Trump’s Budget Will Cut Payments to California

President Trump’s proposed budget would likely result in billions of dollars of cuts to vital health and human services programs in California, state Democratic lawmakers and advocates for the poor said Tuesday,” reported the Los Angeles Times,

“It’s unconscionable and un-American,” blasted Gov. Jerry Brown, who himself slashed state social spending to balance the budget.

In announcing the May Revision to his budget proposal for fiscal year 2017-18, Brown warned, “We have ongoing pressures from Washington and an economic recovery that won’t last forever.”

Actually, to use a line from another California governor, Ronald Reagan: You ain’t seen nothin’ yet. The cuts in California programs soon will be much larger than those in Trump’s proposal, and they will strike whether or not he’s president, or the White House occupant is Elizabeth Warren or the ghost of Lyndon Baines Johnson. Nor will it matter if Nancy Pelosi again becomes House speaker and is joined by Chuck Schumer as Senate majority leader.

The reason is simple: The Baby Boomers will continue retiring, and Social Security and Medicare payments will gobble up an increasing proportion of federal spending. That will crowd out everything else: spending for defense (especially wars), even though Trump now wants to increase defense spending $50 billion a year; and for all discretionary spending, including for health, education and welfare transfers to state governments.

According to Brown’s May Revise budget proposal, general fund spending would be $124 billion for fiscal 2017-18, which begins on July 1.

Brown’s January budget proposal included more details on federal funding. For example, turn to p. 28, Figure K-12-05. We see the $90.7 billion in revenue for K-12 education will come 61% from federal sources.

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The May Revise also warns: “The state must also continue to plan for and save for tougher budget times ahead. The federal government is contemplating actions – such as defunding health care for five million Californians, eliminating the deductibility of state taxes, and zeroing out funding for organizations like Planned Parenthood – that could send the state budget into turmoil….

I got some of the following charts from an article on the libertarian website LewRockwell.com, by Gary North, Ron Paul’s first economic adviser. Title, “Guns or Granny: The Looming Political Battle of the West.” North, who has written about this issue for years, copied the charts and data from non-libertarian sites. His analysis makes sense to me. But feel free to come up with your own interpretation of the independent data.

His conclusion, “Sometime before the 20’s are over, there will be no more discretionary slice of the budgetary pie. At that point, there is going to be a guerilla war in Washington. It will be a battle over the size of the slices of pie. Political voting blocs that thought the size of their slice was guaranteed will find that it isn’t.”

Check out this chart:

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The first thing to note is federal taxing is limited to 20% of GDP. In America’s entire history, it only briefly went slightly above that amount during World War II, until Hitler and Tojo were defeated. Then it went back below the 20% threshold. Americans just won’t be taxed more.

In most years since 1970, the federal government has spent more than revenues, usually around 23% to 25% of GDP. That is, spending is at least 3 to 5 percentage points above revenues. That’s how presidents and Congress have run up a massive debt that now clocks at $20 trillion. This year’s projected deficit of $603 billion, in the proposed Trump budget, sure doesn’t help. The rising debt, of course, means higher interest payments in the future – meaning less money to spend on other areas.

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Note that there is no connection between the top marginal income tax rate and tax receipts. Even if President Warren boosted the top tax rate back to 90%, as it was in the 1950s, total tax receipts would not rise, but would remain under 20%.

So, there isn’t going to be any more money. And more Baby Boomers will be retiring, putting extra demands on Social Security and Medicare. That means: Something has to give.

North’s point is that old people are not going to let their Social Security and Medicare be cut before everything else is cut: defense, education, environmental programs, science, etc.

Here’s a chart I found from the UC Davis Center for Regional Change from the 2014 California election:

Seiler-4-768x444

Notice how those ages 64-74 voted more than six times those of ages 18-24. That was not a presidential election year, but the votes affected congressional races. And it’s the Congress that passes the bills, not the president. In a democratic system, with majority ruling, if it’s Social Security and Medicare vs. aid to colleges and K-12 schools, who’s going to win that battle? Who is more likely to write a letter to Rep. Porkbarrel insisting on funding? It won’t matter whether the honorable representative is a Democrat or a Republican.

Finally, here’s a pie chart of federal spending in 2015:

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Notice the two slices on the right: Social Security is 24% of the budget. And 25% goes for health care – which includes not only Medicare for retirees, but Medicaid (Medi-Cal here), the Veterans Administration, federal retiree health guarantees, etc.

Those two slices are guaranteed to increase, which means the rest of the slices will have to be cut. Even in that nutty new math they teach under Common Core in the California public schools, all of something = 100%, not 110% or 150%.

When the feds cut the gravy train, which inevitable, the California state budget, like most of us aging baby boomers, is going to find it’s going to have to go on a diet.

John Seiler wrote editorials for the Orange County Register from 1987 to 2016. He now writes freelance White Papers. His email: [email protected]

Why Calexit is Pure Fantasy

I suggest those who think there’s even a one in a million chance we’ll ever have CalExit instead take a trip to Anaheim and spend a year at Disneyland’s Fantasyland. Even the objections have not gotten to the real reasons it won’t happen, which are, in rough order of importance:

1 — The more than $211 trillion (with a “t”) in U.S. unfunded liabilities, as calculated by Prof. Laurence Kotlikoff of Boston University. This largely is for Social Security, Medicare, federal pensions and military pensions. calexitGiven that California is 12 percent of the USA, our share comes to $25 trillion.

