Freedom Line Blog

Over at RealClearMarkets, the American Enterprise Institute’s Kenneth Green has a wonderful take-down of California’s delusional alternative energy mandate, which would “require that 15.4 percent of all vehicles sold by 2025 must be electric cars, plug-in hybrid cars, or (currently non-existent) fuel cell cars.” Green notes that this is the second time the Golden State has gone down this road, after a similar mandate — imposed back in 1990 — had to be scrapped due to its total infeasibility.

As you may recall, it used to be fashionable amongst conspiracy-minded greens to posit that the electric car had been undermined by some nefarious cabal of big oil, the auto industry, and hydrogen fuel cell advocates. They even made a film about it: 2006’s “Who Killed the Electric Car?”, which included the contributions of such noted experts in transportation economics as Martin Sheen, Mel Gibson, and Phyllis Diller. As Green points out, however, the electric car and its alternative fuel cousins have never taken the market by storm for a much simpler reason — they’re just not economically viable:

The GM Volt sells for a non-competitive $40,000, and is barely selling despite federal tax subsidies up to $7,500, and some state subsidies that further sweeten the pot. Plug-in hybrid technology is more expensive to manufacture, more expensive to repair, more expensive to insure, and, after 22 years, they still have overheating and fire problems.

As Robert Bryce points out in his book Power Hungry, electric cars are the “Next Big Thing. And they always will be.” Bryce observes that EV-boosters have been flogging electric cars since 1911, when the New York Times declared that “the electric car “has long been recognized as the ideal solution” because it “is cleaner and quieter” and “much more economical.”

Scan the hard data on any alternative energy source being promoted as a panacea and you’ll find much the same thing: Too little performance for too much money and too little convenience. And that’s the real tragedy of mandates like California’s or federal handouts to firms like Solyndra. The reality is that we probably will shift away from our reliance on conventional sources of energy like coal and oil in the future. But in order to do so, alternative energy sources will have to be scalable, affordable, and efficient. Providing subsidies for those technologies before they reach that point only delays their viability by reducing the financial incentive to get a better product to market.

The upshot? Reliable green energy may indeed be on the horizon for California. But if it does arrive, it will be because of the efforts of businessmen, not bureaucrats.

In a letter (pdf) to California legislators, State Controller John Chiang summarizes the Golden State’s fiscal problems with deft understatement:

As of December 31, 2011, total receipts are coming in $2.6 billion less than forecasted, and expenditures are $2.6 billion more than assumed.  Together, both of these components translate into a $5.2 billion reduction in cash resources.

At least someone in California can still do math.  Will it matter?

You know political differences are coming to a head when state and local leaders takes step – albeit unrealistic – to break away from misbehaving neighbors.  Earlier this year liberal Pima County made noise about seceding from Arizona.  A county official in conservative Inland California called for meetings to legally distance themselves from spendthrift Sacramento and the loony Left Coast.  Now, two Republican state lawmakers in Illinois have introduced a bill to divide Illinois into two states: liberal Cook County (home of Chicago), and the other 101 municipalities.  Claiming that “Chicago-style politics” are dominating all other concerns in the state, the GOP legislators want to part ways and limit the influence of Second City Mayor Rahm Emanuel to a smaller geographic area.

Will any of these ideas work?  Almost certainly not.  But the popularity of political separation just underscores how divided America is becoming.  That we’re still together is something to be thankful for, if not an occasion for perpetual rejoicing.

More bad news from the Tarnished State:  A memo circulated by Democratic Assembly leaders pegs California’s budget deficit for next year at $8 billion, more than double the $3.1 billion Governor Jerry Brown and legislative Democrats projected just a few months ago.  In (un?)-related news, Brown’s office shut down a transparency website from the Schwarzenegger-era that made far-flung government documents easily available.  Now, visitors are redirected to some of the relevant primary sources, but many others are not listed.

In both cases, the price of reliable information seems to be too little, too late.

Recently, Troy wrote an excellent indictment of the latest Los Angeles boondoggle, a debt-laden deal to bring an NFL team to a city with job-killing regulations and 12.5 percent unemployment.

Now, Joel Kotkin echoes Troy’s analysis with more scathing criticisms of the regulations-for-thee-but-not-for-me pay-to-play scandal pushing a publicly financed stadium forward.

