Judge Gives Pension-Ravaged Cities a Powerful Tool

From U-T San Diego:

A federal bankruptcy court’s ruling this week that the city of San Bernardino can file for bankruptcy protection has big implications for struggling local governments across California.

Judge Meredith Jury rejected the California Public Employees’ Retirement System’s claim that pension obligations couldn’t be reduced in bankruptcy proceedings. The judge expressed bafflement at CalPERS’ contention that San Bernardino exaggerated its woes. “They can’t make cash where it isn’t,” Jury said.

(Read Full Article)Downtown_San_Bernardino

Dozens of Bills Die in CA Legislature Committees

From The Sacramento Bee:

With California’s legislative session in its final days, state lawmakers pared dozens of bills from consideration Friday, including a measure to expand the independence of nurse practitioners.

They also halted the progress of a bill that would allow mothers who get pregnant while enrolled in CalWORKs to claim benefits for the child.

The appropriations committees in both houses considered their “suspense files,” the holding place for hundreds of bills that would cost the state more than $150,000 each to implement.

(Read Full Article)

Photo courtesy of jglazer75, flickr

Photo courtesy of jglazer75, flickr

Crowding Out is Everywhere

A defining characteristic of those who continuously push government activism is an abiding faith that the state’s interventions will benefit society.  For that to be true, the benefits must outweigh the costs.  As a result, self-interest tempts them to ignore or undercount anything that reveals some supposed panacea’s benefits to be lower, or its costs to be higher, than “advertised.”

That is why “crowding out” seems anathema to them. Just as Superman’s powers were degraded in the presence of Kryptonite, the supposed gains from liberal government interventions are degraded by taking crowding out into account.

The most common example involves government fiscal policy to “cure” recessions.  Stripped to its most basic level, liberal activists assert that increases in government spending will directly increase aggregate demand by the same amount, and trigger further multiplier effects in the economy.  Just let their Keynesian experts manipulate the spending lever and things will be better.

However, that approach ignores multiple forms of crowding out. The added government spending must be paid for in one way or another.  If it is financed with current taxation, the reduced take-home incomes of those forced to bear the burdens will crowd out some of what they would have spent (and any multiplier effects).  If it is financed by increased government deficits, that borrowing will absorb a larger fraction of society’s savings, leaving less to fund investment, so investment will be crowded out. Further, it will require higher future taxes as well, crowding out future investment and other spending.  And to the extent people recognize the future burdens implied by present policies, it will crowd out current consumption spending in order to pay them.  If deficit-induced increases in domestic real interest rates attract funds from overseas, they will increase the exchange value of the dollar and crowd out net exports. And while expansionary monetary policy can offset those effects for a period, it can do so only by delaying and worsening the day of reckoning.

Unfortunately, macroeconomic malpractice does not exhaust the cornucopia of overlooked crowding-out effects from government policies.

Americans’ savings are also subject to large crowding-out effects.

People have been led to substitute Social Security’s vastly under-funded promise of retirement benefits for funds they would have saved.  With less saved, less is invested, leaving fewer future output- and income-increasing tools, from hammers to factories, crowding out future production potential.

Medicare, whose unfunded liabilities far exceeds Social Security’s, similarly crowds out saving for future medical costs.  Medicaid coverage of nursing home costs, once other assets are nearly exhausted, crowds out still more.

Unemployment benefits, along with food stamps and other poverty programs, also crowd out citizens’ savings to provide a nest egg, “just in case.”  And as with any number of disasters, not to mention recent house price and mortgage problems, government steps in after the fact to assist those who “need” it, crowding out incentives for financial responsibility.

Aid programs also trigger fund diversions from donors’ intended purposes. Such crowding out taints food stamps, other in-kind transfer programs, cash aid, lottery funds for education, and humanitarian foreign aid, among other programs, by replacing money that would have otherwise been spent in areas of government sanctioned “need,” freeing those resources to be spent however recipients choose.

Food stamp (SNAP) benefits are perhaps the most straightforward example.  They are equivalent to a cash transfer for almost all recipients, because recipients would purchase more food than their benefit allotments. The benefits simply replace money recipients would have spent on food anyway, freeing that cash to use as they wish.  The attempt to increase food consumption is in large measure crowded out by that substitution.  The same issue faces other in-kind programs as well, such as housing and winter heating subsidies.  Money that would have been spent on those items privately is crowded out to whatever uses recipients select.