If a CalExit vote makes it to the ballot, every senior citizen will vote against it. So will everyone age 50 or older, as they already get in the mail offers to join AARP.

There’s no way you could de-couple California’s welfare state for seniors and others from that of the United States. No one knows how to deal with that $211 trillion black hole. But who would trust a California People’s Republic to keep any part of its secession bargain, especially when its own pension funds for state workers already are woefully underfunded.

What about when the Soviet Union, Yugoslavia, Czechoslovakia and other countries went splitsville? They all were leaving a communist system that had bankrupted pensions systems, usually by hyperinflating them into penury, so the pensioners got stiffed. Then the newly capitalist countries started from scratch. That’s not the situation with the U.S. pension systems – at least not yet.

There’s a reason why tampering with Social Security is the “third rail” of politics: Seniors want their welfare and don’t want it cut. Ask ex-President George W. Bush how well he did with his 2005 scheme to privatize Social Security.

2 — Then there’s the “regular” federal debt of $20 trillion, the one we hear most often about. California’s share of that is $2.4 trillion. Where’s that money going to come from? It presents all the same problems as No. 1.

3 — The dollar. Truly independent countries have their own currencies. That was one reason Brits voted for Brexit: they saw staying in the EU might mean being forced to ditch the pound, the world’s oldest currency with close to its original value, for the Euro.

So how would California set up a californio, to give the new CalCurrency a name? The Euro might be an example. But it’s really controlled by the Germans, so it’s just an extension of the old deutschemark. Remember how Frau Merkel used the Euro’s power to short-circuit Grexit? She conquered Greece more successfully than Der Fueher.

Given how liberal California is, there also would be a strong bias toward inflating the californio, meaning nobody would want it, instead favoring Yankee dollars, which still would be circulate, much as in Mexican border towns. The main alternative would be to tie the californio’s value to the dollar. Or maybe the Chinese yuan. But that wouldn’t be real independence.

4 — Silicon Valley. The digirati in the Valley and San Francisco use all the USA as a vast testing ground for their products. What works here then is spread around the globe. As part of the USA, the Valley has the same culture, politics and finances as its major test market. If California split off, it would find itself gradually separating from the rump USA, making it harder to figure out what’s going on there.

Given that a CalExit almost certainly would need to be financed by Silicon Valley oligarchs, who now control state politics, their reluctance to do so would make it a non-starter.

5 — The NSA. Formerly called “No Such Agency,” it’s the National Security Agency. As Edward Snowden revealed three years ago, it spys on, and keeps electronic records of, absolutely everything digital that goes on in America, and the world. After the revelations, Congress did precisely nothing about this wholesale violation of the Fourth Amendment “right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.” Snowden now is in exile in Russia.

In the recent national plebiscite, a decisive factor in Hillary Clinton’s defeat was the drip-drip-drip by Wikileaks of damaging emails from Hillary, her staff and the DNC. Suspected leakers include staff members, Russia and anonymous hackers. But the likely source is elements in the NSA itself worried about her constant warmongering and the need to rein in the unsuccessful Clinton-Bush-Obama hyper-interventionism.

Also notice this. On the campaign trail President-elect Donald Trump promised fresh faces in his administration. But so far he has appointed as National Security Adviser Gen. Mike Flynn, the former head of the Defense Intelligence Agency, and as CIA Director Rep. Mike Pompeo, a member of the House Intelligence Committee. Both appointees have been strong critics of the Obama-Hillary foreign policy of recent years, but strongly back the national security state. Pompeo also has attacked Silicon Valley’s stances on strong encryption.

Yet the Valley itself, including Google, long has enjoyed strong ties and even funding from the intelligence agencies.

There’s no way the NSA, CIA and FBI would let Silicon Valley and the rest of California leave. If it ever came close to happening, CalExit’s major backers and funders would get anonymous threats to release their private emails. And how about a little federal anti-trust action against what have become monopolies or duopolies, as Trump threatened during the election?

6 — President Schwarzenegger. Guess who would be an independent California’s first president? The Austrian muscleman who always wanted to become U.S. president but was barred by his foreign birth. A California People’s Republic’s new constitution would take out that plank in the U.S. Constitution. Would Arnold’s run be impossible? That’s what people said before he was elected governor in 2003. And similar things were said before Trump was elected president on Nov. 8.

Arnold, learning from Trump, would be even more formidable than in 2003. What about all Arnold’s scandals? Brushed off, like Trump’s, with humorous tweets.

As Hillary liked to say, “This is not who we are.” So there will be no CalExit except, to use another theme park analogy, maybe as a ride at the Disney California Adventure Park.

Longtime California columnist John Seiler now writes freelance. His email:[email protected]

How Trump’s Win Might Spark CA Republican Revival

Donald Trump SNLMy title is, “How Trump’s Win Might Spark CA Republican Revival.” The key word is “might.” This statement is counterintuitive, given the hostility to him among many GOP ranks here. But bear with me.

There are two conditions: Taking immigration off the table and a Reaganesque economic boom.

First, immigration. But isn’t he nasty toward Mexicans and other immigrants? Hasn’t he offended Latinos so much they’ll never become Republicans?

