U.S. Economy Needs Hardhats Not Nerds

The blue team may have lost the political battle last year, but with the rapid fall of oil and commodity prices, they have temporarily gained the upper hand economically. Simultaneously, conditions have become more problematical for those interior states, notably Texas and North Dakota, that have benefited from the fossil fuel energy boom. And if the Obama administration gets its way, they are about to get tougher.

This can be seen in a series of actions, including new regulations from the EPA and the likely veto by the president of the Keystone pipeline, that will further slow the one sector of the economy that has been generating high-paid, blue collar employment. At the same time, housing continues to suffer, as incomes for the vast majority of the middle class have failed to recover from the 2008 crash.

Manufacturing, which had been gaining strength, also now faces its own challenges, in large part due to the soaring U.S. dollar, which makes exports more expensive. Amidst weakening demand in the rest of the world, many internationally-oriented firms such as United Technologies and IBM forecast slower sales. Low prices for oil and other commodities also threatens the resurgence of mainstream manufacturers such as Caterpillar, for whom the energy and metals boom has produced a surge in demand for their products.

Left largely unscathed, for now, have been the other, less tangible sectors of the economy, notably information technology, including media, and the financial sector, as well as health services. In sharp contrast to manufacturing, energy, and home-building, all of these sectors except health care are clustered in the high-cost, blue state economies along the West Coast and the Northeast. As long as the Fed continues to keep interest rates very low, and maintains its bond-buying binge, these largely ephemeral industries seem poised to appear ever more ascendant. No surprise then that one predictably Obama-friendly writer called the current economy “awesome” despite weak income growth and high levels of disengagement by the working class in the economy. If Wall Street and Silicon Valley are booming, what else can be wrong?

Should the whole economy become more bluish?

One consistent theme of blue-state pundits, such as Richard Florida, is that blue states and cities “are pioneering the new economic order that will determine our future.” In this assessment, the red states depend on an economy based on energy extraction, agriculture and suburban sprawl. By this logic, growing food for mass market consumers, building houses for the middle class, making cars, drilling for oil and gas—all things that occur in the red state backwaters—are intrinsically less important than the ideas of nerds of Silicon Valley, the financial engineers of Wall Street, and their scattered offspring around the country.

But here’s a little problem: these industries do not provide anything like the benefits that more traditional industries—manufacturing, energy, housing—give to the middle and working classes. In fact, since 2007, according to the Bureau of Labor Statistics, the information and technology sectors have lost more than 337,000 jobs, in part as traditional media jobs get swallowed by the Internet. Even last year, which may well prove the height of the current boom, the information and technology industry created a net 2,000 jobs. And while social and on-line media may be expanding, having added 5,000 jobs over the last decade, traditional media lost ten times as many positions, according to Pew.

In contrast, energy has been a consistent job-gainer, adding more than 200,000 jobs during the same decade. And while manufacturing lost net jobs since 2007, it has been on a roll, last year adding more than 170,000 new positions. Construction, another sector hard hit in the recession, added 213,000 positions last year. The recovery of these industries has been critical to reducing unemployment and bringing the first glimmer of hope to many, particularly in the long suffering Great Lakes region.

These tangible industries seem to be largely irrelevant to deep blue economies. A prospective decline of energy jobs, for example, does not hurt places like California or New York, which depend heavily on other regions to do the dirty work. Overall, for example, California, despite its massive energy reserves, created merely 15,000 jobs since 2007, barely one-tenth as many as in Texas. Energy employment in key blue cities such as New York and San Francisco has remained stagnant, and actually declined in Boston.

Similarly, a possible slowdown in manufacturing—in part due to an inflated dollar, depressed international demand, and the loss of industrial jobs tied to energy—will affect different regions in varying degrees. Since 2009, the manufacturing renaissance has been strongly felt in traditional hubs like Detroit, Grand Rapids, and Louisville, as well as energy-charged places such as Houston and Oklahoma City. All saw manufacturing growth of 10 percent or more. Meanwhile New York, Los Angeles, Chicago, San Francisco, and Boston all lost industrial positions.

Finally, there remains the housing sector, a prime employer of blue collar workers and the prime source of asset accumulation for middle class families. Sparked by migration and income growth, construction growth has been generally stronger in Texas cities but far more sluggish in New York and California, where slower population growth and highly restrictive planning rules make it much tougher to build affordable homes or new communities. Last year at the height of the energy boom, Houston alone built more single family homes than the entire state of California.

If you think inequality is bad now …

The new ephemera-based economy thrills those who celebrate a brave new world led by intrepid tech oligarchs and Wall Street money-men. The oligarchs in these industries have gotten much, much richer during the current recovery, not only through stocks and IPOs, but also from ultra-inflated real estate in select regional areas, particularly New York City and coastal California. As economist George Stiglitz has noted, such inflation on land costs has been as pervasive an effect of Fed policy as anything else.

Even in Houston, some academics hail the impending “collapse of the oil industrial economy,” even as they urge city leaders to compete with places like San Francisco for the much ballyhooed “creative class.” Yet University of Houston economist Bill Gilmer notes that low energy prices are driving tens of billions of new investment at the port and on the industrial east side of the city. This growth, he suggests, may help offset some of the inevitable losses in the more white collar side of the energy complex.

The emergence of a new ephemera-led economy bodes very poorly for most Americans, and not just Texans or residents of North Dakota. The deindustrialized ephemera-dominated economy of Brooklyn, for example, has made some rich, but overall incomes have dropped over the last decade; roughly one in four Brooklynites, overwhelmingly black and Hispanic, lives in poverty. Similar patterns of increased racial segregation and middle class flight can be found in other post-industrial cities, including one-time powerhouse Chicago, where areas of  concentrated poverty have expanded in recent years.