State lotteries promoted to supplement education funds crowd out other government budgetary support for education, with the dollars released spent however the state government decides.

Crowding out can hobble the effectiveness of humanitarian foreign aid, as well.  Giving humanitarian aid, say, medical supplies, to those who would have bought or produced them otherwise, has a far smaller effect in that humanitarian area, but frees up resources for whatever recipients desire (including for military spending, which can be used to repress citizens or threaten neighbors).  Yet again, crowding out effects are overlooked to maintain the illusion that government programs are more effective than they are in fact.

Crowding-out effects are created whenever government takes over some function previously left to individuals’ voluntary actions.  As the history of friendly societies and other voluntary groups illustrate, public welfare programs crowd out far more effective private charity, private insurance arrangements, family responsibility, etc.

There are multitudes of other examples.

Every tax introduces a wedge between what a buyer pays and what a seller receives, crowding out some specialization and exchange that would have benefitted both parties. (For example, our voluntary trading of something whose opportunity cost to you was $20, but was worth $25 to me, would create $5 of wealth; but if there was a $6 tax imposed, it would exceed the private gains from that arrangement.  The trade would no longer take place and the $5 of wealth it would have created is crowded out with it.)  Similarly, regulations, which act like taxes, and mandates, which raise costs, also crowd out production and wealth.

Rent-seeking (economists’ term for favor-seeking from the manipulation of government power, which necessarily harms others not favored) crowds out productive activities that would benefit others in favor of “investments” in stealing from others.

Minimum wages (along with living wages,Davis-Bacon prevailing wage laws and project labor agreements) crowd out on the job training (increasing workers’ skills and future earning prospects), other benefits or terms of employment; or they crowd out low skill jobs.

Rent controls and other housing regulations and burdensome requirements, crowd out rental housing by reducing property owners’ incentives to build and maintain it.

Food stamps and other means-tested benefits crowd out work, by effectively increasing their income taxes (via benefit reductions or elimination as income rises). Unemployment benefits crowd out reemployment by decreasing the cost of remaining unemployed.

Subsidies to favored producers crowd out production from others, who are not as politically popular.  Similarly, import restrictions (tariffs, quotas and non-tariff barriers, dressed up as solving various problems from “safety” assurance to “meeting domestic standards”) crowd out consumers’ ability to buy from suppliers that benefit them the most, given their situations and preferences.

There are also many other examples of crowding out, ranging from FDA regulations that crowd out the rapid introduction of new life-saving drugs to Corporate Average Fuel Economy (CAFÉ) standards that have crowded out automobile safety by leading to lighter cars.

Crowding-out effects caused by government interventions are everywhere, for those willing to look.  But those who push such alleged “solutions” simply fail to look, deceiving both themselves and others.  What has society gotten from the resulting cornucopia of such blindered policies imposed on it?  It has not advanced citizens’ “general welfare.”  But it has crowded out freedom, responsibility, independence,   frugality, fairness, voluntary arrangements, personal growth in character, family ties, and more.  In other words, the result has been a widespread demonstration of the adage, “The bigger the government, the smaller the citizen.”

(Gary M. Galles is a Professor of Economics at Pepperdine University.)

Obamacare Litmus Test: Lawmaker Perks

From Politico:

Leaders on Capitol Hill fought quietly behind the scenes for months to tweak Obamacare rules, so the government could keep making big premium payments for aides and lawmakers when they were pushed onto the new health care exchanges.

But that victory is turning into something else for Republicans up for reelection and in tight primary races across the country: the latest Obamacare purity test.
(Read Full Article)

Photo courtesy of Rob Crawley, flickr

Photo courtesy of Rob Crawley, flickr

The CAGOP’s Conundrum

From The Nooner:

There’s an internal debate within the California Republican Party about where to dedicate resources in 2014. Some believe that it’s essential for the party to compete in the gubernatorial race, even though Jerry Brown’s reelection is essentially signed, sealed and delivered. Others argue that it’s hopeless and the party’s limited resources should be spent in races that reduce the Democratic Party’s dominance in the legislature, with the goal of eliminating the Dem’s supermajority in both houses.

Last week, when Paul Mitchell and I presented at Hacks and PACs, Paul provided an outlook from Political Data (PDI) on likely 2014 primary voters. The projection is that 50% are DemPlus, 39% are RepPlus, and 11% are other. “Plus” is a categorization used by PDI that tries to identify voting behavior by identifying independent voters who behave like they are affiliated with a party. Thus, a “no party preference” voter who contributed to Mitt Romney is likely to consistently vote Republican, despite their independent registration.