The problem might – again, might – be that neither party has come up with a sensible policy on immigration, the failed attempts going back 30 years. A lot of people point out how President Reagan signed the Immigration Reform and Control Act of 1986, which amnestied 3 million illegal aliens. Except the “Control” part of the Act never was implemented. So the amnesty part brought in millions more, increasing the number today to something like 11 million illegals.

A lot of these illegals – yes, I’m going to keep using the word – have become part of our community. An accountant friend of mine was talking with some of the Latinas at the construction company where he works. The ladies all voted for Hillary because they didn’t want their friends and neighbors deported. That’s understandable.

But what if Trump: 1) Builds the wall – for real. Which I think he will do. 2) Sharply restricts new immigration. 3) Makes a Trumpian “deal” on those here for a long time. Recent arrivals would have to leave. Those overstaying visas would have to leave. That would take care of half or so of the 11 million. But the other half would have some long-term path to citizenship, provided they pay back taxes and fill out all the paperwork.

If such a “deal” becomes real, the key will be effectively restricting new immigration. But if the “deal” happens, and really works, it will take the whole immigration issue off the table. Memories of Proposition 187, the illegals screening initiative thrown out by courts, will begin to fade, along with hatred of the California Republicans who pushed it. After all, a Republican president will have “solved” the immigration problem.

Second, Trump will have to boom the economy. He and the Republican Congress then would get credit for the prosperity lifting all boats, and all barcos. That will filter out here to California Latinos.

A 2012 Pew Research Center study found that Latinos still are moving up the upward mobility ladder that long has brought immigrants into the middle class: “Despite difficult economic times, in the long trajectory of their lives Latinos see improved standards of living when compared with their parents and expect their children’s standard of living to be even better. Two-thirds (67 percent) of Latinos (compared with 61 percent of the general public) say their standard of living is better than that of their parents when their parents were the age they are now.” It’s the old story of American prosperity.

Better yet, the Trump immigration cutoff would accelerate the assimilation. New immigrants suppress wages because the increased supply of anything brings about greater price competition. If new immigration is sharply reduced, then those already here would move faster up the upward mobility ladder.

As correctly was said of open immigration by legendary United Farm Workers co-founder Cesar Chavez, who has a state holiday in his honor, “As long as we have a poor country bordering California, it’s going to be very difficult to win strikes as strikes are won normally by other unions with the employer … . Now, there’s no way to defend against that kind of strikebreaking.” Except a wall.

That’s why the biggest defenders today of open borders are not immigrant groups, but big farms and other businesses that want to boost profits with cheap labor.

By contrast, when people gain upward mobility, they are less likely to seek the government benefits promoted by the Democratic Party and more likely to yearn for the tax cuts and business promotion championed by the Republican Party. That’s even more true now that the new president and party leader will be a famous billionaire.

So, if California Republicans want to get back in the game, they should stick to their pro-business, small-government principles.

Of course, I could be all washed up. Maybe I have no idea what I’m talking about. Maybe there will be no economic recovery no matter what Trump does. Maybe ethnic resentments are too high. Maybe.

But Trump might (might!) have put an oxygen mask on the wheezing body of the California Grand Old and Decrepit Party. They just need to breathe deeply.

Thirty-year California columnist John Seiler now writes freelance. His email:[email protected]

This piece was originally published by Fox and Hounds Daily

California Continues Its March to the Left

Atty. Gen. Kamala Harris urges funds for tracking prescription drugsOn Tuesday, California voters lurched even further to the political Left, bringing the state even more out of step with the rest of the country. In a battle of two Democrats for a U.S. Senate seat, Bay Area leftist Attorney General Kamala Harris trounced Orange County moderate Rep. Loretta Sanchez, two to one – a greater margin than the victory in the state of Hillary Clinton over Donald Trump.

The Senate election again showed the bankruptcy of the “Top Two” primary reform of 2010, Proposition 14, which was supposed to produce moderate victors. As in many other local races, this race mainly prevented voters from having alternatives on the ballot from the Republican Party and third parties.

On the 17 state initiatives, giddy voters overall imposed massively higher taxes, spending and regulations. Combined with the $15 per hour minimum wage passed earlier this year by the Legislature, California in the future is going to be a much more expensive and less pleasant place to live. The next recession, which could hit next year, again will zoom unemployment above the 10 percent level and rapidly empty the state treasury, despite – or, rather, because of – the tax increases.

The Proposition 55 tax “extension,” really a $7 billion tax increase, belies the promise in 2012 that Proposition 30’s tax increase was “temporary.” The real problem here is that Prop. 30 was supposed to cover state deficits during the economic recovery from the Great Recession. But there’s no recession in 2016 and no deficits. So taxes should have been allowed to subside to the previous level. What will be done in the next recession? Another $7 billion tax increase – “temporary,” of course? Then another? And another?

Indeed, Prop. 55 passed with more than 60 percent of the vote, which for state teachers’ unions and other tax obsessives is like putting catnip in front of a mountain lion.

The Proposition 56 tax increase of $2 a pack of cigarettes, as I warned in a previous article on this site, will gouge poor people almost exclusively. How many non-poor people do you know that smoke a pack a day? And it will ignite a massively bigger black market in smokes. All to fund special interests favored by hedge fund billionaire and perpetual Silicon Valley busybody Tom Steyer.

Proposition 58 also passed, bringing back the retched, illiterate-producing Bilingual Education. As I wrote here, it’s one of the biggest education scams ever. Asian parents make sure their kids don’t get near this educational malpractice. But Hispanic kids won’t learn English or Spanish well, keeping them behind other kids.

