Freedom Line Blog

Previously, I interviewed California Republican Assemblyman Chris Norby about the costs associated with taxpayer-funded redevelopment agencies (RDAs).  Along with liberal use – and threats – of eminent domain powers, RDAs siphon away local tax money from schools, roads and other public services to service the debt incurred to privilege certain businesses.

Writing for City Journal, Steve Greenhut of the Pacific Research Institute laments the dependency on RDA funding by local officials like the mayor of Glendora, CA.

When I spoke to Tessitor, I finally got to the heart of his redevelopment defense. The city relies on RDA funding for 15 percent of its budget, he said, and assuring the city’s financial future is “all I care about.” Individual cities have indeed become dependent on redevelopment money, but that doesn’t mean that the current system works. Nor does it change the reality of how these abusive agencies operate. I sympathize with the mayor’s budget worries, but if Glendora is an example of redevelopment done right—as he argues—then the situation is even worse than I thought.

For the all the protests to the contrary, it’s hard to shake the feeling that RDAs are crony capitalism by another name.

In 2009 and 2010, the news out of Washington was dominated by stories of Congress rushing through legislation without reading it, voting in the middle of the night, and generally disregarding the adjective in the term “representative government.” Perhaps more than the specifics of policies like the stimulus package, Obamacare, and cap and trade, it was this disdain for honest dealing that set the public firmly in opposition to the Pelosi-Reid Congress and precipitated the blowout midterm elections of 2010.

As with most pathologies in American politics, what’s bad in Washington is usually even worse in Sacramento. The Sacramento Bee reports today:

Numerous bills to crack down on California lawmakers have been shelved quietly by the Legislature in recent weeks.

Casualties included proposals to bar middle-of-the-night legislative sessions, to restrict lawmakers from receiving pay for serving on state boards within four years of leaving office, and to require annual disclosure by public officials of their pay, benefits, travel and other compensation.

Legislators opted not to dock per-diem pay for absences or to create a “do not call” list for campaign robocalls.

What’s consistently fascinating about California politics is that, for all the dysfunction of state government, the Golden State doesn’t have a criminal political culture akin to Illinois or New Jersey, states where the capstone of a successful electoral career is often a stint in federal prison. And why would it? With six-figure legislative salaries and virtually guaranteed appointments to one of the (literally innumerable) state boards and commissions that act as legislative rest homes, one need not break the law to plunder the taxpayers.

As with most of its deficiencies, California would do well to replicate the example of Texas, a state that has shown that a massive population and a sophisticated economy do not necessitate governmental incompetence. Texas has a part-time legislature that only convenes once every two years. The stated goal of this policy: to protect the liberties of the people of Texas. Considering that Texas has created more jobs in the last five years than every other state combined, that seems to be a decent formula.

The upshot: California can take Texas’s principles or Texas can take California’s jobs. Reforming the way the Golden State’s feckless legislature does business would be a good start towards the former end.

Last week I wrote about California’s prison dilemma: mandatory sentencing laws combined with too few prisons.  So far, the choice has been presented as between less time for criminals or more taxes for the law-abiding.  An update by the Debra Saunders doesn’t paint a prettier picture:

Even law-and-order types understand that the system must be streamlined. Nina Salarno Ashford of Crime Victims United told me, “I understand budget constraints.” For example, parole violators should go to jail – not prison. But Salarno looks at overcrowded jails, which already have had to release inmates, and fears the consequences.

How do you pay for it?

“It is probably going to take taxes,” she answered.

No lie. There is not much point in keeping taxes low – only to have some lowlife boost your wallet.

On the other hand, there’s not much point in paying higher taxes if the state slashes the number of inmates by 40,000.

Now that the United States Supreme Court has demanded California reduce its overcrowded prison population by over 40,000, there may not be enough time to raise taxes and build adequate prison space even if Californians wanted to.

If ever there was a need for statesmanship from California’s executive and legislative leaders, this is it.  Otherwise, when tens of thousands of felons are freed, there will literally be rioting in the streets.

