May 19 Special Election: Just Say No

Calitics has announced its endorsements for the ballot propositions on the May 19 special election: no on everything. I agree, and will not duplicate their analysis. I’ve written before on the problem with spending caps (Prop. 1A), but it is worth quoting the League of Women Voters on this issue:

[Prop. 1A] would actually make it more difficult for future governors and legislatures to enact budgets that meet California’s needs and address state priorities. It would amend the state Constitution to dictate restrictions on the use of funds put into the reserve and limit how “unanticipated” revenues can be used in good years. It could lock in a reduced level of public services by not taking proper account of the state’s changing demographics and actual growth in costs. Prop 1A would also give future governors new power to make budget cuts without legislative oversight. Like the other propositions opposed by the League on this ballot, Prop 1A came from a deeply flawed process that resulted in measures written in haste and without public input or analysis. The League would support real budget reform, but we regretfully conclude that this measure would only make things worse. (League of Women Voters)

The only issues where I break a little from the Calitics editorial board is on propositions 1D and 1E. As a rule, I am generally opposed to dedicated tax increases tied to specific spending. With the exception of sin and consumption taxes tied to related issues (carbon taxes for climate change, alcohol/tobacco taxes for health care), I feel that such arrangements strip flexibility from the legislature and prevent reasonable shifts in government priorities. They distort the budget process just as Prop 13 does, if not to the same extent. However, the issue of dedicated taxes should be addressed as part of comprehensive budgetary reform, and not as a part of a crazy budget work-around. So, I come to the same conclusion: no on Props. 1D and 1E.

With it increasingly clear that this budget will not be sufficient even if all of the ballot propositions pass, there is no reason to pass them at all. We cannot be held more hostage than we already are.

Environmentally Friendly Development in a National Perspective

This editorial in the Los Angeles Times caught my eye. Ed Glaeser, professor of economics at Harvard, argues that environmental regulations limiting development in California are harmful with regards to carbon output because the climate in California is so much better than in the rest of the country. Every house that isn’t built here is built somewhere else, and with a bigger carbon footprint.

Much of America struggles with cold winters and hot summers. Making such difficult climates comfortable for humans requires a lot of energy. By contrast, much of coastal California is pretty pleasant year-round, requiring far less energy. The natural implication is that to reduce carbon emissions, more Americans should live in temperate California.

This is an interesitng proposition, and one that makes a certain amount of sense on the face of it. I had some questions about the methodology of calculating the carbon output of a marginal home, so I took a look at the original study, which can be found here. I am in no way competent to critique the study itself, though I have questions about determining location of the marginal home (for Los Angeles, there isn’t much room for development on the coast, most development is inland with higher air conditioning needs and longer commutes) and the calculation of vehicle emissions (which seemed to ignore the output of idling in traffic and the marginal impact of the new household on traffic itself). There is also the question of the carbon cost of supplying water to the marginal household. This is a critique acknowledged on study co-author Matthew Kahn’s blog, though he is focused on the costs of pumping the water. My concern is more the cost of producing the water, especially given the recent discussion of desalination plants which are notorious energy hogs. Finally, I wonder at the effect on carbon output for the marginal household if the house is built on land formerly used for farming. How does the carbon cost of shipping food into cities that used to be supplied by local farms impact the urban carbon footprint?

That said, I feel fairly comfortable critiquing the conclusion that the lesser carbon footprint of a marginal home in California means we should relax environmental regulations designed to protect open space. Continued below the fold. (more…)

Misleading Budget Reporting from the Los Angeles Times

The LA Times had a ‘news analysis’ piece today on the impact of the budget deal on the middle class. While it got the gist right – Californians are getting screwed – it repeats a great many of the myths about state finances. I was going to discuss it in detail, but instead I’ll point to Robert at Calitics.

I do want to mention three things. On the question of the tax burden in California as opposed to other states. According to this CNN Money graph from 2005, California ranks 20th on taxes as a percent of income. In a February 2009, the Public Policy Institute of California [PDF] showed that on the same metric, California ranked 18th. We are firmly in the middle of the pack. For some reason, the mindset in California is that our tax burden is still well over the national average. This hasn’t been true since the last 1970s, but reporting like this helps to perpetuate the belief.