As to regulations, Proposition 63’s absurd new gun-control measures passed, bringing certain lawsuits by gun groups for violations of the Second Amendment “right to keep and bear arms.” Given that President Trump will be appointing pro-Second Amendment justices to the U.S. Supreme Court, the odds are that 63, and equally absurd gun controls passed by the Legislature earlier this year, will be overturned.

Like state officials in general, voters haven’t heard the proof that gun control only works on honest citizens; that criminals easily can get guns and ammo. Conversely, when honest citizens are armed, crime drops because criminals fear being shot by potential victims.

On the positive side, the drug companies successfully spent heavily to defeat Proposition 61’s price controls on prescription drugs. Even Bernie Sanders ads didn’t help any more than did his national backing of Hillary.

Although the death penalty again was upheld with the defeat of Proposition 62, as I pointed out here, no future governor will allow an execution, so the matter is mute – except to get cooperation from criminals too dumb to know they can’t be executed.

Proposition 57, criminal sentence reduction, passed with nearly two-thirds of the vote. That seems reasonable, but if crime keeps increasing, you can bet a tightening measure will be on the 2018 ballot. These things go in cycles. The 1990s saw Three Strikes imposed with Proposition 184 in 1994, which was too strict. Like the 1960s, now is a time of laxity. The pendulum probably will swing back the other way eventually.

Overall, the election will drive tens of thousands of productive people and thousands of businesses from the state to seek a better life in other states, or even countries, despite almost guaranteed worse weather.

Those who stay can light up with the passage of Proposition 64, legalizing recreational use of marijuana, evaporating their troubles in a purple haze of hallucinogenic bliss.

John Seiler is a longtime California columnist. His email: [email protected]

How Would President Hillary Affect California?

Photo courtesy SEIU International, flickr

Photo courtesy SEIU International, flickr

Should Hillary Clinton be elected president on Nov. 8, how would that affect California?

1) National recession. As Ambrose Evans-Pritchard just reported in the Telegraph, “The risk of a U.S. recession next year is rising fast. The Federal Reserve has no margin for error. Liquidity is suddenly drying up. Early warning indicators from U.S. ‘flow of funds’ data point to an incipient squeeze, the long-feared capitulation after five successive quarters of declining corporate profits.”

Uh-oh.

There are ways to deal with this. When something similar happened 35 years ago, President Reagan and Fed Chairman Paul Volcker met it with cuts in taxes and regulations and stabilizing the dollar at $350 an ounce of gold – even though Volcker pushed up interest rates to kill off the 1970s inflation. As Reagan later admitted, it was a mistake to delay the bulk of his tax cuts to 1983. But when the tax cuts finally freed the economy, that year it grew at 7 percent, and at least 4 percent annually until President George H.W. Bush’s “Read my lips! New taxes!” tax increase of 1991 sparked a recession.

Donald Trump’s program would be similar. But we’re talking here about Hillary, who wants more taxes and regulations. Assuming Republicans still control the House, she’s unlikely to impose higher taxes; but taxes won’t go lower, either. And President Obama has shown how executive orders can greatly increase the intrusive powers of the regulatory state. She has regretted promising, “We’re going to put a lot of coal miners and coal companies out of business.” And she supposedly believes those jobs will be replaced by “green jobs.” But that just means more Solyndras.

2) Massive California budget deficits. If the Fed increases interest rates, that finally would end its Zero Interest Rate disaster, now more than eight years long, which has devastated middle-class savings. But raising interest rates would tank the places money has been forced to go: the stock market and real estate.

That would shrink California tax collections, which rely abnormally on income, capital gains and (despite Proposition 13) property taxes. The state’s $7 billion “rainy day fund” would dry up fast. Soon we’d be back to $20 billion-plus deficits.

3) Split-roll tax increase? The deficits would spark calls for yet another tax increase to keep the state spending spree going. If Democrats again grab 2/3 of both houses of the Legislature, they could pass tax increases themselves, with no Republican input. But moderate Democrats likely would torpedo that. And Gov. Jerry Brown probably would say it should be put before voters for the June or November 2018 ballots; probably the latter because of greater (more liberal) turnout.

With the Proposition 55 income tax increase (or “extension”) likely having passed in 2016, it would be tough to push income tax rates yet higher, say to 15 percent from an already staggering 13.3 percent. Moreover, the declining revenues would be due to a drop-off in income and cap gains taxes, so increasing taxes on lower revenues wouldn’t help that much.

So the push would be for a split-roll tax on property, with Prop. 13’s protections remaining for homes. A higher tax would be levied on commercial property, possibly with an exemption for apartments. As we’ve seen whenever this proposal has come up, it would be a battle royale between the public-employee unions and such anti-tax groups as the Howard Jarvis Taxpayers Association, who probably would win.

Here are a couple of “positive” things for California:

4) More defense spending and jobs. Hillary heavily pushed for the bombing in 1999 of Serbia over Kosovo and in 2011 of Libya. She also supported the Iraq and Afghan wars; as well as other wars in Ukraine, Somalia, Yemen, Syria, etc. And every chance she gets she attacks Russian President Vladimir Putin and says Donald Trump is his puppet. Wars are the greatest way to boost defense spending because you have to replace the depleted materiel.