Mercury News opinion writers David Houston and Jot Condie give a sense of the near impossibility of doing business in California.  Andy Puzder is the CEO of CKE Restaurant, the parent company of Carl’s Jr., a popular hamburger eatery in California.

Even after businesses have gotten off the ground, California’s regulations continue to pigeonhole business owners in how they operate. For example, California’s strict work rules classify general managers as employees, requiring that they take breaks at specified times, harming their ability to manage the business effectively. Puzder said he has had to fire managers who insisted on working more hours than the state allows.

The reason managers would have to be fired for working hard is that it makes businesses vulnerable to litigation. With more than 1 million lawsuits filed every year, California is one of the most litigious states in the country, and its countless regulations make business owners a magnet for abusive lawsuits. No matter what type of business you are in, it seems like there is a lawsuit waiting for you.

If you own a restaurant and your bartender chooses to forgo a break to collect extra tips, you can be sued for wage-and-hour violations. If your trash can is moved by someone else in your store, you can be sued under the Americans with Disabilities Act. If you try to bring renewable energy to the desert, you can be sued by environmentalists and unions. Is it any wonder that many owners are deciding doing business in California is not worth it?

Firing managers who want to work more hours for more money because the law makes litigation almost mandatory?  Now that’s Progressivism!

An editorial in today’s Stockton Record crystallizes one of the reasons California is facing a $20 billion deficit: it has no master list of state-funded commissions and boards.

Per the Record:

…apparently no one really knows how many are out there although 300 is the number most often cited. A 1989 report by the Little Hoover Commission put it at 400. More recently, the California Performance Review evaluated 339 state boards and commissions. Others have put the number as high as 1,000.

How much they’re costing also is unknown, although getting rid of the 37 panels Brown has targeted would save about $10 million. Admittedly, that’s a drop in the proverbial state budget bucket, but do the math, and if 37 panels are costing us $10 million, what are all of them costing?

And lest anyone think this scandal isn’t bipartisan:

When he swept into office, Gov. Arnold Schwarzenegger vowed to dismantle the forest of boards and commissions that had grown like weeds in state government. That led to the creation of another panel to review government operations.

Among the panel’s findings: “These entities are so scattered and numerous across government that arriving at a firm number is nearly impossible. In our search, there was no single source we could turn to find out which commissions existed and why. In fact, state government has no master list of all boards and commissions and the thousands of political appointees that populate them.”

Incredible.

Indeed.

City Journal has a piece by Pacific Research Institute’s Steve Greenhut praising the California Assembly’s GOP leadership for proposing a series of small fixes that would result in dramatic savings for the state budget:

But much more encouraging is that the Republican plan suggests how simple reforms can save serious dollars. Take the provision of medical care for prison inmates. According to the Assembly GOP’s budget white paper, “The cost of providing health care to state prisoners has been the fastest growing part of the corrections budget. After the [federal] receiver took control of the system in 2006, medical costs skyrocketed. They reached $2.5 billion a year, including mental health care. The cost of health care for each inmate per year in California is approximately $11,600, while prison healthcare costs $5,757 in New York; $4,720 in Florida; $4,418 in Pennsylvania; and $2,920 in Texas. While costs have increased dramatically, it has not improved the quality of care enough to take the system out of federal court receivership.” Under the Republican plan, the state would contract out the correctional health-care system, saving $400 million. But that would mean taking on the powerful California Correctional Peace Officers Association, the prison-guard union that just won an absurdly generous contract from the governor.

Other budget cuts in the Republican blueprint include $3.7 billion from programs related to early childhood, mental health, the poor, and the elderly, as well as $1.1 billion from the state payroll. The plan also includes $2.8 billion in other savings from a bill that has already passed the Assembly but hasn’t become law. It doesn’t go far enough toward addressing the size and scope of California’s government, since the state faces even bigger fiscal problems down the road. But Republicans have made their point: California can fix at least its short-term budget problem if Democrats truly want to.