Nowhere is this clearer than in ephemera central: California. Once a manufacturing juggernaut and a beacon of middle class opportunity, the Golden States now suffers the worst level of poverty in the country. While Silicon Valley and its urban annex, San Francisco, have flourished, most of the state—from Los Angeles to the Inland regions—have done poorly, with unemployment rates 25 percent or higher than the national average. The ultra-“progressive” city now suffers the most accelerated increase in inequality in the country.

Similar trends have also transformed Silicon Valley, once a powerful manufacturing, product-producing center. As the blue collar and much of older middle management jobs have left, either for overseas or places like Texas or Utah, the Valley has lost much of its once egalitarian allure. San Jose, for example, has long been home to the nation’s largest homeless encampment. Black and Hispanic incomes in the Valley, notes Joint Venture Silicon Valley, have actually declined amidst the boom, as manufacturing and middle management jobs have disappeared, while many tech jobs are taken by predominately white and Asian younger workers, many of them imported “techno-coolies.”

In contrast, the recoveries in the middle part of the country have been, to date, more egalitarian, with incomes rising quickly among a broader number of workers. At the same time, minority incomes in cities such as Houston, Dallas, Miami, and Phoenix tend be far higher, when compared to the incomes of Anglos, than they do in places like San Francisco, New York, or Boston. In these opportunity cities, minority homeownership—a clear demarcation of middle income aspiration—is often twice as high as it is in the epicenters of the ephemeral economy.

To succeed in the future, America needs to run on all cylinders.

The cheerleaders of the ephemeral economy often point out that they represent the technological future of the country, and concern themselves little with the competitive position of the “production” economy—whether energy, agriculture, or manufacturing. They also seek to force the middle class into ever denser development, something not exactly aspirational for most people.

Nor is the current ephemera the key to new productivity growth. Social media may be fun, but it is not making America more competitive or particularly more productive (PDF). Yet there has been strong innovation in “production” sectors such as manufacturing, which alone accounts for roughly half (PDF) of all U.S. research and development.

What is frequently missed is that engineering covers a lot of different skills. To be sure the young programmers and digital artists are important contributors to the national economy. But so too are the many more engineers who work in more mundane fields such as geology, chemical, and civil engineering. Houston, for example, ranks second (PDF) behind San Jose in percentage of engineers in the workforce, followed by such unlikely areas as Dayton and Wichita. New York, on the other hand, has among the lowest percentage of engineers of major metropolitan areas.

To be sure, an aerospace engineer in Wichita is not likely to seem as glamorous as the youthful, urbanista app-developers so lovingly portrayed in the media. Yet these engineers are precisely the people, along with skilled workers, who keep the lights on, planes flying and cars going, and who put most of the food on people’s tables.

The dissonance between reality and perception is most pronounced in California. The state brags much about the state’s renewable sector to the ever gullible media. But in reality high subsidized solar and wind account for barely 10 percent of electrical production, with natural gas and coal, now mostly imported from points east, making up the vast majority. In terms of transportation fuels, the state has a 96 percent dependence on fossil fuels, again large imported, despite the state’s vast reserves. Los Angeles, although literally sitting on oil, depends for 40 percent of its electricity on coal-fired power from the Intermountain West.

Equally critical, the now threatened resurgence of the industrial and energy sectors could reverse trends that have done more to strengthen the U.S. geopolitical situation than anything else in recent decades. Foreign dictators can easily restrict a Google, Facebook, or Twitter, or create locally-based alternatives; for all its self-importance, social media has posed no mortal danger to authoritarian countries. In contrast, the energy revolution has undermined some of the world’s most venal and dangerous regimes, from Saudi Arabia and Iran to Russia and Venezuela.

In no way do I suggest we don’t need the ephemeral sectors. Media, social and otherwise, remain important parts of the American economy, and testify to the country’s innovative and cultural edge. But these industries simply cannot drive broader based economic growth and opportunity. Part of the problem lies in the nature of these industries, centered largely in Silicon Valley and San Francisco, which require little in terms of blue collar workers. Another prime issue is that these areas can only import so many people from the rest of country due to extraordinary high housing costs.

Under current circumstances, the centers of the ephemeral economy such as New York or San Francisco cannot accommodate large numbers of upwardly mobile people, particularly families. These, for better or worse, have been vast gated communities that are too expensive, and too economically narrow, to accommodate most people, except those with either inherited money or elite educations. This is why Texas—which has created roughly eight times as many jobs as California since 2007 and has accounted for nearly one-third of all GDP growth since the crash—remains a beacon of opportunity, and the preferred place for migrants, a slot that used to belong to the Golden State.

As a country, we stand at the verge of a historical opportunity to assure U.S. preeminence by melding our resource/industrial economy with a tech-related economy. Our strength in ephemera can be melded with the power of a resource and industrial economy. In the process, we can choose widespread and distributed prosperity or accept a society with a few pockets of wealth—largely in expensive urban centers—surrounded by a downwardly mobile country.

The good news is America—alone among the world’s largest economies—has demonstrated it can master both the ephemeral and tangible economies. To thrive we need to have respect not for one, but for both.

Editor of NewGeography.com and Presidential fellow in urban futures at Chapman University

This piece first appeared at The Daily Beast.

Cross-posted at New Geography and Fox and Hounds Daily 

School Choice Week Highlights Vouchers, Opportunity

National School Choice Week kicked off yesterday, designed to heighten awareness for innovations in education. According to SchoolChoiceWeek.com:

“Independently planned by a diverse and growing coalition of individuals, schools, and organizations, National School Choice Week features thousands of unique events and activities across the country. The Week allows participants to advance their own messages of educational opportunity, while uniting with like-minded groups and individuals across the country.”

California is a mixed bag on school choice. It has been a leader in charter schools, which are public schools that operate without most of the red tape of regular schools. According to the California Charter Schools Association, the number has grown from 31 in 1994, the first year they were allowed, to 1,130 in 2014.

