Thursday, March 31, 2011

Dianne Feinstein on MSNBC: Our Current War on Libya is Insufficient

In case you wondered whether the stupidity in Sacramento kept us distracted from the even more damaging stupidity coming out of Washington, wonder no more. We came across this video (thanks to Nick Gillespie and Reason Hit & Run) of our senior Senator suggesting that the current "bombardment from the sky with no end in sight" approach to Libya may not be aggressive enough.

We've refrained from writing much about the situation in Libya or the broader Middle East, mostly because we're trying to keep this blog focused on California topics. But we couldn't let this one slip by. Dianne, if you really think that the international community may need to deal with Khaddafi* the way they dealt with Saddam Hussein, you're both dumber and less principled than we thought. And that's saying something.

* Note: To Muammar, if you're a reader, sorry, but we have no idea how to spell your last name.

Clean Energy Rules Will Drive New Economy. Either Off a Cliff or Into a Wall

Apparently we were a bit too optimistic in our optimism regarding the chattering class's understanding of the economic effects of environmental regulation. A mere 24 hours after publishing an editorial concluding (rightly) that the state's new clean-energy standard (the California Renewables Portfolio Standard) would cripple California's economy by jacking up the price of energy, the Sacramento Bee follows up with this nugget of stupidity from Dan Adler, president of a clean-energy venture capital firm.

Adler's piece employs numerous arguments to suggest that "in clean energy today, what is needed more than innovation is implementation." Unfortunately, all of these arguments are false. For one thing, he claims that "California's clean energy economy is growing three times faster than the state's economy as a whole", as though this proves an association with robust wealth creation. He claims that the Renewables Portfolio Standard "does not pick winners from the range of clean, renewable energy technologies". Um, Dan, when you limit the list of potential winners to a small number of your favorites, you're still picking winners. And his only counter to the argument that laws like the California standard distort markets and are dependent on public subsidies? "Public subsidies are a fact of life in the energy business." He follows that non sequitur with this one:
In truth the debate over mandates and subsidies misses two crucial points about the nature of markets and energy markets in particular: They are in every instance shaped by laws, and the most effective regulations create robust, stable markets that encourage private, not public, capital to flow into them.
Where do we start with this? His first point, of course, is nonsense. In a state with 12% unemployment and a remarkably hostile business climate, industries receiving heavy government subsidies can create jobs more quickly than others can; does this really make the case that the subsidies are a good idea? He's also far too quick to wave his hands at the criticisms of green technologies. As this excellent piece by Ron Bailey explains, the public subsidies for wind, solar, and electric cars are massive, and in each case there's no indication that any of these would be viable in a free market, due to their cost and the difficulty of implementing them on a large scale. But worst of all, his argument assumes that government subsidies for clean energy have no effect on economic growth in other industries. But you really have to consider the whole "what is seen and what is unseen" thing on this one. For one thing, you're talking about an industry that produces an input to a great deal of other economic activities, so raising that input's price will necessarily increase the cost to other industries of producing the same level of output. Even more importantly, dollars funneled into favored industries by government are dollars that can't be invested in creating other jobs, so in effect the subsidies destroy those jobs. So what's the track record for government subsidies of green energy? Not a good one, alas. A study of another country (Spain) that threw immense sums of money at renewable-electricity plants found that these subsidies consumed 2.2 jobs' worth of private capital for every "green" job they created.

We'd be all for clean technologies if they produced energy more efficiently and at lower cost than old-school fossil fuels or nuclear. But that isn't the case. And Dan Adler's set of "most effective regulations" that set up the perfect energy market almost certainly do not exist. Given that we're, you know, already broke, why not remove all the subsidies and all the market controls and let the consumers of fuel decide what's best?

The Bell Tolls for Thee, Robert Rizzo

The uppance continues to come for Robert Rizzo and others in the Bell corruption scandal. Yesterday, a Los Angeles County grand jury released an indictment accusing the recalled City Administrator and an aide, ex-Assistant City Manager Angela Spaccia, of eight counts of conspiracy, falsifying documents, and conflict of interest, alleging that they abused state pension rules to build gargantuan retirement packages for themselves. It also accuses Rizzo of perjury related to a lack of disclosure on his annual statement of economic interest.

The full story is here. We're very comforted to know that all the Democrats in Sacramento are trying to push tax extensions on us so that this behavior can continue.

The Boys of Summer Return

We may be taxed and regulated to death with no hope in sight, but today that weighs a little lighter on us, because it's Opening Day of baseball season. We devote a lot of time to gloom and doom, but it's important to step back sometimes and remember that life is something you're supposed to enjoy. And to us, there's nothing better than spending a warm summer evening at the ballpark, or taking a vacation day from work to take in a weekday matinee game.

