Public Sector Unions – The Other Deep State

When government fails, public-sector unions win. When society fragments, public-sector unions consolidate their power. When citizenship itself becomes less meaningful, and the benefits of American citizenship wither, government unions offer an exclusive solidarity.

Government unions insulate their members from the challenges facing ordinary private citizens. On every major issue of our time; globalization, immigration, climate change, the integrity of our elections, crime and punishment, regulations, government spending, and fiscal reform, the interests and political bias of public-sector unions is inherently in conflict with the public interest. Today, there may be no greater core threat to the freedom and prosperity of the American people.

In the age of talk radio, the Tea Party movement, internet connectivity, and Trump, Americans finally are mobilizing against the uniparty to take back their nation. Yet the threat of public-sector unions typically is a sideshow, when it ought to occupy center stage. They are the greatest menace to American civilization that nobody seems to be talking about. Ask the average American what the difference is between a government union, and a private sector union, and you’re likely to be met with an uncomprehending stare. That’s too bad, because the differences are profound.

While America’s labor movement has always included in its ranks varying percentages of crooks, Communists, and thugs, it derived its mass appeal based on legitimate and often compelling grievances. Most of the benefits American workers take for granted—certainly including overtime pay, sick leave, and safe working conditions—were negotiated by private sector unions.

Over time, private sector unions overreached, negotiating pay and benefits packages that became unsustainable as foreign manufacturers slowly recovered from the devastation of World War II and became competitive. The diminished influence of private sector unions parallels the decline in American manufacturing, a decline only partially caused by insufficient flexibility on the part of union negotiators in a changing world. Properly regulated, private sector unions may still play a vital role in American life.

Differences Between Public and Private Sector Unions

Public-sector unions are a completely different story. If Americans fully understood the differences between public and private sector unions, public-sector unions would probably be illegal.

Public-sector unions do not negotiate with management accountable to shareholders, but instead with politicians whom they help elect and, therefore, are accountable to the unions. Moreover, politicians, unlike corporate executives, typically occupy their offices for shorter periods of time. And politicians, unlike corporate executives, don’t own shares that might be devalued after they leave office due to decisions they made while in office.

Not only are politicians far more accountable to the unions they negotiate with than to the people they serve, but the consequences of giving in to outrageous demands from public-sector unions are much less immediate and personal for the politicians. When a corporate executive gives in to union demands that are unsustainable, the corporation goes out of business. Union negotiators know this, and in the private sector, the possibility of business failure tempers their demands. But the survival of government agencies doesn’t depend on efficiently competing in a market economy where consumers voluntarily choose to purchase their product or service. When government agencies incur expenses that exceed revenues, they raise revenues by increasing taxes. Consumers have no choice but to pay the higher taxes or go to jail.

If electing their own bosses and compelling taxpayers to guarantee revenue sufficient to fulfill their demands weren’t enough, public-sector unions have another advantage denied private sector unions. They operate the machinery of government. Their members run our public schools, our transportation agencies, our public utilities, our administrative bureaucracies including code enforcement and construction permitting, our public safety agencies; everything. This confers countless unique advantages. Depending on the intensity of the issue, the percentage of unionized government employees willing to use their positions as influencers, educators, gatekeepers, and enforcers may vary. But within the permanent bureaucracy of government, it doesn’t take a very large minority of committed operatives to wield decisive power.

Public-sector unions epitomize the establishment. Politicians come and go. But like the deep state, public-sector unions are permanent, embedded in the bureaucracy, running the show.

How Public-Sector Unions Arose

While the rise of public-sector unions paralleled the rise of the private sector labor movement in the United States, it lagged behind by decades. Apart from the postal workers’ unions that emerged in the late 19th century, or the Boston police strike of 1919—which was decisively suppressed by then-Massachusetts Governor Calvin Coolidge—there wasn’t much support for public-sector unions in the early 20th century.

During the 1930s, as private sector unions acquired federal protections via the Wagner Act of 1935, public-sector unions remained unusual apart from the postal workers. Historians disagree about President Franklin D. Roosevelt’s position on public-sector unions, but it is reasonably clear that even if he did support them, he did not think they should have the degree of protection afforded private sector unions. His most quoted remark on the topic was in a 1937 letter to the president of the National Federation of Federal Employees:

“All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters. Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderliness and continuity in the conduct of Government activities. This obligation is paramount. Since their own services have to do with the functioning of the Government, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable.”

The fact that FDR, a pro-labor Democrat, had a nuanced position on public-sector unions, believing that collective bargaining had “distinct and insurmountable limitations when applied to public personnel management,” ought to be strong evidence that they are problematic. Not quite 20 years later, in 1955, none other than George Meany, founder and long-time president of the AFL-CIO, flatly stated that it was “impossible to bargain collectively with the government,” and that the AFL-CIO did not intend to reach out to workers in that sector.

But where common sense and propriety inhibited some of the most illustrious supporters of organized labor from unionizing the public sector during the first half of the 20th century, circumstances changed during the century’s latter half. Corruption, opportunism, and a chance to achieve decisive power for the Democratic Party gave rise to new laws that enabled unionized government.

The modern era of public sector unionism began in the late 1950s. Starting in Wisconsin in 1958, state and local employees gradually were permitted to organize. Today, there are only four states that explicitly prohibit collective bargaining by public employees, and only 11 additional states place any restrictions on collective bargaining by public employees.

According to the U.S. Bureau of Labor Statistics, 7.2 million employees in the public sector belonged to a union in 2018, compared with 7.6 million workers in the private sector. Union membership among public-sector workers is more than five times higher (33.9 percent) than that of private-sector workers (6.4 percent). After a slow start, public-sector unions now wield far more power than their private-sector counterparts.

How Public-Sector Unions Fought for Clinton in 2016

Everyone knows that in 2016, Donald Trump—and Bernie Sanders, for that matter—were not “establishment” candidates. But what is that? America’s so-called establishment today is a political alliance favoring bigger, more authoritarian government at all levels—local, state, federal and international. It unites transnational corporations, global financial interests, and government unions. It is an alliance that finds its primary support from members of these elites and the professional classes who serve them, and acquires a critical mass of additional popular support by pandering to the carefully nurtured resentments of anyone who is deemed a member of a “protected status group.”

While “protected status groups” now include nearly everyone living everywhere in America, those people living in urban areas are more susceptible to the union-sponsored propaganda of identity politics, because they are more exposed to it.

For over a generation, especially in California’s urban centers, but also in Chicago, Seattle, Miami, New York City, and hundreds of other major American cities, government unions have exercised nearly absolute control over the political process. This extends not only to city councils but also to county boards of supervisors, school boards, and special districts ranging from transit systems to departments of water and power. Most government funding is spent at this local level. Most government jobs are at this local level. And the more local these jurisdictions get, the more likely it is that only the government unions have the money and the will to dominate the elections.

In America’s cities, where the union agenda that controls public education trains Americans to be hypersensitive to any alleged infringements on their “identity,” big government is presented as the guardian of their futures and their freedoms. In America’s cities, where poor education combined with over-regulation has resulted in a paucity of good jobs, welfare and entitlement programs are presented as the government’s answer. And the more poverty and social instability we have in America, the bigger government gets.

Take another look at this map that depicts the absolute vote margins by county in 2016. From viewing this map, it is evident that the split that was exposed on November 8, 2016, was not simply urban versus rural. It was government union-controlled areas versus places relatively free of government union influence.

From the above map, only a few places stand out as decisive factors in Clinton’s popular vote victory—Seattle, Miami, New York City, and most prominently, Los Angeles and Chicago.

In Los Angeles County, Clinton received 1,893,770 votes versus 620,285 for Trump. In Chicago’s Cook County, Clinton received 1,528,582 votes versus 440,213 for Trump. Let that sink in for a moment. If just a few blue counties—not blue states, blue counties—were taken out of the equation, the popular vote would have been a toss-up. The political systems and the public schools in all of these blue counties are controlled, many informed observers would say absolutely, by public-sector unions.

Government Union Agenda vs. the Public Interest

It would be cynical and unfair to suggest that politically savvy members and leaders of public-sector unions are consciously supporting policies that undermine America’s democracy, prosperity, freedoms, and culture. But that’s what’s happening.

It doesn’t matter all that much what union members and leaders think; the institutional momentum of their organizations have this effect. The primary agenda of a government union, like any organization, is to survive and thrive. For government unions, this means to acquire more members, collect more dues, and acquire more power and influence. The only way this can be accomplished is for government to expand.

This is where government union reform should be a nonpartisan issue. Because even big-government advocates have the expectation that expanded government programs will be effective. But government unions actually become more prosperous and more powerful when government fails—and, for that matter, when society fails. The worse things get, the more calls there are for new government programs to solve them. The bigger the crisis, the greater the opportunity. And at the forefront of these calls for bigger government to solve every problem are the government unions, using all of their considerable power and influence to make the call.

We see this at the local level all the time. Thousands of local tax and bond measures are placed on ballots across the nation every election cycle, as well as between elections, during primary season, and in special elections. Opposing these proposed new taxes and bonds are the usual hardscrabble assortment of local anti-tax activists; typically a handful of volunteers with almost no money. Supporting these new taxes and bonds are public-sector unions, with standing armies of professionals and, for all practical purposes, unlimited funds. Also supporting the new taxes are the private contractors that stand to gain from the increased spending, as well as the government bureaucrats themselves, who use municipal budgets to fund “information outreach” to voters. But for these unions, the victory is sealed when the new taxes and bonds are approved. If the new revenue they collect and spend fails to solve the problem, it doesn’t really matter.

At the state and national level, it is easy to see the influence of government unions corrupts public policy.

Immigration and climate change are core issues where the inherent interests of government unions are in conflict with the public interest. Immigration to the United States in the 21st century should consist of highly skilled and highly educated immigrants, since America already has millions of unskilled residents who need to choose jobs over welfare. But while the American people would benefit by inviting scientists, engineers, and doctors to immigrate and fill advanced positions for which there is a shortage of qualified applicants, it would not benefit government unions.

The more difficulty America has in assimilating newcomers, the more government jobs are created. If immigrants don’t speak English, public schools must hire teachers with foreign language certifications. If they live in poverty, public schools must develop free-meal programs. If these immigrant communities fail to achieve the educational results that make them employable, the government will need more social workers and welfare administrators. If the ongoing poverty breeds higher crime rates, more police, judges, bailiffs, prison guards, and probation officers are the answer. The worse things get, the more government employees and government benefits become necessary.

And, of course, as these communities fail to become prosperous, they are taught by leftist, unionized social studies teachers that it’s not their responsibility, but rather the fault of their white male oppressors, and they’d better vote for Democrats in order to guarantee their reparative handouts. And to enforce “diversity” quotas—unionized government bureaucrats.

With climate change, the conflict between government unions and the public interest is equally stark. Here again, there is also a strong connection between connected government contractors and the public-sector unions. Instead of building subsidized housing, special needs school facilities, and more prisons—which come with marginally assimilable immigrants—these contractors supply solar farms, wind farms, “smart” appliances, and everything else that comes with mandated climate change mitigation. It doesn’t matter if any of these mandates accomplish anything, so long as profits are made. And overseeing it all are the government unions, who hire more code inspectors, environmental consultants, and a byzantine monitoring and enforcement bureaucracy.

While immigration and climate change are core drivers of government union endorsed government expansion, they aren’t the only factors. In every area of policy and spending, government unions benefit when things are harder for ordinary families and small businesses. In all areas, taxes, borrowing, spending, and regulations, the more there is, the more the government unions benefit.

The Financial Power of Public-Sector Unions

One of the primary reasons government union activists exercise influence disproportionate to their numbers is because behind these activists are billions of dollars in annual dues, collected from government payroll departments across the nation.

In California alone, government unions collect and spend nearly $1 billion a year. Nationwide, government union revenues are estimated to total at least $6 billion per year. Apart from private sector unions, no other political special interest enjoys access to a guaranteed, perennial torrent of money of comparable magnitude. This money is not just spent on federal elections; most of it is directed at tens of thousands of state and local election campaigns.

With this perpetual torrent of funding, fueled almost exclusively through membership dues, government unions engage the permanent services of the finest professionals money can buy. While much of their spending is explicitly political, even more is spent on community organizing and “educational” advocacy which is not reportable as political spending. Thousands of lobbyists, political consultants, grassroots organizers, public relations firms, opposition researchers, academic researchers, and other freelancers are on-call to these unions.

If you study money in politics, you soon realize there is a rough parity between major political donors who contribute to causes and candidates on the Right versus those who contribute to the Left. But the election of Donald Trump in 2016 revealed the so-called Right to be nearly as bad as the Left, as libertarians and NeverTrump Republicans abandoned their base. This abandonment was especially obvious among donors, whose only apparent unifying political theme was lower taxes for wealthy people. Trump and his supporters exposed the libertarian and NeverTrump Right for being just as committed as the establishment Left was to importing workers to drive down wages and exporting jobs to increase corporate profits. As a result, donations to Republicans, while remaining roughly at parity with donations to Democrats, were for the most part not supporting an America First agenda.