Parent Trigger Law

Another development is the Parent Trigger Law, authored by former Democratic state Sen. Gloria Romero of Los Angeles. It allows a majority of parents in a failing school to “fire” the administration, and start over on a more successful model.

It has succeeded in a couple of cases, including Desert Trails Preparatory Academy in Adelanto.

But it has faced numerous challenges. It just overcame one. Romero wrote last month in the Orange County Register:

“The California Senate Legislative Counsel issued last week a sweeping opinion, concluding a controversy as to whether a school district – Los Angeles Unified, in this case – can proclaim itself exempt from California’s historic Parent Trigger law….”

She quoted the Leg Counsel:

“[T]he legislative intent in enacting [the law] … was to allow parents or guardians of pupils enrolled in schools that have been underperforming … to request specified interventions. It would be inconsistent with that legislative intent to conclude that … [they] … are deprived of the remedy set forth … on the basis that a school district has received a federal waiver whose purpose is to relieve that district solely from compliance with federal performance requirements. [I]t is our opinion that the … waiver … does not exempt that school district from compliance with the [law].”

And she noted a controversy in Anaheim:

“parents at Palm Lane Elementary School in Anaheim are mobilizing to turn around their school. Already they have faced obstacles imposed on them by some hostile school board members and school officials, but the parents have surmounted each obstacle and could become the first parents in Orange County to succeed in using the Parent Trigger law on behalf of their children.

“At a time when too many people complain about the lack of parent involvement in their kids’ educations, these parents should be celebrated as everyday heroes.”

No vouchers

However, the school voucher program active in several states has not done well here. It gives each student a voucher, or scholarship, to the school chosen by him and his parents. The school could be public or private.

Facing fierce teacher-union opposition, it twice was heavily defeated at the polls: with Proposition 174 in 1993. And with Proposition 38 in 2000.

That’s probably a lost cause here for school-choice fans.

But overall, parents do have more choices in California for their kids’ schools than 20 years ago. Charters are secure and spreading. And the Parent Trigger Law has survived legal challenges, albeit its progress remains slow.

Originally published at CalWatchdog.com

‘Surf City’ First in Nation to Repeal Plastic Bag Ban

On Tuesday night, on an overwhelming 6-1 vote, the city council of Huntington Beach, California–which is officially known as “Surf City, USA“–directed the city staff to begin the process of repealing a policy that bans the use of plastic grocery bags, and requires grocery stores to charge a ten-cent fee on paper bags.

This coastal city in Orange County, which boasts 9.5 miles of beautiful beaches, is about to make history, as never before has a city with such a bag ban ever repealed it.

The city’s bag ban was an issue in last year’s council elections, and all four council members who won election were public in their support for repealing it, defeating two incumbents who had voted in favor.

Breitbart News spoke with Councilman Mike Posey, who placed the repeal onto the council agenda, and made the motion for its passage. He was crystal clear on his motive. “The intention of the bag ban was to reduce litter and improve the environment. We have no verifiable proof that our local bag ban has done anything to reduce locally sourced and discarded single-use plastic bags. Littering of any kind is unacceptable, but we already have laws in place to address littering.”

Posey added, “”I believe in protecting the environment, and I treasure the beach, ocean, air and environment. I drive a clean diesel-powered car and telecommute a few days per week. I am not necessarily an environmentalist but am steadfastly environmentally conscious. I also value freedom. However, litter from plastic bags is caused by misuse and not use, and I object to punishing everyone because some people choose to litter.”

Other Councilmembers supporting the vote to begin the bag ban repeal process were Dave Sullivan, Barbara Delgleize, Erik Petersen, Billy O’Connell and Dave Katapodis (the latter of whom actually voted for the original ban, but who has apparently changed his mind). Mayor Jill Hardy cast the lone dissenting vote.

Former mayor Matthew Harper, who had been on the losing end of the ban vote in 2012, but who was just elected to the California State Assembly this last November, lauded the actions of the city council.

“The vote to begin the process of repealing the ill-advised ban is a step forward for the local community,” he said. “Whether you look at this as a consumer choice issue, or from the perspective that the ban seeks to correct an alleged problem that is not prevalent on our beaches, I applaud the council’s overwhelming vote.”

The city’s plastic bag ban/paper bag fee ordinance was adopted in 2012 amidst much controversy, with the Surfrider Foundation, major proponents of the ban, committing to cover the city’s $20,000 cost of conducting a necessary environmental impact report.

While the city moved forward at the time, ultimately adopting the ban, it is worth noting that the Surfriders never did make good on their pledge.

Last year, in the final hours of the California legislature’s session, legislators put SB 270 onto Governor Jerry Brown’s desk, and he signed the statewide ban on plastic grocery bags, which required grocers to charge at least ten cents for every paper bag used.

However, right after Brown signed the bill, the American Progressive Plastic Bag Alliance, an industry group, announced that it would seek to gather the signatures necessary to trigger a statewide referendum on the bill.  A few months later they turned in over 800,000 signatures of registered voters, well above the required 504,760 number.

The effect of qualifying the referendum is that SB 270 does not go into effect, and instead the question of whether to ban plastic grocery bags and mandate a fee on paper bags will appear on the 2016 general election ballot.

For years more extreme environmental activist groups had been trying, without success, to pass a statewide ban on plastic bags. Year after year, the effort was beaten back by a coalition made up of bag manufacturers, grocers, liberty-oriented groups, and groups concerned that a bag ban is regressive and adversely impacts the poor.

The lynchpin for the ban finally passing was the placing of the mandatory ten-cent fee on paper bags into the bill, with the profits from that fee (double the actual cost of the paper bags) going straight to the profit margin of grocery stores. That amounts to hundreds of million of dollars of years to grocers, and thus it is not surprising, if alarming, that with this economic incentive the California Grocers Association abandoned its traditional opposition to the ban, instead reversing its position to support it.