The Assembly GOP’s white paper on their budget proposal balances the state’s remaining $15 billion budget deficit without raising taxes.  Greenhut points out that although the proposal doesn’t fix the structural issues plaguing California’s chronically dysfunctional governing process, it does show that there are at least a few Republicans able to offer a serious solution to the state’s most troubling problem.

Conservatives are rightly convinced that private sector initiative is the key ingredient to almost every major improvement, be it economical, cultural, etc.  But before individuals can make big changes, they must be legally allowed to do so.

Thanks to Education Secretary Arne Duncan’s Race to the Top program, states like California opened up their public school districts to more parent involvement.  (These kinds of reforms are necessary to qualify for Race to the Top funding.)

According to Parent Revolution, a Los Angeles-based organization helping parents maximize their rights under the law,

The Parent Trigger is a historic new law that gives parents in California the right to force a transformation of their child’s current or future failing school. All parents need to do is organize – if 51% of them get together and sign an official Parent Trigger petition, they have the power to force their school district to transform the school.

If successful, parents have five options:

1) Charter conversion:

If there is a nearby charter school that is outperforming your child’s failing school, parents can bring in that charter school to transform the failing school. The school will then be run by that charter school, not the school district, but it will continue to serve all the same students that have always attended the school.

2) Turnaround:

If parents want huge changes but want to leave the school district in charge, this option may be for them. It forces the school district to hit the reset button by bringing in a new staff and giving the local school community more control over staffing and budget.

3) Transformation:

This is the least significant change. It force the school district to find a new principal, and make a few other small changes.

4) Closure:

This option would close the school altogether and send the students to other, higher-performing schools nearby.  Parent Revolution does NOT recommend this option to parents – we believe schools must be transformed, not closed.

5) Bargaining power:

If parents want smaller changes but the school district just won’t listen to them, they can organize, get to 51%, and use their signatures as bargaining power.

Parents get to pick which option they want for their children and their school. For a much more detailed overview of each one of these options, please click here.

All public policy needs to do is create space for private initiative to occur.  Once it does, the ingenuity of the American people will make the most of the opportunity.

For more on Parent Revolution, click here.

Last week, Ashton examined California’s economic failures courtesy of a John Fund piece that used restaurant CEO Andy Puzder as an object lesson in the Golden State’s fiscal insanity. Puzder recently appeared on Fox Business’s “The Wild Card” to explain the state’s travails in greater detail. Watch it and weep.

Along with lying about the size of the budget deficit and imposing a steep rise in the car tax, California Governor Gray Davis did something else to guarantee his historic recall: impose a pay-to-play “donation” schedule on groups wanting to do state business.  Want a permit from the Coastal Commission?  How about a government contract to manage welfare cases?

For Davis & Co. there was only one question: How much did you contribute to my campaign?

Former Federal Elections Commissioner Hans von Spakovsky obtained a draft executive order that would implement the substance of the Disclose Act, a bill promising to chill corporate political speech before it was defeated in Congress last year.

According to von Spakovsky, the proposed executive order claims to “increase transparency and accountability,”

Yet this proposed Executive Order would require government contractors to disclose:

(a) All contributions or expenditures to or on behalf of federal candidates, parties or party committees made by the bidding entity, its directors or officers, or any affiliates or subsidiaries within its control.

(b) Any contributions made to third party entities with the intention or reasonable expectation that parties would use those contributions to make independent expenditures or electioneering communications.

In layman’s terms, that means the federal government wants to know which political groups you’ve been giving money to before it will consider awarding a government contract.

In an editorial today, the Wall Street Journal (subscription required) notes that the order exempts federal employee labor unions and the recipients of federal grants, both dues paying members of the Democratic Party.

At the moment, the Right is deploring the president’s last-ditch effort to silence dissenting political views after losses in the courts, Congress, and the FEC.  (Especially since Obama’s executive order specifically targets only those entities most likely to disagree with him.)