An illustration of how this schism within the American Right, and especially among big libertarian donors, persisted into the 2018 midterms is exemplified by their withdrawal of key financial support for pro-Trump candidates. And here’s where the union money becomes decisive. Into the political conflict between Left and Right, between Democrat and Republican, into a battle for financial supremacy already skewed, because half the Republican donors are now exposed as being more committed to a uniparty establishment than to Republican voters, ride the unions. And almost all of the union money goes to Democrats.

The lack of parity in political power and political advocacy becomes further lopsided when accounting for the role of nonprofits and government bureaucracies. Much has been made of the educational nonprofits supposedly beholden to right-wing donors. Their collective spending is indeed impressive, led by heavyweights like the Heritage Foundation, along with well-known stalwarts such as the Cato Institute, the Reason Foundation, and several others at the national level along with a growing number of state focused organizations such as the many member organizations of the State Policy Network.

But contrary to the wailing of the establishment media and left-wing pundits, the influence of these organizations is overstated.

First, many of them must adhere to orthodox libertarian principles in order to keep their donors. This makes them useless on immigration and trade, which are two of the defining issues of our time.

Second, because arrayed against these organizations is the entire rest of the nonprofit universe, which while mostly self-declared as nonpartisan, is in reality a part of that great mass of establishment organizations that have reached a consensus on open borders, “free” trade, and climate change activism consistent with the big government coalition: corporations, government unions, and the financial sector.

To provide one example, the combined budget of just a partial list of the major U.S.-based environmentalist nonprofits and foundations totaled over $4 billion per year as of 2018.

The Financial and Cultural Consequences of Unionized Government

Spokespersons for government employee unions perpetuate a myth of staggering absurdity and tragic consequences—that they are protecting hard-working Americans from wealthy corporations and wealthy individuals.

The reality is that government employee unions are focused on one thing: expanding government employee pay, benefits, and privileges. This requires expanding government, and that priority comes in front of everything else, including the cost to society at large. In states where government unions have taken control, such as California, expansive environmentalist regulations have made prices for housing and utilities the highest in the nation. In California, America’s poster child for union control, excessive compensation packages for unionized government workers have resulted in chronic deficits and accumulating state and local government debt that by some measures already exceeds $1.5 trillion. High taxes and over-regulation have made California consistently rank as the most inhospitable place in the nation to run a small business.

Exactly how does any of this protect the poor from the wealthy?

It doesn’t, of course. But the deeper story is how government employee unions are not only failing to “protect” the aspiring multitudes in California, or anywhere else in America, but are in fact enabling the wealthy special interests they claim to protect us from. The most entrenched and massive corporate entities are not harmed by excessive regulations, because they can afford to comply. An obvious example would be calls to increase the minimum wage– a movement almost exclusively restricted to states with powerful public-sector unions. Large corporate entities like McDonald’s will simply automate a few positions, tinker with the menu and recipes, incrementally raise prices, and go forward. Large corporations can hire attorneys and lobbyists, they have access to capital, and when the smaller players go out of business they gain market share. They benefit from over-regulation, but the consumer and workers suffer.

Less obvious but far more consequential is how the financial sector also benefits from an overbuilt, financially irresponsible, unionized government. When excessive rates of pay and benefits consume government budgets, financial institutions step up to extend debt. Bond underwriters collect billions each year in fees to issue new debt and refinance existing debt. When excessively generous pension plans are granted to unionized government employees, pension funds pour hundreds of billions into Wall Street investment firms, earning additional billions in fees. As for “carbon emissions auctions,” also rolling out inexorably in blue states, as that ramps up, virtually every BTU of fossil fuel energy consumed will put a commission into the hands of a financial intermediary. Trillions are on the table.

Unionized government hides behind environmentalism to justify increasing pay and benefits over-investment in infrastructure—which after all is environmentally incorrect. As the cost-of-living inevitably rises through artificial constraints on the supply of land and energy, the unionized government workers negotiate even higher pay and benefits to compensate, and the corporate monopolies that control existing supplies of land and energy get more revenue and profit. And of course the resultant asset bubble is healthy both for pension funds and wealthy investors, even as low and middle-class private-sector workers are priced out of owning homes—or even automobiles—and struggle to make ends meet.

It is crucial to perceive the irony. Government unions empower the worst elements of the capitalist system they persistently demonize. The crony capitalists and speculative financial interests benefit from an overbuilt, over-regulating, state and local government populated with overpaid unionized workers. Those virtuous capitalists who want to compete without subsidies are successfully lumped together with these robber barons, discrediting their support for reform. Those small business owners who want to grow their enterprises are harassed and marginalized.

If government employee unions were illegal, the most powerful political force in California, New York, Illinois, Massachusetts, and a host of other smaller blue states would cease to exist. But losing these government unions wouldn’t “turn government over to the corporations and billionaires.” Quite the opposite. It would take away the ability of those corporations and billionaires to collude with local and state government unions who currently control the lawmakers. It would force them instead to compete with each other, lowering the cost of living for everyone. It would restore balance to our debate over environmental policy, energy policy, and infrastructure investment.

Wherever government unions become as powerful as they have become in California, their domain increasingly becomes a feudal state, where the anointed and compliant corporations build monopolies, government workers lead privileged lives, the rich get richer, the middle class diminishes, and the poor become dependent on government. Nobody who is serious about reversing California’s decline into feudalism—or America’s potential decline—can ignore the fundamental enabling role unionized government is playing.

It is important to emphasize that the most ominous consequence of unionized government is its complicity in the asset bubbles that, if abruptly deflated, threaten to plunge the United States, if not the world, into a liquidity crisis. Government unions in the United States control the directorships managing trillions of dollars of public employee pension funds. These pension funds are the biggest single player in the U.S. equity markets. They are also major investors in real estate and bonds. One may argue all day as to just how inflated all these asset classes have become, but regardless of your stance on the question, one thing is indisputable: public employee pension funds are dangerously underfunded despite the fact that there has been a bull market in stocks, bonds, and real estate for over a decade. They will use all their influence to keep the bubbles inflated—and that includes ongoing support for extreme environmentalist regulations to create artificial scarcity of everything—houses, energy, water, food, commodities—buoying their prices which boosts profits, as well as mass immigration to create unmanageable demand for homes, also buoying prices and investor profits. The insatiable need for perpetually increasing asset values constitutes an identity of interests between public-sector unions, multinational corporations, and international investors and speculators that is as obscure as it is inviolable.

Government Union Abuses That Provoke Bipartisan Opposition

“Bipartisan” isn’t what it used to be. Now that America’s political establishment has been exposed as supporting with bipartisan unity, regardless of party, the policies of importing welfare recipients, exporting jobs, fighting endless wars, and micro-managing all forms of energy production under the pretext of saving the planet, the term “bipartisan” doesn’t evoke quite the same transcendent connotations it once did. With that noted, it remains true that with respect to public-sector unions, establishment Democrats are worse than establishment Republicans. When it comes to fighting the influence of public-sector unions, most Republicans lack the courage of their convictions, whereas most Democrats have no convictions at all.

Two exemplary issues, however, have the potential to bring Republicans and Democrats together in opposition to public-sector unions. Those issues are public education and pensions. These issues are not only capable of fostering productive, bipartisan reform efforts, but that eventuality is almost inevitable because the status-quo is not sustainable.

Public EducationIn blue states, union control over public education is almost unassailable despite strong opposition. California’s failing school districts face insolvency caused by a combination of administrative bloat and out-of-control costs for pensions and retirement health benefits. The academic achievement of California’s schools is hard to measure objectively. California’s average SAT score, 1076, places it in 34th place among states. According to a study sponsored by U.S. News and World Report, California’s K-12 system of public education was ranked 26th among states.

But this average performance obscures a bigger problem in California’s union controlled public schools. Union work rules are causing the schools in the most vulnerable communities to get the worst teachers. In 2012 a coalition of mostly Democrats filed a lawsuit, Vergara v. California, attempting to change these rules. Claiming that education was a civil right, they tried via litigation to revise three union work rules; tenure (a job for life) after only two years, dismissal rules (almost impossible to fire an incompetent teacher), and layoff rules (seniority over merit).

The impact of these three rules was, and is, a relentless migration of the worst teachers into the worst performing schools, since they can’t be fired, but they can be transferred. View the closing argumentsof the plaintiffs for a compelling description of how these three union work rules are destroying California’s public schools. In 2016, after a favorable district court ruling, the appellate court ruled againstthe plaintiffs, and California’s Supreme Court refused to hear an appeal. The schools harmed the most by these corrupt union rules are those in the burgeoning low income immigrant neighborhoods of Los Angeles, where literally hundreds of thousands of children are denied a quality education.

For better or for worse, these kids are America’s future. But who wins when society fails? The government unions win. As demographically ascendant low-income immigrant subcultures are permanently handicapped because their children got indoctrinated instead of educated, taxpayers will have to hire more unionized public servants to redistribute wealth and preserve the peace.

The good news? Increasing numbers of Americans of all ethnicities and ideologies are realizing the impact of union controlled schools is denying future opportunities to a generation of children. The battle over charter schools, home schooling, and union work rules in traditional public schools is far from over.

Public Employee PensionsWith pensions, reform is even more inevitable, because financial reality will compel reform. According to Pew Research, in 2016 state and local government pensions plans disclosed assets of just $2.6 trillion to cover total pension liabilities of $4 trillion. This understates the problem. These pension plans assume they can earn, on average, 7.5 percent per year on their invested assets, yet, as discussed, despite nearly a decade of a bull market in stocks, bonds, and real estate, these pension plans are less than 70 percent funded.

Pension finance isn’t as complicated as the experts would have you believe. What “pension liabilities” refers to is how much money would have to be invested, today, for these pension plans to earn enough interest over time to eventually pay all of the future pension benefits that have been earned so far. Think of pension assets as a growing tree, nourished by the water and sun of investment earnings, supplemented by the fertilizer of regular taxpayer contributions, and pruned each year by the payments going to retirees. If this tree is less than 70 percent of the size it needs to be, then it’s going to get pruned faster than it can grow. Eventually, there won’t be any cuttings to provide pensions to retirees.

For clarity, take the metaphor one step further. What if this undersized tree had been enjoying a decade of abundant water and sunshine—the generous investment returns of the bull market—but suddenly that changes, as it always has and always will? What if this undersized pension asset tree now has to endure years of drought and cloudy weather, stunting its growth at the same time as the pension payment pruning for retirees continue at the same pace?

This is what America’s public employee pension funds are already confronting. The tree is too small, and in response more and more fertilizer—payments by taxpayers—have to be applied to keep it alive. This data compiled by the California Policy Center explains what’s coming:

“A city that pays 10% of their total revenues into the pension funds, and there are plenty of them, at an ROI of 7.5% and an honest repayment plan for the unfunded liability, should be paying 17% of their revenues into the pension systems. At a ROI of 6.5%, these cities would pay 24% of their revenue to pensions. At 5.5%, 32%.” To restate—according to this analysis, at a 5.5 percent annual return for the pension funds, 32 percent of total tax revenue would have to go straight into the coffers of the pension funds, just to keep them solvent.”

These are staggering conclusions. Only a few years ago, opponents of pension reform disparaged reformers by repeatedly asserting that pension costs only consumed 3 percent of total operating expenses. Now those costs have tripled and quadrupled, and there is no end in sight.

The looming pension crisis is already uniting fiscal conservatives, who want smaller, financially sustainable government, and conscientious liberals, who want to protect their cherished government programs from being eliminated in order to pay the pension funds. And as out-of-control pension costs become a problem too big to ignore, it casts a spotlight on the entire question of overcompensation for unionized government employees. Government employees, on average, retire 10 years sooner and enjoy annual retirement benefits two to five times greater than private sector workers. In California, on average, they make twice as much in pay and benefits during the years they work, and veteran employees are eligible for as many as 58 paid days off per year, not including sick leave.

A harrowing example of just how skewed political discourse has become can be found in the government union campaign against California’s Proposition 6, placed on the November 2018 ballot by tax reformers. The proposition was struck down by voters, who were barraged with union-funded flyers and television ads featuring a rugged firefighter, in uniform, explaining how public safety would be jeopardized if voters approved Prop. 6. But nobody told the rest of the story, how this firefighter, as readily verified by publicly available online data, made $327,491 in 2017. That’s only a bit unusual. The average firefighter in a California city in 2015 made $200,000 in pay and benefits. It would be interesting to compile more recent data. The number certainly has not fallen.

Teachers and firefighters are our heroes. They are our role models. But the best among them are unrecognized, because the worst among them are not only nearly immune to being fired, but make exactly as much money as the best. The only thing that matters is seniority. It is likely that the finest teachers are underpaid. But overall, and especially with respect to the cost of retirement benefits, unionized public employees are overpaid, and the cost is becoming too much to bear.

These two issues, quality schools and financially sustainable pensions, represent the wedge that could eventually roll back, if not break the power of public-sector unions. Everyone cares about public schools, because their success or failure governs our children’s future. Everyone cares about public employee pensions, or will care, because if they aren’t reformed, they will bankrupt our cities, counties and states. The primary reason public schools are underperforming, and the primary reason public-sector pensions are not reformed, is because public-sector unions fight reform at every turn.

But all their power cannot deceive voters forever. Change is coming.