So, good luck to the Giants as they try to defend their improbable but well-deserved World Series title. And good luck to the A's, Dodgers, Angels, and Padres as well.

Wednesday, March 30, 2011

Budgepocalypse Update: GOP-Brown Talks Collapse; Did the Kochtopus Strike Again?

Sacramento is abuzz today with news that Jerry Brown has broken off his budget negotiations with 5 Senate Republicans on his proposal to patch California's budget hole with a mix of spending cuts and a five-year extension of tax increases. For now at least, the deal is dead. It's not clear what comes next, though the dreaded "all cuts" budget Brown recently threatened is still on the table. We're not optimistic about this ending well, but today we'll enjoy the possibility that the tax extensions are gone.

A little reported back story in all this is the role of a taxpayer lobby called Americans for Prosperity. Apparently, AFP was running radio ads in the districts of two of the 5 Republicans, urging them not to support the tax increases. We thoroughly enjoyed the terrified reporting on the ad in this Sacramento Bee alert, and it gathered a mention in today's LA Times story on the budget talks. This is amusing because AFP was founded by David Koch, a libertarian-leaning billionaire and political donor whose place in the conspiracy iconography of liberal Americans is right alongside Skull and Bones, the Illuminati, and Halliburton. Much as Glenn Beck imagines George Soros at the heart of organized labor, the Middle East uprisings, and the Obama Administration (Beck is, of course, an idiot, insofar as Soros is obviously a pawn of the Bilderberg Group and the Knights Templar), left-wing rubes see Koch behind every setback of the Democratic Party. We look forward to panicked editorials about the "Kochtopus" as the establishment in Sacramento veers ever closer to bankruptcy.

When You're Losing Dumb Journalists, Are You Losing the Environmental Battle?

You know environmental regulation is threatening to turn California into an Atlas Shrugged-like dystopia when even the establishment newspapers start to question their wisdom. I mean, it's one thing when it's just cranks like us complaining. But when people who don't even understand economics raise sound objections to your law, perhaps this means your effort to play God with nature is in trouble.

Yet this might be exactly what's happening. Today's LA Times has an editorial concluding that the Environmental Quality Act (or CEQA) has become a job killer and a source of corruption, however noble its original intentions. If you're not familiar with CEQA, it essentially requires a formal assessment and public input on the expected environmental impacts of new land development projects. Well, in theory, anyway. In practice, CEQA is a bloated monstrosity that adds to the cost of business while enabling both corruption (as favored businesses use it to prevent their competitors from growing) and extortion (as labor unions use it to extract union-friendly deals from businesses, and environmental lawyers and groups bring meritless legal action in the hopes of extracting a settlement). While the article takes a (sadly typical for the Times) mealy-mouthed approach to reform, it is right to link CEQA to the state's anemic economy.

And this piece in the Sacramento Bee informs us that, indeed, the basic laws of supply and demand still hold. A new law, approved by both houses of the Legislature and awaiting Gov. Brown's signature, will require power companies to produce 33% of their energy through "green" sources like wind and solar, up from the current 20% requirement. Since no one has yet figured out a cost-effective way of producing wind or solar power on a large scale, this will sharply increase rates over the next few years. Again, at a time of recession, the state is artificially hiking energy costs. And even the Bee can see the problem with that. The article closes with this pearl of wisdom regarding solar and wind technologies, courtesy of one Matt Freedman, attorney for a San Francisco green-energy lobby: "It seems like a waste of money in the first place, but when you need it, it makes you seem like a genius for having bought in the first place." Um, Matt, even by your logic, that still means it was a waste of money.

Is a Tea Party Emerging in California?

We've concluded that libertarians were a bit quick to embrace the Tea Party movement (it strikes us as less a libertarian movement than an anti-tax movement with some libertarians in it), so this may or may not be interesting news. But according to this piece from the Orange County Register, a grassroots organization has formed in Costa Mesa with the goal of educating and advocating for the city's taxpayers.

It's been a long time since anti-tax activists gained significant political traction in California, and it was hard not to notice that the Tea Party movement (so significant in other states) had almost zero presence in the 2010 elections here. But it's a start, and something to keep an eye on.

