Newsom Budget Plan – California’s Spend-a-Thon Begins

Gov. Gavin Newsom submitted his budget Friday, outlining how he wants the state to spend a record $227.2 billion in the 2021-2022 fiscal year. And spend California will, as usual on items in no way connected to government’s limited role in our lives.

In addition to the usual largess customarily handed out to the Big 3 of any California budget – schools; health and human services; and prisons, which drain taxpayers through a hungry corrections officers union – conspicuous in the governor’s spending list is a $1.5 billion program to fund the state’s conversion to a zero-emissions vehicle fleet. Newsom calls it an “investment” that will “accelerate our state’s progress toward” “California’s historic commitment to requiring sales of all new passenger vehicles to be zero-emission by 2035.”

Newsom’s ZEV program is neither an “investment” – investment suggests there will be a return on capital – nor is it “California’s historic commitment” – it’s supplemental to Newsom’s October order, which outlawed the sale of new gasoline- and diesel-powered cars after 2034. This is personal with him. The entire scheme has the look of becoming the object of the governor’s affection the same way Jerry Brown adopted the high-speed rail as an ego project.

A particularly revealing clue is that the program is part of Newsom’s planned $4.5 billion in spending for the “business and workforce recovery elements” of his budget, even though it has nothing at all to link it to an economic rebound. It is not unlike Assemblyman Phil Ting’s “climate crisis investment plan.” It’s political lust disguised as a component of economic recovery by the Assembly Budget Committee chairman, who’s shown a particular affinity for electric vehicles.

Newsom’s growing obsession with ZEVs drove him to not only bypass the legislative process when he issued the executive order, but to ignore the science, as well. Because California produces only about one percent of worldwide man-made greenhouse gas emissions, it can do nothing to affect the global climate. The needle wouldn’t move one way or the other if California doubled its greenhouse gas production overnight or if it dropped it to zero.

Fixations have a way of blinding us to consequences and this is true of the governor’s ZEV preoccupation. Though his proposal includes “support for low-income Californians to purchase cleaner vehicles,” the poorest will still suffer the most painful financial hit.

“Zero-emissions vehicle subsidies have always been giveaways to the wealthy,” says PRI Senior Fellow Wayne Winegarden, who has explained how the rush to decarbonize automobiles has produced “Costly Subsidies for the Rich.”

Any form of government support for purchasing cleaner vehicles is less than it appears to be. Subsidies granted to low-income buyers will be offset by “slower economic growth,” which isn’t sufficiently addressed in the budget, says Winegarden, as well as the “higher costs that result from doubling down on the California approach to lowering greenhouse gas emissions.”

Newsom is also proposing to use taxpayers’ dollars to “support” the purchases of “clean trucks, buses and off-road freight equipment,” as well as “construction of electric charging and hydrogen fueling stations necessary to accelerate zero-emission vehicle adoption.” Was he even aware while dreaming up these goals that the world’s largest producer of electric cars, Tesla, was, in effect, run out of the state (along with billions in tax revenues) by lawmakers’ hostile-to-business policies?

With a $15 billion surplus – or what is being called a $34 billion “budget resiliency,” which includes reserves – available to dedicate to his recovery plans, Newsom also wants to spend nearly $800 million on an initiative centered around job creation and retention; regional development; and small businesses and climate innovation. That last item should have been labeled “boondoggle,” because that is exactly what it will be, “a waste of both time and money” that is marked by “extraneous policy or political motivations.”

There’s no denying that Californians need work, though. The jobless rate is 8.2 percent, still far higher than the 5.5 percent registered in March, the month the pandemic lockdowns began, and more than double the 3.9 percent rate of November 2019. But a jobs program is never the answer to a high unemployment rate. A growing economy is. Lower taxes and deregulation will accelerate expansion.

The tax credits included in the initiative will help, as will $71 million worth of waived business fees. But a smoother, straighter path would be to permanently cut taxes across the board. That’s not in Newsom’s budget, though. Rational tax policy is found only outside of California’s state lines.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

This article was originally published by the Pacific Research Institute.

Case For A Newsom Recall Continues To Grow

After some fits and starts, the recall effort against Gov. Gavin Newsom appears to be gaining traction. Proponents say they have collected over 1 million signatures.

Media reports of a half-million dollar donation to the effort plus rumors of even more forthcoming are getting the attention of California’s political establishment. If the required 1.5 million valid signatures are submitted before the mid-March deadline and subsequently verified, a special election will be held and California voters will soon thereafter vote on the recall.

That is, unless the California Legislature pulls another fast one as it did in 2017, passing a last-minute change to the rules or the election calendar.

Any such attempt would be extremely unwise, with public confidence in government already low.

On the ballot, the recall question would be accompanied by a separate question of who would replace the incumbent if the recall passed. (In the October 2003 recall election of Gov. Gray Davis, a total of 135 candidates were on the ballot as replacement candidates, including pornographer Larry Flynt and former TV child star Gary Coleman).

Recalls are not easy and are fraught with many unknowns. They are expensive and the complicated politics of multiple replacement candidates, each seeking a plurality of votes, makes the state’s “jungle” primaries seem simple by comparison.

Polling is unreliable in such an environment, and there’s a Wild West atmosphere to the process.  Nonetheless, recalls are a legitimate political remedy when the public loses confidence in an elected official. At least a million Californians have reached that point.

To read the entire column, please click here.

Environmentalists Increase Influence on Local Governments

In less than a year, three Orange County cities will be in the utility business. Fullerton, Costa Mesa, and Irvine have created a joint powers authority to purchase and distribute electricity to households and businesses in those cities, under what’s known as “community choice aggregation.”