 (Read Full Article)

California Cult Wines: Why Should We Care?

As the name suggests, “cult wine” is a somewhat opaque reference to a group of wineries in California that have a strong (almost a pseudo-religious) following among wine enthusiasts and collectors.  The dynamics of this cult oeno-worship are such that the typically very small supply is faced with a high demand.  At that point, economics kick in, and combined with the psychology of coveting that which is difficult to obtain, a cult wine is born.  In less hyperbolic terms, California cult wines are generally Napa wines that have the following characteristics:

1. Very small production;

2. A famous or (at least) a highly respected local wine-maker;

3. Very high scores from established critics – particularly Robert Parker;

4. High prices (approx. “retail” of $300 to $1000+ per bottle);

5. Sales through mailing lists that are preceded by waiting periods on a waiting list, with occasionally targeted small allocations to Michelin-starred restaurants and highly regarded charity auctions.

There are no absolute lines here, other than small production, great reviews, and vertiginous prices. Ultimately, cult wines are a marketing marriage of quality and branding.  There are many self proclaimed California cult wines, and so-called emerging cult wines… There is no absolute consensus and no actual classification as that in Bordeaux in 1855 establishing a rigid hierarchy. Notwithstanding, many would agree that the following wineries produce cult wines:

Screaming Eagle, Harlan, Grace Family, Colgin, Bryant, Aruajo, Sin Qua Non, Dalle Valle Maya, and perhaps a relative newcomer – Scarecrow.

The “second tier” of what might be considered a California Cult wine (but is up for debate) casts a much wider net, and might be comprised of such wines as: Hundred Acre, Verite, Abrue, Marcassin, Kapcsandy, Dana Estates, Levy & McClellan, Dunn, Ovid, Schrader, Saxum, and probably a number of others.  Some industry veterans explain that the original “cult” wines was Heitz Martha’s Vineyard, and indeed, Heitz Martha’s Vinyard from 1974 is epic, and in my opinion transcends the cult label, as arguably the most important wine ever to be produced in U.S.  It is only possible rival in terms of rarity and prestige might be the first bottling of Screaming Eagle in 1992.

Cult wines are often seen as trophy wines to be collected, shown off, or put down in private cellars or storage facilities with an eye for future resale as an investment (an alternative asset class).  Unfortunately, as “investors” in California cult wines have learned during the recent economic crisis, the mythical mailing lists wilted away, and prices on most of the California cult wines dropped off – often even below the mailing list prices. Elin McCoy, writing for Bloomberg, points this out in her article, Cult Wine Crowd Drops Off Elite Mailing Lists with $350 cabs. “On wine Web site bulletin boards, collectors are trading tales of paring their lists. One planned to purchase from only three of the seven in-demand wineries whose mailing-list offers he received last month. Others are splitting their allocations,” she writes.

The emergence of the cult movement coincided with trends in the 1990s towards riper fruit and wines with bigger and longer fruit finish.  This was what presumably what earned high scores from the Warren Buffett of Wine – Robert Parker.  These wines are generally very expensive and with tiny production (often fewer than 600 cases per year) often commanded even several times their mailing list “release price” in the secondary market (i.e. speculators, auctions, restaurants).  This market crashed around 2008/2009.  Moreover, it has not come back, and it unlikely will to the same extent.  The three possible exceptions might be Screaming Eagle and to some extent Bill Harlan’s marquee wine, Harlan out of Napa.  The other wine that weathered the cult crash is Manfred Krankle’s Sin Quo Non, a strange brew born out of a barn-like winery with weird and sometimes risqué hand drawn labels, and an uber concentrated taste that drives the Francophile purists crazy.  It is hard to predict the future of these three cult survivors, and if I had to bet, I would probably pick Screaming Eagle as the only one that would at least maintain value.

The critics of California cult wines have a great deal to say, and they have been saying for a long time – even before the cult wine mystique was shattered by the economy.  There are two, none mutually exclusive positions.  The first considers California cult designation elitist, and judges the distribution methods and attitudes as undeservingly elitist.  The underlying notion is that great wine should not be treated as a material obsession.  The second view comes from serious wine collectors and wine “purists”.  These are typically collectors of French wines – mostly Bordeaux and Burgundy.  They claim that California cult wines have no history, no mystique of French terroir, and that they are over-engineered, relying on clever marketing to earn their status and their coveted 100 points from Parker.