There is no doubt that Surf City’s repeal of its local ordinance will be featured in the statewide campaign against the bag ban on next year’s ballot.

Assemblyman Travis Allen (R), who along with Harper lives in and represents Huntington Beach and who testified to the Council in support of repealing the ban, told Breitbart News, “Huntington Beach reversing their ban is proof that a one-size-fits-all statewide ban on plastic bags is a terrible idea.”

The projected timeline for the final repeal of Huntington Beach’s ban, after the results of an environmental impact report, and the requisite multiple votes on the repeal, is late May.

Originally published in Breitbart CA.

Taking On The Minimum-Wage Debate in L.A.

The national debate over minimum-wage increases will take center stage in Los Angeles because two efforts to raise the minimum wage face staunch opposition from the business community.

The Los Angeles Business Federation, known as BizFed, went on the offensive last week, coming out strongly against both minimum-wage proposals and the way the City Council is going about reviewing the consequences of a minimum-wage increase.

Mayor Eric Garcetti wants to see the minimum wage increased to $13.25 an hour; while advocates and some council members say that’s not enough, the minimum wage should go up to $15.25 per hour.

BizFed doesn’t think the discussion should be a competition on which higher minimum wage proposal takes effect, but whether there should be an increase at all at a time the state is raising the minimum wage — to $9 an hour in 2014 from $8; and to $10 in 2016.

BizFed made its argument against the minimum-wage increase as a way to deal with the tide of poverty that is washing over Los Angeles. Said MC Townsend, president and CEO of the Regional Black Chamber of Commerce of San Fernando Valley and chair of BizFed, “We share Mayor Garcetti’s strong commitment to reducing poverty, and that is best achieved by creating good paying middle class jobs that can actually lift individuals and families out of poverty.”

Jobs lost

BizFed leaders said minimum wage increases could cost jobs; something the city cannot afford.

While Los Angeles gained 1 million new residents over the last three decades, it lost about 165,000 jobs.

In an effort to convince the City Council to understand the effects of a minimum wage increase on the job market, BizFed has raised issues dealing with the proposals’ enforcement mechanisms, teenage workers looking for entry jobs, and that neighboring cities maintaining a lower minimum wage will draw jobs from L.A.

Convincing the mayor and council to stop a race to establish a higher and even higher minimum wage will not be an easy task. The Los Angeles City Council already approved a $15.37 minimum wage plan for hotel workers.

As I’ve written before, the council ignored a review to its hotel wage proposal – even when it asked for it:

When the Los Angeles City Council passed the minimum wage for hotel workers, economist Christopher Thornberg opined in the Los Angeles Times, after studying the matter for the council, that the results of his study ‘strongly suggest that such a steep increase in the minimum wage could result in a sharp decline in the number of jobs in the hotel industry.’

“More troubling was Thornberg’s assertion that the council didn’t bother to look at his findings. Thornberg wrote, ‘But the City Council never seemed interested in really examining the potential economic consequences of the ordinance. We got our instructions about what questions to address just two weeks before the vote, and we were surprised to learn that the council intended to vote on the day after we turned in our final analysis, which suggests none of the members spent time looking at our findings.’” 

There seem to be similar goings-on with the new debate over raising the minimum wage.

Questionable study

Mayor Garcetti used the University of California, Berkeley’s Institute for Research on Labor and Employment to study and then speak up for his minimum-wage proposal. Now, city officials wants to hire the same group to study its proposal instead of reaching out for new, independent researchers.

Apparently, city bureaucrats and some council members are not interested in second opinions, especially ones they might not agree with, as was the case with the analysis of the hotel minimum-wage proposal.

The business community has objected to this arrangement. BizFed president Tracy Rafter said the organization was “calling for a truly independent analysis of these proposals that will give policymakers credible, unbiased information to make decisions moving forward. It’s absurd for the city of Los Angeles to spend taxpayer dollars contracting U.C. Berkeley’s Institute for Research on Labor and Employment to tell them what they’ve already told them previously, especially when that organization has been helping advocate for the mayor’s proposal.”

With a unified effort from the business community, perhaps this time the City Council will at least listen to business concerns.

Originally published on Calwatchdog.com

ONE Labor Contract Dispute Is Crippling Small Businesses

Retailers have become increasingly alarmed as the West Coast port dispute becomes more hostile.

For the past eight months, the Pacific Maritime Association and the International Longshore and Warehouse Union have struggled to agree on a new labor contract. Even as negotiations resumed Friday after a short break, the inability to come to a deal and the resulting port congestion has prompted vast economic concern, especially among those in the retail industry.

Stephen Schatz, the senior director of media relations for the National Retail Federation, notes that though retailers have been doing all they can to keep their stores and warehouses stocked, they grow increasingly concerned over the long-term economic impact the dispute may have.

“The National Retail Federation has been keeping a close eye on this dispute,” Schatz told The Daily Caller News Foundation. “Over the past two to three months we have seen increasing concern from stakeholders.”

Schatz said retailers and businesses involved in the supply chain have done all they can to work around the dispute, including using ports outside the country to get their supplies.

“We’ve talked to our members and they say they’ll go to Canadian ports or Mexican ports,” Schatz said. “It’s critically import for retailers to have stock.”

Along with using foreign ports to get products into the United States, Schatz notes that some companies have even flown products into the country — which cost significantly more to do.

It’s not just companies reliant on imports that are concerned, companies that export good to foreign countries have suffered greatly because of the slowdowns and port congestion. Schatz notes that small companies that export goods are likely the hardest hit.