Moreover, a President Hillary would have stronger political and economic ties to California than any president since Reagan and, before him, Richard Nixon of Yorba Linda. As did LBJ in the 1960s, the Bushes moved a great deal of defense spending to Texas. So did Vice President Dick Cheney, the former chief of Houston-based Halliburton. Assuming she doesn’t get into a nuclear tiff with Putin and get us all killed, that will mean more defense industry jobs for Californians. Also more jobs in the U.S. Army’s Mortuary Affairs service.

5) A more level playing field with other states. Enthused AB32, the Global Warming Solutions Act of 2006, “[A]ction taken by California to reduce emissions of greenhouse gases will have far-reaching effects by encouraging other states, the federal government, and other countries to act.” That hasn’t happened. Instead, AB 32 and similar legislation have pushed businesses and jobs to other states.

But if Hillary is elected, she’ll impose AB32 and similar legislation nationally. Likewise, although she won’t be able to raise the national minimum wage to the $15 an hour California soon will have, she certainly will be able to convince Republicans to boost it from the current $7.25 – say, to $12. Who cares if a higher minimum wage destroys the jobs of poor people? That will mean more jobs for Hillary-supporting social workers.

But the greater relative damage to other states from her policies would mean fewer jobs leaving California for those states. Although jobs still would depart for more sensible countries.

My suggestions to ride out the tough years of a Hillary administration: Get a job in the defense industry or as a social worker. And if she keeps up her belligerence toward Russia, dig a bomb shelter.

Veteran California columnist John Seiler now is a freelance writer. His email:[email protected]

This piece was originally published by Fox and Hounds Daily

What Threat Does a Democratic Supermajority in the Legislature Really Pose?

Photo courtesy Franco Folini, flickr

Photo courtesy Franco Folini, flickr

Once again, we’re confronted with the possibility of Democrats grabbing two-thirds control of both houses of the California Legislature. As with the U.S. Senate at the national level, because of higher voter turnout Democrats in California generally do better in presidential election years (2008, 2012) than in the non-presidential years (2010, Tea Party time, and 2014).

The last time this happened, after the 2012 election, Gov. Jerry Brown joked to Democrats in the Legislature, “Remember, hug a Republican.” But then Dems had a problem leveraging their two-thirds supermajorities because several legislators were promoted to the state Senate or the U.S. Congress, leaving vacant seats. Then special elections sometimes elected Republicans, such as state Sen. Andy Vidak of Hanford in July 2013. That election ran up $5 million in campaign costs.

It used to be the two-thirds vote was needed to pass the state budget. That brought up the quasi-undemocratic Gang of Five meetings of the governor and the Democratic and Republican leaders of the Assembly and state Senate. Republicans had real clout and could delay passage of a budget for weeks, even months.

All that ended in 2010, when voters passed Proposition 25, allowing a majority vote for passing the budget. Also helping pass budgets by the June 15 deadline have been large new revenues from the economic recovery and the adept moves of a governor now in his fourth term in office.

Today, the two-thirds supermajority only applies to tax increases, putting measures on the ballot and reversing gubernatorial vetoes.

Tax increases likely won’t be on the agenda because two more probably are going to pass on Nov. 8: Proposition 55, the “extension” of Proposition 30 from 2012. And Proposition 56, the $2 a pack increase in cigarette taxes to further impoverish poor and lower-middle-class smokers. Even Democrats have a limit of how much they can increase taxes. (Don’t they?)

Of course, if the economy tanks next year, once again we’ll have $20 billion budget deficits, and howls for higher taxes to pay for the overspending during the recent years of prosperity. But the deficits usually lag the start of a recession by a year or two, bringing us to 2018, another election year, so the increases would just be put on the ballot.

As to putting measures on the ballot, after the 17 mind-numbing initiatives put before voters this year, does anyone really want any more in 2018? How about that “advisory” initiative, Proposition 59, stuck before voters when the Legislature passed Senate Bill 254? It urges California members of Congress to reverse the Citizens United decision by the U.S. Supreme Court that allowed campaign contributions by corporations.

Here’s some advice to the Legislature: Stop putting initiatives on the ballot! Let the people only do so through the signature process.

As to overturning vetoes by governors, the last time that happened was in 1979. If Dems do regain their two-thirds majorities, what’s likely to happen is a repeat of 2013: fighting over open seats interspersed with increased clout for moderate Democrats.

As Capital Public Radio reported in January 2013, “The most important members of the California Legislature this year might not be the two Democratic leaders – despite the two-thirds supermajorities they hold in each chamber.  And it almost certainly won’t be the Republicans.  They’ve been courted for key votes in recent years but now don’t have the numbers to block any bills on their own. The leverage in this legislative session may well lie with a newly-critical voting bloc: moderate Democrats.”

Republicans’ role? Pretty much what it has been in recent years. They sometimes pair up with Democrats to give bipartisan legitimacy to bills, such as the excellent asset forfeiture bill passed this year. And they put on the eyeshades like state Sen. John Moorlach, R-Costa Mesa, a CPA, and look at the budget numbers.

It’s something. And it’s not likely to change until the return of the Emperor Norton.

Veteran California columnist John Seiler now edits the Seiler Report. His email: [email protected]

This piece was originally published by Fox and Hounds Daily.

California Should Reduce Legislature to Part-Time

Photo courtesy Franco Folini, flickr

Photo courtesy Franco Folini, flickr

When the Legislature finally adjourned at the end of August, it again screamed the need for a return to part-time operations. The “reform” of the late 1960s that imposed a full-time gathering of busybodies in the Capitol was one of the state’s biggest mistakes.