The second issue pertains to paying for our freeways. I’ve discussed a mileage tax before, and how it should replace the gas tax as the means for paying for transportation infrastructure, with the gas tax being retained for climate change mitigation until a carbon tax is instituted. The article hints at a mileage tax around the edges, but mostly suggests that new construction will take the form of toll roads rather than freeways. This need not and shouldn’t be the case. The debacle of the TCA in Orange County should be evidence enough. There is a good coverage of this issue over at OC Progressive.

Finally, there is the question of the article’s focus on the middle class.

But at a time when taxes are about to rise substantially, the services that have long set this state apart are deteriorating. The latest budget cuts hit public programs prized by California’s middle class particularly hard — in some cases at the expense of preserving a tattered safety net for the poor — following years of what analysts characterize as under-investment.

The entire tenor of the article paints the picture that the middle class is being targeted specifically for both tax increases and budget cuts, in favor of the “tattered safety net”. However, this is misleading in three ways. First, public programs are prized by and benefit all residents of California, not just in the specific (everyone wants afforable higher education for their kids), but also in the abstract (quality education benefits businesses in the state and helps combat crime). Second, see this post at Calitics on the intensely regressive nature of the tax hikes in this budget – it is the poor who are being unfairly targeted, while corporations get a tax cut. Finally, the Democratic proposal for this budget always involved restoring high income tax brackets abolished in the 1990s. It is the governor, and ultimately the Republican obstructionists, who deserve the credit for shifting the burden to the middle and lower classes, both in the form of the income tax increase and in the sales tax increases, which are inherently regressive. Of course, this is seen as a bonus by the Yacht Party. Shame on the Los Angeles Times for getting the isolated facts right, but missing the larger story.

The Problem With Spending Caps

The supposed purpose of a spending cap is to prevent the government from increasing spending (or, presumably, cutting taxes) during times of high tax revenue, on the assumption that such actions will lead to larger deficits and tax increases (or, presumably spending cuts) during bad times. This is, perhaps, a sensible goal. However, there are better methods to dampen the effect of economic downturns on the state budget (notably, by shifting toward property taxes and away from income and sales taxes).

The real effect of a spending cap is to remove flexibility from policy making. Even if the cap accounts for inflation and population growth, it only really allows the legislature to fund existing programs. Any new program or an expansion of any existing program would need to come at the cost of another existing program. New taxes could not be levied to fund an immediately new program, although since the cap is based on some calculation from the previous decade’s tax revenues, the higher taxes may, over time, allow for more spending. But even then, that adds a decade’s lag for the adoption of new policy, an unacceptably long wait.

More importantly, the cap will ignore significant other constraints on the budget. It will ignore the aging population and the corresponding strain on state health services. Additionally, health care costs have been rising significantly faster than inflation and income, again increasing the demand for and cost of state services. I don’t think it is much of a reach to suggest that even if no new programs were adopted, and the prison population remained the same, that the cost of running existing programs would still increase faster than inflation and population growth over the next 20 years. Ergo, a spending cap doesn’t prevent new spending, but locks us into future spending cuts as program costs rise in unpredictable ways.

Furthermore, spending caps are anti-democratic (small ‘d’), in that they prevent new spending desired by a majority of the public. However much Republicans may like to pretend, spending generally isn’t forced on an unwilling population by out of control legislators. Spending is something the public generally wants, and if it doesn’t, then it can replace the legislators and end the programs. Spending caps don’t have brains. They do not think or reason. They do not recognize that there was a natural disaster or that the public wants expanded arts education for their children or that massive water infrastructure spending is necessary to prevent the Central Valley from turning into a dust bowl. If we want a government by algorithm, let us replace the legislature with a computer and be done with it. Of course, the result will be that the computer says “no”.