“In the long term it’s really putting our exports in jeopardy,” Schatz continued. Many small businesses don’t have the resources and ability to divert products to ports in Canada and Mexico like the bigger companies can. Additionally they are much more reliant on foreign companies who will likely look elsewhere for products if they cannot get them easily from the United States.

The slowdowns and port congestion hurt one Washington-based Christmas tree grower so badly that Schatz fears, “that tree farm may have to go out of business,” because they were unable to be exported to Japan in time for the holidays.

Retailers have grown so concerned they have sent several letters to the PMA and ILWU along with lawmakers in the hopes of resolving the conflict. In the most recent letter from last week, dozens of manufacturers, farmers, wholesalers, retailers, importers, exporters and distributors wrote to express their concern over the rhetoric and growing hostility they have seen from both sides throughout the negotiation process.

“As customers of your ports, and industries affected by their operations, our members desperately need this negotiation to be concluded and operations returned to normal levels of through-put,” the letter noted.

“Over the summer months, both sides verbally agreed to work during the negotiations without interruptions,” the letter continued. “That promise was broken and the consequences have been to the detriment of our collective industries, the economy and our global competitiveness.”

“The stakes are extremely high and the uncertainty at the West Coast ports is causing great reputational and economic harm to our nation,” the letter declared. “The competitive marketplace will respond if you continue on this current path.”

As the letter points out, foreign competitors are already using the slowdowns and the resulting uncertainty as a reason not to buy American made or grown products. Additionally, retailers are already seeing delays stretching far into spring.

While the PMA has accused the union of purposely causing the port slowdowns to pressure it at the bargaining table, ILWU defended itself by noting much of the congestion was happening before the current negotiations.

The PMA argued in a statement provided to TheDCNF, “Despite ILWU rhetoric, there was no significant congestion in Tacoma, Seattle or Oakland prior to their slowdowns, which began on Halloween night in Tacoma and at other major ports the following week.”

“In Southern California, the ILWU’s targeted slowdowns have severely worsened existing congestion by withholding the skilled workers who are most essential to clearing crowded terminals,” PMA continued. “All the while, cargo sits idle, the economic damage to our communities worsens and the reputation of West Coast ports is harmed.”

Though Schatz is optimistic that the two sides are meeting and have both agreed on federal mediation, he still is very much concerned that these port slowdowns may result in a full-scale shutdown.

“If the 29 west coast ports were to shutdown, the consequences would be severe,” Schatz warns. “The longer it is shutdown, the bigger the economic impact.”

“A shutdown is totally unacceptable and the delays are also unacceptable,” Schatz added.

Follow Connor on Twitter

This article was originally published by the Daily Caller News Foundation. 

Rose Bird’s Ghost Will Kill CA Death Penalty

Given that Gov. Jerry Brown was just elected to an unprecedented fourth term, it’s not surprising an old controversy would come up: the death penalty. As the Los Angeles Times reported, his recent appointments of three liberal justices to the California Supreme Court give “hope” to those on the state’s death row.

Of course, families and friends of the victims the death-row inmates killed may have a different opinion of whether there is “hope” for justice.

But the state has been through this before under Rose Bird, the controversial state Supreme Court chief justice Brown appointed in 1977, and who served until 1987. During her tenure, she voted against the death penalty 64 times in 64 appeals of death sentences. As a result, in 1986, voters refused to confirm her position on the court, as well as two other anti-death penalty justices, Cruz Reynoso and Joseph Grodin.

The three were not, as commonly stated, “recalled” from the court, although justices can be recalled the way Gov. Gray Davis was in 2003. Rather, Bird and the other two justices failed a routine confirmation. As the Secretary of State’s office explains: “Under the California Constitution, justices of the Supreme Court and the courts of appeal are subject to confirmation by the voters. The public votes ‘yes’ or ‘no’ on whether to retain each justice.”

Ballotpedia notes: “Justices of the California Supreme Court and California Courts of Appeal face retention to 12-year terms in the gubernatorial elections, which are held every four years in November.” Moreover, the only non-retention of justices in California history was that in 1986.

Green mile electric chairBrown appointments

Of Brown’s three recent appointments, in Nov. 2014, two were confirmed by voters: Goodwin Lieu (67.1 percent approval) and Mariano-Florentino Cuéllar (67.7 percent). So they next will go before voters, assuming they continue to hold these offices, in 2026.

The third justice, Leondra Kruger, was appointed after the election. So she will face confirmation by voters in 2018.

Brown also can be expected to appoint similar justices over his last four years in office. He has stated he wants to remake the court in an activist mode.

Which means the death penalty is dead in California — even though Brown, sloughing off Rose Bird’s legacy, won office in 2010 by saying he wouldn’t impede the death penalty.

Meanwhile, numerous court challenges have prevented the death penalty from being imposed in California since 2006, leaving 748 convicted murderers on Death Row. And just 13 convicted killers have been executed in the state since 1978.

In 2012, voters barely defeated Proposition 34 by 52 percent to 48 percent, which would have banned the state death penalty. Brown supported it.

Potentially, California could get around federal court limitations on the death penalty by adopting the methods of Texas, where 72 executions have been carried out since 2010. But there’s no way the California Legislature would do that; nor would Gov. Jerry Brown sign any such legislation into law.

What likely will happen is that, once the Brown Justices become a four-member majority on the seven-member court, they will decide a case that finds the death penalty is “cruel and unusual punishment.” They will not be recalled. Nor will their future confirmations be denied.

This also means all the activism of pro-death penalty Californians over the years, believing the state was a democracy that followed the voters, was misguided, if not delusional. On this as on so many other issues, your vote does not count.

In California, the death penalty is dead.

This piece was originally published by CalWatchdog.com

What’s the Real Reason for Police Understaffing in San Diego?

