transportation Secretary Ray LaHood had assured people in the U.S. that everything to do with all these infrastructure projects will be built using American Made products. Why is China building a section of the eastern span of the San Francisco-Oakland Bay Bridge?

$400 million dollars cheaper is why. California officials estimate that they will save at least $400 million by having so much of the work done in China. California issued bonds to finance the project, and will look to recoup the cost through tolls.

It turns out that China is getting lots of work here in the U.S. in New York City alone, Chinese companies have won contracts to help renovate the subway system, refurbish the Alexander Hamilton Bridge over the Harlem River and build a new Metro-North train platform near Yankee Stadium.

I sure hope with all these infrastructure projects that China is involved in are made better than “most” made in China products that I have ever seen – can you say CHEAP? I worked for years on a farm that my dad owns, I know how “cheap-made” China’s products are, same goes for Mexico. This is a major problem here in the U.S., it’s why the nation’s unemployment rate is a 9% average or more.

I may complain a lot about all this money being basically wasted on different things. But I am going to complain more when my tax money is going for things that we can make here in the U.S. that would give jobs to American workers. I think everyone would agree that if our tax money is going to be spent – then it needs to be spent in America – not another country.

When you look at the entire picture we will be losing more than construction jobs on this “China made” California bridge. It has to be transported from China by a Chinese boat and fuel for the boat will be from China. I could go on listing several things that America has lost by California outsourcing the construction of this bridge – but I won’t I think you get the picture.

Zhenhua the Chinese company building the bridge put 3,000 employees to work on the project: steel-cutters, welders, polishers and engineers. The company built the main bridge tower, which was shipped in mid-2009, and a total of 28 bridge decks — the massive triangular steel structures that will serve as the roadway platform. That is not all – to ensure the bridge meets safety standards, 250 employees and consultants working for the state of California and American Bridge/Fluor also took up residence in Shanghai.

We here in the United States must really owe China a lot of money. It is bad enough that we borrow money from China to give to other country’s – that sometimes don’t even like us – but we are giving them our jobs too! This needs to stop, I know we can build and manufacture these products here in the U.S. – it may be a little higher – but the quality is much better – and plus the money stays in this country.

Libertarian Steve Collett Launches TV Ad Campaign in CA’s 36th Congressional District Election

VENICE, Calif., May 16, 2011 — Libertarian congressional candidate Steve Collett has been airing a series of TV commercials for the Tuesday, May 17 election. Collett says he offers “win/win solutions where we actually get more by spending less.”

In the first ad Steve says, “We have 5% of the world’s population, but 25% of the world’s prisoners and we spend 43% of total world defense dollars. It’s tough to spread democracy and freedom with a gun.” The ads are running on CNN, MSNBC, The History Channel, Bravo and The Animal Planet.

In the second ad Steve is pictured with his two Great Pyrenees dogs and says, “Our war on drugs is the most costly and failed policy in U.S. history. By treating drugs as a medical rather than criminal issue, we can stop the killings in Mexico without firing a single shot.” He continues, “I believe in the right of each person to choose who they can marry and what they can do with their own body. We need to revoke the Patriot Act.”

Steve is running in an election which includes several prominent Democrats in a usually Democratic district, including teacher Marcy Winograd, California Secretary of State Debra Bowen, Los Angeles City Councilwoman Janice Hahn and newcomer Dan Adler. Collett is spreading a civil libertarian message which advocates marijuana decriminalization for adults, which he says discriminates against minorities and the less affluent who are disproportionately victimized by arrests, prosecution and imprisonment. Collett says, “I can out-Democrat the Democrats on civil rights. At the same time, I’m a fiscal conservative.”

Collett adds, “We are pouring our tax dollars down the drain on a military and prison industrial complex that knows no boundaries. We spend $700 billion a year on defense, which is more than the next eleven largest defense budgets put together. Republican proposals to slash Medicare and add another $100 billion to defense are a disgrace.” Prominent Republicans in the race include Redondo Beach Mayor Mike Gin, Hermosa Beach City Councilman Kit Bobko and social conservative Craig Huey.

Collett, 56, is a Certified Public Accountant who owns his own firm in Venice and has lived in Hermosa Beach for 24 years. He projects spending approximately $50,000 on his campaign and is the only non-major party candidate who has raised enough money to require a Federal Election Commission finance report.

“We need to stop subsidizing big oil companies and others who are making record profits while paying no taxes. We need to stop cuts to education to pay for wars in Iraq, Afghanistan and the war on drugs. We need to stop forcing the middle class to pay for intrusive government activities. We need to stop trying to pay for the mess on the backs of the sick, the elderly, the children and the poor.”

Collett says his “win/win solutions can save tens of thousands of lives, reduce income taxes for a hundred million U.S. taxpayers and make a billion lives a little bit better.”

Mr. Collett is running for U.S. Congress in California’s 36th District on May 17th, 2011.

If you would like more information, or to arrange an interview with Mr. Collett, please call (424) 672-0088 or email [email protected]


Steve Collett for Congress
1728 Abbot Kinney Blvd.
Venice, Calif. 90291
phone: (310) 477-2226
email: [email protected]
cell: (909) 641-7675