However, the Left should be leery of this latest version of gangster government.   There’s only a hair’s breadth of difference between punishing “bad” political expenditures, and demanding “good” ones.  As the deposed Gray Davis showed in California, a government nosy enough to punish its enemies, is a government powerful enough to tax its friends.

John Fund gives an excellent distillation for the reasons California businesses are relocating en masse to Texas:

Andy Puzder, the CEO of Hardee’s Restaurants, was one of many witnesses to bemoan California’s hostile regulatory climate. He said it takes six months to two years to secure permits to build a new Carl’s Jr. restaurant in the Golden State, versus the six weeks it takes in Texas. California is also one of only three states that demands overtime pay after an eight-hour day, rather than after a 40-hour week. Such rules wreak havoc on flexible work schedules based on actual need. If there’s a line out the door at a Carl’s Jr. while employees are seen resting, it’s because they aren’t allowed to help: Break time is mandatory.

Indeed, California policymakers are enjoying an extended break from economic reality by focusing on everything else but job creation.

If the trend of 4.7 businesses a week abandoning California continues, pretty soon the great weather will be the only reason to visit the once Golden State.

Political Wire has the astounding sums failed gubernatorial candidate Meg Whitman (R-CA) paid to campaign consultants last year.

Key staffers: Campaign manager Jill Hasner ($948,000); senior adviser Jeff Randle ($550,000); finance director Sara Myers ($439,438); deputy campaign managers W. Todd Cranney ($389,000) and Tucker Bounds ($324,572.)

Overall, the campaign cost Whitman $178 of her $1 billion+ fortune.  All that to lose by 13%; how much to lose by 20%?

Following up on a previous diagnosis of all that ails California, CFIF Senior Fellow Troy Senik is out today with a prescription for the Golden State to get back on the road to recovery.

Senik’s piece in City Journal doesn’t hold out much hope for newly elected Governor Jerry Brown, but the author does shed light on one proposal that might garner enough votes for a simplified tax code:

California would therefore do well to take the advice of economist Arthur Laffer, not just because of his status as one of the authors of Reaganomics but because he is an example of the state’s woes, having packed up his California-based fund-management business in 2006 and relocated to Tennessee. By Laffer’s estimates, if California abandoned its current, highly progressive income-tax system in favor of a statewide flat tax of no more than 6 percent on personal income and net business sales, it could completely abolish all property taxes, state gas taxes, and state payroll taxes, as well as all current state and local sales taxes, without losing revenue. And that’s without factoring in the increased economic activity that such a dramatic change to the tax code would almost certainly generate. This change would once again require the support of a two-thirds majority in the legislature, but its appeal just might be broad enough to attract such a coalition.

Read the entire article here.

According to a blogger at the Huffington Post California just inaugurated a “Right-Wing Republican” as governor.  He’s referring to Jerry Brown, aka ‘Governor Moonbeam’ and the man proposing sharp cuts, tax increases, and budget raids to balance the state’s deficit-ridden balance sheet.   In HuffPo world, that combination merits being tarred and feathered as the second coming of another rock-ribbed fiscal conservative, outgoing governor Arnold Schwarzenegger.

Please.  If Brown’s budget proposal looks suspiciously similar to Schwarzenegger’s it’s because there are precious few options for governors of any party to try.  Sure, nobody thinks they’ll actually solve the problems, but that’s because actually solving California’s budget woes will take some serious undoing of cherished political prizes.

Republicans want to hang onto the 2/3 requirement for passing a budget and maintaining Prop. 13’s cap on property taxes, while Democrats act as though rich (i.e. working) people will pay any price to live within a 100 miles of a beach and subsidize a green welfare state.  Neither party is serious about making investments in the state’s infrastructure (e.g. road, power, and water grids), a precondition for economic and social improvement.

The only way California heals its self-inflicted budget wounds is if it repeals all of the constitutional amendments mandating budget appropriations.   To do that, Republicans will likely have to agree to end Prop. 13’s property cap, a move that would likely increase property taxes.  Though unpalatable to many, removing the cap would return discretion to counties and cities (historically better than Sacramento at balancing budgets) while giving voters an outlet for their displeasure with the next Election Day.