Fighting Back

In June 2018, in the landmark case of Janus v. AFSCME, the U.S. Supreme Court ruled that public sector employees cannot be compelled to pay anything to unions as a condition of employment, not even the so-called agency fees. In the months leading up to this case, public-sector unions made Janusout to be a catastrophe in the making, fueled by “dark money” and poised to destroy the labor movement.

In the months prior to the Janus decision, the mainstream press played up the panic. The Economist reported that “Unions are confronted with an existential threat.” The Atlantic went with “Is This the End of Public-Sector Unions in America?” Even the Wall Street Journal was caught up in the drama, publishing a report with the ominous title “Supreme Court to Decide Fate of public-sector unions.”

Maybe some union officials actually thought an unfavorable Janus ruling would destroy their organizations, but more likely, they saw it as an opportunity to rally their base and consolidate their power.

The Janus ruling has come and gone, but public-sector unions are as powerful as ever. In ultra-blue states such as California, they still exercise nearly absolute control over the state legislature, along with the city councils and county boards of supervisors in nearly every major city and county. Their control over school boards is also almost absolute.

This pattern repeats itself across the United States, especially in ultra-blue states. For example, following the 2018 midterms, fourteen states had democratic “trifectas,” where Democrats controlled both houses of the state legislature, plus the governorship. These would include the powerhouse states of California, New York, New Jersey, Massachusetts, and Illinois, along with Washington, Oregon, Nevada, Colorado, New Mexico, Maine, Rhode Island, Connecticut, and Delaware. These states have one overwhelming political variable working in their favor—the politics of their major urban centers are dominated by public-sector unions.

It has been long enough since the Janus decision to assess the initial impact. As of July 2018, unions could no longer collect “agency fees” from workers who didn’t want full membership. Comparing monthly payroll deductions from early 2018 to those from late 2018, one analysis indicated the unions were not very successful in converting these agency fee payers to full members. It is likely that the impact on public-sector unions based on losing their agency fee payers may have caused their revenue to decline by between five and ten percent. That’s a lot of money. Or is it?

In almost any other context, reducing the annual revenue of a network of political players by somewhere between $300 and $600 million per year would be a catastrophe for the organizations involved. But these are public-sector unions, which still have well over $5 billion per year to work with. Losing most of their agency-fee payers clearly had a permanent and significant impact on union revenues, but for them, and only them, it might be most accurately described as a one-time loss of manageable proportions.

The bigger impact that the Janusruling might have regards what is going to happen to their rates of full membership. It is now possible for public-sector union members to quit their unions. But will they? And if they want to, will the unions be forced to make that an easier process?

Some of the tactics the unions have adopted to make the process of quitting more difficult are being challenged in court. These cases would include Uradnik v. IFO, which would take away a public-sector union’s right to exclusive representation, or Few v. UTLA, which would nullify many steps the unions have taken to thwart the Janusruling. How those cases play out, and whether or not public-sector unions can remain accountable enough to their members to keep them in voluntarily, remains to be seen.

Public-Sector Unions and America’s Future

With America’s electorate split almost evenly between Republicans and Democrats, between liberals and conservatives, between socialists and capitalists, between Right and Left—however you want to express those polarities, it doesn’t take much to alter the equilibrium. But wherever you identify powerful forces shifting the balance, you find the public-sector unions are the puppeteer.

Should America import millions of highly skilled immigrants whose children will excel in public schools no matter what? Of course not. Private success requires no public money.

Should America reform its financial house of cards before a liquidity crisis crashes the global economy? No. Because pension solvency requires asset bubbles.

Should public-private partnerships fund new infrastructure so private investors can competitively develop new cities on America’s vast reserves of open land? Not a chance. Artificial scarcity keeps property tax revenues up, and helps prop up the real estate asset bubble.

Should incompetent bureaucrats and teachers be fired? No, because the union protects them.

To understand how intractable this problem has become, it’s worthwhile not only to identify the differences between public and private sector unions, but also the differing philosophies that guides them. To be sure, these structural differences are profound: unlike private-sector unions, public-sector unions elect their own bosses, are funded through coercive taxes instead of competitively earned profits, are rewarded by inefficiency and failure which they use as justification to expand government, and operate the machinery of government, which allows them unique powers to harass their opponents.

But these structural differences need to be viewed in the context of the ideological differences between unionized workers in the public and private sectors. These ideological differences are not absolute, but they are nonetheless very real and impact the political agenda of public-sector unions versus private sector unions. There are at least three areas of ideological differences:

Authoritarian vs. Market DrivenWorkers for the government exercise political power, whereas workers in the private sector exercise economic power. A private sector union can cause a company to go out of business, an economic threat, whereas a public sector union can cause their manager—the elected politician—to lose their next election, a political threat. This basic difference makes if far more likely that private sector union workers will have a better appreciation of the limits of their power, since if their demands have a sufficiently adverse economic effect on the company they’re negotiating with, that company will go out of business and they will lose their jobs.

Another related manifestation of the authoritarian core ideology among government workers is the simple fact that the government compels people to pay taxes and provides only one option for services, whereas corporations must persuade consumers to voluntarily purchase their products if they want to stay in business. Private-sector union members understand this difference quite well, because they live with the consequences if their company fails in the market.

Environmentalist Restriction vs. Economic DevelopmentWorkers in the private sector benefit from major construction projects and resource development. These projects create new jobs, and they yield broad societal benefits in the form of more competitive choices available for basic resources; energy, water, transportation, and housing.

When more development occurs, this increases supply and lowers prices. Development creates jobs and lowers the cost of living. Private sector union members understand this, but public sector union members have an inherent conflict of interest. This is because public sector workers benefit when roadblocks are placed in the way of development. An extended process of permitting and review, labyrinthine regulations impacting every possible aspect of development, creates jobs in the public sector.

The harder the public sector can make it to build things, the more fees they will collect and the more government jobs they will create. Ironically, the public-sector unions have an identity of interests with the most powerful monopolistic corporations on earth in this regard, because they both benefit from barriers to competitive development. Private sector union members just want to see more jobs and a lower cost of living, which development ensures.

Internationalist vs. NationalistThis area of ideological differences between public and private sector unions is perhaps the least mentioned, and the most subject to overlap and ambiguity. But identifying this difference is crucial to understanding the differing agendas of public- and private-sector unions.

For example, the ideological agenda of the unions controlling public education in the United States are dramatically out of touch with the values of a great many Americans. In states where public education is controlled by powerful teachers unions, classroom materials and textbooks routinely demonize the role of the United States and Western Civilization in current affairs and world history. Their emphasis is to mainstream the marginalized, at the expense of teaching the overwhelmingly positive role played by democracy and capitalism in creating freedom and wealth. Another critical example is how job losses to foreign manufacturers affect members of these respective unions; it has an immediate, deeply negative impact on members of private-sector unions, but is something that has no effect on a public-sector worker.

Members of public-sector unions who consider themselves in favor of free markets and resource development, and harbor pro-American patriotic sentiments, would do well to examine carefully how the leaders of government employee unions have powerful incentives to promote policies in direct opposition to these values. And that is where there might be hope.

The precarious equilibrium between Right and Left in America is maintained not only by virtue of powerful public-sector unions pushing as hard as they can in favor of the Left; public employees themselves constitute a critical swing vote in America’s electorate. Including federal workers, there are nearly 20 million government employees in America, and nearly all of them vote. If you include households with government workers in them, you likely could double that number. These Americans have a tough choice to make: Will they vote for more government, because more government will create more career opportunities for themselves and their loved ones, or will they only ask themselves what political choices will offer the most benefit to all Americans?

Public employees, like all Americans, are awakening to the propaganda that passes as mainstream journalism. Despite rampant suppression of the truth, they can see what has happened to Europe thanks to mass immigration. Despite endless rhetoric coming from the press and public institutions, they realize that campus radicalism and identity politics are a nihilistic dead end. Despite nightly “news” that spends more time on celebrity gossip than global events, they can see the where socialism leads in the devastated nation of Venezuela. They’re even realizing that climate change activism is a cover for globalist rationing and wealth redistribution. They see the hypocrisy.

Public-sector unions are the brokers and enablers of corporate power. As politicians come and go, and business interests rise and fall, they are the continuity, decade after decade. In every city and state where they’ve been allowed, they are the deep state. They are globalist instead of nationalist, authoritarian instead of pluralistic, they favor rationing and regulation over competitive development. They want to make everything harder, scarcer, more expensive. They prefer cultural disintegration and chaos to unity because it empowers them when things get bad. In a just world, public-sector unions would be outlawed. Until then, their agenda and their impact must be exposed for all to see.

This article originally appeared on the website American Greatness.

Grand Bargains To Make California Affordable


new houseThe good life in California is out of reach to ordinary people. The reason for that is simple: homes cost too much, energy costs too much, water costs too much, and transportation infrastructure is inadequate. In each of these critical categories, however, grand bargains are possible that would bring California’s cost of living back down to earth.

Unaffordable housing is the most obvious, talked about problem. The solutions being considered in Sacramento are either inadequate or flawed. The most significant proposal currently being considered in the state legislature is SB 50, which would require cities and counties to allow apartment building redevelopment in any place that is either within a half-mile of a rail transit station, within a quarter-mile of a “high-frequency bus stop,” or within a “job-rich” neighborhood. SB 50 would also remove the requirement for developers to provide adequate parking.

It is possible that SB 50 will pass. When it does, developers will be able to purchase homes in qualifying residential neighborhoods, demolish them, and construct apartment buildings up to 55 feet in height.

There are a lot of things to criticize about SB 50, most notably the fact that it overrides local control of these zoning decisions. More to the point, there is the disruptive impact to residents who invested their lifetime earnings into paying off a mortgage to own a home in a spacious, quiet neighborhood, who will see that ambience destroyed. Not only should these residents be able to rely on the zoning laws that were in place when they purchased their homes, but it is likely they cannot afford to move. If they sell, they will have to pay taxes on any profit over $500K, and once they’ve moved, they will no longer have California’s property tax protections for long-time property owners. Fixed income retirees will be harmed the most by SB 50.

Not everything SB 50’s opponents bring up is necessarily valid, however. The accusation that SB 50 will just cause more gentrification is based on cases where new high rise developments were made in the heart of downtown areas, on some of the most expensive real estate on earth. Of course those developments will only attract wealthy buyers. But whenever new housing units are put on the market, basic laws of supply and demand still apply. The wealthy buyers who choose these ultra expensive new units will not be purchasing the alternatives. Whenever more homes are built, then up and down the value chain, from exclusive penthouses to trailer parks, buyers have more choices.

The key factor in reducing housing prices in California depends on increasing the supply of homes. SB 50 recognizes this, but only addresses half the problem. SB 50 increases the density of cities, but it doesn’t touch the other fundamental problem, which is the need to expand the footprint of cities. Because of this, it is unbalanced, and as such, it is going to cause far more havoc on existing neighborhoods than would otherwise be necessary. And it won’t fix the problem.

No realistic assessment of housing policies, or the history of urbanization, can fail to acknowledge that as populations increase, existing neighborhoods are disrupted. Increasing housing density in the urban core as more people arrive is inevitable. But at the same time, outlying suburbs must be allowed to expand.

There is Plenty of Land in California for New Homes

Here is where the fundamental assumptions of California’s political elites are at odds with history and at odds with the natural preferences of millions of ordinary Californians. By forcing development into urban service boundaries, not only does it become far more difficult to create an adequate supply of new homes, but millions of people who want to raise families in detached single family dwellings with yards are denied that opportunity.

The justifications for denying urban expansion are not beyond debate. First of all, there is no shortage of land in California, which is only five percent urbanized. Entire new cities can spring up along the I-5 and Highway 101 corridors, along vast stretches of mostly empty land stretching over 500 miles from north to south. Basic facts contradict the arguments for “smart growth.”

Encompassing 164,000 square miles, California is only 5 percent urbanized. According to the American Farmland Trust, California has 25,000 square miles of grazing land (15 percent), 28,000 square miles of non-irrigated cropland (17 percent), and 14,000 square miles of irrigated cropland (9 percent). The rest, 54 percent, is forest, oak woodland, desert, and other open space.The above chart depicts three urban growth scenarios, all of them assuming California experiences a net population increase of 10 million, and that all new residents on average live three people to a household (the current average in California is 2.96 occupants per household). For each scenario, the additional square miles of urban land are calculated.

As the chart shows, adding 10 million new residents under the “low” density scenario would only use up 3.2 percent of California’s land. There is no reason why any of this growth has to occur on irrigated cropland. For example, if all the growth were concentrated onto grazing land—much which is being taken out of production anyway, it would only consume 21 percent of it. If all the growth were to fall onto non-irrigated cropland, which is not prime agricultural land, it would only use up 19 percent of that. Much growth, of course, could be in the 58 percent of California not used either for farming or ranching.

The grand bargain? Streamline the process for reasonable urban densification but mitigate the impact (and enhance the benefit) by also streamlining the process for urban expansion onto open land.

Competitive Development of Enabling Infrastructure

Policymakers might also strike grand bargains in the areas of water, energy and transportation, all critical to making and keeping California affordable as the population grows. In all three areas, not only are policy solutions available, but the array of solutions increases every decade as new technologies become available.