Such projects often obscure the real and more complex challenge of nurturing broad-based economic growth. This would require substantive change in a city or regional political culture. Instead the football stadium services two basic political constituencies: large unions and big-time speculators, particularly in the downtown area. The fact that the stadium will be built with union labor, for example, all but guaranteed its approval by the city’s trade union-dominated council.

Downtown developers and “rent-seeking” speculators, the other group behind the project, have siphoned hundreds of millions in tax breaks and public infrastructure in the past decade. They have done so – subsidizing companies from other parts of Los Angeles, entertainment venues and hotels — in the name of a long-held, impossible dream of turning downtown Los Angeles into a mini-Manhattan. Perhaps no company has pushed this more effectively than the stadium developer Anschutz Entertainment Group, a mass developer of generic entertainment districts around the world. AEG has expanded its influence by doling out substantial financial donations to Mayor Villaraigosa and others in the city’s economically clueless political class.

Perhaps a head nod to Hot Shots fans will lessen the depressing (but by no means surprising) analysis from the Sacramento Bee’s Alan Autry on the dismal failure of Jerry Brown’s resurrected governorship:

The governor has signed nearly 745 bills, most aimed at yet more micromanagement of every aspect of our lives from Sacramento or at satisfying the interests of the organizations that funded his election. The Los Angeles Times said, “When the dust settled on Gov. Brown’s first legislative session in nearly three decades, no group had won more than organized labor.”

There you have it, the product of Brown’s first year in office: signing off on campaign payoff obligations, more Sacramento micromanagement, vetoing of bipartisan common sense reforms to increase government efficiency and effectiveness, procrastinating on regulatory reforms to help job creation, and signing a gut-and-amend bill that will ensure even more partisan gridlock – this from the man who ran on breaking the “morass of poisonous partisanship.”

The canary is dead and the coalmine is collapsing.  If you run a business and you have an option outside of California – take it.

Things were already pretty bad in California, as it hurtles down the fast track toward junk bond status and a Greek-style financial collapse.  But instead of even tapping the brakes, its political leaders are flooring the accelerator.

On Saturday, Governor Moonbeam – pardon, Jerry Brown – signed into law taxpayer-funded financial aid to illegal immigrants.  Never mind that undocumented students can’t even legally work in the state, or that fewer financial aid dollars will now be available to legal residents.  No, what California’s political leaders think the state needs is another new government benefit.

Compounding that assault against California taxpayers, Gov. Brown today signed A.B. 144, which prohibits openly carrying firearms in public – even if they’re unloaded.  The bill also prohibits “allowing a person to bring an open and exposed unloaded handgun into the vehicle,” along with an array of other new restrictions.  While other states continue to allow greater Second Amendment freedoms and enjoy lower crime rates as a result, California opts for the European model (where firearms bans have led to higher crime).

After years of policy mistakes like these, it’s no wonder the formerly golden state failed to gain a new House seat for the first time since 1920.

For every crisis, there is an opportunity:

As part of the June budget agreement, the state will transfer to the 58 counties responsibilities for managing low-level offenders, as well as providing mental health, substance abuse and child protective services. It’s a Reaganesque approach – the idea that we can deliver better service at less cost by moving government decision-making closer to the people. Or, as Gov. Jerry Brown described Thursday, “It’s a bold vision of a new relationship between the state and local governments.”

It’s also a bow to fiscal reality.  Here’s to more (forced) bold thinking that gives local officials the power to best serve their neighbors.

The Los Angeles Times reports that California’s unemployment is now 12.1 percent statewide, 25 percent higher than the national average, and second only to Nevada’s 13.4 percent.

For decades, California politicians have prided themselves on being “first in the nation” on numerous job-killing efforts such as fanciful global warming regulations, onerous land use regulations, and stupefying bans on products like Mylar balloons and plastic bags at grocery stores.

Recently, Troy wrote a painfully insightful piece on yet another attempt to wage war on business by Los Angeles Mayor Antonio Villaraigosa (higher taxes on commercial property).

California’s political class cannot resist the siren song of being the first to put the screws to the engines of economic growth.  If Villaraigosa’s plan becomes reality, perhaps the Golden State will finally be first in a category no one should want: unemployment.

There’s been quite a bit of media buzz surrounding the recently announced bankruptcy of Solyndra, the California solar panel company that couldn’t turn a profit even after a $535 million loan from the federal government.