Misguided voters passed Proposition 1A in 1966, the same year they put Ronald Reagan in the governor’s chair. The first thing the new full-timers did was pass a massive tax increase. Reagan had campaigned against any tax increase. He broke that pledge and signed $1 billion in higher taxes, equivalent to something like $20 billion more today, the highest state tax increase in history.

Fast-forward to 2016 and the Legislature passed one absurd bill after another, many supposedly “helping” the poor, but actually hurting them. The farm worker overtime bill has been covered by my colleagues and I here at Fox and Hounds.

Another one was the cap-and-trade deal, as reported in the Los Angeles Times, which would “spend $900 million on programs to reduce greenhouse gas emissions …. The money will go toward subsidies for electric cars, new park space and pedestrian-friendly affordable housing. California’s 4-year old cap-and-trade program raises money from businesses that purchase permits to pollute.”

Supposedly the “program” dedicates the money toward such allegedly pollution-reducing actions. But in government, all money is fungible. With legislative legerdemain, it would be possible to switch the $900 million to pay, for example, for some of the $250 billion in the state’s unfunded pension and medical care liabilities.

It also is absurd to think the state can reduce “greenhouse gas emissions” when, according to the Guardian, “1,500 new coal plants are in construction or planning stages around the world,” although only half might be built. “However, 84GW of plants (about 85 stations) were built in 2015 and new plants are being commissioned at five times the rate that old plants, such as those in the UK, are being retired.”

The electric car subsidies largely go to rich Tesla drivers, with the cost picked up by poor people forced to drive long distances in old cars because housing is cheaper away from the expensive, job-rich areas along the coast.

New parks might be nice, but why not let localities decide that? And how will the money be spent? Remember the parks scandal where the director, as AP reported, “sat on nearly $54 million in surplus money for years while parks were threatened with closure over budget cuts”?

But the most absurd part of the cap-and-trade flim-flam was “pedestrian-friendly affordable housing.” Where will poor people park their cars? Once again: Because coastal areas are prohibitively expensive, poor people either bunch up in homes, often illegally; live far from jobs and drive long distances; or sleep on park benches.

If the “pedestrian-friendly affordable housing” is erected in coastal areas, and the homes are nice, that’ll be another manipulation of housing prices – which always means overall higher prices. Take New York City – please. Massive subletting has led to spying on tenants. One supervisor just was fired for refusing to spy.

If the Rotten Apple just would end all rent control, money would flow in to build new apartments, the greater supply then would reduce overall prices. Oh, and rent control there was a “temporary” expedient during World War II. City politicians haven’t heard that Hitler blew his brains out 71 years ago.

Back to the part-time Legislature. An initiative last was advanced in 2012, but never made it to the ballot. And before that, in 2009, an analysis by Legislative Analyst Mac Taylor found, “Potential annual state savings of tens of millions of dollars.”

As they say in Hollywood: Time for a reboot. Ideal time: November 2018 ballot.

Longtime California journalist John Seiler’s email is: [email protected]

This piece was originally published by Fox and Hounds Daily

Why Farmworkers Will Regret Earning More Overtime

Farm workers farmingWe can’t predict whether Gov. Jerry Brown will sign Assembly Bill 1066, which the Legislature just passed and which imposes stricter overtime rules on farm labor. But even if he vetoes it, a similar bill will be passed in 2019 and signed by the next governor.

That’s all the incentive farm owners need to keep advancing automation. Another incentive is that California farmers, as the Sacramento Bee just reported, lost $9 billion in revenues in 2015 from the drought.

You’d think that a state whose penultimate governor, Arnold Schwarzenegger, became famous playing a cyborg would understand that machines gradually are terminating most human jobs, and that more restrictions on human labor only will hasten that day.

The AP story waxed nostalgic how, if Brown signs the bill, it would “mark a victory in the fight to improve farmworkers rights in the decades old movement launched by Cesar Chavez, the legendary co-founder of the National Farm Workers Association who fought for higher farm worker pay.” But when Chavez co-founded the National Farm Workers Association (later called the United Farm Workers) in 1962, a computer was a gigantic machine that ate Hollerith cards in an air-controlled room.

Now it’s your iPhone.

The AP story added, “Gonzalo Najera, who drives a tractor on Salinas Valley’s lettuce, carrots and broccoli fields, said some farmers are saying the extra overtime payments could drive them out of the state, but he doesn’t buy the argument.

“‘The growers can’t leave,’ Najera said. ‘They can’t take their dirt with them.’”

Najera, meet the Lettuce Bot: “SALINAS (CBS/AP) – On a windy morning in California’s Salinas Valley, a tractor pulled a wheeled, refrigerator-sized contraption over rows of budding iceberg lettuce plants. Engineers from Silicon Valley tinkered with the software on a laptop to ensure the machine was eliminating the right leafy buds.

“Hired by a Salinas-based agricultural produce company, the engineers were testing the Lettuce Bot, a machine that can “thin” a field of lettuce in the time it takes about 20 workers to do the job by hand.”