Creating Abundant, Affordable Water

The following chart depicts several projects that could be funded through a combination of revenue bonds – to attract private financing, and general obligation bonds – to reduce costs to ratepayers. While these projects are expensive, they are well within the capacity of California’s economy to support, and if constructed, they would guarantee consumers affordable water abundance for several decades, possibly forever. And it is important to note, these are California cost estimates. With appropriate reforms to provide relief from litigation and overregulation, these costs could be dramatically reduced. The capital costs for desalination plants in Israel, for example, per unit of capacity, came in at one-sixth what the costs were for the Carlsbad plant in San Diego.

For water, as with everything else that matters, compromise on a grand scale is necessary to negotiate a grand bargain. Environmentalists would have to accept a few more reservoirs and desalination plants in exchange for plentiful water allocations to threatened ecosystems. Farmers would have to pay more for water in exchange for undiminished quantities. While private financing and revenue bonds could cover much of the expense, taxpayers would bear the burden of some new debt – but in exchange for permanent access to affordable, secure, and most abundant water.

Creating Abundant, Affordable Energy

It is difficult to imagine how any state, or nation, could do worse than California’s done when it comes to providing electricity to its residents. With that ingratiating introduction to the topic, here’s why: Renewable energy has to be priced based on providing a 24 hour, 12 months per year, uninterrupted supply. As it is, renewable energy providers are permitted to sell their electrons based on their direct costs, and utilities are required to purchase it. Meanwhile, when the sun goes down or the wind dies down, utilities have to find power elsewhere. This is extremely expensive, because these backup plants cannot produce continuous power, meaning their construction costs and fixed overhead costs have to be priced into part-time operation.

Michael Shellenberger, an energy expert and advocate for nuclear power with impeccable environmentalist credentials, recently published a blistering takedown of renewable energy in Forbes. Entitled “Why Renewables Advocates Protect Fossil Fuel Interests, Not The Climate,” the article provides revealing details about how fossil fuel corporations are pouring money into environmentalist nonprofits that advocate renewables. And why not? By stigmatizing nuclear power into oblivion, the only reliable way to balance intermittent flows of renewable energy is to build more natural gas fueled power plants.

The solution to providing California with abundant energy is to retrofit, expand and recommission existing nuclear power complexes and build new ones, along with building more natural gas power plants. The grand bargain? Environmentalists get cleaner air, but have to accept nuclear power. Special interests that advocate renewables can still sell their products, but have to price in the costs for them to cover their nightly and seasonal production deficits. Fossil fuel interests can continue to operate, but have to compete with nuclear power. And California’s power consumers will see prices in a competitive market come back down to national standards.

Creating Effective Transportation for the 21st Century

California’s roads are poorly maintained and inadequate. Meanwhile, the most egregious waste of public funds perhaps in history, the “bullet train,” continues to hang on to life as a truncated boondoggle still planned to connect Merced to Bakersfield. Explaining the folly of high speed rail in California may also explain the benefits of alternative solutions.

Within a few decades, self-driving cars, some owned for personal use, others privately owned but serving the public, will zoom along smart hyperlanes at speeds well in excess of 100 miles per hour. They will convoy with each other, running close together, using linked navigation systems, to facilitate far more throughput per lane mile than today’s freeways. Overhead, within a few decades, electric drones will shuttle people to and from their chosen destinations at speeds well in excess of 200 miles per hour. And far overhead, at around 50,000 feet, supersonic planes , electric VTOL/turbojet hybrids, will fly at speeds well in excess of 1,000 miles per hour.

This is the future of transportation in California, a future that demands upgraded roads and new modes of FAA administered airspace. As for rail, upgrading existing rail might have tremendous practical value. But why take a bullet train, when within a decade or two you’ll be able to dial up an aerial Uber on your cell phone, and at speeds exceeding the most optimistic HSR projections, fly from any rooftop in San Francisco to any rooftop in Los Angeles?

A Completely New Mentality is Needed for 21st Century Development

The good life can be recaptured for all Californians. The weather’s still great. The land is still beautiful and bountiful. The economy remains diverse and resilient. But California’s current policies have stifled innovation and created artificial scarcity of literally every primary necessity – not just housing, but water, energy and transportation. Each year, to comply with legislative mandates, government agencies and private developers alike spend billions of dollars to pay attorneys, consultants and bureaucrats, instead of paying engineers and heavy equipment operators to actually build things. The innovation that persists despite California’s unwelcoming policy environment is inspiring.

California’s policymakers have adhered relentlessly to a philosophy of limits. Less water consumption. Less energy use. Urban containment. Densification. Fewer cars and more mass transit. But it isn’t working. It isn’t working because California has the highest cost of living in the nation. Using less water and energy never rewards consumers, because the water and energy never were the primary cost within their utility bills – the cost of the infrastructure and overhead is always the primary cost. And nearly all these policies – high speed rail is the perfect example – diminish if not ignore potential technology breakthroughs on the horizon.

Within the next few decades, there will be modular, plug-and-play desalination units that coastal municipalities can put offshore to supply abundant water to consumers. In turn, these desalination units can be powered by modular, safe, plug-and-play nuclear reactors, scaled to whatever size is required, and nearly maintenance free. It doesn’t end there. Within the next fifty years or so, energy will be beamed from orbiting solar power stations to earth-based receivers to deliver uninterrupted electricity. We’re also probably less than fifty years from having commercial, scalable fusion power.

A completely new mentality is required, incorporating a vision of abundance instead of scarcity that encompasses every vital area of resource consumption. A completely different approach that could cost less than what it might cost to fully implement scarcity mandates. An approach that would improve the quality of life for all Californians. Without abandoning but merely scaling back the ambition of new conservation and efficiency mandates, embrace supply oriented solutions as well.

These are the grand bargains that would make California affordable again.

This article originally appeared on the website California Globe.

California Cronyism and its Consequences


Crony capitalism is an economy in which businesses thrive not as a result of risk, but rather as a return on money amassed through a nexus between a business class and the political class. This is done using state power to crush genuine competition in handing out permits, government grants, special tax breaks, or other forms of state intervention.
– Wikipedia, Feb. 2019

If the goal of public policy is to optimize the role of government, cronyism must be identified and curbed wherever possible. Cronyism wastes the limited resources of governments, at the same time as it reduces the efficiency of the private sector by using subsidies and other incentives to undermine healthy competition.

The harm caused by crony capitalism can best be illustrated by example. In California, cronyism is a major culprit in one of the worst policy failures in recent decades, the housing and the related homeless crisis. Several types of cronyism played into California’s housing debacle. The most significant was cronyism that took the form of regulations that favored the wealthiest, most established corporations, while driving the smaller, emerging competitors out of the housing business entirely.

This form of cronyism through regulations was originally described by Bruce Yandle, now with the Mercatus Center, back in 1983. Yandle, writing for the American Enterprise Institute, coined the phrase “Bootleggers and Baptists,” to describe how during prohibition, the bootleggers who profited from the trade in expensive illicit liquor, would support the temperance movement’s Baptist activists and others, who lobbied against legislation to restore affordable legal booze. This concept applies perfectly to California’s punitive legislation that restricts land development.

For the past 30-40 years, and especially in the last decade or two, a growing assortment of laws and regulations have driven control over all major land development into the hands of a shrinking group of very large corporations. Using Yandle’s analogy, these are the bootleggers. Smaller landowners and construction companies have to sell out or subcontract to these large corporations, because there is no way they can afford the thousands or millions of dollars in fees and litigation, nor the years or decades of regulatory delays. And the Baptists in this example? The environmentalist lobby and its army of trial lawyers, who have seen to it that housing is restricted to ever smaller slices of California’s otherwise vast reserves of land, at the same time as they’ve successfully promoted building codes that make building a home far more expensive than it would otherwise cost.

Tent of homeless person on 6th Street Bridge with Los Angeles skyline in the background. California, USA. (Photo By: Education Images/UIG via Getty Images)

California’s homeless crisis is certainly caused in part by unaffordable housing, but it is exacerbated by another type of cronyism, “nonprofit cronyism.” These are rent seeking nonprofits that develop scandalously expensive “permanent supportive housing” for the homeless. In Los Angeles today, apartments for the homeless – palatial abodes by any reasonable comparison to the squalor of living on the streets – are being constructed in some cases for as much as a half-million per unit. The government pays a portion of these costs through grants, using taxpayers money, while other funds are secured through tax deductible donations. And when these units actually are opened to a microscopic fraction of the homeless population, because they are owned and managed by nonprofit corporations, they pay no income or even property taxes.

Crony capitalism in its most obvious form is exemplified by massive public works projects of dubious value to society. California’s grandiose and possibly doomed high speed rail project is the classic example. Even if the final project is restricted to the segment from Merced to Bakersfield, tens of billions will have been spent on a project that never passed any reasonably unbiased cost/benefit analysis, which is why it never attracted matching funds from the private sector.

There are plenty of similar examples. One noteworthy case of a massive, and dubious public work, is the costly rebuild of San Francisco’s Transbay Terminal, which for over 50 years had functioned as the central bus terminal connecting downtown San Francisco with other points in the city as well as routes extending into neighboring counties. In 2010, the terminal was demolished to make way for an expanded, “multi-modal” transit hub for the 21st century. Not only would a new tunnel bring commuter trains into the rebuilt terminal from the existing Caltrain station, 1.3 miles away, but the new terminal would also serve high speed trains.

The probable demise of high speed rail hasn’t diminished enthusiasm for the project which in total is estimated to cost around $10 billion. Yet the design of the station itself, already mostly complete at a cost so far of $2.1 billion, is no longer considered sufficient to handle the projected volume of commuter trains. After eight years of construction, the new terminal opened for bus service in 2018 – essentially performing the same service as the old terminal – and then shut down a few months later because of structural defects. Nobody knows when it will reopen. And even when it does reopen, trains won’t be arriving until the $6 billion connecting tunnel is completed, sometime around 2029.

The enthusiasm that informs persistent supporters of dubious projects, which would certainly include high speed rail and San Francisco’s Transbay Transit Center, brings into focus one of the central questions about crony capitalism. How does one distinguish between a project of dubious value, and one of compelling value? Paul Rubin, a professor of economics at Emory University, expresses this question in his own humorous but revealing alternative definition of crony capitalism: “Crony capitalism is lobbying by someone I don’t like for something I don’t like.”

This question of one person’s good cronyism being another person’s bad cronyism is easily recognized in the allocation of subsidies to manufacturers. Ideally, there should be a level playing field between market participants. The government shouldn’t be, as they say, “picking winners.” To choose another obvious example, California’s legislature is determined to increase the number of zero emission vehicles in the state, via rebates, incentives and mandates. The cost to taxpayers – and benefit to manufacturers of electric vehicles – over the next ten years is estimated to range between $9 and $14 billion.

But what if electric cars aren’t an unmitigated good thing, so good they are worthy of subsidies? What if electric vehicles produce illusory environmental benefits? What if the embodied energy in an electric car, far exceeding that of a conventionally powered car, represents an environmental cost that isn’t made up for during its useful, zero emission life? What if the environmental costs of recycling these cars and their massive batteries, or the environmental costs of extracting the resources needed to manufacture these batteries in the first place, represent an unrecoverable environmental cost? What if the emergence of some even better, cleaner transportation technology is being suppressed by the proliferation of subsidized electric cars?

This sort of debate surrounds any subsidized product. And it is fair to say that sometimes subsidies are necessary. But in crony capitalism, those debates are hijacked and skewed by the special interests in the private sector with the strongest connections to government policymakers.

There are myriad forms of crony capitalism. Incentives offered by California’s state and local governments for manufacturers to relocate to California, or stay in California, have cost taxpayers billions. A report published last year in the San Jose Mercury described how public money subsidies have poured hundreds of millions to Silicon Valley giants including Google ($766 million), Facebook ($333 million), Apple ($693 million), and Tesla ($3.5 billion).

These sorts of arrangements repeat themselves across California, and while there is an economic payback to keeping those companies and their jobs in-state, there is also a great irony. California is consistently ranked as the worst state in the U.S. to do business. Why not change the laws and regulations that make California such an unwelcoming place, which would help retain and attract all businesses, instead of pouring compensatory money into the hands of a favored few?

Speaking of the favored few, another problem that consistently accompanies crony capitalism is that it usually benefits the cronies more than it benefits whatever deserving group or cause the deal supposedly supports. The environment and open space is protected – or overprotected – enabling rich developers to get richer, and nobody can afford homes. Palatial “permanent supportive housing” is built for a handful of the homeless, while well heeled nonprofits collect subsidies that could have been used instead to house tens of thousands of homeless using tents and porta-potties. Billions are poured into monumental, landmark, “signature” transportation projects, while ordinary people sit in traffic on pitted, congested, inadequate roads. Taxes are raised so wealthy people can save money on electric cars that remain priced well out of reach of an ordinary Californian. High tech corporations earn hundreds of billions for their shareholders, yet taxpayers support subsidies to keep them from pulling up stakes and moving to Texas.

Finding examples of crony capitalism is an endless task, somewhat shrouded in ambiguity and contradictions. Whenever the government interferes in the “free market,” a subjective assessment is made that the interference is in the public interest, and an even more fraught decision is made to undermine one set of private concerns while creating an advantage for another. Apart from the the impossible extremes of anarchy or communism, good governments have to find that balance in between.