But what started out as Exhibit A in the case against subsidizing green jobs into existence has morphed into the latest scandal engulfing the Obama Administration.  At issue is a suspicious connection between a Solyndra investor’s work as a bundler for the Obama campaign and the sweetheart loan given to the company.

On Wednesday, the FBI raided Solyndra’s Fremont, California headquarters, and Republicans are promising increased scrutiny.  It would be bad enough if there is a pay-to-play scandal, but it’s even worse financially since the failure of Solyndra is both corrupt and incompetent.

California Democratic Governor Jerry Brown appointed Michael Rossi, former Bank of America executive and GMAC subprime mortgage guru, to be his unpaid “jobs czar.” Brown hopes that Rossi will be able to tell Brown how to revive the state’s sagging economy.

It’s telling that Brown chose a career Big Business executive instead of a successful entrepreneur.  The two types of people – and their skill sets – couldn’t be more different.

Rossi’s path to success involved managing large corporate structures that focus heavily on exploiting government-created revenue streams, such as subprime mortgages that but for government-owned Fannie Mae and Freddie Mac’s guarantee would never have been made.  It also doesn’t help that today BofA is announcing its second straight year of layoffs (3,500 employees this year alone).

It would be far better for Brown to enlist the help of an entrepreneur with success starting and growing businesses.  As the Kauffman Foundation showed in a study released last summer, “new firms add an average of 3 million jobs in their first year, while older companies lose 1 million jobs annually.”

Here’s the Kauffman Foundation’s explanation:

Most notably, during recessionary years, job creation at startups remains stable, while net job losses at existing firms are highly sensitive to the business cycle.

“These findings imply that America should be thinking differently about the standard employment policy paradigm,” said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation. “Policymakers tend to focus on changes in the national or state unemployment rate, or on layoffs by existing companies. But the data from this report suggest that growth would be best boosted by supporting startup firms.”

If Governor Brown wants to create jobs he should consult the people creating jobs – not those managing a declining workforce.

Dan Walters, the dean of California political journalists, is sounding the alarm over a series of moves by the state’s Democratic machine to restrict conservative access to statewide ballot initiatives.

As California Democrats see it, conservatives are poised to unleash a torrent of ballot measures to rein in government spending and regulations, as the state continues to suffer double-digit unemployment and annual budget deficits.  With Democrats controlling all levers of government, there’s only one area where their tax-and-spend liberalism could be challenged: at the ballot box.

To eliminate that threat, Democrats in and outside government are pushing to criminalize paying signature gatherers per name collected, and issuing radio ads linking petition-signing with identity theft.  Last week, Democratic Governor Jerry Brown vetoed the criminalization measure, but others are waiting the wings.

The motivation behind the Democrats’ ploy is protecting the public employee union members who live off legislative largesse, be it sweetheart pension deals, deferred compensation, or over-generous overtime pay.

With Californians waking up to the fact that economic growth isn’t possible without serious reforms, it’s becoming clearer by the day that the liberal Democrats running the state are not governing in the taxpayer’s best interest.  So to the statist’s mind, it’s far better to cut off debate than face reality.

The International Business Times chronicles another blow to the meaning of American citizenship:

The Illinois DREAM Act would make undocumented students eligible for private college scholarships and would allow them to enroll in state college savings programs. The California DREAM Act, signed last week by governor Jerry Brown, granted undocumented immigrants at public universities greater access to privately funded scholarships. The California state legislature is debating a more controversial measure to allow undocumented immigrants to pay in-state tuition, which Brown has signaled he supports.

Heather MacDonald of City Journal highlights yet another example of California residents migrating to Texas for greener cash pastures.  (In this case, UC San Diego lost three top cancer researchers to Rice University after the latter offered a 40% increase in compensation.)  Facing a $650 million cut in state funding, the University of California system campuses are shedding faculty and programs, but not, unfortunately, the blizzard of “diversity czars” and their sizable staffs.