None of this will be easy or popular.  Then again, neither is California politics.

In a not-quite-as-bad-as-reported op-ed in the Los Angeles Times, State Treasurer Bill Lockyer (D-CA), downplays the Golden State’s fiscal outlier status among the several states.  Setting aside some of his premises, it’s worth zeroing-in on a paragraph that should be the starting point for debates on spending at any level of government.

Fiscally, we have to get smarter, think longer and stop hoping for a miracle. Californians have to assume more responsibility for deciding what they want government to do and how much they’re willing to pay for public services. We have to design a saner system for financing public schools.

Like a majority of voters everywhere, Californians are attracted to pricey programs, but are allergic to their costs.  Ergo, budget deficits.  With House Republicans facing a divided Senate and a liberal President, making a commonsense case for balancing spending with revenues will be the single most important task during the next Congress.  Let’s hope fiscal conservatives at all levels of government are united on this front.

Jerry Brown, the once-and-future governor of California, has precious little time to shore up his legacy.  Next month, he’ll retake office and be at the center of the nation’s worst state government budget crisis.  Most think he’s in the pocket of the public employee unions who spent millions supporting his campaign.  California’s Victor Davis Hanson posits a different possibility.

If the liberal Brown were to now take on out-of-control public spending, he would be immune to the charges of callousness that destroyed multimillionaire outgoing Gov. Arnold Schwarzenegger and would have likewise smeared Republican billionaire gubernatorial candidate Meg Whitman had she won. Perhaps given that California already has the highest sales, income and gas taxes in the nation, Brown could shrug and say that any more tax increases would set off an even greater stampede out of the state.

And at 72, the once overly ambitious Brown — who ran for the presidency three times — can forget about leapfrogging into the White House. The question now is Brown’s final legacy, not his next career move. We know from the implosion of the European Union that unchecked big government inevitably leads to public insolvency. But does it also ensure, Brown might ask, moral bankruptcy?

In a postmodern world of omnipresent cheap consumer goods and all sorts of government-subsidized cradle-to-grave perks, can “small is beautiful” Jerry Brown teach Californians not just that too much stuff is no longer affordable or sustainable, but, at a deeper level, that our out-of-control excesses, appetites and dependencies are no longer good for our souls?

Before he chose politics Jerry Brown spent time in a seminary discerning whether he had a vocation to the priesthood.  If he wants to be remembered as one of the state’s greatest leaders perhaps he would do well to remember that being fiscally responsible isn’t just good politics, it’s also good morals.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

Laying out his interpretation of California’s electoral decisions on Tuesday, Governor-Elect Jerry Brown is hinting that his third term in office may not be all tax-and-spend.

Brown headed a Democratic ticket Tuesday in blue-leaning California, where voters resisted the “red tide” of Republican victory sweeping the nation. He added that the message from voters was clear: “The voters last night turned down a mere $18-a-year (car) tax by about 60 percent, so I would say that the electorate is in no mood to add to their burdens.”

He said Californians passed Proposition 25, which ends the two-thirds legislative majority for passing a state budget, while also approving Proposition 26, which calls for a two-thirds vote to pass fees.

“The taxpayers gave – and they also took away,” he said. “On the one hand, people said, ‘by majority give us a budget’ and on the other, they said, ‘don’t pick my pocket.’

“What we have to do is win the confidence and trust of the people of California,” he said. That, he added, will require competing groups – Republicans, Democrats, labor unions and business – to “push toward a common interest.”

If California does get a reformed liberal as a budget trimmer, it will be more than the state deserves, and a tentative step in the right direction.

H/T: San Francisco Chronicle

Last month, we profiled how federalism is alive and well in economic policy — as exemplified most explicitly in the sharp contrast between California and Texas (a topic we’ve been exploring for nearly a year).