In California’s case, there is a great deal of room for improvement. Support efforts to increase transparency in contract negotiations and contract oversight to expose and deter overt cronyism. Recognize that the impact of environmental regulations has crippled the aspirations of low and middle income Californians, and repeal them, starting with the most extreme. Pay attention to the reports that expose the waste and corruption surrounding attempts to house the homeless. Fight for precedent setting court rulings that will make it easier and less costly to get things done – from building homeless shelters to constructing new roads and related housing infrastructure. Repeal CEQA; there’s plenty of regulation at the federal level. Most of all, make the state’s regulatory climate more inviting so it’s easier to keep and attract all businesses.

Tax Free Policies to Increase California’s Housing Stock


affordable housingOne of the most frustrating contradictions inherent in the policies being enacted by California’s one-party state goes something like this: We are inviting the welfare cases of America and the expatriates of the world to move here, while simultaneously enacting environmental policies that make it extremely time consuming and expensive to build anything.

No wonder there’s a “housing crisis.” Until demand decreases, or supply increases, housing in California will remain unaffordable for most of its residents. But don’t expect demand to slacken any time soon. The political consensus in favor of increasing California’s population has a strong moral justification – why shouldn’t the wealthy, innovative, compassionate people of California be willing to share their wealth with millions more people who are less fortunate? But there are other less high-minded upsides to population growth and obstacles to new housing.

Currently, real estate prices and rents are on the rise, favoring investors and landlords. Banks enjoy higher lending volumes, while borrowers enjoy greater liquidity, however precarious, as the property bubble offers them more collateral as security. The government agencies profit from higher property tax assessments and higher capital gains collections on sales of real estate. Large land developers that have the political clout and financial heft to build housing despite the many obstacles, enjoy unusually high margins that they could never achieve in a normal competitive market. Finally, as an expanding population increases demand for housing, at the same time public school districts can increase attendance-based revenue – which will make it somewhat less urgent that they reform their union work rules and spending priorities.

Efforts by California’s policymakers to increase the supply of housing have to be viewed in this context. They want to increase the supply of housing. Yet they also want to keep happy the special interests that pay for their political campaigns. Therefore, strict – and very self-serving – parameters are likely to limit what new laws are enacted to stimulate new housing. For example:

Negative Consequences of Special Interest Defined Development in California

(1) Additional open land outside of urban boundaries will remain off limits to development, in order to ensure that existing municipal jurisdictions are able to retain access to the new property revenues that will accrue to new stocks of residential and commercial real estate. This will be justified as necessary to protect the environment.

(2) Most obstacles to housing construction will remain in place – in particular, excessive fees to government agencies and onerous CEQA requirements. This will ensure that only the most powerful corporate and financial entities will be able to take advantage of new opportunities to build housing, while cutting out the small landowners and developers.

(3) Major land developers will be given financial incentives by state and local government entities to build “affordable housing” and eliminate “blight,” but these incentives will be out of reach for smaller landowners and developers.

(4) In order to keep the real estate asset bubble fully inflated, housing prices will only fall marginally as development occurs, which pretty much helps nobody, but massive programs of taxpayer funded rent control and rent subsidies will be enacted to make up the difference for qualifying low income families.

(5) “Densification” will be imposed on residential neighborhoods, with the primary victims being any neighborhoods that are situated close to bus stops or light rail stations. Developers will be permitted to build multi-story, multi-unit buildings on small residential lots and will not be required to offer parking; all of this will greatly increase their profits.

(6) Building code requirements will relentlessly increase in the name of energy efficiency and safety, with the practical effect being to lock out small landowners and developers from being able to afford to upgrade their properties or develop new properties; these same more stringent regulations will not seriously impact large development corporations and financial investors.

It is wrong to be entirely cynical about the laws that are coming. Slamming the door completely shut on newcomers to California would be cold hearted, unpopular and probably cause more economic harm than good. Zealously enforcing residential zoning densities that were put in place several decades ago would be overly sentimental, ignoring the disruptive adaptations and radical transformations that have defined and enriched urban life since settlement began. Completely embracing a new wave of suburban sprawl would needlessly eat up more open land than a more balanced policy approach might cost. While the new building code mandates are now excessive (if not ridiculous), nobody wants to go back to toilets with seven gallon tanks, or insulation with an R value of 2.0.

Unfortunately, balance is not what we’re finding in the new laws. Last year, the State Senate considered a bill – SB 827 – that would have removed local zoning control and allowed multifamily housing to be built in well-established single family neighborhoods. This would have allowed those multifamily housing projects to be as tall as 55 feet. Against heavy opposition, SB 827 never made it out of committee, but this year it’s back. The new legislation, again sponsored by Democrat Scott Wiener, is SB 50.

Reading through the text of SB 50 grants insight into just how entrenched the collusion is between public officials and developers seeking subsidies and waivers. Consider this introductory language:

Existing law, known as the Density Bonus Law, requires, when an applicant proposes a housing development within the jurisdiction of a local government, that the city, county, or city and county provide the developer with a density bonus and other incentives or concessions for the production of lower income housing units or for the donation of land within the development if the developer, among other things, agrees to construct a specified percentage of units for very low, low-, or moderate-income households or qualifying residents.

In plain English, the “Density Bonus Law” forces taxpayers to subsidize not only developers who are already making more money by being allowed to pack more units on less land, but also low and “moderate” income households who will occupy a percentage of housing units. Bring ’em in! Paying artificially high prices for housing while also paying for someone else’s inflated rent will never wear thin with taxpayers.

The Coalition to Preserve LA, “a citywide movement of concerned residents who believe in open government, people-oriented planning, equitable housing and environmental stewardship of Los Angeles,” produced this summary of SB 50.

Densification a la SB 50:

  • Forces cities to allow luxury towers in single-family areas.
  • Upzones thousands of beautiful streets to 6- and 8-story apartments if an area is “jobs-rich with good schools.”
  • Upzones thousands of single-family areas within a 1/4 mile of a frequent bus stop or 1/2 mile of a rail station.
  • Lets developers sue any city that tries to stop them.
  • Cuts parking to zero, claiming rich residents “use transit.”
  • Falsely claims to protect renters & sensitive communities.
  • Strips protections of many HPOZs and historic buildings.
  • Lets developers wipe out setbacks, backyards, green belts.

For millions of Californians who live in bucolic suburbs, with tree lined streets and spacious private yards, SB 50 unchecked is going to be a holocaust. It will utterly destroy their way of life. Many victims will not have the ability to move. The greatest insult of all: Their taxes will be paying for it. And as a “solution,” it is completely unnecessary. There are better ways, that leave established neighborhoods intact and cost taxpayers nothing.

Reforming the California Environmental Quality Act (CEQA)

There are two ways to mitigate the impact of CEQA, the law that requires “environmental impact reports” on any land development in California, including “climate change” impact along with a host of metastasizing additional requirements. The first, being practiced increasingly, is to grant CEQA waivers to politically connected developers that are proposing projects deemed politically correct. The second, far preferable solution, is to fundamentally rewrite CEQA.

An excellent summary of how to reform CEQA appeared in the Los Angeles Times in Sept. 2017, written by Byron De Arakal, vice chairman of the Costa Mesa Planning Commission. It mirrors other summaries offered by other informed advocates for reform and can be summarized as follows:

  • End duplicative lawsuits: Put an end to the interminable, costly legal process by disallowing serial, duplicative lawsuits challenging projects that have completed the CEQA process, have been previously litigated and have fulfilled any mitigation orders.
  • Full disclosure of identity of litigants: Require all entities that file CEQA lawsuits to fully disclose their identities and their environmental or, increasingly, non-environmental interest.
  • Outlaw legal delaying tactics: California law already sets goals of wrapping up CEQA lawsuits — including appeals — in nine months, but other court rules still leave room for procedural gamesmanship that push CEQA proceedings past a year and beyond. Without harming the ability of all sides to prepare their cases, those delaying tactics could be outlawed.
  • Prohibit rulings that stop entire project on single issue: Judges can currently toss out an entire project based on a few deficiencies in environmental impact report. Restraints can be added to the law to make “fix-it ticket” remedies the norm, not the exception.
  • Loser pays legal fees: Currently, the losing party in most California civil actions pays the tab for court costs and attorney’s fees, but that’s not always the case with CEQA lawsuits. Those who bring CEQA actions shouldn’t be allowed to skip out of court if they lose without having to pick up the tab of the prevailing party.

Unfortunately, California’s new governor, Gavin Newsom, while acknowledging problems with CEQA, has put responsibility for recommending changes to CEQA in the hands of a task force consisting of labor union officials and land developers. It will be a surprise if a group dominated by these two special interests will be capable of coming up with the solutions recommended by De Arakal and others.

Principles of Appropriate Development in California

There is a moral imperative to increase the supply of housing in California. As noted, California’s policymakers have awakened to the fact that construction of new housing is not nearly meeting demand for new housing. But the way they’re going about stimulating housing construction is flawed. It will not appreciably lower the cost of housing and it will needlessly enrich special interests. Here are some ways housing could be more appropriately developed in California:

(1) Eliminate all forms of government subsidies, incentives or waivers to any developers. All players in the housing industry should be unsubsidized, and playing by the same set of rules.

(2) Stop requiring diverse types of housing within the same development or neighborhood. Mixing high-density, subsidized housing into residential neighborhoods devalues the existing housing, and this social engineering is unfair to existing residents who have paid a high price to live there.

(3) Roll back the more extreme building codes. Requiring 100 percent of homes to be “energy neutral” or include rooftop photovoltaic arrays, for example, greatly increase the cost of homes.

(4) Lower the fees on building permits for new housing and housing remodels. Doing this might require pension reform, since that’s where all extra revenue goes, but until permitting costs are lowered, only billionaire developers can afford to build.

(5) Speed up the permitting process. It can take years to get permits approved in California. Again, the practical effect of this failure is that only major developers can afford to build.

(6) Reform the California Environmental Quality Act as noted. Better yet, scrap it altogether. Federal laws already provide adequate environmental safeguards.

(7) Make it easier to extract building materials in-state. California, spectacularly rich in natural resources, has to import lumber and aggregate from as far away as Canada. This not only greatly increases construction costs, it’s hypocritical.

(8) Increase the supply of land for private development of housing. Currently only five percent of California is urbanized. There are thousands of square miles of non-farm, non critical habitat that could be opened up for massive land development.

(9) Engage in practical, appropriate zoning for infill and densification in urban cores, but only after also increasing the supply of open land for housing, and only while continuing to respect the integrity of established residential neighborhoods.

California has unaffordable housing because extreme environmentalists have imposed an agenda onto state policymakers that, unfortunately, dovetails perfectly with the agenda of special interests – in particular, public sector unions and bureaucrats, and large corporate land developers and construction contractors. This coalition is also responsible for the related problem of neglected infrastructure in California. Until California’s voters wake up and break this immoral, self-serving coalition, there is little hope that housing prices in particular, or the cost-of-living in general, will come down in California.

This article originally appeared on the website of the California Policy Center.

Is Gavin Newsom California’s Denier-in-Chief?


Gavin NewsomCalifornia’s newly elected governor, Gavin Newsom, gave his first “state of the state” address on February 12, and it was a speech more noteworthy for what he didn’t than for what he did mention. Were Newsom’s sins of omission the conscious choice of a seasoned politician, or is he in denial, like so many of his California leftist cohorts?

Before criticizing the content, and the omissions, of Newsom’s speech, it’s necessary to make something clear: Nobody can deny California’s accomplishments; its great universities; its vibrant, diverse industries; its global economic and cultural influence. But California’s accomplishments are in spite of its state government, not because of it. That cannot be emphasized enough.

Newsom began by saying Californians had to make “tough calls” on the issues of transportation, water, energy, migrants, the homeless, healthcare, and the cost-of-living. He proceeded next to make no tough calls.

Forget About Fixing Roads, Let’s Build Half a Bullet-Train

With respect to transportation, Newsom made no mention of California’s crumbling, clogged freeways and connector roads. To be fair to Newsom, when you don’t have to commute day after day during rush hour — and even when you do drive, you have a driver so you can sit in the back seat of a very quiet, very smooth ride, and conduct teleconferences — you don’t really think about “roads” the same way the rest of us do. So understandably, Newsom chose to talk about high speed rail, and even on that topic, he hedged his bets. He proclaimed the project would cost too much and take too long to build a track from Sacramento all the way to San Diego, or even from San Francisco to Los Angeles. Instead he committed to focusing on completing the track from Merced to Bakersfield, where work has already begun.

Is this denial? Or just the out-of-touch priorities of an extremely wealthy man who doesn’t have to drive? Merced? To Bakersfield? Along the entire 163 mile stretch between these two cities, including everyone living in all the five surrounding counties, there are only 2.8 million people. How much will that cost? $10 billion? $20 billion (more likely)? Has Newsom considered how much highway improvement could be done with all that money? For that matter, might we ask the voters of Fresno and Kern counties, as if all that money should be spent there — “would you rather have $20 billion spent on road improvements, or that train?” Or are we afraid of the answer? Does Gavin Newsom understand that even if high-speed rail were built in all its original scope, it would still do virtually nothing to ameliorate California’s transportation challenges, which can only be solved by building new roads and widening existing roads?