It’s difficult to imagine how this model will result in lower electricity bills, although that’s one of the ways this program was sold to local elected officials who approved the plan. Southern California Edison will still be the primary supplier of electricity and will still manage the distribution. Since SCE only generates 19 percent of the power it distributes to customers, and purchases the other 89 percent, the costs to customers will only go down if this new joint powers authority outperforms SCE in their procurement efforts enough to offset the cost of the new bureaucracy.

As reported by the Orange County Register, “Unbound by long-term contracts many utilities hold, they can adjust the mix to take advantage of lower costs or to favor renewable energy — or both. Additionally, they can be more aggressive than private utilities in encouraging and developing clean local power generation and battery storage.” But which is it? Saving money? Or going green?

The problem with newly formed independent, city owned utilities being “more aggressive than private utilities” in developing clean renewable sources of energy is the existing state mandates are already the most aggressive in the nation, if not the world. California has mandated that public utilities deliver 100 percent carbon-free power by 2045. And SCE’s well on its way. In their 2019 Annual Report they claim they already deliver 48 percent carbon-free power to their customers.

There is a cost for “carbon-free power.” According to the U.S. Energy Information Administration, California’s residential rates for electricity in October 2020 were 20.8 cents per kilowatt-hour, compared to a national average of 13.6 cents per kilowatt-hour. In Texas, residents only pay 11.9 cents/KWh, in Utah, 10.3 cents/KWh. Even progressive Oregon manages to keep rates lower than the national average, at 11.37/KWh.

By now most rational observers realize that even if global warming is caused by anthropogenic CO2 emissions, the U.S. is only responsible for 15 percent of that, and California’s share is less than 2 percent. Readers of the latest BP Statistical Review of World Energy know that for everyone on earth to consume half as much energy per capita as Americans, global energy production would have to more than double, and that renewables in 2020 accounted for less than 4 percent of all global energy production. This is why China, India, and every other rising economy in the world is developing additional sources of gas, oil and coal as fast as they can, and there is nothing anyone can do about it.

So why are California’s legislators hell-bent on developing renewables?

The most charitable answer to this question is their desire to make California an example of environmental sustainability for the world to follow, and a belief that innovations pioneered in California will be emulated worldwide, delivering fantastic profits to Californian entrepreneurs at the same time as the planet is saved.

The problem with this noble explanation is that to accomplish these high minded objectives, California has been turned into an expensive laboratory, with 40 million captive subjects. While policies that elevate costs for electricity benefit public utilities and tech entrepreneurs, millions of ordinary Californians are driven into poverty. And this ideal, to make California a green beacon for humanity, finds expensive expression in far more than just electricity.

The green lobby in California has not only made electricity barely affordable for low and middle income households, but they have declared war on natural gas. In a state where electricity is four times as expensive as natural gas on an energy-equivalent basis, and in a nation where natural gas has never been as cheap or abundant as it is today, the movement to ban natural gas quietly gathers momentum.

As of November 2020, thirty-nine California cities have already enacted new ordinances limiting natural gas in new construction. The California Energy Commission is considering enacting a statewide ban effective in 2022. With a mandate already in place that requires new vehicle sales to be all-electric by 2035, it is clear that policymakers are determined to turn California into an all-electric, carbon-free state before anyone else, no matter what the cost.

This goal of a carbon-free society in California is also evident in housing policies, based on the theory that the denser California’s urban areas become, the less need for energy to be spent on transportation. While this theory rests on dubious foundations, it is already the primary rationale for countless local and state restrictions on development, which in turn is the primary reason housing is unaffordable in California.

Open land along freeway corridors is plentiful in California, but when attempts to develop it are mired in prohibitively expensive regulations and endless litigation, the only logical place to increase housing stock is within existing cities. The efforts in Orange County by local activists to advocate for this are typical. One such activist organization, People for Housing, announces on their website “Cities that are now on a new path.” They claim recent victories for their city council candidates in Costa Mesa, Huntington Beach, Garden Grove, Santa Ana, and Tustin.

One of the goals of these local housing advocates, echoed in pending state legislation such as Assembly Bill 68, passed in 2019, is to stimulate a “backyard building boom,” whereby homeowners can build new smaller homes in their backyards. Additional state legislation abounds, all of it designed to densify neighborhoods, and absolutely none of it designed to facilitate construction of new single family neighborhoods on open land. Meanwhile, residents who relied on zoning laws to preserve the spacious ambience of their suburbs are stigmatized as NIMBYs, racists, and “deniers.”

There is no effective opposition to California’s drive to confine its residents to existing cities, nor to challenge the move to a carbon-free, all-electric society. Both goals are impractical and extremely expensive. Shorn of the supposedly enlightened motivations behind these goals, their impact is explicitly misanthropic, and it hurts everyone.

The influence of environmental activists is the reason for California’s unaffordable cost-of-living. It is a form of economic oppression, justified on environmental grounds, but also a convenient cover for opportunistic special interests. Along with the high tech industry, the clean power industry, public utilities, real estate investors, and subsidized housing developers, California’s powerful public sector unions are big winners.

With every new regulation, and every time a private enterprise is coopted by a new government agency, more jobs are created in the public sector. This translates into more dues paying union members which results in more political spending by union leadership on the candidates of their choice. At the same time, whenever environmentalist activists block public spending on new infrastructure that might enable more suburban development, that money is redirected to pay and benefit increases for public sector workers.

There is a tremendous symbiosis between California’s economic elite, its environmentalist activists and their allies in the social justice movement, and the unionized public sector. But despite all the rhetoric about helping the disadvantaged, the biggest victims are those Californians who can least afford to fund the bleeding edge.