Abel Maldonado: Not A Hero

As mentioned over at Calitics, the California media seems to be fawning over Abel Maldonado for successfully forcing an open primary amendment through the legislature. Without getting into a discussion of whether open primaries are good policy or good for the parties, I instead want to ask whether the process by which the proposal was adopted. First, George Skelton’s laudatory language:

Normally, it might take years for a citizens reform group to place an open primary proposal on a statewide ballot. Sen. Abel Maldonado did it in less than a week.

Actually, the heavy work was done in less than 24 hours.

The brashness, the audacity, the tenacity of this Republican lawmaker from Santa Maria in ramming such a landmark measure through a Legislature that ordinarily wouldn’t have touched it in a blue moon made him the single biggest winner of the budget-tax brawl that finally ended in the Capitol at dawn Thursday.

The state, broke, has been withholding income tax returns because it doesn’t have the money on hand. Infrastructure projects had been halted, and those that had previously been exempted on the grounds of public safety were also about to be shut down. State employees were being ordered to take mandatory furloughs, and tens of thousands were about to be laid off. California has the lowest municipal bond rating in the country. Months of Republican obstructionism had blocked any reasonable budget, and a dubiously legal work-around had been vetoed by the governor. Finally, a budget compromise had been worked out, in secret, with no hearings and few publicly released details, and only one vote in the Senate remained to get it passed. And Abel Maldonado saw an opportunity.

Actually, the heavy work was done in less than 24 hours.

No. The heavy work was on the budget, and had been going on for months while Maldonado complained about the costs associated with relocating the State Controller’s offices. There was no heavy work on the open primary. There were no hearings, no public comment, no testimony by expert lawyers or political scientists, and certainly no discussion of whether this kind of open primary will benefit the populace. Open primaries are an article of faith among some ‘centrists’ and ‘reformers’, so there was no need to have a debate on whether open primaries would drive up the costs of or lead to voter confusion. Washington state has this kind of open primary, but there was no discussion of the results there. Instead, the proposal was rammed through the legislature with nary a debate. Whatever ‘winners’ there may be in this entire debacle, good governance certainly isn’t one of them.

We have a word for people who exploit the fears of others for political gain. Holding hostage the welfare of the poor, the disabled, the young, the elderly, and the ill to advance some dubious electoral change is as morally reprehensible as taking civilians hostage to free a ‘political prisoner’. For 72 hours, Senator Maldonado, you held this state hostage in an attempt to ease your path to reelection, and for that I name you extortionist. And George Skelton, for your praise of his tactics and results, I name you apologist. May both of you be punished as the people of this state see fit.

The Party of No Solutions

State Assembly Speaker Karen Bass was on the Rachel Maddow Show tonight. The video can be found here (I cannot figure out how to make the MSNBC embed code work on wordpress – advice would be welcome).

Key, Speaker Bass referred to the Republican Party as “The Party of No Votes. The Party of No Solutions.” This should become the Democratic motto in California for the next two years. Assuming that some sort of compromise is finally reached, the inclination will be to let the horror of this budget crisis pass into history. Progressives are going to need to keep Republican obstructionism front-and-center both for the fight against the 2/3rds rule and for the gubernatorial race.

(On the 2/3rds rule, see Robert in Monterrey at Calitics on the history of the rule, and the approach to changing it.)

Overall, I thought that Speaker Bass hit the key points, especially on the recent history of Democratic concessions to spending cuts. However, I found fault  with her on two issues. The first, she made a point that this crisis is a product of the Republican party – referring to recall threats and KFI’s John & Ken specifically. Okay, that is accurate. But in doing so, she appeared to give a kind of clemency to the individual legislators. This is dangerous, especially given Abel Maldonado’s narcissistic attempt to rewrite the constitution to protect his own seat.

Rachel also asked her about the liberal response to those threats, a question that Speaker Bass had to evade, because there has been relatively little liberal or progressive response. I think some of this is structural – liberal outrage is unlikely to sway recalcitrant Republicans, and threatening Democratic legislators for more tax increases and fewer spending cuts is counterproductive in the face of total disaster. However, I also suspect that the problem, among both Democrats and the populace at large, is familiarity. We’re used to budget crises in California. They aren’t news – they’re olds. As such, I believe that most of the state ignored the crisis in the summer of last year, even though in retrospect is was an obvious prelude to the current disaster. We’re so used to storms that we didn’t recognize the hurricane for what it was.