It is true that the best vintages of top Bordeaux and Burgundy stood up to economic downturns better than high priced California or other elite new world wines.  The best Burgundy wine has continued to increase in value, and may claim the investment wine status even more so than its much bigger neighbor, Bordeaux.  Regardless, California cult wines or those that claim to be the new cults are generally great wines, assuming you like California wine.  I believe that many could age longer than 10 years, but most of them are not an investment.  Ergo, California cult wines are more for drinking, and should be enjoyed just as many other attributes of California.

(Yuri Vanetik is a private investor, philanthropist, and wine collector.  He resides in Southern California, and occasionally writes about wine, politics, and the economy.)

SB 25: A ‘Surgical Strike’ Against CA Agriculture

California’s vital farm sector could see costs rise sharply if SB 25 becomes law. Backed by state Senate President Pro Tem Darrell Steinberg, it would allow the United Farm Workers labor union to force an employer into mandatory mediation at any time.

The bill would put farm workers under the state’s Mandatory Mediation and Conciliation law. Under that law, the California Agriculture Labor Relations Board could impose wages, terms and conditions of employment on the farm workers and the company itself. The terms of an agreement would decided by a single arbitrator/mediator, who meets with the employer and the union separately, and drafts the contract. Workers never would get to vote on the contract (as they do with collective-bargaining agreements).

The bill is sponsored by the United Farm Workers labor union, which has come under hard times since legendary co-founder Cesar Chavez died in 1993. As the Nation magazine reported in 2012, mismanagement has caused the union’s membership to nosedive from a peak of 50,000 to about 6,000 today.

Steinberg, a former labor union lawyer, is not only carrying the legislation, but using his considerable influence to get the bill signed into law.  SB 25  passed both houses of the Legislature and awaits a decision by Gov. Jerry Brown on whether to sign it.

Targeting successful agriculture

Farm owner Dan Gerawan calls Steinberg’s bill a “surgical strike against the industry.” SB 25 could wipe out Gerawan’s family-owned farm, currently employing 5,000 workers, as well as six other targeted farming businesses.

Farmers and growers could be forced into fast track mandatory binding mediation with a collective bargaining agreement. This would severely limit any due process an employer may have to appeal a mediator’s order to a court.

SB 25 would expand the use of mandatory mediation under California’s Agricultural Labor Relations Act of 1975, and would remove the current requirement that the employer must have committed an Unfair Labor Practice prior to mandatory mediation. SB 25 seeks to shorten the length of time it takes for a mediation decision to become binding, as well as reduce the number of negotiations that qualify for the process.

Dan Gerawan’s story depicts a state government seeking to encroach on private sector business. Gerawan says that, if SB 25 is signed into law, he could lose his business and thousands of his workers could lose their jobs.

He believes the real motive behind SB 25 targets his 5,000 workers, as well as other large farming companies’ workers. Forcing Gerawan’s workers into the UFW would almost double the union’s size — assuming the workers didn’t lose their jobs.rightcol-trees-overhead

Back to the future

The UFW won an election to organize Gerawan Farming more than 20 years ago. The election was certified by the California Agricultural Labor Relations Board in 1990. The UFW held only one meeting a couple of years later, then abandoned the farm due to lack of worker support, according to Gerawan. There was never a contract.

Gerawan has testified at each legislative committee hearing for SB 25 that his company offers the highest paying employment package in the industry; his workers don’t need or want the union.

“After campaigning to represent those workers over 20 years ago and being certified as their exclusive bargaining agent in 1992, the UFW did essentially nothing to represent those workers,” Gerawan said.

Then, without warning, the UFW union reentered the scene in late 2012, claiming it represented Gerawan’s workers.

“To our knowledge, the UFW has never asserted, as a justification for its failure to do anything, an alleged statement by us that we would not sign a contract,” Gerawan explained. “They didn’t file unfair labor practice charges, or even send us a letter, or call us in 20 years.”

The UFW recently invoked the Agricultural Labor Relations Act, and the California Agricultural Labor Relations Board compelled Gerawan Farming into Mandatory Mediation and Conciliation.