Tuesday, March 29, 2011

Signs Your City is Hopelessly Broke: The Curious Case of Victorville

Wondering if your California city is on the verge of collapse? After reading this article, we thought we'd offer a list of signs that suggest you might want to consider moving. In no particular order:
  • Your city spent the 2000's frantically building cheap housing
  • The unemployment rate is almost 17%, and per-capita incomes are far below the national average
  • The city's finances are being audited by the same firm (Mayer Hoffman McCann) that audited Bell
  • Mayer Hoffman was hired after the previous auditors refused to certify the city's books
  • Even after cutting services and 200 jobs, your city is likely to be out of cash reserves as it uses them to plug its budget deficit
  • Your city shuffled funds between agencies as a way of paying its bills, in many cases without proper approvals
  • Your city is under investigation by the SEC, and by a San Bernardino County grand jury
  • Moody's has downgraded the debt of the city's Southern California Logistics Airport Authority, and has it on notice for further downgrades
  • The mayor steadfastly denies that the city will declare bankruptcy
  • You live in Victorville, a town of 111,000 in the high desert 80 miles from Los Angeles

Just in Time for the Weekend . . .

Fourteen California cities will be hiking their sales tax rates beginning this Friday. A list of the cities and the new rates is here.

Once more now: any time you're tempted to think our politicians and the special interests that own them care about "the people", remember that they pushed a tax increase at a time when inflation was piling itself on top of a recession.

The Other Kind of Disaster in Sacramento

The editors of the Sacramento Bee may be starting down that long road toward understanding the pernicious evil that is government regulation of private industry. In the context of asking readers what regulation is the state's single biggest job-killer (the replies are here, but don't say we didn't warn you of the stupid therein), Foon Rhee brings up the post-Northridge seismic standards for California hospitals.

Recent events in Japan and New Zealand have, of course, been a grim reminder to many of us that catastrophic earthquakes are always a danger. And it goes without saying that, should such a disaster occur, we'll all want our hospitals open and able to care for the injured. But depending on where you live in California, you might face disaster risks far more salient than quakes (which thankfully have a low probability of causing serious damage), which raises a question: what if the cost of complying with seismic standards diverts funds that could be used to protect against more likely disasters? In Sacramento, this is a fair question to ask. Hospitals in the capital, after all, are less likely to suffer massive quake damage than those in, say, San Francisco; on the other hand, the city is very, very flood-prone, and finding high ground to build something as large as a hospital can be a challenge.

Rhee raises this issue in the context of discussing a bill from Sen. Ron Calderon (D-Montebello) that would require all state agencies to conduct a full review of all regulations, in order to weed out the unnecessary and the unnecessarily harmful. We don't care for this approach, simply because it's likely to get bogged down in details and result in few meaningful changes. We'd prefer to abolish regulations across the board, and simply trust that professionals who've dedicated their lives to caring for the sick will build facilities that best ensure patient safety. That is, even without the regulations, we'd expect hospitals in San Francisco to be built with the optimum seismic safety in mind, just as we'd expect those in Sacramento to be built to withstand large floods. It's past time we started trusting the people who actually care about these problems and know how to solve them.

Thomas Sowell and the 2010 Census

The always-smart Thomas Sowell breaks down some 2010 Census data pertaining to the movement of citizens within the country. His conclusion: "In general, people are voting with their feet against places where the liberal, welfare-state policies favored by the intelligentsia are most deeply entrenched". And regardless of race or ethnicity, people spent the last decade leaving California in droves. Noting that both whites and blacks have been fleeing the Golden State, his analysis also includes this interesting note:
Although California has long been a prime destination of Asian immigrants and the homes of their descendants, the 2010 census shows a striking increase in the Asian American population of Nevada, more so than any other state. Nevada is adjacent to California but has no income tax nor the hostile climate for business that California maintains.
California is by no means unique in this: old-school liberal states like Massachusetts, Pennsylvania, Michigan, Ohio, Illinois, New York, and New Jersey saw similar outmigration. But the pattern the data suggest is pretty obvious: hard-working, determined people will do what they have to do to make good lives for themselves and their families. And to the extent that their governments treat them like milk cows, they'll vote with their feet.

Monday, March 28, 2011

Seen in Our Local Safeway ...

First the high prices, now the shortages. The Peoples' Republic of California, indeed.

Straight Outta Compton, Good News for California Parents

The Orange County Register has a rundown of the efforts of a dedicated group of parents to push reforms at Compton's McKinley Elementary School, one of the worst schools in the state. The story begins in January 2010, when the Leglislature passed the so-called "parent trigger" law. This law allows parents of students in awful schools the option to petition for radical changes, including school closure, drastic changes to staff, teachers, or curriculum, and conversion to a charter school.