This article originally appeared on the website California Globe.

Newsom Recall Gathers Momentum

With over 1.2 million signed petitions already collected, and tens of thousands more arriving daily, the chances have never been higher that Gavin Newsom will have to fight for his political life in a special recall election.

How the proponents have built a powerful coalition of committees is an example of innovation that offers a new model for qualifying initiatives, recalls and referendums, one that will not be restricted to billionaire corporations or one-party legislatures.

According to lead proponent Orrin Heatlie, the volunteer signature gathering army that has been growing all summer is now deploying over 5,000 people every weekend to gather signatures. “They’re tired but they keep plugging along like they always have,” said Heatlie, adding that “more and more people volunteer as they learn about the progress of the movement.”

The latest counts, confirmed by representatives at both of the main committees, indicate over 200,000 signatures have already been collected via a direct mail effort, and over 1,000,000 signatures have now been gathered by volunteers. The original volunteer committee, the California Patriot Coalition led by Heatlie, has been active since June 2020. The committee running the direct mail campaign, Rescue California led by Anne Dunsmore, has only been doing mass mailings for a few weeks.

Using direct mail instead of professional signature gatherers is a risk that appears to be paying off. Paid signature gathering campaigns currently face the multiple obstacles of COVID restrictions on where they can set up, as well as the impact of AB 5 which destroys the traditional business model of hiring signature gatherers as independent contractors. Even before these new hurdles were added, the costs for signature gathering had already gone up because the number of firms able to do statewide campaigns consolidated at the same time as the number of well-funded special interests willing to pay whatever it takes increased. For example, Uber, or the real estate industry, or the association representing dialysis clinics, and others, can easily spend tens of millions of dollars on a signature campaign. But activist groups rarely have unlimited funds.

This is why the synergy generated by the original committee, the California Patriot Coalition, which successfully recruited a grassroots army, combined with the innovative approach of direct mail being used by Rescue California, may become a precedent setting breakthrough to be emulated in future initiative qualification campaigns.

“It is exciting to see the response to our effort,” said Anne Dunsmore when reached for comment. “We are way ahead of our projections, and we absolutely expect to reach our goal of 700,000 signed petitions via direct mail. The signed petitions we receive are validating at the astonishing rate of 98 percent, each response averages over two signatures, and we also have received donations from over 8,000 people, including over 500 in the past week.”

Dunsmore also recognized the tremendous contributions of the original recall committee, saying “We are enormously pleased with our partnership with the California Patriot Coalition and their volunteer effort.”

A key member of the California Patriot Coalition is Robin McCrae, who echoed Dunsmore’s sentiments about the synergy between the two committees, saying “we are all well intentioned, passionate people who care about making change for the better and we all have a common goal and common purpose and our parallel efforts will get the job done.”

With thousands of active volunteers, managing the logistics and messaging of the group is a challenge. Heatlie explained how that challenge was recently complicated by Facebook. “We have 75 local Recall Gavin groups on Facebook with over 200,000 members,” said Heatlie, “and in the days following the events on January 6 in Washington DC, all of our administrators were locked out of posting or commenting on posts. Over 150 of our administrators and regional managers were locked out of their Facebook groups. The ban won’t lift until January 23rd.”

The irony of Facebook leaving these group pages up but locking out the administrators is that the group leaders lost the ability to screen user posts and comments. This meant the risk of non-administrators leaving posts or comments that might offend Facebook went up, not down, by virtue of their ban. “If violations were entered on our Facebook pages,” said Heatlie, “we couldn’t remove them anymore.”

Opponents of the recall point to incendiary comments online, attributable to a few people and often posted in the heat of the moment. But a few objectionable comments only represent a minute fraction of the vast movement behind the recall. It worth wondering who is helped when Facebook prevents recall organizers from even moderating their online forums.

McCrae offered additional thoughts that might summarize the motivations of the vast majority of recall supporters when she said “The heart and soul of this recall are hard working volunteers who are dedicated to saving California. They are fighting for the right to work, to save their businesses, and protect their freedom from government overreach. They recognize that California is no longer thriving. Our beautiful state is deteriorating and we are trying to save it.”

Dunsmore summed up the opportunity represented by tapping tremendous grassroots energy and supplementing that with traditional professional campaigning. “We are working together with passion, but not reckless passion. That’s hard when people are coming up with policies that are so atrocious and polarizing. When something is really important and it’s bad, you can’t just get mad, you have to fix the problem with a level head.”

What Newsom faces with this recall is a new coalition. A populist movement that is growing in political and logistical savvy every day, allied with a group of seasoned professionals who dove in against the odds to support them. There are many politicians in California that have, at least in the minds of millions of voters, failed to recognize and correct the challenges facing Californians. As they watch the “walls close in” on Newsom, they may rest assured they will be next.

This article was originally published by the California Globe.

California Labor Unions Are Trying To Reverse the Outcome of an Election

In his first inaugural address in January 1911, California’s progressive Gov. Hiram Johnson detailed a far-reaching “people’s reform program” that would help wrest control of the state’s government from what his contemporaries called “The Octopus”—a reference to muckraker Frank Norris’ 1901 novel about the outsized power of Southern Pacific Railroad.

As Norris explained, the Cyclopean sea monster was a “symbol of a vast power, huge, terrible, flinging the echo of its thunder over all the reaches of the valley, leaving blood and destruction in its path.” Drawing heavily from that corporate-power theme, the new governor touted something that would define California politics for the next century: the initiative, recall, and referendum.