The UFW has invoked the law only a few times since 1975 because the union cannot use mediation until it gains contracts. According to Gerawan, the union has been largely unsuccessful in its attempts to organize workers in the last two decades. “The UFW is so inept,” Gerawan said. “They abandoned the workers, and now they are back to pick the pockets of the highest paid workers in the industry.”

 Legislative target

“The UFW won a contested election at my family’s company 23 years ago,” Gerawan first told me in June. “But after only one bargaining session, they disappeared. The UFW completely abandoned the workers. We have no right to opt-out. Neither do our workers. They won’t be asked to ratify this contract. They won’t be asked to authorize the UFW to negotiate. They are not given that choice.”

SB 25 would be a weapon so powerful there would no longer be a need to negotiate with the UFW, only to capitulate to union demands, according to Gerawan.

Card-check

In 2011, Steinberg authored SB 104, which sought to give the UFW the ability to organize farm workers by using a card-check system. Card-check allows a union to organize if a majority of employees simply sign a card. The card is then made public to the employer, the union organizers and co-workers. It’s easy to intimidate workers into signing because there’s no secret  ballot.

Brown vetoed SB 104 and said he wasn’t convinced the ALRA needed the drastic changes to the law. Brown signed California’s 1975 Agricultural Labor Relations Act into law during his first stint as governor. The ALRA provides many of the worker protections that previously needed to be negotiated in union contracts.

Political pressure

Simultaneously, while Steinberg is losing no time pushing SB 25 through the Legislature, the UFW and ALRB mandatory mediation is speeding toward a board-ordered contract, according to Gerawan.

Gerawan was in the Capitol on August 15 with a large group of farm workers who also oppose SB 25, meeting with lawmakers about the ramifications of SB 25.

“No staff or member argued that there was anything fair about the bill,” Gerawan said. “They all agreed it sounded unfair. Many Democrats seemed actually outraged over it.” However, Gerawan said there is tremendous political pressure on lawmakers from Steinberg.

Gerawan said he’s not giving up the fight. “SB 25 will put us out of business,” Gerawan said. “Out of earshot of my employees, I stepped back into the legislators’ offices when I was at the Capitol last week, and told lawmakers this.”

Gerawan said he is hopeful for a veto from Brown.

(Katy Grimes is CalWatchdog’s news reporter. Grimes is a longtime political analyst, writer and journalist. Grimes has written columns for The Sacramento Union, The Washington Examiner, The San Francisco Examiner and The Sacramento Bee. Originally published on CalWatchdog.)

Will California Become Detroit on the Pacific?

(Editor’s Note: California Political Review has been following this situation for a few years now, and we are re-releasing past articles detailing the state’s challenges.)

Environmentalists have used the allusion of the canary in the mineshaft when describing the importance of protecting the endangered Desert Sand Fly, Stephens Kangaroo Rat or the infamous Delta Smelt. By placing these insignificant creatures on the Endangered Species List, they were able to stop construction of hospitals, schools, roads and homes. And in the case of the Delta Smelt, they turned off water to countless farms in the fertile Central Valley of California.

Long ago, the death of a canary in a mineshaft signaled the presence of poisonous gases that would imperil miners. Today, environmentalists argue that the loss of the slightest of creatures is a signal of man’s impending doom. Policies like the Endangered Species Act worked — not to save species, but to slow or stop development. Countless jobs were lost by the imposition of such noble logic. Initially created to protect the American Bald Eagle, according to the Scientific American, only 1 percent of species (20 out of 2,000) under the protection of ESA have recovered to qualify for being taken off the endangered list.

It is time to use this same allusion to analyze the aggressive policies of the Progressive Movement in America as they seek to create their vision of a Blue Utopia in America. One must study the impact of their policies, not on canaries, but to the plight of hard-working American families. Will the canary warn us of the poisonous economic gases of Progressive policies? Or has the canary already died? Look no further than Detroit as a city and California as a state before entering the economic future mine shaft of our nation.

Detroit: A Model City in Blue Utopia

In the 1950ss and 60s, Detroit was the fourth largest city in the United States, with arguably the highest median income, the highest percentage of home ownership and the highest standard of living in the country. The industrial capacity of Japan, Germany, France and England had been decimated by war. America, the “arsenal of democracy” protected by oceans, stood alone with an untouched industrial capacity able to supply the Baby Boom population with the new suburban homes, appliances and cars they wanted.