As John Steele Gordon points out in the Contentions blog over at Commentary’s website:

It is often pointed out that the states make great laboratories for political-science experiments. And an experiment has been underway for quite a while testing the liberal model — high taxes, extensive regulation, many government-provided social services, union-friendly laws — against the conservative model — low taxes, limited regulation and social services, right-to-work laws. The results are increasingly in. As Rich Lowry reports in National Review Online, the differences between California and Texas are striking. Between August 2009 and August 2010, the nation created a net of 214,000 jobs. Texas created more than half of them, 119,000. California lost 112,000 jobs in that period.

California has always prided itself on being a leading indicator for the rest of the nation. We’ll see how well they like that designation when it turns out to mean being the canary in the coal mine.

The Los Angeles Times — that bastion of journalistic daring do — has discovered that recessions cause job losses. Don’t laugh — they will probably submit this to the Pulitzer people.

What really steams the Times’ clams, however, is that manual labor is being replaced by mechanical automation. Writing in this morning’s edition of the paper, reporter Alana Semuels notes:

Forced to cut costs during the recession, employers across the country are looking at ways to avoid hiring. They’ve accelerated use of computers and technology, replacing administrative assistants with software, cashiers with self-service kiosks and laborers with machines.

These structural changes mean some jobs that disappeared during the recession may never come back. Productivity gains are good for company profits and help the economy grow over the long run. But in the short term, the shift is exacerbating America’s jobless recovery.

Kudos to Semuels for at least noting the importance of productivity gains, but there’s a still something of a misdirect here. It’s probably an overstatement to say that employers “are looking at ways to avoid hiring” (my money is on the fact that most employers would love to be in a financial position to consider new employees). While there are many instances where shifting to automation is inherently superior to relying on labor, the scales are tilted by government intervention. Consider this passage from elsewhere in the article:

“Labor is so expensive,” said [farmer Mike] Young, whose great-grandfather started farming row crops in Kern County in 1910. “There’s their wages, truck, insurance, workers’ comp and the safety regulations. We went to a high-value crop that needed less labor input.”

Notice a trend? With the single exemption of trucks (and even that’s debatable given California’s automotive taxes), these are all factors created or exacerbated by government. California has one of the highest minimum wages in the nation, a heavily regulated insurance sector, and excessive workers’ comp and safety regulations. Technology may have an inherent economic appeal, but the challenge it presents to labor is only compounded by state government’s attempts to “help” the working man.

Apart from government distortions of the market, however, there is a bigger point to be made here. Technology’s displacements of the labor force may be jarring, but they lead to a stronger economy (the capital savings can be directed towards more productive investments) and an infinitely better life for all Americans. After all, we could have attempted to protect the horse-drawn carriage industry by suppressing the development of the automobile, subsidized makers of candlesticks and gas lamps by impeding the development of the light bulb, and employed many more bank tellers by standing athwart the ATM. But we’d live in a society that had made decisively less progress from 100 years ago than the one we currently inhabit.

This principle was captured brilliantly by the French political economist Frederic Bastiat in a satirical letter that he wrote to the French Parliament under the aegis of seeking “protection” for his nation’s candlestick makers:

We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us.

When you’re 150 years behind the French on economics, you know you’re in trouble. Or that you work for the Los Angeles Times.

The Los Angeles Times reports that after receiving $111 million in federal stimulus money the City of Angels has only created 55 jobs.  Officials counter that whenever they get around to spending taxpayers cash the total jobs created will be 264.

Yeesh.

With California losing citizens and jobs to other states in record numbers, why not allow cities like L.A. to give $1 million to any business that promises to move into city limits and employ a domestic workforce?  Better yet, give 111 businesses $1 million in tax breaks to set up shop and revive the local economy.

American taxpayers can’t afford to spend millions of dollars for dozens of jobs.  (And government jobs at that!)  Since we need a much higher return on investment to get the economy growing again, why not direct money and incentives to businesses?  After all, they – unlike bureaucracies – can create jobs without perpetual government handouts.