Whenever there is a shortage of police personnel in a California city, a common reason cited is inadequate pay. When officers at a particular agency are paid less than their counterparts at some other agency, so the theory goes, they quit in order to start working where they can make more. This seems to be sound logic. But is it supported by facts? According to a new study “Analysis of the Reasons for San Diego Police Department Employee Departures,” released last week by the California Policy Center, the answer to that question is a resounding “no.” Authored by Robert Fellner, research director for the Transparent California project, the study’s findings contradicted the conventional wisdom. They were:

  • Claims that SDPD officers were leaving to join other departments misrepresented the data on attrition, by focusing on the 10% who left to join other departments, instead of the 60% who retired.
  • These claims also misrepresented the overall data regarding staffing and recruitment, focusing on approximately 20 people leaving in a department of nearly 1,800 while ignoring the fact that there were 3,000 applicants for open 25 positions.
  • In support of these claims, a misleading study, funded by the city of San Diego, only analyzed base pay, the only category of pay San Diego didn’t boost in their 2014 pay raises for the SDPD.
  • This same study compared San Diego to one of the most expensive cities in the world – San Francisco and other totally different markets, instead of comparing SDPD pay to rates of pay in neighboring cities.

One thing that is not in serious debate is the fact that the San Diego Police Department is understaffed, like many other police departments in California. But the reason they are understaffed is a result of poor recruitment efforts. Fellner writes:

“The City’s ability to recruit new candidates would be seriously compromised when budget decisions in FY 2009 and FY 2010 resulted in the City cutting its quarterly academy class sizes from 50 to 25. In FY 2011 the City cancelled all but one academy class, a decision that ‘resulted in a lost opportunity to add approximately 57 additional recruits.’ And what did happen after the hiring freeze of 2011 ended? The SDPD received over 3,000 applicants for just 25 positions in its first academy class of 2012, according to 10News. This is symptomatic of a larger trend – a tremendous, unmet demand to work in law enforcement in the San Diego area. For example, the following year the nearby San Diego County Sheriff’s Department received over 4,000 applicants for their 275 deputy positions.”

There is no shortage of people who want to work in law enforcement in San Diego. Surely a few hundred of these many thousands of applicants are qualified to do the work.

While the facts don’t support the assertion that San Diego is losing police officers to other departments, the facts do support an alarming loss of officers to retirement, a problem that is getting worse. But if recruitment isn’t a problem, what difference does it make if officers retire in great numbers? The problem is the cost for these retirements take away funds that could be used to pay for more police academy classes, and more active officers on the force. To fund an adequately staffed police force, San Diego could have reduced retirement formulas to the levels they were back in the 1990′s – i.e., reducing them back to levels that are fair and financially sustainable. Instead, to induce veteran officers to delay retiring, San Diego joined several other California cities in implementing “DROP,” which stands for “Deferred Retirement Option Program.”

In general, the way DROP works is this:  A retirement eligible employee agrees to freeze their retirement benefit accrual and continue to work, usually for five more years. Then, while they continue to work for the city and get paid as an active employee, the pension they would be earning if they had retired is paid into an interest bearing account. When they retire, the entire amount accrued in that pension account is paid to them in a lump sum, and from then on they begin to directly collect their pension.

Take a look at Transparent California’s listing of San Diego’s pension payouts in 2013. Nearly all of the top pensions are police and fire personnel who received massive lump sum payments under the DROP program. This is a scandalous waste of money. The primary reason SDPD officers leave their department is to retire. So instead of investing in recruitment efforts to replace retirees, the San Diego implemented the DROP program, at staggering expense, to retain veterans a little longer.

As always, the power behind these distortions of logic and perversions of policy are the government unions. Unlike the police officers themselves, who almost invariably want to serve their communities and make a positive difference in people’s lives, government unions thrive on fomenting resentment and alienation. The more anger they can manipulate their members into feeling, the more righteous indignation those members will bring to city council meetings, and the more dues they will willingly pay to purchase candidates for local office. Ultimately, what government unions thrive on is the failure of government, because the worse things get, the more money they will demand to fix the problems.

Inadequate pay is not the reason SDPD has a staffing shortage. Excessive pensions, the staggering expense of DROP, and a failure to fund recruitment efforts are the reasons why. The unions would have you think otherwise.

Ed Ring is the executive director of the California Policy Center.

$10 Billion Sales Tax on Services Proposed by State Senator

An influential state lawmaker is proposing a $10 billion sales tax on services that would include everything from accounting to yoga classes.

State Sen. Bob Hertzberg, D-Van Nuys, says the changing global economy requires a reevaluation of what’s considered subject to sales and use taxes. That’s why he’s introduced Senate Bill 8, a massive tax overhaul that, he contends, will help avoid “the state’s boom-and-bust tax structure.”

“During the past 60 years, California has moved from agriculture and a manufacturing-based economy to a services-based economy,” said Hertzberg, a former speaker of the State Assembly, who is considered one of the state’s most effective lawmakers. “As a result, state tax revenues have become less reliant on revenues derived from the Sales and Use Tax on goods and more reliant on revenues derived from the Personal Income Tax.”

“Something more,” he added, “something visionary, is needed.”

BOE member George Runner criticizes $10 billion tax on services

“Something visionary,” in Hertzberg’s view, is for state government to take “something more” from the state’s service workers. That means you’ll be paying “something more” every time you get a haircut, visit your accountant for tax help or call your lawyer.

taxesBoard of Equalization Member George Runner, who serves on the state board responsible for administering sales and use taxes, says Hertzberg’s plan is a massive tax increase masquerading as tax reform.

“Some California lawmakers want yet another $10 billion from the people,” said Runner, a former Republican state senator. “They want a broad tax on services. Everything from bank transactions to haircuts to movie tickets, and everything in between. This will not work.”

Runner says “California’s hard-working families cannot afford higher taxes,” a view that is supported by the state’s leading taxpayer organization.