Detroit’s workers had plenty of good-paying jobs thanks to the dominance of the auto industry. Detroit had modern skyscrapers, mass-transit trolley cars and great public services — water, sewer, roads, public schools and libraries. It had museums, parks, a symphony orchestra and a world-class zoo. Its sports teams included Lions, Tigers, Pistons and Red Wings. Detroit worked. Its weather was not great, but no worse than Cleveland, Philadelphia, New York or Boston. This was Detroit’s Golden Era.

After 1962, backed by the powerful unions of the auto industry, Detroit tilted from a two-party political system to one-party rule. Democrats, fueled by union contributions, routed Republicans from office and had their way governing Detroit for the next 50 years. They brought $400 million in federal funds to Detroit from President Lyndon Johnson’s Great Society and “Model Cities” initiatives. Their progressive policies were unchallenged.

With one-party rule, the Progressives were able to impose their utopian ideas on the bluest of American cities without political debate. What did their vision of Blue Utopia create? In 1967, Detroit burned. During horrific race riots, 2.500 businesses burned to the ground and 43 people were killed. That same year saw 67,000 people move out of the city and another 80,000 followed in 1968.

With the election of Coleman Young in 1973 as the nation’s first black mayor, the shift to Progressive policies supported by massive federal funding was complete. Detroit’s Golden Era was gone. The canary was dead. The proof is history itself.

Detroit in 2012 is a shadow of its former self. Its population has shrunk from 1,849,568 in 1950 to 706,000. Of 12,103 babies born in Detroit in 2009, 75.4 percent were born to unmarried women (2010 Census Bureau survey). Unemployment officially stands at 29 percent. But Mayor Dave Bing said at a recent White House Jobs Summit that Detroit’s unemployment rate was “probably close to 50 percent.”

Bing, like every Detroit mayor since 1962, went to Washington to press the federal government to channel more money directly into the city. There are between 100,000 and 200,000 vacant houses in the city and the average home price has fallen below $10,000. That unimaginable number is not a typo but a symbol of reality in modern Detroit. Over 500 arson fires are set in the city of Detroit per month.

According to one report, “The Detroit Fire Commissioner, Donald Austin has suggested that it be wiser for the sake of cost and safety, to allow some vacant structures to burn when set on fire by arsonists. He has suggested the fire department handle the fire as a controlled burn, rather than extinguish the fire and leave a half burnt down shell that poses the danger of an unpredicted collapse.”

In 2010, Detroit Mayor Dave Bing proposed a radical plan to bulldoze 40 square miles of the city (25 percent), turning it back into pre-1950′s farmland. Economics writer Benjamin Clement wrote in an article, “Detroit: America’s War Torn City“:

Visiting Detroit is the closest Americans can come to viewing what appears to be a war-torn city without leaving the U.S. This former powerhouse is a barren stretch of land, devastated by looters and full of run-down, vacant houses. Rows upon rows of dilapidated structures line the streets; empty apartment buildings and factories consume the landscape. Almost a third of Detroit has been abandoned.”

Detroit once manufactured 5 million cars per year and now produces just 2 million. Detroit has been ruled for 50 years by one party, which is funded by the once-powerful labor unions. In the 1970s, the unions arrogantly ignored low-priced Japanese imports and allowed Toyota and Nissan to take their jobs. They refused to make wage concessions when manufacturers threatened to move to Ohio, Alabama and South Carolina — and lost more jobs.

As even more automobile manufacturing was outsourced under the North American Free Trade Agreement, the unions had become too weak to block the legislation in 1994. Understandably when jobs left, people followed in search of work, just as in the dust bowl days. Detroit today is a city on life support; its factories silent, its jobs gone, its coffers empty, its schools bankrupt and its families ripped asunder.

In 1960, no one could envision the rapidity of Detroit’s decline. How could this happen in Blue Utopia?

California: Today’s Blue Utopia

Spanish-American philosopher George Santayana said, “Those who cannot remember the past are condemned to repeat it.” Californian’s political leaders ignore the canary lying on the bottom of its cage and blindly follow Detroit’s model.

Last November, California voters vanquished the last of the state Republicans, leaving no Republican holding statewide public office. Democrats, capturing supermajorities in both the state Senate and the Assembly, no longer need a single Republican vote to pass legislation, including tax increases. They are fueled by powerful labor unions that collect dues from teachers and public employees to fund campaigns that guarantee the re-election of their proxies in the Legislature, who vote higher and higher benefits to union members.