California’s emerging experiment in direct democracy would “prevent the misuse of the power temporarily centralized in the Legislature,” Johnson argued, noting that supporters of these reforms believed in the ability of the people to govern themselves. However opponents “may phrase their opposition, in reality (they) believe the people cannot be trusted.”

Ironically, modern California’s progressives have become increasingly hostile to the direct democracy concept, as evidenced by their repeated attempts to place limits on these voter initiatives. The reason has less to do with political ideology and more to do with raw political power.

Democrats exert ironclad control of the Legislature and don’t like the Johnson era’s checks on its power. For example, the state’s Democratic-heavy electorate nevertheless took remarkably conservative positions on the statewide ballot initiatives during the Nov. 3 election—and gave lawmakers a comeuppance on some key issues.

We’ve seen these anti-democratic tendencies arise in recent days, which is ironic timing given the fracas in Washington, D.C. I’ve also been appalled at Donald Trump’s efforts to overturn the results of a legitimate presidential election even as 60-plus courts, state legislatures, and federal agencies rebuke his claims. Apparently, California Democrats now share Trump’s litigious approach: they support elections, but only if they yield the desired result.

For starters, the Service Employees International Union (SEIU) announced last week a lawsuit challenging the results of Proposition 22, which exempted drivers for companies such as Uber, Lyft, and DoorDash from the ominous provisions of Assembly Bill 5. That’s the “landmark” legislation that mostly bans companies from using contractors as their workforce.

The voters were unequivocal, given that the proposition passed with a nearly 59-percent “yes” vote. That result is not a huge surprise. The law obliterated moderate-income service jobs—and not just in the burgeoning gig economy. Because of the blowback from freelancers losing their livelihoods in the midst of a pandemic, the Legislature exempted 100 industries from this bad law’s provisions.

In their wisdom, California voters added additional exemptions and they assured that the companies they’ve come to depend upon will continue to exist. Yet Democratic leaders are much less trusting in the intelligence of the people than their ideological forebear, Johnson.

“Prop. 22 not only created a permanent underclass of workers in California—it stripped the Legislature of its power to step in and improve the working conditions for … app-based workers,” said Assemblywoman Lorena Gonzalez (D-San Diego), who authored A.B. 5. She’s peeved that “corporations can use the initiative process to write their own laws with artificial barriers designed to block elected representatives from doing their jobs.”

Ironies abound. I understand that Gonzalez doesn’t like Proposition 22, but that’s an issue that voters had a chance to consider. Furthermore, the unequivocal purpose of the initiative process—and I’d recommend that she spend some time studying California’s political history—was to block elected representatives from doing their jobs.

Whatever their claims, such opponents simply don’t trust the people, as Johnson understood. Certainly, SEIU and the opponents of this (or any) initiative have the right to challenge its constitutionality, just as Trump had the right to file his election-challenging lawsuits. That doesn’t make it the right—or democratic—thing to do.

Gonzalez complains about the power of corporations to use the process, which is another irony, given that direct democracy targeted corporate power. Yet Democratic lawmakers have nothing to say about the modern-day robber barons who more commonly place initiatives before voters: public-sector unions. Note that the failed property tax hike measure (Proposition 15) was largely a union endeavor.

In another fit of hypocrisy, Democrats last week blasted the movement to recall Gov. Gavin Newsom. “This recall effort, which really ought to be called ‘the California coup,’ is being led by right-wing conspiracy theorists, white nationalists, anti-vaxxers, and groups who encourage violence on our democratic institutions,” said California Democratic Party Chairman Rusty Hicks. He didn’t provide evidence to back such inflammatory allegations.

Again, I’d refer Hicks and his Democratic cohorts to Johnson’s inaugural words. He said the initiative, referendum, and recall are not panaceas, but they give voters “the power of action when desired, and they do place in the hands of the people the means by which they may protect themselves.”

This column was first published in The Orange County Register.

Mayor Garcetti’s Homeless Policy is Destroying Los Angeles

Los Angeles Mayor Eric Garcetti is arguably the most incompetent, destructive, negligent, no good, irresponsible mayor in American history. And he’s got plenty of competition, especially now. San Francisco’s London Breed, Ted Wheeler in Portland, Bill DeBlasio in New York City. Blue City mayors bent on destroying civilization are plentiful, but Eric Garcetti is the worst member of this odious gang.

It isn’t as if Garcetti doesn’t have partners in the ongoing annihilation of urban civilization in what ought to be America’s magnificent megacity on the Pacific Rim. He’s got a city council that is equally corrupt and delusional, and a newly elected Los Angeles County District Attorney, George Gascon, who is one of the most dangerous, pompous imbeciles to ever live. But Garcetti is in the bully pulpit. Garcetti sets the tone. Garcetti could make a positive difference if he had the vision and the guts. The buck stops with Garcetti.

Garcetti attracted well deserved outrage when he not only arbitrarily enforced “lockdown” orders throughout most of 2020, but went a step further and posted a page online – still up – where people can turn in anyone they think is violating the “Safer at Home” order. Then, just in case anyone hadn’t yet realized what a sinister authoritarian they had as mayor, Garcetti set up a bounty to encourage people to turn in their neighbors, and announced to the press that “snitches get rewards.”

The arbitrary enforcement of pandemic restrictions make Garcetti’s snitch hotline particularly offensive. Neighbors, and competitors, get paid to anonymously turn in the corner bistro or nail salon, while big box retailers and corporate fast food franchises stay open with impunity. Citizens can be turned in and cited for walking their dog, while within the city’s growing archipelago of homeless favelas, anything goes.