“‘Tax reform’ which imposes a net tax increase of $10 billion isn’t tax reform at all,”
says Jon Coupal, president of the Howard Jarvis Taxpayers Association. “It is an insult to working Californians.”

Revenue for schools, local government

Hertzberg believes California needs a permanent solution to raise revenue when Proposition 30, a temporary sales and income tax increase of $7 billion passed by voters in 2012, begins to expire next year.

“We must once again provide Californians with the opportunity to thrive in the 21st century global economy beyond temporary solutions like Prop. 30,” he said.

SB8 would allocate:

  • $3 billion to K-14 education, which would go toward rebuilding classrooms and saving for teachers pension fund demands;
  • $2 billion to higher education, which would be split between the University of California and the California State University systems;
  • $3 billion to local governments, which could go towards “additional public safety, parks, libraries or local development” but will be left to “local governments to best meet the specific needs of their particular communities”;
  • $2 billion to low-income families in the form of a new earned income tax credit to “offset the burden of proposed sales and use tax on services”

It also opens the door to “altering” the corporate and personal income tax codes, possibly cutting their tax rates. However, in addition to providing few specifics, Hertzberg says those changes would be delayed.

“The latter provisions would be phased in when it is clear that new revenue from the service taxes is sufficient to replace revenue that would be lost by those changes — and is sufficient to provide low-income workers with an Earned Income Tax Credit,” Hertzberg wrote in a piece co-authored with Edward D. Kleinbard, a USC law professor, and Laura Tyson, a business school professor at the University of California, Berkeley and chair of the U.S. President’s Council of Economic Advisers.

Most small businesses won’t be spared

Unlike past attempts to tax services, Hertzberg has embraced an expansive tax base with limited exclusions for health care and education services as well as businesses with less than $100,000 in gross sales.

Lawyers, Cagle, July 27, 2013“Small businesses, like plumbing contractors, auto repair shops, and restaurants account for more than 90 percent of the state’s businesses and well over a third of all jobs,” Hertzberg said. “They are a key rung on the ladder of upward mobility.”

Yet, those small businesses are likely to be hit with the new sales tax on services. According to the U.S. Small Business Administration, the two most widely used size standards are “500 employees for most manufacturing and mining industries and $7.5 million in average annual receipts for many nonmanufacturing industries.” Other industry specific size-standards are:

  • Legal services — $11 million in average annual receipts;
  • Accounting and related services — $20.5 million in average annual receipt;s
  • Architectural services — $7.5 million in average annual receipts;
  • Engineering, surveying and mapping services — $15 million in average annual receipts;
  • Specialized design services – $7.5 million in average annual receipts.

According to a 2011 policy paper published by the California Budget Project, which generally favored expanding the sales tax to services, “[A]t the height of the Great Depression, policymakers feared taxing services, viewing it as a tax on labor that would discourage employment.”

SB8: Chance of passing?

What are the bill’s chances of advancing?

As with most other bills, the first hearing on SB8 has yet to be scheduled. CalWatchdog.com reached out to half a dozen Republican state lawmakers for their reaction to the $10 billion tax increase, several of whom had yet to read the bill. None was willing to comment.

“To be clear, this is not tax reform,” stressed Runner, the former GOP state lawmaker now at the state tax agency. “It is a massive tax increase.”

This article was originally published on CalWatchdog.com

The Formidable Jerry Brown

The national Republican Party may be fortunate that California governor Jerry Brown is probably too old to run for president. One needn’t be a fan of Brown’s policies to recognize that, in his fourth and final term, the governor formerly known as “Moonbeam” is displaying a level of political skill that could be hard to beat. True, he had a long record of saying some rather radical stuff on his syndicated “We the People” radio show back in the 1990s. He’s proud of his tax-raising efforts and is committed to dubious and expensive environmental policies. Yet, he is warmly received not only by the state’s Democratic establishment, but also by many Republicans.

As a columnist in Sacramento, I’m always surprised at the nice things said about Brown — even off the record. Republicans see him as the most “conservative” elected official with any power in the state capitol and their last line of defense. Democrats credit him for hauling the state out of its deep fiscal mess. They get frustrated the governor isn’t as eager to create new social programs as they are—but they still get 90 percent of what they want from him.

If anyone doubts Brown’s approach, look no further than the budget he introduced on January 9. The $164.7 billion proposal for Fiscal Year 2015–16 takes state spending to record levels. He’s provided no check on the vast increase in the Medi-Cal program, which would expand from 7.9 million recipients to 12.2 million—roughly a third of the state’s residents—in three years. He talks a good game about fixing the state’sunderfunded pension systems and unfunded health-care liabilities, but the reforms he touts do little except kick the can down the road. He seems more interested in protecting union priorities than taking on his core constituency.

The high-speed rail system Brown embraces would cost $68 billion (based on extremely conservative state estimates) to create a transportation option that would be outdated and unnecessary by the time it comes on line—assuming it ever does, given the lack of funding streams. His plan to build twin tunnels under the Sacramento-San Joaquin Delta is another legacy-building project with a huge price tag but without the promise of delivering more water to the Southland.

Brown spent his first two terms from 1975 to 1983 halting the kind of infrastructure projects the state needed to meet a growing population. Now, he’s channeling the spirit of his father, Governor Pat Brown, who 50 years ago bequeathed California with a modern highway and water system. The state needs better roads and water storage, which the current governor supports—but he is more interested in projects that fight global warming. Indeed, his global-warming approach could stunt the state’s economic growth and will certainly hobble its competitiveness. In his January 5 inaugural speech, Brown called for policies that would slash the state’s reliance on petroleum-based fuels by 50 percent and boost the percentage of the state’s electricity generation from renewable sources from 30 percent to 50 percent.