Speaking of progressive response, Calitics has been urging people to call Abel Maldonado for days.

If you haven’t called him, please call Maldo,916-651-4015, and tell him to end the hostage situation. If you have, call him again, or you can also call his local offices. And if you are in the district, why not call both offices and send him an email too?

This is especially important given this from the LA Times:

But for others, including Sen. Sam Aanestad (R-Grass Valley), it is a matter of listening to the “hard-working middle-class people” he represents.

“Just yesterday alone, we had 400 telephone calls,” he said. “Overwhelmingly, more than 40 to 1, they were saying, ‘Please do not raise our taxes.’ “

Take the time; make a call.

Meg Whitman, Gubernatorial Candidate (Updated)

The LA Times ran article yesterday on Meg Whitman, the latest California gubernatorial candidate for the 2010 race. The article depicts her as befuddled unsteady.

In a wide-ranging interview, the first-time Republican candidate’s demeanor vacillated between that of a confident, take-charge chief executive officer delivering a PowerPoint presentation to that of an ill-at-ease novice who has studied stacks of policy binders, but has yet to master the art of political maneuvering.

“I don’t know the answer to that question,” Whitman responded when asked her stand on school vouchers, a perennial issue of importance to the conservatives who dominate her party’s primary.

She also had wishy-washy nuanced opinions on tax increases (she supports Pete Wilson’s decision to do so, but would not do the same now), proposition 8 (voted for the ban, but existing marriages should be left intact), illegal immigration (would have opposed proposition 187, but believes hospitals, local law enforcement, and schools maybe schools should have to report illegal aliens to federal authorities), and offshore drilling (wouldn’t usually support it, but does in the current economic climate).

She expressed a similar thought with respect to the battle over California’s vehicle emissions standards:

Whitman also called herself a champion of the environment. But she voiced qualms about California’s efforts against global warming, mainly the attempt under Gov. Arnold Schwarzenegger to force car makers to adopt emission standards tougher than the federal government’s.

“I would have said, ‘Hey listen, let’s keep one standard for the country as a whole today; if the economy gets better then let’s give those rights to states,’ ” she said.

In all, the article suggested a kind of intellectual inconsistency, which should, perhaps, be expected from a moderate Republican running in a primary election likely to be dominated by the conservative base. Whitman just seems to be relatively bad at spinning the inconsistency. She doesn’t seem to be prepared to perform the kind of double-talk necessary to win a California GOP primary without loosing any opportunity to win the general election in this overwhelmingly Democratic state.

The article finishes by quoting Whitman about what I believe will be her biggest campaign pitch.

“This is something that I’ve done before,” Whitman said of her fiscal recovery plans. “I think maybe it is about time for a governor who has created jobs, who’s managed a budget, who’s led and inspired large organizations, who listens well, and who can drive an agenda.”

I don’t believe, a priori, that CEOs and business leaders make good government officials. The transition from the priorities of business (profit) to those of government (the public good) is a paradigm shift. Business leaders must demonstrate the ability to make that transition before they can be elected.

I also think we can do without someone who will take credit for the jobs created at Ebay, but ignore the layoff of 10% of the workforce not six months after she left the job.

Update: See the take on her interview with AP at Calitics.

George Skelton: Almost Right (Updated)

In the LA Times yesterday, George Skelton made three suggestions aimed at preventing future state budget crises. He almost got it right.

Lower the vote requirement for a budget to 55%. That’s still a supermajority, but one that’s practical given California’s increasing diversity of people and interests represented in Sacramento. A budget then would need 44 votes in the Assembly and 22 in the Senate, rather than 54 and 27. Democrats normally could handle that by themselves.

Also drop the two-thirds vote requirement for taxes to 55%, with one caveat: All the new revenue must be used to help balance a status-quo budget — not a penny for spending increases above inflation and population growth.