The problem of affordable housing and a growing homeless population afflicted Los Angeles before the pandemic, and since the pandemic began has become worse than ever. It is the signature failure of Garcetti’s mayoral tenure. The manner in which Garcetti has bungled the related issues of housing and the homeless provides a sordid glimpse into an administration riddled with corruption and delusion. They have literally done everything wrong.

There are many flawed theories that underlie housing and homeless policies in Los Angeles. To name a few: “Housing first,” first endorsed by Obama’s Dept. of Housing and Urban Development, which prioritizes funds to provide shelter before using any government money for treatment or counseling. The concept of “wet shelters,” which admit homeless individuals regardless of their sobriety. And the most misguided of all, “inclusive zoning,” the preposterous theory that the most appropriate way to house the homeless is to construct shelters on some of the most expensive real estate on earth.

This notion, that somehow anyone who is homeless, for whatever reason, has a right to live for free in a wealthy neighborhood, would be material for hilarious satire, except for the fact that the purveyors of this nonsense are dead serious. Some of the proponents of inclusive zoning are motivated by compassion unfettered by the numerous reality checks that should apply, others are stone cold communists, determined to destroy the rights of property owners. But the most influential advocates for inclusive zoning are the special interests that correctly recognize it as a scam they can ride to riches.

On January 13, the City of Los Angeles Planning Commission is going to vote on whether to approve the “Reese-Davidson Community,” a proposed 140 unit monstrosity to be built on 2.8 acres that straddle the main thoroughfares connecting Venice Beach to the rest of Los Angeles. Located just a block from the beach, the city-owned property is currently used to provide parking for beach visitors. The most virtuous choice for the city would be to keep the property as it is, at least if they ever manage to make the beach a safe place again for families to visit on the weekends. But there are other options.

Real estate in the heart of Venice Beach and close to the ocean is extremely expensive. The market value of this land, if it were sold to a developer to build an unsubsidized, 140 unit multi-family complex, is conservatively estimated at $35 million. Imagine how this money might be spent by a resourceful city council committed to helping more people at a reasonable cost. Low income housing can be built in low income areas of Los Angeles for a fraction of the cost for the Reese-Davidson project, as can “permanent supportive housing” for the homeless. The construction cost alone is estimated at over $1,000 per square foot, over $68 million. Taking into account the value of the land and the parking structure, this project is going to end up costing over $735,000 per unit – most of them studios.

This isn’t unusual for taxpayer subsidized housing projects in Los Angeles. In 2019 the City Controller, Ron Galperin, published an embarrassing audit of how the city used its voter approved Prop. HHH funds, which authorized the city to issue $1.2 billion in general obligation bonds to partially subsidize the development of supportive housing units. The gist of that report? Galperin writes: “The current median cost per unit for projects in the Proposition HHH pipeline is $531,373, and more than 1,000 units are projected to exceed $600,000.”

The implications of these findings, which represent not only a scandal for Los Angeles, but dozens of other cities in California under the same mismanagement, illustrate the futility of this approach. To house the more than 60,000 homeless living in Los Angeles today at these prices for shelter would cost $32 billion. Since these projects are also designed to accommodate low income residents of Los Angeles, easily ten times more numerous than the homeless, the true cost to get the job done is in excess of $300 billion. And this is the low estimate.

The current theory of “housing first” means that until all the homeless are housed, money cannot be allocated to treating their addictions, even to the extreme of not requiring sobriety as a condition of their residency in these permanent housing units they’re being given. This means that Los Angeles, with its mild winters and inviting beaches, is a magnet for the indigent across America, from sea to sea. This is already a demonstrated fact, as a street culture reminiscent of Lord of the Flies plays out daily in Venice Beach. The party never stops, and the only heat comes from gangs.

But even if the number of homeless in Los Angeles were capped somehow, meaning that someday they all would find permanent supportive shelter, why would the developers that are building and operating these housing projects ever want to solve the problem? This is where the concept of “inclusive zoning” becomes extremely useful. One of the besieged Venice Beach residents, Soledad Ursua, recently interviewed by the Epoch Times, explained how the racket works. “Developer fees are a fixed percentage. If you’re one of these nonprofit developers, what which project would you work on, one that pays 10 percent of $10 million or 10 percent of $100 million?”

This ten-to-one range of potential costs is not far fetched. Taking into account the value of the land and the inevitable cost overruns, it is possible, even likely, that the apartments of the Reese Davidson project in Venice Beach will come in at a total project cost of around a million dollars per unit. If the many amenities were dispensed with, and these studios were constructed efficiently in some of the inland neighborhoods of Los Angeles, it ought to be possible to build studios at a cost of $100,000 per unit. And for that matter, why aren’t homeless, especially the significant percentage that would be sane and able bodied if they were denied drugs and alcohol, not just rounded up and offered shelter in a supervised tent encampment? Such facilities could be built quickly and cheaply, and overnight, not only would taxpayers save billions, but Los Angeles would lose its status as a magnet for the stoners of the world.

One must ask, and ask again, why aren’t these solutions being pursued, or even seriously considered? Why isn’t Eric Garcetti using the resources of his city to change the legal and legislative environment to make practical solutions possible? What aren’t taxpayers demanding these reforms? The reason is because too many people are getting rich on this fraudulent masquerade of compassion. They are making billions in fees, receive additional billions in tax credits, to create projects that operate exempt from property taxes and business taxes. As the problem just gets worse.

Los Angeles mayor Eric Garcetti may or may not deserve all of the unflattering descriptions leveled at him by his critics. He is part of a much larger hypocrisy. But Garcetti knows exactly what is going on, and nobody is in a better position to do something about it than him. The homeless and housing policies of Garcetti’s administration are destroying Los Angeles. With the lone exception of the relative handful of bureaucrats, consultants, builders and operators that are making a killing, everyone in this vast city are victims of this failed policy. Not just the hard working residents who can still afford their rent or their mortgage, but the homeless themselves.