UC San Diego is adding diversity fat even as it snuffs out substantive academic programs. In March, the Academic Senate decided that the school would no longer offer a master’s degree in electrical and computer engineering; it also eliminated a master’s program in comparative literature and courses in French, German, Spanish, and English literature. At the same time, the body mandated a new campus-wide diversity requirement for graduation. The cultivation of “a student’s understanding of her or his identity,” as the diversity requirement proposal put it, would focus on “African Americans, Asian Americans, Pacific Islanders, Hispanics, Chicanos, Latinos, Native Americans, or other groups” through the “framework” of “race, ethnicity, gender, religion, sexuality, language, ability/disability, class or age.” Training computer scientists to compete with the growing technical prowess of China and India, apparently, can wait. More pressing is guaranteeing that students graduate from UCSD having fully explored their “identity.” Why study Cervantes, Voltaire, or Goethe when you can contemplate yourself? “Diversity,” it turns out, is simply a code word for narcissism.

MacDonald also highlights how the multi-million dollar diversity industry has embedded itself into plumb positions at UC Berkeley and UCLA.  If UC students are upset about the coming hike in tuition, they should aim their picket lines at the faculty senates and diversity czars whose very existence makes such increases even higher than need be.

It looks like Governor Rick Perry (R-TX) isn’t the only person entertaining thoughts of seceding from a bankrupt government.  But unlike Perry who joked about Texas leaving the federal union to Tea Party activists, California citizens from 13 counties are trying to separate themselves from a state government that is far from golden.

“Onerous regulations on business” that are driving jobs out of the state and the California legislature’s attempts to balance the budget by “stealing” tax revenue from local governments are two reason why Riverside County Supervisor Jeff Stone said he is pushing for secession.

The Riverside County Board of Supervisors voted Tuesday to hold a meeting in late September of representatives from every city and county in California to decide if their grievances can be solved without secession.

If not, the group will hammer out the details of creating a new state.

“Obviously I touched a nerve that is felt not only among Californians but among people around the country who feel their voices are not being heard,” Stone said. “I’m hoping that the nerve that I touch with a lot of citizens will resonate and we will see dramatic changes in the way we do business in the state and the way we do business in this country.”

Only time will tell if Supervisor Stone’s nerve touching will result in the second coming of the Bear Flag Republic.  If so, one hopes representatives of the newly created state will incorporate at least some of that short-lived government’s founding document.  (A taste: “…believes that a Government to be prosperous and happyfying in its tendency must originate with its people who are friendly to its existence. That its Citizens are its Guardians, its officers are its Servants, and its Glory their reward.”)

Kudos to Governor Jerry Brown (D-CA) for vetoing a state version of “card-check,” a shift in policy that would replace the secret ballot with signing a card given to union organizers.  For those needing confirmation that eliminating the secret ballot is one of the last gasps of a dwindling union movement, the good folks at Western Farm Press report this little nugget:

Farmers lobbied mightily to turn back the legislation and convince Brown to veto it. The veto was a victory that ranks close to the triumph several years back when the taxes on farm equipment and agricultural fuel were rescinded due to a herculean lobbying effort. Passage of the card-check law would have created heightened union organizing efforts by a floundering United Farm Workers of America.

And how’s this for a bit of history:

The 1975 Agricultural Labor Relations Act gave wings to the United Farm Workers of America, which eventually reach 100,000 members. However, that number has plummeted to less than 20,000 today. The card-check rule would have breathed new life into the UFW.

Other unions like the Teamsters came in to challenge UFW, and growers simply increased wages and benefits to stave off unionization. UFW became unnecessary.

And so is card-check.  Good veto, Governor Brown.  Keep ‘em coming.

For anyone interested in whom the Texas Democratic Party will look to for leadership in the very near, consider rising twin brothers Julian and Joaquin Castro.  Both are Stanford and Harvard Law graduates.  Both represent San Antonio – Julian as mayor; Joaquin as a state representative.  Each is being groomed for higher office.

From his perch as San Antonio mayor, Julian could very likely seek the Democratic nomination for governor in 2014.  By then, current Republican Governor Rick Perry will either be in the White House or in an uphill battle for election to his fourth term in office.  (Perry doesn’t have a history of landslides.  In 2006, he won a four-way race with 36% of the popular vote.  In 2010, he won just 51% in a three-way primary after more than a decade as governor.)

For his part, Joaquin just announced a primary challenge to nine-term Democratic congressman Lloyd Doggett.  A new redistricting map connects south Austin with San Antonio, making the state legislator a natural fit to represent the two cities he’s spent the most time in since being elected to office.