The Economist provided a picture and explained how it operates: “Enter Lettuce Bot, the brainchild of two Stanford-trained engineers, Jorge Heraud and Lee Redden. Their diligent robotic labourer, pulled behind a tractor, starts by taking pictures of passing plants. Computer-vision algorithms devised by Mr. Redden compare these to a database of more than a million images, taken from different angles against different backdrops of soil and other plants, that he and Mr. Heraud have amassed from their visits to lettuce farms. A simple shield blocks out the Californian sun to prevent odd shading from confounding the software.”

Will the farm-worker lobby be able to impose Luddite-style restrictions on the new technology? Not when their statewide clout is a fraction that of Silicon Valley, which now basically runs the state government.

A January 2016 study by Oxford Martin for Citi predicted 57 percent of global workers could be replaced by cyborgs. Specifically, it found, “As shown by a number of studies, labour-saving inventions may only be adopted if the access to cheap labour is scarce or prices of capital are relatively high…. In addition, recent empirical research reveals a causal relationship between the access to cheap labour and mechanisation in agricultural production, in terms of sustained economic transition towards increased mechanisation in areas characterised by low-wage worker out-migration.”

Translation from econo-speak: When labor prices rise and the cost of technology drops, cyborgs enter with the relentlessness of Arnold in the original, 1984 “Terminator.”

Regardless of what the California Legislature and governor do, they’ll be back.

This piece was originally published by Fox and Hounds Daily

New Studies: CA Has 4th-Highest Taxes and 3rd-Worst Business Climate

The newest figures just released by the Tax Foundation show California continues to be one of the highest-taxes states in the country. According to “Facts & Figures 2015: How Does Your State Compare?” the Golden State now ranks fourth-highest for taxation. The only states with higher taxes are Connecticut and New Jersey, tied for the highest; and New York in third place.

A big problem was pointed out to CalWatchdog.com by Esmael Adibi, A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis at Chapman University: Three of our Western States competitors make the Top Ten list of the least-taxed states: Nevada in third place, Utah in 9th and Texas in 10th.

Overall, the state with the least taxes is Louisiana, followed by Mississippi, South Dakota and Tennessee.

Adibi pointed out that California’s high rank derives largely from it having the highest personal income tax in the country, 13.3 percent at the top marginal rate after voters passed Proposition 30 in 2012. “Prop. 30 really pushed us over,” he said.

He added that, despite the Proposition 13 tax limitation measure, California ranked only 14th-best for property-tax collections. If property here cost less, then California would rank much higher. “But property is so expensive, the taxes paid equal the tax rate times the amount you pay for the property,” he calculated.

California also scored low on the overall 2015 State Business Climate Index, with third-worst business climate. Worst of all was New Jersey, followed by Connecticut.

That’s similar to the finding of CEO Magazine’s survey of CEOs, who have ranked California the worst state in which to do business for eight straight years.

And the Kosmont-Rose Institute Cost of Doing Business Survey found, “California dominates the list of the most expensive cities, with a total of 12 cities – nine in Southern California and three in the San Francisco Bay Area. Los Angeles and the San Francisco Bay Area are the two most expensive metropolitan areas in the western United States.”

Leaving the Golden State

California net population outflow“There’s no question high taxes at least affect some people on whether to stay in California or move to a state with lower taxes,” Adibi pointed out. He provided CalWatchdog.com a chart showing “Net Population Outflow and Destination” for California. “Net” means both those coming into the state and those leaving.

From 2005 to 2013: 279,000 Californians left for Texas, 222,500 for Arizona, 157,200 for Oregon, 153,200 for Nevada, 98,300 for Washington State, 76,900 for Colorado and 59,500 for Utah; all other states were 217,500.

Rankings

Some other rankings from the Tax Foundation “Facts & Figures”:

  • Sources of California state and tocal tax collections: 28.1 percent from property tax, 22.3 percent general sales tax, 30 percent individual income tax, 4.3 percent corporate income tax and 15.3 percent all other taxes.
  • Federal aid as a percentage of general state revenue: 25 percent. The national average is 30 percent. That is, California is a “donor state,” it pays more into the federal government than it gets back.
  • State individual income tax receipts per capita: $1,750, ranking fourth; Connecticut was highest, at $2,174.
  • State and local sales tax rate: 7.5 percent, highest of any state. (Some local governments add to that.)
  • State gasoline tax rate per gallon: 45.39 cents, second highest. Pennsylvania is highest, at 50.50 cents.
  • State spirits excise tax rate, per gallon: $3.30, 39th highest; California is Wine Country. The highest was Washington State, at $35.22.
  • Like most states, California exempts groceries from the sales tax. The highest grocery sales tax is Tennesse’s, at 5 percent.
  • California does not have a state inheritance tax, or “death tax.” The highest state rate is Washington State, at up to 20 percent.
  • California state and local debt is $11,094 per capita, 8th highest. At the top is New York, at $17,405.

Originally published by CalWatchdog.com

Brown’s 4th Inaugural Looks to CA Past, Future

Gov. Jerry Brown’s unprecedent fourth, and final, inaugural address had an aura of “Back to the Future” about it. Given at 10 a.m. this morning before the assembled Legislature, he looked back to his first inaugural address 40 years ago; and to the gubernatorial inaugural in 1959 of his father, Pat Brown.

He also recalled, among other things, “the discovery of gold … the Transcontinental Railroad, the founding of great universities … oil production … the State Water Project.” The latter was a singular accomplishment of his father.

These were echoes of the items on his own agenda, including, “We are leaders in renewable energy and efficiency … we are building the nation’s only high-speed rail system … we are confronting the drought and longer-term water issues.”