City after city faces bankruptcy and ruin from massive unfunded pension obligations that allow lifeguards in Newport Beach to retire at 50 years old with $108,000 annual pensions for life. The Stanford Institute for Economic Policy Research reported in Feb.  2012 that local governments have $200 billion in unfunded pension obligations that will consume 17 percent of municipal budgets. An earlier report in 2010 revealed the State of California has $500 billion in unfunded pension obligations.

Gov. Arnold Schwarzenegger issued a supposed hiring freeze during the worst of the 2008-2009 recession. Yet the state continued to hire more workers, adding over 13,000 employees in 2008-2009.  Salaries that fuel high pension costs are also out of control. U.C. Berkeley’s “Institute for Research on Labor and Employment” produced a detailed policy paper entitled “The Truth about Public Employees in California” that revealed the following:

* The average public sector worker makes $65,000 per year, plus pension, health and vacation benefits, making their average total compensation $102,225 per year.

* The average private sector worker makes $46,500 per year, plus pension, health and vacation benefits, making their average total compensation $57,558 per year.

With policies like this, California ran $20 billion deficits year after year. Gov. Jerry Brown declared California should generate a surplus this year with the passage of Proposition 30, which raised the top state income tax on the wealthy to 13.3 percent — higher than top tax rate in Russia. And Californians also have to pay the 39.6 percent top federal income tax rate.

But  Brown and his fellow Progressives have plans to spend this tax windfall on new state spending like a Bullet Train between Fresno and Bakersfield that will cost $68 billion.

California’s schools once were the envy of the world. This is no longer true. Journalist Peter Schrag describes it as the “Mississippification” of California.

California voters and politicians have drained education’s coffers to pay for prolific spending elsewhere in the state budget. In 2011, public colleges and universities received 13 percent less in state money than they had in 1980 (when adjusted for inflation). Its Community College system lost $809 million — or 12 percent of their state funding — since 2008. The state’s K-12 education system now ranks 49th in state spending per pupil. California could face a shortfall of a million skilled workers by 2025.

According to Columnist David Spady, California local school districts have become some of the worst abusers of passing on debt to future generations. In Poway, voters approved borrowing $105 million for its schools. Payments of $50 million per year begin in 20 years, with total repayment of $981 million. Voters shackled future residents with a terrible burden for spending today.

Poway is not alone. In response to reduced funding, since 2007 school districts in California borrowed $7 billion for new construction projects using Capital Appreciation Bonds that feature no payments for 20 years.

The Central Valley, once the food basket of America, found its water diverted from farms to the ocean to “protect” the Delta Smelt. To protect this tiny fish, otherwise known as bait, water was diverted from farms, eliminating 37,000 jobs and leaving 300,000 acres fallow. Unemployment in the Central Valley is now 40 percent in places with farm workers relying on food stamps to feed their families.

With unemployment in California officially near 10 percent, but practically around 15 percent, people continue to migrate out of the Golden State in search of jobs and opportunities elsewhere. It is understandable and the consequences are obvious.

This migration, which began two decades ago, has now picked up speed with new taxes on the wealthy and the successful fund the Progressive vision of Blue Utopia. Golfer Phil Mickelson was ridiculed for stating the obvious — that he might have to leave California. With the new California taxes imposed by Prop. 30, Mickelson’s “fair share” is around $8 million per year — $22,000 per day or $1,000 per hour — for the privilege of living in their Blue Utopia. Can anyone blame Mickelson when he moves to Florida, where there is no state income tax?

Blue Utopia America?

We have a Progressive President who, with his re-election, made it clear he plans to pursue a Progressive agenda. He wants clean water, clean air and green energy. He proclaims Republicans want dirty air and dirty water and oppose him on green energy. He would like nothing less than one party rule so he can impose his vision of Blue Utopia on America.

If Americans paid attention to the past, they might not be condemned to repeat it. If they were paying attention now, they would notice the canary in their mineshaft gasping for breath. If they studied the policies that have already failed miserably, making Detroit a third world city, they could change course and save the Golden State. If our leaders in Washington did the same, they would know better than to push us down this path. The problem is we do not teach history anymore. And if Americans cannot remember their own past, they too will be condemned to repeat it.

(Robert J. Cristiano PhD is a successful real estate developer and the Real Estate Professional in Residence at Chapman University in Orange, CA. Originally published on CalWatchdog, 02/18/2013.)

The Difference Between Liberal and Conservative

Equal Treatment

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