Forget About Increasing Water Supply, Let’s Build Half of the “Twin Tunnels”

On the issue of water, Newsom also split the difference on what promises to be California’s second biggest infrastructure money pit after high-speed rail. That would be the two proposed “delta tunnels” that would transport runoff from Northern California, under the Sacramento River Delta, and onward to thirsty farms and cities in arid Southern California. But the governor didn’t call for two tunnels, nor did he kill the project. Like Solomon, Newsom is going to give the “water fix” advocates half of their baby. He wants to build one tunnel.

Newsom correctly stated that demand for water exceeds supply in California, but he was firmly in denial as to the solution, which is to create more supply. For the cost of even just one delta tunnel, massive desalination plants could be constructed on the Southern California coast. Those facilities, combined with runoff capture and sewage reuse projects throughout California’s coastal cities, could make them water independent. Seismic upgrades to levees along with new fish hatcheries could preserve cost-effective, environmentally acceptable movement of northern water to southern customers through the delta, something that’s worked for decades. And more storage via new off-stream reservoirs, aquifer recharge, and raising the Shasta Dam would supply additional millions of acre feet. Instead? A tunnel that will cost at least $20 billion, and add zero water to California’s annual supply.

Never Mind the Shortages We Created, Let’s Invite the World to Migrate Here

California’s politically sacred mission these days, of course, is to invite the migrants of the world to settle here. Newsom didn’t disappoint his crowd, trotting out dubious statistics to prove that undocumented immigration is a “manufactured problem.” But again, Newsom is denying the big picture: If California rolls out the welcome mat for the destitute masses of the world, where does it end? There’s good, accurate data available on this.

More than 800 million people in the world live in extreme poverty — defined as living on less than two dollars per day. What about Latin Americans, who according to Newsom’s equally photogenic counterpart in the U.S. Congress, Alexandria Ocasio-Cortez (D-N.Y.), “must be exempt from immigration laws because they are ‘native’ to U.S. lands”? Over 150 million Latin Americans live on less than $4 per day. Hundreds of additional millions of Latin Americans struggle economically. Why not form “caravans” to bring them all here? Newsom, along with the entire California Legislature, will cheer them on and let them in, no matter what the cost.

As it is, currently 2.6 million undocumented immigrants live in California. Even the liberal website politifact.com acknowledges that 55 percent of immigrant households in California benefit from welfare, with their only supposedly debunking caveat being that some of these households have U.S. born children. Other recent studies put the California total as high as 72 percent. There is a cost to Californians for all this, estimated as high as $25 billion per year, so where does Gov. Newsom draw the line? Three million more migrants? Five million? Ten million? One hundred million? Or is he in denial?

And What About Those Politically Created Shortages?

Newsom mentioned “overcrowded classrooms,” and talked about “too much demand, too little supply” for housing. But his solution for education was, what a surprise, more money and “accountability for all public schools, traditional and charters” (a slap at the charter schools, well received based on the applause from the union-controlled audience). Newsom remained in denial as to the real reason California’s public schools are failing, the fact that teaching professionals have been unionized, and the unions have used the dues revenue to exercise nearly absolute control over state and local politicians. Thanks to the teachers union, bipartisan reforms to union work rules (dismissal policies, layoff criteria, lengthened tenure) are watered down or completely squelched, and charter schools are under constant attack.

As the old cornball adage goes, denial ain’t just a river in Egypt, Gov. Newsom. Public sector unions destroyed public education in California. Do something about that, if your thousand watt compassionate smile is doing anything more than hiding a vacuous brain, guiding a feckless, morally indifferent human, attracted to nothing more than publicity, power, money, and beautiful women. That’s probably an overly harsh, unfair and inaccurate assessment of the Governor. So maybe he will silence his skeptics, by doing something that takes actual courage. Take on the teachers union. Don’t talk about it. Fight them. Fight them tooth and nail. Fight them on the beaches. Fight them in the streets. Fight them in the hills. Never give up.

Wasn’t Newsom’s campaign slogan “courage for change”? Offer that slogan, but nothing else, to the semi-literate, totally innumerate, thoroughly indoctrinated products of California’s public schools, and see how much good it does. They are the victims of the teachers unions. They need courage from the Governor. Not a pretty face. Not a pretty phrase.

Newsom’s solution for the housing shortage, so far, is to sue cities and counties that won’t build government subsidized “affordable housing.” But “affordable housing” is never affordable, and everyone knows that by now. It’s just a money tree for connected developers. To make homes “affordable” doesn’t have to cost taxpayers a dime. Just deregulate the private housing industry, making it easier to develop land. Then, strip away the overreaching design mandates that turn ordinary homes and apartments into hermetically sealed, stupefyingly expensive, miniature Borg cubes with embedded, connected chips in everything from the toilets to the coffeemaker, festooned with phony “gingerbread” eaves and trim that some marketing department tested with focus groups.

Newsom, to his credit, did mention the need to modify the California Environmental Quality Act (CEQA), an absurdly intrusive law that is a gold mine for trial lawyers and unions who use it to stop land development in its tracks. But his solution? Turning CEQA reform over to a task force consisting of union officials and large home developers.

Newsflash, Gov. Newsom! Union officials and large home developers won’t benefit from CEQA reform, so they won’t come up with anything useful. They like CEQA just the way it is. Because CEQA is the reason the median home price in California is $547,400. That is an absolutely obscene amount for anyone to have to pay for a home. But it further enriches the billionaire land developers who have the political clout and financial heft to withstand the avalanche of CEQA lawsuits and regulatory hurdles. Who is harmed by CEQA? The average Joe who owns ten acres and knows a building contractor. Those guys can only dream of meaningful CEQA reform. Better yet, they should move to Texas which is still open for business. Or, that is, move to Texas before Gov. Newsom’s other photogenic counterpart, “Beto,” and his gang of Leftists with a twang, manage to turn that state into another California.

Charisma Can’t Make Up for Denial, But Redemption is Possible

On every topic, Newsom’s theme was at least consistent. Let’s be tough, let’s be honest, let’s do our duty to ALL Californians. But he wasn’t tough, and he wasn’t honestly choosing the right questions to ask, so it’s hard to see how he was doing his duty to all Californians. And for a man leading the biggest state in the United States, who could very well end up being inaugurated as the next U.S. President in January 2024, we need more. Much more. Here are three topics of bipartisan urgency that Newsom should have, but didn’t touch.

He didn’t talk about how on the next economic downturn, state and local public employee pensions are poised to bankrupt half of California’s cities and counties and totally blow up the state budget.

He didn’t talk about how California’s public employee unions have formed a coalition with extreme environmentalists and Leftist billionaires to stop all development of land and energy in order to create an asset bubble that benefits public coffers and private investments while screwing everyone else.

He didn’t talk about how, even if you believe all the alarmist hyperbole regarding climate change, you can’t possibly go “carbon free” without more hydro-electric and nuclear power.

Newsom’s mannerisms might remind one of Chris Collinsworth, a tall and well-liked sportscaster who talks with a perpetual smile on his face. But Newsom isn’t a sportscaster. He’s presiding over a state — with 40 million people and “the fifth largest economy on earth” — that has been taken over by a gang of money grubbing, power-mad, opportunistic, platitude-spewing con artists.

If Newsom’s intentions are half as benevolent as that compassionate smile of his tells us they are, and if his “courage for change” is sincere, then here’s another way he can redeem himself in the eyes of his skeptics. He can live the life that his political comrades have imposed on California’s hardest working residents. Instead of moving into a 12,000-square-foot mansion, located on an eight acre compound in one of the wealthiest ZIP codes in Sacramento County, Newsom should move his family into one of those California median priced $547,400 homes, situated on a 3,200 square foot lot, surrounded by other homes on 3,200-square-foot lots, and send his four children to a public school.

Redemption is good for the soul, so there’s more: for Newsom to fully live the California dream, and prove he cares about “ALL Californians,” he should give his personal wealth away to charity — or better yet, send it to the CalPERS public employee pension fund because they’re going after every dime they can get their hands on. Then, Newsom should cut his governor’s pay to $71,805, which is California’s median household income, and refuse all outside honorariums and fees. And he should do this not for two weeks to make a statement, or even for the next four years. He should do this for the rest of his life.

He would be in denial no longer.

This article originally appeared on the website American Greatness.

California’s Green ‘Bantustans’ Are Coming to America


If the “smart growth” urban planners that dictate land use policies in Democratic states and cities have their way, the single family dwelling is an endangered species.

In Oregon, proposed legislation would “require cities larger than 10,000 people to allow up to four homes to be built on land currently zoned exclusively for single-family housing.” In Minneapolis, recent actions by the city council mean that “duplexes and triplexes would be allowed in neighborhoods that only previously allowed single-family housing.”

The war on the detached, single family home, and — more to the point — the war on residential neighborhoods comprised exclusively of single family homes, is on. And it’s gone national.

In California, ground zero for this movement, state legislation now requires cities and counties to fast track permitting for “accessory dwelling units.” This scheme will allow developers and ambitious homeowners to construct detached rental homes in their backyards, but since they’re called “accessory dwelling units,” instead of “homes,” they would not run afoul of local zoning ordinances that, at one time, were designed to protect neighborhoods from exactly this sort of thing.

“Smart growth,” however, began long before the home itself came under attack.

First there was the war on the back yard. Large lots became crimes against the planet — and if you doubt the success of this war, just get a window seat the next time you fly into any major American city. In the suburbs you will see a beautiful expanse of green, spacious, shady neighborhoods with lots designed to accommodate children playing, maybe a pool or vegetable garden, big enough for the dog.

But you will also see, plain and obvious, those suburbs that were built after the smart growth crowd came along. Tight, treeless, and grey, with homes packed against each other, these are the Green Bantustans, and there’s nothing green about them.

The image below shows homes packed roughly 15 per acre — including the streets — on private lots that are 40-feet wide by 80-feet deep. As of January, these homes were selling for $350,000. Such a deal! Smart growth!

Why call neighborhoods with mandated ultra-high density “Green Bantustans”? Because the Bantustan was where a racist elite used to herd the African masses during South Africa’s apartheid era. The commonality between the Green Bantustan and the Racist Bantustan becomes clear when you step back and ponder what is happening. In both cases, a privileged elite condemn the vast majority of individuals to live in a concentrated area designed to minimize their impact on the land.

But in America, the “smart growth” advocates aren’t racists, they’re misanthropic environmentalists.

The image below is fascinating, because at the same scale, it shows a neighborhood in the township of Soweto, once touted as a poster child for one of the most chilling warehouses for human beings in history. But notice the size of the lots—40 feet by 80 feet—are identical in size to that Green Bantustan in California. Also, please note, it’s probably much easier to get a building permit in Soweto.

In the name of “smart growth,” urban planners have succeeded in creating policy that has drawn lines around American cities, “urban service boundaries,” which make it nearly impossible to start new home construction outside these lines. While the purpose of these boundaries ostensibly is to protect open space, farmland, and wilderness habitat, not only are those goals only marginally fulfilled, but other negative unintended consequences abound. Consider the following:

Urbanization just takes a different form. Creating these greenbelts of protected open space mean instead of leapfrog development, you have super-leapfrog development. People who want to get out of the city now build and purchase homes on the other side of the greenbelt. Instead of suburbs on the perimeter of cities, you have exurbs, whole new cities, constructed just beyond the protected areas.

Quality of life is ruined in older suburbs. Homes within these cities are concentrated onto tiny lots in order to get as many people into each new development as possible. Often these new developments are imposed in the middle of semi-rural suburbs where the way of life for the people already living there is destroyed.

Traffic congestion gets worse. These dense new neighborhoods are designed to be “pedestrian friendly,” but what they really are is car unfriendly. There is no room to park, inadequate roads, and expensive light rail that most people can’t make practical use of.

Housing becomes unaffordable. The winners in “smart growth” are never people who need affordable homes, because prices always go up when you reduce the supply of developable land. The winners are those landowners lucky enough to have property within the arbitrary boundaries where growth is permitted, and the public sector bureaucrats who keep development within their jurisdictions, in order to collect property taxes and fees on artificially inflated home values.

Basic Facts Contradict the Arguments for “Smart Growth” 
If the proportion of land consumed by people, even in low density suburbs, is compared to the amount of land available for development, the case for high-density “smart growth” weakens. For example, even with nearly 40 million residents, California is a sprawling, relatively unpopulated state where harsh restrictions on land development are unnecessary.

Encompassing 164,000 square miles, California is only 5 percent urbanized. According to the American Farmland Trust, California has 25,000 square miles of grazing land (15 percent), 28,000 square miles of non-irrigated cropland (17 percent), and 14,000 square miles of irrigated cropland (9 percent). The rest, 54 percent, is forest, oak woodland, desert, and other open space.

The above chart depicts three urban growth scenarios, all of them assuming California experiences a net population increase of 10 million, and that all new residents on average live three people to a household (the current average in California is 2.96 occupants per household). For each scenario, the additional square miles of urban land are calculated.