California’s landmark Global Warming Solutions Act of 2006 (signed byArnold Schwarzenegger, but embraced by Brown) is significantly raising electricity and fuel costs, hiking taxes for manufacturers and leading to aggressive land-use restrictions that drive up housing costs—especially in the state’s already expensive big-city housing markets. He has downplayed legitimate concerns about the state’s oppressive tax and regulatory climate.

When Brown returned to the governor’s office in 2010, California faced budget deficits upward of $26 billion. Brown led the campaign in 2012 for Proposition 30, which imposed large income- and sales-tax increases. Combined with a recovering stock market—California’s tax system depends heavily on capital gains—the result was a balanced general-fund budget (provided you don’t look too closely, or count underfunded liabilities). Still, by Sacramento standards he’s holding the spending line and at least putting liability issues on the table.

To his credit, Brown insists that the Prop. 30 tax increases remain temporary. In his budget, he refuses to create new social programs and reminds legislators that, in California, deep deficits almost always follow balanced budgets. He axed the state’s redevelopment agencies, which doled out corporate welfare, though he signed into law a new, less troublesome type of replacement agency. He uses conservative language when talking about poverty, noting that California’s safety net is generous and arguing that the poor should acquire the skills to get good jobs. Such an approach—even if mostly rhetorical—buys him widespread bipartisan support.

“Brown has delivered a very consistent message to the state’s business community over the last four years: ‘I might not be your best friend, but around here I’m the best friend you’ve got,’” said Dan Schnur, a former Republican consultant and professor at the University of Southern California. “He has held the line against more ambitious spending from the Democrats in the legislature, which allows him to balance a rightward lean on budget matters with a more liberal approach to environmental and public safety issues. He got both sides to sign on to his water bond and rainy day fund, which might not leave him precisely on the 50 yard line, but certainly to the right of most legislative Democrats and the left of most Republicans.”

That explains why pension reformers, the business community, and taxpayer groups are relatively comfortable with the governor. Everyone seems to like him, which might have more to do with his personality and intellectual curiosity than anything else. He gets a pass on some of his wilder views because people understand he likes to toss around ideas. At press conferences, Brown directly answers questions (rather than sticking to talking points) and goes off on entertaining tangents about philosophers and historical figures. At a press event in Sacramento, the governor came up to me, mentioned something I’d written, then fumbled around his cell phone to give me the name of an author he thought I should read. Other reporters and politicians tell similar stories. From an authenticity standpoint, what’s not to like?

“He’s not an embarrassment like his predecessor,” said Grant Gillham, a political consultant and former Republican staffer. “Unlike Schwarzenegger, he’s not hamming it up for the cameras, or making stupid ‘girly-man’ jokes. . . . He’s got a Jesuit’s education, but a Franciscan’s behavior. After the last several clown acts, we’re all better for it.”

Falling Gas Prices Mask Hidden Tax

So why is it that while other states are now enjoying gas prices of less than $2 per gallon, California is still paying higher prices?

Due to high taxes and costly regulations, our state’s gas prices are higher than other states. It’s been that way for years.

But what’s new is that the gap between California’s and other states’ gas prices has grown.

To get a sense of the change, compare California gas prices with those of the nation as a whole. According to GasBuddy.com, even while overall prices have fallen, the gap has grown from about 32 cents per gallon just a month ago to as much as 47 cents this January.

That’s a 15 cent increase in just one month!

The likely culprit is a new “hidden gas tax” that took effect January 1. The new regulation expands the state’s cap-and-trade program to include transportation fuels. The expansion is the latest in a series of sweeping and costly regulations developed by the California Air Resources Board as it implements the California Global Warming Solutions Act.

Luckily for the Governor and his Air Board appointees, gas prices barely budged when the new rule kicked in; in fact, prices have continued to fall, masking the rule’s true impact and ironically causing the new “hidden gas tax” to be even more hidden.

Just a few years ago gas prices were soaring dangerously near $5 per gallon. Imagine public outcry if the government had caused gas prices to soar then!

When government imposes higher costs on fuel providers, California consumers inevitably pay the price in lost jobs, income and opportunity.

As economist Severin Borenstein notes: “Every analysis of cap-and-trade — or of a gas tax or, for that matter, of movements in the price of crude oil — finds that a change in the cost of selling gasoline, up or down, is quickly and fully passed through to consumers.”

We’d likely all be paying 10 to 15 cents less per gallon if not for the new regulation. Depending on the auction price of emission credits, some fear the cost could grow far higher in future years.

Concern about the economic impact of high gas prices led to a bipartisan effort last year to postpone the planned cap-and-trade expansion. Unfortunately, Assemblyman Henry Perea’s legislation (AB 69) died when Senate President Pro Tem Darrell Steinberg refused to authorize a hearing.

Republicans have already announced a repeal effort this year in the form of SB 5 and AB 23, but it’s hard to imagine their bills will fare better.

Of course, with hidden taxes, exactly how much more we’re paying is anyone’s guess. That’s just one of many reasons hidden taxes are such a bad idea. Taxes should be transparent, straightforward and easy to understand. You shouldn’t need to hire an economist to know how much money you’re sending to Sacramento—or Washington, D.C.—each year or how it’s being used.

We do know that 25 percent of the billions in new revenue the State of California collects from its cap-and-trade system is being used to fund the state’s costly and controversial high speed rail project. Yet even with this funding source, the project—which recently broke ground in Fresno—still lacks the necessary funding to finish the job.

So next time you fill up at the pump, remember you’re helping pay for a train you won’t be able to ride until the year 2029—assuming it ever gets built.  (Even then you’ll still have to pay to ride the train.)

Maybe that’s why politicians try so hard to keep taxes like these hidden.

George Runner represents more than nine million Californians as a taxpayer advocate and elected member of the State Board of Equalization. For more information, visit boe.ca.gov/Runner.