This article originally appeared on the website American Greatness.

Biden Team Fears Rocky Transition

Photo by Gayatri Malhotra on Unsplash

Joe Biden’s transition team had no illusions about the chaos they were inheriting from President Donald Trump. They expected a disorganized government and mismanaged agencies, many of them hollowed out and ignored over the past four years.

Hours before they assume office, however, there is a fear among Biden’s team that the roadblocks they encountered during the chaotic transition shielded them from understanding the full scope of the problems at various agencies, and that the state of the executive branch is far worse than they understood — “the tip of the iceberg” as one senior transition aide put it.

At the National Security Council, Trump officials were reluctant to share information about who was even on the staff, and at the Department of Defense, requests for information were either ignored or only partially answered. At the Office of Management and Budget, the practice of making career officials available for the incoming administration to craft their budget was disregarded, leaving Biden officials frustrated that their budget will likely be delayed. And at the Office of the United States Trade Representative, the lack of interest in assisting the Biden transition was stated plainly.

“Transition is not a priority for USTR,” Robert Lighthizer’s chief of staff told a Biden official, according to a person briefed on the conversation.

A spokesperson for USTR did not respond to a request for comment. Officials at the Defense Department and OMB, meanwhile, have vocally defended their transition cooperation. “Our DOD political and career officials have been working with the utmost professionalism to support transition activities in a compressed time schedule,” Acting Secretary of Defense Christopher Miller said in a Dec. 28. statement.

Complicating matters even more was the massive SolarWinds hack discovered late last year, which left open the possibility that suspected Russian operatives are still lurking inside federal computers, impacting virtually everything that Biden’s team tries to do. …

Click here to read the full article from Politico.com

Vaccine Chaos: Californians Scramble For Shots Amid Mixed Messaging

The chaos and confusion many Californians experienced this week in their search for a COVID-19 vaccine only intensified today as Gov. Gavin Newsom revealed that the state would not receive an additional supply of doses it was counting on to accelerate vaccination. 

Newsom said he, like other governors, expected about 50 million doses to be released from storage by the feds in the next few days. “And then we read, as everybody else, that they have reneged or … are unable to deliver on that,” he said at a news conference unveiling a new mass vaccination site at Dodger Stadium. 

The governor said he does expect there to be enough vaccine for Californians who already have received their first shot and need the required second dose. But the state needs to verify the supply it will be given, he said. 

Just 48 hours ago, federal officials had promised states an expanded supply of vaccine and demanded they start vaccinating people 65 and older and those with documented preexisting conditions to speed the slow pace of immunizations nationwide. 

But a national stockpile of vaccines held back for necessary second doses appears to have been depleted, meaning that states won’t get the amount of vaccine they were counting on to dramatically ramp up mass vaccination campaigns, according to a Washington Post report Friday. 

Newsom last week announced an audacious goal of immunizing 1 million people in 10 days, under mounting political pressure over the state’s slow vaccine rollout. But at least 450,000 people would need to receive shots today to fulfill that goal. The state is on pace to achieve it, Newsom said, adding that there is a lag in the state’s data reporting.

California has used about 30% of the doses it has been allocated from the federal government while Texas has used about 55%, according to the U.S. Centers for Disease Control and Prevention. California ranks 43rd among states in the proportion of people it has immunized. 

On Wednesday, following hastily-announced federal guidance, Newsom said that anyone 65 and older could now be immunized — broadening a complicated priority system that previously reserved doses for health workers and nursing home residents.

Local public health officials and health systems weren’t at all ready for an onslaught of potentially 6 million seniors. Not all adopted the state’s recommendation, creating a patchwork of access that Californians are now trying to decipher. 

Reports of glitches mounted as counties launched dozens of different online platforms for appointment sign-ups and waiting lists. Tiny Inyo County, with about 18,000 residents, had to ask people to sign up with just a Google form. …

Click here to read the full article from CalMatters.org

Election Integrity Still Matters

This is neither a column about “Stop the Steal” or “there was no fraud.” At this point, whether there was a sufficient level of fraud to affect the outcome of the 2020 presidential election is a moot point. Nonetheless there were, and continue to be, legitimate concerns about election integrity in the United States.

If this nation is to survive as a constitutional republic, those concerns must be addressed. The problem is that our nation is currently so divided that there exists little trust in any remedy that may be proposed by one side or the other. Just how deep is that mistrust? Consider this.

In a Politico/Morning Consult poll taken shortly after November’s election, 70 percent of Republicans rejected the notion that it was conducted in a “free and fair” manner. Before the election, just 35 percent of Republicans held that belief. The shift was opposite among Democrats, where 95 percent believed the election was free and fair afterward, compared with 52 percent who said the same before the election.

Despite this divide, there is a workable template for election reform that was the product of a bipartisan commission. Several of its recommendations are worthy of consideration.

After the 2000 election debacle culminating in the Supreme Court case of Bush v. Gore, a Commission on Federal Election Reform was formed. It was a continuation of a previous commission created by former President Jimmy Carter. Co-chairing the new commission was James A. Baker III, who served as Treasury Secretary in the Reagan administration and Secretary of State under President George H.W. Bush. The commission’s twenty-one members were a who’s who of political heavyweights and academics from across the political spectrum.

In a 91-page report, the commission put forth 87 recommendations to secure fair elections. Key among these proposals was the recognition that voter ID laws are important to preserve election integrity. Granted, with the Covid-19 pandemic, there was a perceived need to rely heavily on mail-in voting last year, but that does not mean that we should ignore this important recommendation for future elections.