As the chart shows, adding 10 million new residents under the “low” density scenario would only use up 3.2 percent of California’s land. If all the growth were concentrated onto grazing land—much which is being taken out of production anyway, it would only consume 21 percent of it. If all the growth were to fall onto non-irrigated cropland, which is not prime agricultural land, it would only use up 19 percent of that. Much growth, of course, could be in the 58 percent of California not used either for farming or ranching.

Two key points about these data bear emphasis. First, there is plenty of room for low-density development for millions of new residents, not only in California, but elsewhere in the United States. As shown in this example, moving 10 million people into homes on half acre lots, with no infill within existing urban areas, would only consume a small fraction California’s land area.

Second, even the dense scenario depicted on the first column the chart, cramming ten homes onto each developed acre, is not acceptable to the smart growth crowd. The policy goal in California, and elsewhere as noted, is to channel as much new development as possible into the confines of existing cities, and overwhelmingly favor multi-family dwellings over single-family detached homes.

“Smart Growth” is Not Smart, It’s Just Cruel

None of this is necessary. The idea that American policymakers should enforce urban containment is a cruel, entirely unfounded, self-serving lie.

The lie remains intact no matter the context. If there is an energy shortage, then develop California’s shale reserves. If fracking shale is unacceptable, then use safe land-based slant drilling rigs to tap natural gas in the Santa Barbara channel. If all fossil fuel is unacceptable, then build nuclear power stations in the geologically stable areas in California’s interior. If there is a water shortage, then build high dams. If high dams are forbidden, then develop aquifer storage to collect runoff. Or desalinate seawater along the Southern California coast. Or recycle sewage. Or let rice farmers sell their allotments to urban customers. There are answers to every question.

Environmentalists generate an avalanche of studies, however, that in effect demonize all development, everywhere. The values of environmentalism are important, but if it weren’t for the trillions to be made by trial lawyers, academic careerists, government bureaucrats and their government-union overlords, crony green capitalist oligarchs, and government pension-fund managers and their partners in the hedge funds whose portfolio asset appreciation depends on artificially elevated prices, environmentalist values would be balanced against human values.

The Californians who are hurt by urban containment are not the wealthy people who find it comforting to believe and lucrative to propagate the enabling big lie. The victims are the underprivileged, the immigrants, the minority communities, retirees who collect Social Security, low wage earners, and the ever-shrinking middle class.

In America, it used to be that refugees from California who aspired to improve their circumstances could move to somewhere like Houston and buy a home with relative ease. Watch out. That is changing. The masses are being herded into Green Bantustans, as America turns into a petri dish for the privileged upper class, backed up by a fanatical Earth First movement.

This article originally appeared on the website American Greatness.

The Destruction of Venice Beach Epitomizes California’s Idiocracy


Venice BeachVenice Beach, California, used to be one of California’s great places. A Bohemian gem, nestled against the sand between big Los Angeles and the vast Pacific Ocean. Rents used to be a little lower in Venice compared to other coastal neighborhoods. The locals mingled with surfers, artists, street performers, and tourists. People from suburbs further inland migrated to Venice’s beaches on sunny weekends year-round. Venice was affordable, inviting, inclusive. That was then.

Today, Venice Beach is off limits to families who used to spend their Saturdays on the sand. It’s too dangerous. On the sand, beached seaweed now mingles with syringes, feces, broken glass, and other trash, and the ocean has become the biggest outdoor toilet in the city. Over a thousand vagrants now consider Venice Beach their permanent home. At the same time as real estate values exploded all along the California coast, the homeless population soared. In Venice, where the median price of a home is $2.1 million, makeshift shelters line the streets and alleys, as the affluent and the indigent fitfully coexist.

What has happened in Venice is representative of what’s happened to California. If progressives take back the White House in 2020, it will be America’s fate. California’s cost-of-living is driving out all but the very rich and the very poor, a problem that is entirely the result of policies enacted by California’s progressive elite. They reduce to two factors, both considered beyond debate in the one-party state. First, to supposedly prevent catastrophic climate change, along with other environmental concerns, California’s restrictive laws such as CEQAAB 32, and SB 375 make it very expensive and time consuming to construct new homes. These laws also decrease the availability of entitled land, which further increases costs to developers.

At the same time, California has become a magnet for the welfare cases of America and the expatriates of the world. According to a 2018 report(presenting 2015 data, the most recent available – ref. page 20) issued by the U.S. Department of Health & Human Services, of the 4.2 million recipients in America of Temporary Assistance for Needy Families and Supplemental Security Income, an amazing 43 percent of them live in California, over 1.8 million people. And according to the liberal Public Policy Institute of California, as of 2016, California was also home to 2.6 million undocumented immigrants. Could California’s promise of health coverage for undocumented immigrants, or sanctuary state laws, have anything to do with this?

When you enact policies to restrict supply (to save the planet) and increase demand (invite the world to move in), which is exactly what California has done, housing has become unaffordable. Supply oriented solutions are relatively simple. Stop protecting all open space, everywhere, from development. Invest in public/private partnerships to increase the capacity of energy, water, and transportation infrastructure, instead of rationing water, “going solar,” and “getting people out of their cars.” Reform public employee retirement benefits instead of incessantly raising taxes and fees to feed the pension funds. It’s that simple.

Unfortunately, in California, nothing is simple. In 2006, the notoriously liberal 9th U.S. Circuit Court of Appeals in Jones v. City of Los Angeles ruled that law enforcement and city officials can no longer enforce the ban on sleeping on sidewalks anywhere within the Los Angeles city limits until a sufficient amount of permanent supportive housing could be built. And how to create permanent homes for the more than 50,000 homeless people in Los Angeles? In 2016’s $1.2 billion HHH ballot measure was approved by 76 percent of Los Angeles voters, to “help finance the construction of 10,000 units of affordable permanent-supportive housing over the next ten years.”

The passage of Measure HHH raises many questions. Most immediately, why hasn’t much of the money been spent? As reported by NPR’s Los Angeles affiliate in June 2018, “so far only three of 29 planned projects have funds to begin construction.” Worse, the costs have skyrocketed. According to the NPR report:

“When voters passed the bond measure, they were told new permanent supportive housing would cost about $140,000 a unit. But average per unit costs are now more than triple that. The PATH Ventures project in East Hollywood has an estimated per-unit cost of $440,000. Even with real estate prices soaring, that’s as much as a single-family home in many places in Southern California. Other HHH projects cost more than $500,000 a unit.”

Spending a half-million dollars to build one basic rental unit to get one homeless family out of the rain sounds like something a bloated new bureaucracy might manage, and even in high-priced California, there’s no other way to explain this level of waste. What about the private sector?

A new privately funded development company, “Flyaway Homes,” has debuted in Los Angeles with the mission of rapidly providing housing for the homeless. Using retrofitted shipping containers, the companies modular approach to apartment building construction is purported to streamline the approval process and cut costs. But the two projects they’ve gotten underway are not cheap.

Their “82 Street Development” will cost $4.5 million to house 32 “clients” in a 16 two-bedroom, 480 square foot apartments. That’s $281,250 per two-bedroom apartment. Their “820 W Colden Ave” property will cost $3.6 million to house 32 clients in 8 four-bedroom apartments. That’s $450,000 per four-bedroom apartment.

Is this the best that anyone in Los Angeles can come up with? Because if it is, it’s not going to work. Let’s accept the far fetched notion that $5.0 billion could be quickly found to construct housing for the 50,000 homeless people in Los Angeles, and this could be finished within a few years. Does anyone think the growth in subsidized housing would keep pace with the growth in the population of homeless? Why, when California is a sanctuary state, a magnet for welfare cases, and has the most forgiving winter weather in America? One may take issue with the whole concept of taxpayer subsidized housing, but that is almost beside the point. There are more urgent strategic questions that aren’t being honestly confronted in California. For example:

Ten Tough Questions for California’s Progressive Elite

1 – Why is the national average construction cost per new apartment unit somewhere between $65,000 and $85,000, yet it costs five to ten times that much in Los Angeles to build one apartment unit for a homeless family?

2 – Is it wise to create subsidized housing that is of better quality than the apartments that many hard working Californians occupy and pay for without benefit of subsidies?

3 – Why hasn’t there been any attempt to get useful statistics on the homeless population, in order to apply different approaches depending on who they are? For example, how many of them are mentally ill, or criminals, or substance abusers, or sexual predators, or undocumented immigrants, or willfully homeless with other housing options, or hard working sane people who have encountered hard times (yes, “intersectionality” would exist among these categories).

4 – Why not immediately allocate open land to create campsites where the homeless can move their tents and belongings, to get them off the streets?

5 – Why not then study the refugee camps set up around the world, an activity where U.S. NGOs have in-depth expertise, and replicate these in areas of LA County where there is cheaper, available land? These semi-permanent structures are far less expensive than solutions currently offered.

6 – Does inviting millions of people from impoverished, politically unstable nations help those nations, when for every person who makes their way to California, thousands remain? And if not, why not directly help the people who are staying in those nations, which would be far more cost-effective?

7 – Wouldn’t it make more sense to moderate the inflow of unskilled workers across the border into California, in order to eliminate the oversupply of cheap labor which depresses wages? Wouldn’t that be better than mandating a higher minimum wage?

8 – Doesn’t offering welfare and subsidized housing to people capable of work make it unlikely they will ever seek work? While striking a balance is a compassionate necessity, has that balance perhaps been violated, since California is home to 43 percent of America’s welfare recipients?

9 – When will California loosen restrictions on land development and building code mandates, striking a balance between compassion for the earth and compassion for human beings, in order to bring the cost of new housing construction back down towards national averages?

10 – When will the elected officials in a major California city stand up to the litigants who use the 9th Circuit to impose rulings such as Jones v. City of Los Angeles, and take a case to the U.S. Supreme Court? While many homeless people have genuine stories of hardship and bad luck, must we be forced to cede to all of them our most desirable public spaces?

What has happened in Los Angeles is a perfect storm of progressive pressure groups and rent-seeking bureaucrats and profiteers, working together to amass money, power, and prestige. If they were efficiently solving the problem, that would be just fine. But they aren’t, and until they accept tough answers to tough questions, they never will.

As Venice Beach continues to reel from the impact of the homeless invasion, Los Angeles city officials are fast-tracking the permit process to build a homeless shelter on 3.2 acres of vacant city-owned property less than 500 feet from the beach. This property, nestled in the heart of Venice’s upscale residential and retail neighborhoods, if commercially developed, would be worth well over $200 million. Shelter capacity? About 100 people.

In a less utopian, less corrupt society, that single property could be sold, and the proceeds could be used to set up and monitor a tent city housing thousands, if not tens of thousands of people. But not in California. Under the warm sun, against the indifferent ocean, the idiocracy endures.

This article originally appeared on the website American Greatness.

Pension Funds, Meet the “Super Bubble”


Earlier this month, outgoing California Governor Jerry Brown predicted “fiscal oblivion” if California’s state and local agencies are not granted more flexibility to modify pension benefits. As if to help Governor Brown make his point, U.S. stock indexes took an obliging plunge. The Dow Jones average cratered in December, dropping nearly 16 percent in three weeks, from 25,826 on December 3rd to a low of 21,792 on December 24th. And whither hence? Nobody knows.

If history and trends are any indication, however, “up” is unlikely. Depicted on the chart below is the performance of the Dow Jones Index from 1995, when the markets began first showing signs of “irrational exuberance,” to the extremely exuberant present day. Clearly shown are the past two bubbles, the internet bubble of 2000, the housing bubble of 2007, and what we may call the “super bubble” or “everything bubble” of 2018.

Dow Jones Stock Index – 1995-2018 

It doesn’t take an economist to notice a pattern here. The Dow Jones Index, which tracks closely with all publicly traded equities in the U.S., more than doubled in the four year heady run-up to its January 2000 peak, than went into decline for nearly four years, before doubling again between 2004 and 2007. Then when the housing bubble popped, the Dow went off a cliff, dropping to half its 2007 peak in little over a year. In the ten years since 2009, the Dow has exploded again, tripling to a high of 26,743 in September 2018. What now? Visually, at least, another correction is past-due.

There are all kinds of economic reasons why what is visually indicated on the above graph is exactly what’s going to happen. At best, we may hope for stocks to merely stop going up, which is sort of what happened after the internet bubble popped. But what’s different this time?

One key difference is that this time, lowering interest rates is not an option. In January 2000 the Federal Funds rate was 5.5 percent. By June of 2003 it had dropped to 1.0 percent. When interest rates drop, stocks become relatively better investments than fixed rate investments. Lower interest rates also induce more people to borrow, creating liquidity, stimulating consumer spending, which helps corporate earnings which drives up stock prices. The cause and effect is reflected in the stock market history – by 2003, after lowering interest rates by 4.5%, the stock market finally began to recover.

In October 2006 the rate had risen to 5.25 percent. In September 2007, as home sales were starting to drop, it was lowered to 4.75 percent. When the housing bubble popped, and the stock market crashed, the Federal Reserve responded by steady lowering of the Federal Funds Rate. By December 2016 it had dropped to 0.25 percent, the lowest rate possible. What should be of concern, is that the rate today, 2.5 percent, is only half as high as it was during the past peaks. During the previous two bull markets, the Federal Reserve was able to bounce the rate up to around 5 percent before the bears came calling. This time, assuming we’ve hit the peak, only half that increase, to 2.5 percent, was achievable.