If they still don’t pass a budget by the July 1 start of the new fiscal year, the lollygagging lawmakers forfeit their pay and per diem for every day the spending plan is late. For most, that would be a hard hit. Legislators make $116,208 a year; house leaders get $133,639. Per diem is $173 tax-free each day — even weekends — while the Legislature is in session.

To his credit, he recognizes the unfairness of the third rule to legislators who vote for a budget and aren’t rich. He misses, of course, the unfairness to legislators who don’t vote for a budget for some principled reason, and aren’t rich. I disagree with why Republicans refuse to vote for a tax increase, vehemently. I don’t, however, think that we should essentially extort legislators into passing a budget they disagree with.

I think, instead, that abolishing the 2/3rd rule should be enough to result in budgets passed in a timely manner. I don’t believe that a majority of legislators want the budget delayed every year.

The bigger problem is the spending cap he wants to impose as a condition of changing the 2/3rds rule for taxes. He rightly accounts for population growth in the spending cap – a vital necessity given the projections for the next few decades. However, he misses two other key sources of new spending: 1) popular initiative and 2) disaster relief.

A great deal of the spending in our state is in some way governed or mandated by initiative. Between program mandates and debt service on bonds, it is not practical to believe that binding the legislature’s hands on taxes while allowing the populace free-reign over spending will produce balanced budgets. The populace is not going to approve, by initiative, more money for prisons. However, they will approve toughening sentencing laws to send more people to prison. It is the role of the legislature to make sure that the necessary funds are raised to meet the expenditures mandated by the wishes of the populace. A system that denies the legislature the flexibility to meet those mandates is no more functional that the current system.

The second issue is disaster relief. Beyond the obvious expenditures that would follow a massive earthquake, there are other more prosaic expenditures. Climate change will require both large capital improvements in the form of, say, new water infrastructure. It will also involve smaller, annual expenditures in the form of, for example, wildfire fighting costs. There may be costs associated with global warming over the next 50 years that we cannot even predict. And that is the point. Placing any kind of hard cap on either taxes or expenditures fails to account for unexpected future costs.

In a representative democracy it is necessary to trust your representatives. If the populace doesn’t like the tax rate, or feels that the state is misspending money, then elections are the cure. Forcing the legislature to govern with one hand tied behind its back is asking for prolonged and unpopular budget crises. If the populace doesn’t like how Democrats prepare the budget, then they will stop electing them.

Update: See Robert in Monterey at Calitics reacting to an article in the Monterey Herald. He also makes the point that the rising health care costs of an aging population aren’t reflected in a spending cap based on population growth and inflation.

Stimulus, What Stimulus? (Updated)

Here is Paul Krugman’s very initial take on the Senate stimulus package (emphasis added).

Now the centrists have shaved off $86 billion in spending — much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out.

My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans employed over the next two years.

Every state in the country is facing serious cuts in services over the next few years. In some cases, this means reduced health care or unemployment benefits. In many, layoffs of state employees. California is among the hardest hit in the country, and had its first unpaid furlough this past Friday. The furlough has the effect of lowering employees’ salaries by over 9%. All of these cuts and layoffs have the effect of pulling more money out of the economy, worsening the recession.

The bill is bad, and the blame for it largely rests with President Obama. Certainly, House Democrats deserve blame for larding the bill up, giving Republicans the chance to attack it, and the Senate deserves a healthy dose of blame for passing this milquetoast monstrosity. However, President Obama’s failure to lead on the stimulus is the real problem. He could, and should, have presented a list of demands to the House and used his serious popularity to force it through relatively unchanged. An additional future stimulus, negotiated more fully in the Congress, could have been passed in six months or so, giving Congress the opportunity to pursue its pet agendas.

A large part of his failure to lead is his obsession with bipartisanship. He attempted preemptive compromise with Congressional Republicans, which weakened the bill from the very beginning. He refused to make an aggressive, public case for a large, spending-oriented stimulus, giving Republicans cover to 1) vote against it and 2) hold it hostage. And, finally, he backed Congressional Democrats into a corner where if they didn’t weaken the bill to fit Republican sensibilities they would be seen as going against the highly charismatic and popular leader of their party. A bad move all around. I only hope than in 6 months we have the opportunity to revisit a second stimulus package – this one better designed. I also hope that California’s government lasts that long.