He added that he helped push through Proposition 1, the $7 billion water bond. “And I’m proud to report that as a result, by the end of the year, we will be investing in long overdue water projects,” he said.

For any governor, the primary issue is the state budget. On Friday, Brown will issue his budget proposal for fiscal year 2015-16, which begins on July 1. He looked back at the parlous state of the budget when he took over the governor’s office four years ago, “Then, the state was deep in debt – $26 billion – and our unemployment rate was 12.1 percent. Now, the state budget, after a decade of fiscal turbulence, is finally balanced – more precariously than I would like – but balanced.”

Budget limitations

This included soon making “the last payment on the $15 billion of borrowing made to cover budget deficits dating back to 2002.” He was referring Proposition 57 from the March 2004 ballot, part of the program of Arnold Schwarzenegger, elected governor five months earlier in the famous recall election of Oct. 2003, initiated to patch up a $40 billion budget deficit.

At the time, state Sen. Tom McClintock (now a U.S. representative) and others warned Prop. 57 delayed needed cuts to the budget and saddled future budgets with its repayment. That proved the case when the Great Recession hit in 2008-09 and radical budget-cutting was needed, including to pay for Prop. 57.

Also in 2004, Schwarzenegger pushed Proposition 58, the California Balance Budget Act, a rainy-day fund to cushion future budget deficits. It was sold by Schwarzenegger as a guarantee Prop. 57’s bonds would not just be used for future spending. But Prop. 58 proved unenforceable.

In today’s address, Brown touted his own Proposition 2, which voters passed last fall. He said his new budget will include “saving $2.8 billion in the state’s new constitutionally protected Rainy Day Fund.”

Whether Prop. 2 proves durable, or falls to future budget pressures the way Prop. 58 did, remains to be seen. But after Prop. 2 was passed, “S&P raised the state’s credit rating from A to A-plus, citing the stability offered by Proposition 2,” reported the Sacramento Bee.

Pension reform

The biggest threat to balanced budgets remains the state’s pensions. Brown said:

“We have to face honestly the enormous and ever growing burden of the many commitments we have already made. Among these are the costs of pensions and retiree health care, the new obligations under the Affordable Care Act, the growing government costs of dealing with our aging population, bonded indebtedness and the deferred maintenance on our roads and other infrastructure. These specific liabilities reach into the hundreds of billions of dollars.

“My plan has been to take them on one at a time. We have now taken steps to deal with the unfunded teachers’ pensions and those of the public employees. For the next effort, I intend to ask our state employees to help start pre-funding our retiree health obligations which are rising rapidly.”

No details were provided, but they presumably will be forthcoming in Friday’s budget proposal. But as the U-T San Diego reported recently, the $4.5 billion yearly deficit of the California State Teachers’ Retirement System already is digging in to state and local school budgets:

Administrators say they’re at a loss for how they’ll come up with the cash, which for some districts could be tens of millions per year. …

“Some school districts in San Diego County highlighted the sticker shock in so-called “interim midyear” budget reports released this month that show escalating contributions from teachers, school districts and even the state as a way to dig the teachers’ retirement fund out of debt over the next several years.”

Projects

Brown touted two of his favorite projects, high-speed rail and reducing greenhouse gases. Construction on the rail begins on Friday. But Brown gave no indication where money for the $68 billion project will come from above the $9 billion from the Proposition 1A bond voters approved in 2008; and $3.5 billion from President Obama’s 2009 stimulus package.

The new Republican majority in the U.S. Senate is as hostile to any more funding as is the House of Representatives that again will be controlled by the GOP. There is no private funding.

Brown promoted the state’s continuing efforts to reduce greenhouse gases:

“The United Nations’ Intergovernmental Panel on Climate Change, backed up by the vast majority of the world’s scientists, has set an ambitious goal of limiting warming to 2 degrees Celsius by the year 2050 through drastic reductions of greenhouse gases. If we have any chance at all of achieving that, California, as it does in many areas, must show the way. We must demonstrate that reducing carbon is compatible with an abundant economy and human well-being. So far, we have been able to do that.

“In fact, we are well on our way to meeting our AB32 goal of reducing carbon pollution and limiting the emissions of heat-trapping gases to 431 million tons by 2020. But now, it is time to establish our next set of objectives for 2030 and beyond.”

But California comprises only 2 percent of the global economy. No other state has anything like AB32, the Global Warming Solutions Act of 2006. And neither does any other country, besides some movement in Europe. Certainly, rising powers China and India are not being inspired by California to retard their ambitious rise out of poverty.

Upbeat

There also were, possibly, only minor hints in his Fourth Inaugural of whether he might run for president for the fourth time. But he might have been testing themes of progressive, prudent governance. He touted raising the minimum wage and “real protections for our hardworking immigrants, including the issuance of long-awaited driver’s licenses.”

And he ended on a cautious, even frugal, yet upbeat note:

“With big and important new programs now launched and the budget carefully balanced, the challenge is to build for the future, not steal from it, to live within our means and to keep California ever golden and creative, as our forebears have shown and our descendants would expect.”

It could be a compelling narrative in Democratic primaries should he choose to run against Hillary Clinton and Elizabeth Warren. After President Nixon and President Reagan, will Brown seek to become California’s third Oval Office occupant?

This article was originally published on CalWatchdog.com