A consequence of low interest rates is more borrowing, which is a good thing if that borrowing stimulates economic growth that translates into investments in productivity. But borrowing has not been used to stimulate productive investments. Instead, much of the corporate borrowing over the past decade has been used to finance stock buy-backs. This is a dangerous strategy, causing short-term growth in earnings per share, but loading debt onto corporate balance sheets that will have to be refinanced at interest rates that are increasing, at the same time as investment in research and modernizing plant and equipment has been neglected.

In recent years, borrowing has also been an overused tool of government, starting with the federal government. Federal borrowing accelerated in mid-2008, and hasn’t slowed down since, climbing to over $21 trillion by the 3rd quarter of 2018. As interest rates rise, servicing this debt will become far more difficult. Meanwhile, all U.S. credit market debt – government, corporate, and consumer – has continued to increase. After dipping slightly to $54 trillion in the wake of the burst housing bubble, it was up to a new high of $68 trillion by the end of 2017.

When interest rates fall, not only is the stock market stimulated. Bonds make payments at fixed rates, so when the market rate drops, the price of these bonds increases, since they can be sold for whatever price will give the buyer the same return as the current market rate. Interest rate reductions also cause housing prices to rise, since when interest rates are low, people can afford bigger mortgages since they will be making lower monthly payments. The opposite is also true, which is unfortunate for investors. All else held equal, rising interest rates means lower prices for bonds and housing.

What does this mean for pension funds?

When the super bubble pops this time, all assets will drop in value. Everything pension funds are invested in, equities, bonds, and real estate, will all drop in value. Even if extraordinary measures are taken to stop the decline – such as the fed purchasing corporate bonds – there will be nowhere to run. Public sector pension funds have not prepared for this day of reckoning. CalPERS, for example, in its most recent financial statements was only 71% funded. That would be ok at the end of a bear market, but at the end of a bull market, that is a disaster waiting to happen.

As it is, using CalPERS as an example, government agencies are going to have to nearly double their annual payments. The primary reason for this increase appears to be so the participating agencies will eliminate their unfunded liability on a 20 year repayment schedule. To-date, agencies were making those repayments on a 30 year term, and using creative accounting to minimize the payment amounts in the early years. CalPERS does not appear to have lowered the amount they are expecting their investments to earn, and this is critical. Because while they have lowered their expected rate of return to “only” 7.0 percent, they have also quietly lowered their long-term assumed inflation rate. This means they are still relying on nearly the same real rate of return for their investments.

When the super bubble pops, the challenges facing pension funds will not be the only economic problem facing Americans. Unwinding the debt accumulated during a credit binge lasting decades will impact all sectors of the economy. The last thing the fragile finances of government agencies will need is even higher required contributions to the failing pension funds. Instead those running these pension systems need to try new approaches, including modifying benefit formulas, but also redirecting investments into local infrastructure projects – projects that not only create jobs, but address practical and urgent goals such as building resilient, upgraded backbones for supplying water, energy, and transportation.

In early 2019, the California Supreme Court is about to issue one of its most consequential rulings ever, in the case CalFire Local 2881 vs. CalPERSIt is possible this ruling will grant government agencies (and voters) more flexibility to modify pension benefits. Such an opportunity cannot come too soon, if fiscal oblivion is to be avoided when the super bubble finally pops.

Can Public Sector Union Power Ever Be Stopped?


unionImagine you’re hoping to support a candidate for local office who will enact reforms that will improve your city, maybe even save it. Someone who will fight tirelessly to eliminate work rules that force agencies to hire more people than are actually necessary. Someone who will insist that incompetent public employees are fired. Someone who will finally do something about compensation and benefit packages that are threatening to bankrupt the city.

What do you say to them, when their response to your suggested reforms is this: “That’s all great, and I’d like to do it all, but who’s going to give me the million dollars for my campaign that I’m not going to get from the public employee unions if I actually try to do any of it?”

That is the sort of conversation that takes place, or would take place if anyone bothered to ask, multiplied by thousands, every election cycle in California.

Public employee unions run California. They exercise nearly absolute power in the state Legislature, and in nearly every city, county, school district and special district. Can public sector union power ever be stopped?

Earlier this year, a California Public Policy Center analysis estimated that for 2016, total membership in California’s public sector unions was 1.15 million, and total revenue was $812 million. This equates to a stupefying $1.6 billion that these unions collect and spend every election cycle.

 

California’s Public Sector Unions (including local affiliates)
Estimated Total Membership and Revenues

While the figure of $1.6 billion per election cycle is a credible estimate, attempts to come up with precise information on California’s public sector union dues is nearly impossible. In California there are many hundreds, if not thousands, of individual local public sector union affiliates. All of them file separate 990 forms, often including financial transfers between entities that have to be offset in any thorough analysis.

Determining how much of California’s public sector union revenue is spent on politics is also a nearly impossible task, despite several online “transparency” portals, including OpenSecretsFollowTheMoneyVoteSmart, and the California Secretary of State’s Campaign Finance “Power Search.” These portals are primarily focused on national races, and in some cases, statewide races, but none of them descend to the thousands of California’s local races, where hundreds of millions of dollars are spent every election.

Moreover, the portals can only display the information they’re given. California’s government unions, like most sophisticated political players, mask their total spending through multiple committees and transfers.

An excellent analysis of how much of teachers union dues end up being spent on political campaigns was written in 2015 by RiShawn Biddle, editor and publisher of Dropout Nation – a leading commentary website on education reform. He writes: “The pro bono consultants who went through the unions’ published national, state, and local tax returns estimated based on their research, interviews, and sampling that roughly one third of the unions’ efforts went toward political advocacy.”

One-third. In California, that is equal to approximately $540 million per election cycle. That is, California’s public sector unions likely spend over a half-billion per election cycle. And this spending does not include other “non-political” spending. For example, not reportable as political spending can include massive public education campaigns that are designed to influence voters but aren’t engaging in explicit advocacy.

Also not considered political spending, but having immense political impact, is litigation. There are countless examples of how government union power is exercised in California’s courts. Pension reforms in San Jose and San Diego, approved by voters, were eviscerated through relentless court challenges. Statewide pension reform pushed by Gov. Brown and partially realized in the PEPRA legislation of 2012 was undermined, and continues to be undermined, beneath an ongoing avalanche of lawsuits. Charter schools are the targets of continuous litigation designed to wear them out. You can do this, when you have hundreds of millions of dollars pouring in every quarter, year after year.

California’s political landscape over the past 20-30 years has been defined by public sector unions. While the recent Janus v AFSCME decision by the U.S. Supreme Court has taken away the ability of government unions to compel payment of fees, the unions are resorting to clever contractual gyrations to make it extremely difficult in practice for anyone to stop paying. That too, will have to sort itself out in court, where union money guarantees tenacious defense and endless appeals.

Even if public employees can easily withdraw from paying government unions, in many cases, why would they? These unions have made California’s public employees some of the highest paid public servants on earth. A California Policy Center study in 2017 concluded “The composite average total compensation (pay and benefits) for a full-time city, county or state worker in California during 2015 was $121,843; for the average full-time private sector worker in California, including benefits, it was 62,475, which is 51% of what the public sector worker earned.” As a result, it is no coincidence that California’s state and local governments confront over $1.0 trillion in debt and unfunded pension liabilities.

The political and financial power of public sector unions has transformed California politics. Their influence is felt everywhere; education, environmental policy, the business climate, important cultural issues. In every area, their primary agenda is to grow their membership and influence. The effect of this agenda is pernicious. If schools fail, spend more public money on schools. If crime increases, hire more police and build more prisons. Wherever society fails, grow unionized government.

Perhaps the next major U.S. Supreme Court case concerning government unions will abolish them due to this inherent conflict between their agenda and the public interest. Perhaps someday they will be outlawed entirely. That would be a happy, happy Thanksgiving indeed.

This article originally appeared on the website of the California Policy Center.

California’s Legislators Lack Private Sector Experience


CapitolBack in the days of adding machines and manual ledgers, final election results in California were usually done by midnight on election day. Sometimes there would be a few precincts counting ballots into the wee hours of the morning, and you wouldn’t know a result till the next day. Fast forward to 2018, and the age of global interconnectedness, with instantaneous algorithmic management of everything from power grids to Facebook feeds, yet here in California the complete results of the 2018 midterms won’t be available until December 7th. Go figure.

While California’s ability to count ballots runs contrary to the otherwise dazzling march of progress, by now we have enough information to offer a pretty good look at California’s state Legislature for 2019-20. The Democratic supermajority has been re-established. With 28 confirmed seats in the Senate, and 56 in the Assembly, the Democrats hold 70 percent of the seats in both houses. Even if Republicans achieved the unlikely capture of all four Assembly seats that remain too close to call, nothing would change. Overall, so far there are 84 Democratic legislators, and only 32 Republicans.

How Many State Legislators Have Private Sector Experience?

Three election cycles ago, a California Policy Center analysis compared the biographies of California’s state legislators, asking how Republicans and Democrats differ in terms of what they did before they became politicians. To repeat this exercise, 2018 election results were obtained from the California Secretary of States “District Races” page for the Senate and the Assembly. For incumbents who were re-elected, biographies were obtained from the Senate and Assembly websites. For newcomers, a trip to Wikipedia, Ballotpedia, or their campaign websites was sufficient.

When one considers the professional background of California’s politicians, a clear pattern emerges. And while compiling this data requires some degree of subjective interpretation, no reasonable interpretation would fail to reveal dramatic differences in experience between Democrats and Republicans.

California State Legislature, 2019-2020 Membership
Business vs. Government Background

As seen on the above table, in California’s 2019-20 state senate, 79 percent of the Democrats have no private sector experience. On the other hand, 58 percent of the Republicans had no public sector experience prior to running for elected office, although most of them ran for local offices prior to running for state senate. The same story applies with California’s state assembly, where 73 percent of the Democrats have no private sector experience, and 55% of the Republicans have at least some private sector experience.

Before continuing, it’s interesting from this perspective to compare this 2019-20 state legislature to the 2013-2014 state legislature. Back then the proportions were generally the same, but there were almost no Democrats – only five in both houses – compared to 14 of them today. Conversely, back in 2013 there were 25 Republicans who had an exclusively business background prior to holding elected office, compared to only 15 today. Over the same period, the number of Republicans with only public sector experience prior to holding office has more than doubled, from four back in 2013 to 11 today. Overall there are now even fewer Republicans – down from a paltry 36/120 six years ago to a vanishing 32/120 today.

California State Legislature, 2013-2014 Membership
Business vs. Government Background

What might explain this tepid drift to the center, at least in terms of more Republican state legislators with public sector experience, and more Democratic state legislators with private sector experience?

One explanation could be the open primary, which makes it less likely an extreme candidate will survive the general election. Another could be the decision made around 2010 by California’s beleaguered business community to start supporting pro-business Democrats. Finally, as Republicans in California fade further into irrelevance, the alliances and allegiances formed in public sector work offer Republican candidates with that background a better chance of electoral success.

Public Sector Unions Pick Public Sector Careerists to Run for Public Office

Back in the 1950’s and 1960’s there were plenty of pro-business Democrats, so called “Pat Brown” Democrats, who worked with Gov. Brown Sr. to build freeways, bridges, power plants, and the finest system of water storage and conveyance the world had ever seen. Those same Democrats cooperated with Republican Governor Reagan a few years later to build the finest public university system in the world. The opportunities available to California’s middle class were unrivaled. What happened to these Democrats?

The problems began in the 1970’s when public sector unions were allowed to form. Steadily acquiring political power through automatic dues deductions, they used taxpayer’s money to lobby for the interests of government workers instead of the interests of the people they serve. Increasingly, business-backed candidates started losing races to candidates backed by government unions. Almost invariably, unions backed Democratic candidates. The more powerful these union-backed candidates became, the more laws they enacted to further consolidate their power. Today government union rule in California is absolute.

The tragedy of unionized government is not merely that they have taken over California’s state legislature and nearly every city, county and school board in the state in order to pursue their membership’s interest above the public interest. It is that most elected officials no longer understand business. These union anointed elected officials come from government agencies, union bureaucracies, nonprofits, activism, and public education. Most of California’s legislators have never had to balance a budget, make a payroll, or convince a customer to voluntarily purchase a product so they could earn a precarious profit in a competitive market.

California’s lawmakers, to the extent they are elected with the support of public sector unions and to the extent they lack business experience, not only face a conflict of interests every time they have to deal with a reform that threatens the power of the unions. They are also less qualified to understand the financial and operational realities that apply in any  efficiently ran, productive organization, large or small. They are in over their heads.

To exemplify this, consider how California’s democrats are crowing over a $6 billion budget surplus. Compare that $6 billion surplus to the nearly half-trillion in bond debt that California’s state and local governments have piled up, including another $23 billion on Nov. 6th. Compare that $6 billion surplus to, by most reasonable estimates, the more than half-trillion in unfunded retirement benefits that are going to blow sky high in the next market downturn.

Hint. A trillion is a thousand billion.