To read the entire column, please click here.

Anti-Business Policies Are Driving Flagship Firms Out of California

It’s hard to say the word “innovation” and not think of California. Technology has paced the state’s growth in everything from agriculture and oil to housing, entertainment, and aerospace. California has always been the harbinger of the American future, the promise of ever-greater economic and social progress.

Yet increasingly, many of today’s innovators are fleeing the state. This past week, one half of the company arguably most symbolic of tech development in the state—Hewlett Packard Enterprises—one part of the now broken-up old Hewlett Packard and focused on lucrative areas like cloud computing and IT infrastructure—decided to leave for Houston. Within a week Elon Musk, the latest in the line of truly transformative California tech entrepreneurs, also announced that he would move to Texas, along with Oracle, a Fortune 100 company and global leader in database management. Other recent departures also include more traditional firms as Charles Schwab, McKesson, Bechtel, Parsons Engineering, and CB Richard Ellis.

The corporate exodus accompanies a human one. The state’s population, notes demographer Wendell Cox, is now virtually stagnant, with more people leaving and fewer people coming. Millennials, particularly as they ponder family formation (as we recently demonstrated in a report from Heartland Forward), are following a similar pattern. Today, suggests Cox, California, once the ultimate land of youth, is now aging far faster than the rest of nation.

Until the past year, Silicon Valley seemed immune to the economic stagnation or decline afflicting other key state industries such as aerospace, manufacturing, and energy. “We were fat and happy,” notes Jim Wunderman, president and CEO of the Bay Area Council, the region’s leading business group. “Now people are shaking their heads. HPE’s moving sends the message from one of the core founders of Silicon Valley. It’s very troubling.”

The appeal of Silicon Valley, as Wunderman is quick to add, has not disappeared: natural attractiveness and a congenial climate, leading universities, an unmatched pool of technical talent, and the preponderance of leading venture-capital funds. Even as the state suffers the nation’s highest poverty rate, the tech giants have ballooned in value, and new companies, including a set of IPOs, driven by the low cost of money and the pandemic disruption, are creating an enormous tax windfall—this year estimated at $26 billion.

California politicians, notably Governor Gavin Newsom, believe that this patten is immutable, and that even as companies leave, new ones will take their place. Yet the process is slowing. In recent years, according to figures developed by UCI business school professor Ken Murphy, California has been losing market share among the 11 states with high concentrations of innovation-oriented firms. Since 2005, California’s share of the nation’s innovation business has dropped 3 percentage points, while competitors like Florida, Oregon, Arizona, and Utah have expanded their share. The Bay Area has also seen an exodus of corporate headquarters, often to Texas.

California’s innovation industries, which include science and engineering services, are no longer adding jobs faster than those of several other states, notably Florida, Utah, Arizona, and Washington. California’s innovation economy, to be sure, remains a powerful one, with 27 percent of all innovation businesses nationally, but in a world of corporate mobility, for how long will businesspeople be willing to absorb the higher costs of the Golden State?

California’s business flight has been gaining momentum for years. State housing policies, including climate-related regulation, and extraordinarily high development fees, have made it hard to build on the periphery of the major metros, where most population and job growth takes place. One result has been that the state’s new house-building permits have fallen to barely half that of key competitor states like Texas, Tennessee, Florida, and Arizona. California also accounts for all three of the worst metros for first-time buyers, according to a recent AEI survey, and six of the top ten.

High housing costs affect employees and are one reason why so many firms with many mid-income office workers—McKessonToyota, Bechtel, Jacobs, Parsons, Nissan, Bank of America—have departed for places where these workers can afford to buy a house. High energy prices affect both consumers and industrial companies. Regulation against such things as fossil fuels has driven Occidental Petroleum, one of the largest home-grown firms, out of the state, and threatens the future of Southern California Gas and other remaining fossil fuel companies, not to mention the livelihoods of tens of thousands of people in both the Central Valley and Southern California who work in the industry.

Rivaling regulation as a negative is taxes. California already has the nation’s highest income tax—with a top marginal tax rate of 13.3 percent—and capital gains are taxed at that rate. A new proposal circulating in the legislature would add three new surcharges on seven-figure earners. It would add a 1 percent surcharge to gross income of more than $1 million, 3 percent on income over $2 million, and 3.5 percent on income above $5 million. That means a combined state and federal marginal tax rate of 54 percent for high earners. By contrast, Texas, Tennessee, Florida, and some other states attracting tech-industry firms have zero state income taxes.

The tax burden seems likely to get worse. This fall, state public employees pushed a ballot measure that sought to eliminate Proposition 13’s protection for commercial properties, a measure that failed by a small margin. Members of the majority in the state legislature have introduced AB 2088, designed to assess a 0.4 percent “wealth tax” on residents with net worth above $30 million. Approximately 30,400 taxpayers would be affected by this tax, estimated to generate $7.5 billion annually. Moreover, the tax would be assessed on people planning to leave the state for ten years after their exit—a clause of dubious constitutionality. “You get a wealth tax and people will leave in droves,” predicts Daniel Young, former president of the Irvine Company, and a long-time developer of multi-family housing in Silicon Valley.

Some cities, particularly San Francisco, seem determined to gore the golden goose entirely. Even in a year where most of California rejected new taxes, San Francisco enacted new wealth taxes and backed an expansion of rent control. The city’s stores remain closed, and rents are falling more than in any major metropolitan area; the city seems incapable of cleaning its streets or controlling rampant property crime and widespread homelessness.