Update: Brad DeLong has the list of spending cut from the stimulus. What the hell was the Senate thinking?

Published in: on February 7, 2009 at 4:40 pm  Leave a Comment  
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California and the Stimulus

There are a couple of interesting stories on the stimulus package and California today. Starting with this one (h/t Calitics):

The Democratic Congressional Campaign Committee (DCCC), chaired by Congressman Chris Van Hollen, today announced the DCCC is launching a Putting Families First ad and grassroots campaign in 28 targeted Republican districts.  The ads focus on the Republicans out of step priorities by putting bank bail outs and building schools in Iraq before the needs of the Americans in the struggling economy.

Targeted California Congressmen include:

Representative Dan Lungren                         CA-03
Representative Elton Gallegy                         CA-24
Representative Ken Calvert                            CA-44
Representative Brian Bilbray                         CA-50

I’m especially happy to see Calvert targeted. I campaigned for Bill Hedrick in the past election and was pleasantly surprised to see how well he performed. I don’t expect that the ads will target the Orange County part of the district. I do think, however, that Hedrick will have to work to tighten the gap in Orange County if he wants to be able to win.

Update: This is exactly the kind of action the California Democratic Party should have taken this summer with regards to Republican obstructionism on the budget. It is still what they should be doing now – but this summer it could have yielded dividends in the election. The state party should take note.

Moving on, I don’t often have good things to say about Senator Feinstein, but I’ll give her credit for this (from CQ):

The first amendment scheduled for debate is a proposal from Patty Murray , D‑Wash., and Dianne Feinstein, D-Calif., that would boost the bill’s highway funding from $27 billion to $40 billion and its transit funding from $8.4 billion to $13.4 billion.

This is a needed amendment. The stimulus package is already weighted too strongly toward tax cuts and too small overall. Infrastructure and transit spending will help put shovels in the ground, and transit spending in particular will help advance us toward a cleaner economy. Personally, I think this stimulus package should be used much more heavily to advance the serious investment we need in clean energy.

Which is part of what makes this so disappointing:

Friends of the Earth tells Streetsblog San Francisco that Senator Barbara Boxer’s staff has confirmed that Boxer and Senator Inhofe will present an amendment to the federal Stimulus Plan for $50 billion in additional funding for highways, bringing the total to $80 billion, exactly the figure Inhofe demanded last week in a letter to the Committee for Environment and Public Works.

I’m all in favor of more infrastructure spending, and this post doesn’t indicate what the spending will be used for. There are certainly any number of highway and bridge repairs that are desperately necessary. However, I dislike seeing spending going to car-based transit and not a corresponding amount going to mass transit. Unlike others, I’m not as bothered by the cooperation with Inhofe, no matter how odious I think he is.

Finally, LA Mayor Villarigosa is going to lobby Congress for more mass transit spending for LA.

Villaraigosa wants to ensure Los Angeles remains high on the list for funding for major transportation, green-energy projects and big-ticket items such as the “Subway to Sea” as well as the mayor’s ambitious solar initiative. He also wants federal money to go directly to cities.

This may be a day late and a dollar short. The time to do this would seem to have been a week or two ago when the core of the bill was still being written. That said, I certainly believe more money needs to be spend as aid to state and local governments. Such spending may not necessarily create new jobs, but it can certainly help prevent current jobs from being lost. And when jobs are lost, the quality of government services degrade, just as more people come to rely on those services. It is a dangerous cycle of events.

Finally, one of the major objections to more infrastructure spending, and mass transit spending in particular, is that it wasn’t sufficiently ‘shovel ready’. On that subject I point to this post by Paul Krugman last week, where he argues that stimulus spending should probably continue through 2011. I am all in favor of a broader spending package even if the jobs won’t get underway immediately, especially if the spending is on projects that advance other goals, such as combating climate change. Of course, perhaps that spending should be in a stimulus round two package that can be more carefully assembled in the next couple of months.