Texas’ demographic trend mirrors California.  Currently, no race is a majority in Texas, but by the end of the decade, Hispanics will be.  With the state and federal legislative delegations increasingly split between Anglo Republican and minority Democrats, don’t be surprised if someday Julian Castro becomes governor while his brother Joaquin serves in the U.S. Senate.

After California Governor Jerry Brown (D) vetoed the legislature’s budget bill, many questioned the definition of a “budget gimmick” since both Brown and the legislature accused the other of using accounting tricks and unrealistic assumptions to balance the state’s budget.

Thankfully, the Arizona Capitol Times has an answer.  Actually, it has five.  Here are the most commonly used gimmicks states employ to meet the technical (i.e. constitutional) requirement to balance their budgets.  (Note: Examples of states doing these are indicated by their two letter abbreviation.)

(1)   Putting off payments – can include delaying or skipping payments to schools and pensions (Ex: IL, MN, NJ)

(2)   Accelerating revenue – this gimmick collects taxes like those on sales early (TX)

(3)   Using temporary money for recurring expenses – spending ‘rainy day’ funds to cut the grass (HI)

(4)   Counting on savings that aren’t likely to materialize – one example is mandating less spending without enacting a specific policy change (CA, CT)

(5)   Counting on revenue that isn’t likely to materialize – such as counting on a federal bailout or stimulus funding that does not appear (NY, CA)

So, there you have it: A five-point B.S. meter for judging the seriousness of your state’s “balanced” budget.

I wonder if the Tea Party is readying state constitutional amendment drives to ban these practices and give their balanced budgets more credibility…

Those wacky California bureaucrats are at it again!  Reporting by the Wall Street Journal says that Golden State regulators “moved ahead Thursday with an investigation into AT&T Inc.’s $39 billion purchase of T-Mobile USA, raising a fresh hurdle for the U.S. wireless giant as it seeks the government’s blessing to acquire its third-largest competitor.”

The report goes on to explain that AT&T doesn’t need California’s blessing, only a green light from the Federal Communications Commission (FCC).  Nonetheless, California’s objection could “carry weight” with the FCC’s board of governors, potentially scuttling the merger.  Not bad for a group of regulators with zero jurisdiction over the matter.

With California staring at a multi-billion dollar deficit, perhaps this is the kind of government agency whose funding should be cut – or eliminated.

A blog post last Friday by Loren Kaye at Fox and Hounds Daily provides another variation on the theme of California’s broken governing structure.

Two budget-related developments yesterday bring a small amount of clarity to the political positioning on achieving a deal. But their long-term effect is to re-allocate political power.

Controller John Chiang released a legal opinion interpreting the section of Proposition 25 that would halt salary and expense payments to the Legislature if it fails to transmit a budget to the Governor by June 15. His lawyers concluded that even if the budget is timely passed and sent to the Governor, if it is not a balanced budget, then legislators would forfeit their pay until they pass one that is balanced. This twist arises from an earlier measure, Proposition 58 in 2004, which requires that the Legislature may not send to the Governor, nor may the Governor sign, a budget that would spend more than the revenues estimated for the year. Until the Controller’s memo, this constitutional provision had no teeth. Now that provision has been given real force, and the arbiter of whether a budget is balanced – and therefore whether the Legislature will be paid – will be Controller John Chiang.

Within several hours of this disclosure, Senate Pro Tem Darrell Steinberg announced that his SB 653 would be folded into a budget trailer bill. His proposal would provide broad local taxing authority (contingent on existing voter approval requirements) to counties and school districts, which would substantially increase the level of uncertainty surrounding economic development. The significance of including the language into a budget trailer bill is that those bills are granted immunity from referendum, even if passed by a simple majority vote. This was another consequence of Proposition 25 that was warned against, but pooh-poohed by proponents. This maneuver has ramifications that extend well beyond today’s budget controversy, and could presage the demise of the people’s cherished referendum power, 100 years after it was first granted.

The consequences of Proposition 25 on the power dynamics in California government go far beyond just passing the state budget. And we’re only beginning to see their boundaries tested.

So, as of last Friday, California’s Controller claimed the power to determine the state’s budget process.  Maybe next week the state’s Attorney General can find a way to trump him.  After that, why doesn’t the Treasurer figure out how to get in on the fun?  In Golden State government, everyone wants power, but none claim responsibility.