Before the pandemic, California’s boosters and leaders could convince themselves that the state had developed a progressive and sustainable economic model. Covid-19 and the economic downturn have stripped away this illusion, as the state’s unemployment rates now surpass the national average, worse even than in the New York area, the epicenter of the coronavirus outbreak. It is particularly bad in Los Angeles, where less than half of residents now hold jobs. Los Angeles County has lost over 1 million jobs to the pandemic and suffers an unemployment rate higher than any of the major California urban counties.

Initially, the technology industry created lots of middle-class jobs. Hewlett Packard, founded in 1939, was an exemplar of enlightened management and employee benefits. Yet in recent years, Silicon Valley companies have become ever more virtual and digital, with fewer jobs for working- and even middle-class employees.

Today, the state’s economy is totally dominated by a handful of enormously powerful companies—Apple, Google, Facebook, Salesforce—none of which make tangible products, at least not in California. These firms, notes Robert Lapsley of the California Business Roundtable, see themselves as global first and foremost, not primarily as part of a state economy. “We need these people to step up and they are not doing it,” he suggests “That was not a problem when David Packard was around. We have lost that voice.” Many of these firms’ employees are overseas. Even in the Valley, close to half of tech employees—nearly twice the rate for the tech industry nationally— are non-citizens, working under HI-B visas. The federal government recently sued Facebook for discriminating against American workers in favor of foreign ones.

We have gone a long way from “the fire in the Valley” era, with its garage startups, homebrew computer clubs, and innovation by oddballs like Apple co-founder Steve Wozniak. Today, tech firms have become more concentrated. Back in 2006, notes Scott Galloway, author of The Four, a book examining the rise of the tech giants, only one, Microsoft, was in the top five in market cap; today, tech firms account for all five of the country’s top firms by market cap.

Ironically, these firms have done well in part because they have been largely unregulated. And when they object to taxes and regulations, they have the resources and technology to move operations elsewhere—as Musk, Uber, Lyft, Facebook, and Apple have done. Some new companies, such as Peter Thiel-backed Palantir, have chosen to move their headquarters elsewhere—in Palantir’s case, to Denver, in part to escape woke criticism for its work with the military and ICE. With two out of three tech workers now willing to leave San Francisco, big tech can get bigger while spreading talent and wealth around.

Mark Zuckerberg has claimed that he would never start Facebook in today’s California. Yet he seems unconcerned about the fate facing smaller firms. His foundation gave millions to Proposition 15, a measure that would have increased property taxes on businesses and opposed by most legacy businesses, and particularly by minority-owned firms. In a letter to Zuckerberg, the business owners noted: “Unlike Facebook, restaurants, dry cleaners, nail salons and other small businesses can’t operate right now and many may never open again. The last thing they need is a billionaire pushing higher taxes on them under the false flag of social justice.”

Jim Wunderman, head of the BAC, suggests that political pressure from both Washington and Brussels leads the tech mavens to adopt a progressive script—the firms are more concerned about privacy and monopoly issues than about higher taxes or even the most intrusive regulations. They also have to fend off their own left-leaning employees, by seeming to take progressive, pro-labor positions, even in an industry with virtually no unions and where the lower end of the wage spectrum offers little in the way of benefits. “A lot of their employees are progressives,” Wunderman suggests. “They are trying to be responsive to the people who work for them.”

One remarkable phenomenon has been the indifference of state government to big-name departures, even when signature companies such as McKesson—a firm with roots going back to the 1850s and now a “centralized distributor” for the Covid-19 vaccine—or Toyota, the world’s leading car company, shift out of state. Yet, notes Lapsley, the state makes virtually no effort to look out for companies that choose to stick around.

Kaitlin Lewis, Assistant Deputy Director of Communications for the Governor’s Office of Business and Economic Development (GO-Biz), suggests that the state is in “constant communication” with companies and also administers the California Competes Tax Credit program, a job-creation initiative begun in 2013 to help businesses grow and stay in California. In early November, California Competes had awarded $80 million in tax credits to a diverse set of businesses that are projected to create 6,535 new full-time jobs in California. The funding, Lewis says, will bring more than $400 million in new investments.

That may sound promising but consider some context: HP Enterprise is tracking full-year revenue of $27 billion in 2020. It has spent $7 billion in operating expenses in 2020, much of that related to the presence of its corporate headquarters, which will now move to Texas. The $80 million in tax credits that GO-Biz administers to retain businesses is not even close to adequate to retain a major employer like HPE, much less the other unhappy employers leaving or about to leave the state.

“Privately,” notes one top southern California business leader, “the sense is the state doesn’t care about the economy as long as money is coming in. Even Jerry Brown saw the importance of the broader economy outside a few tech firms and IPOs. Newsom’s people still think everyone wants to be us.”

In the past, to be sure, California evolved its remarkably diverse economy to meet new challenges. Yet as the critical mass of talent shifts elsewhere, and the regulatory burdens grow, one must question how long the Golden State’s economy can rely on a handful of firms and some IPOs, many of which will end up absorbed by larger firms. California’s future as a dynamic place for aspiration and innovation is far from guaranteed. Continual assertions of its greatness cannot obscure the likely long-term impact of the flight of the icons.

Joel Kotkin is the Presidential Fellow in Urban Futures at Chapman University and executive director of the Urban Reform Institute. His latest book is The Coming of Neo-Feudalism. You can follow him on Twitter @joelkotkin. Marshall Toplansky is Clinical Assistant Professor of Management Science at Chapman University. He was formerly Managing Director of KPMG’s national center of excellence in data and analytics, and he is a co-founder of Wise Window, a pioneer in sentiment analysis and the use of big data for predictive models.