Last December, 61 percent of McKinley parents signed a petition to transform the school to a charter school. Predictably, the local teachers' union opposed the conversion, and just as predictably, the school district did everything it could to invalidate the petition. In February, the Compton Unified School Districts trustees voted unanimously to oppose the petition, arguing that its signatures were invalid. As part of their process for verifying signatures, the district insisted on an in-person interview with photo ID. The parents sued the district over the verification rules, and last week a Superior Court Judge ruled that the rules were unconstitutional and ordered the signatures to be counted by this Friday.

Hopefully, this will set a precedent for other California parents attempting to do right by their children, especially when those efforts run counter to the wishes of organized labor.

Describing Economic Illiteracy in Fewer than 140 Characters

Today we came across this Economic Policy Journal piece, which describes the growing number of internet firms choosing to locate in San Francisco. Firms like Twitter and Zynga have been followed by others, and apparently the city has almost as many private technology workers these days as it did at the height of the dotcom boom in 2000. What EPJ leaves out, of course, is that many firms have made the decision to move to modest parts of the city due to the expected passage of the so-called "Twitter tax break". This tax incentive, which started gaining momentum a year ago, allows new firms locating in the Mid-Market and Tenderloin districts a six-year pass on payroll taxes, including those on stock options.

As the tax break moves toward passage this week, what has been the response from the city's media outlets and left-leaning political hacks? About what you'd expect. The SEIU is fighting it, as is former city supervisor Chris Daly, who recently said, "We're here talking about giving away, or foregoing, up to $22 million (in tax revenue) to a corporation valued in the billions. Someone needs to stand up again to the corporate threats and do the people's work." Negative coverage in the local media has come here, here, here, and here.

It must be hard being San Francisco: always having to balance your desire to be hip, dynamic, and free-spirited with your desire to interfere relentlessly in the lives of your citizens. Or, in this case, balancing your faux-Marxist distrust of private enterprise with your desire for tax dollars to fund generous social services. If you really think that having Twitter helping to clean up the Tenderloin is a "threat", you really deserve whatever blight you get.

Sunday, March 27, 2011

Broke Municipalities Start to Add Up Their Tabs

How . . . expected is this? California cities and counties that made outrageous public pension promises are now confronting the reality of having to ramp up their contributions to CalPERS, at precisely the time when they have little more to give. We're sure that this news is entirely unrelated.

Of course, had they viewed the extra revenue they were taking in a few years ago as the property of the taxpayers, rather than their own, they might not have been so foolish with it.

Saturday, March 26, 2011

The 10 Worst Things About Being a Libertarian in California

10. You have a governor who thinks $3 billion in internal loans and interagency shifting is the same thing as $3 billion in spending cuts.

9. Your taxes and fees are administered by something with a Mao-era name: the State Board of Equalization.

8. It sucks paying California-level sales taxes every time you buy precious metals.

7. You live very far from the Free State Project, and let's face it, you probably aren't tough enough to handle a winter in New Hampshire.

6. Nancy Pelosi isn't even the worst politician to hold office in your state.

5. Want to be independent and start your own business here? Yeah, in California we like new businesses . . . until we don't anymore.

4. It sucks having to explain to people how shortages and blackouts caused by government limits on the construction of power facilities and price controls in retail power don't actually prove that utility deregulation failed.

3. Want to buy mind-altering drugs and use them peacefully in your own home without harming anybody. Yeah, in California we like mind-altering substances . . . until we don't anymore.

2. Your neighbors who build foolishly in brush covered canyons or on precarious hillsides view your money as the price you pay for their civilization.

1. It sucks being right whenever you talk politics.

LA Mass Transit Meets Economic Reality

We've been following this story for a few days, and today comes a piece on Reason Hit & Run to bring all the facts together: the MTA of Los Angeles is starting to come to grips with the fact that demand for public transit in LA is not what it was expected to be. While others have pointed out the challenge of anticipating demand for taxpayer-funded services, the budget crisis is forcing the MTA to scale back service (including eliminating 9 lines) in areas with very low ridership. The Reason piece argues that this makes a devastating case against the MTA light rail, given the high cost of running even emptier traings around the County.

We aren't as vehemently opposed to mass transit as some libertarians (little secret: we hate city driving with the hot fury of a thousand suns), and we've actually enjoyed light rail in LA the few times we've been on it. For one thing, some friends of ours have an Orange Line Pub Crawl (i.e., starting at Traxx in Union Station, going up through Chinatown and Highland Park, and then on through the hills into Pasadena) which is great fun. But the key point to note is that we've rarely used it, and its hardly fair to ask so many others to subsidize something that provides no value to them. Considering how many other municipalities in the state are exploring privatization options, we can only hope that LA goes this route with its buses and trains.

The Economist on Taming California's Leviathan

We'll admit we're not big fans of the British news magazine The Economist. Aside from the atrocious cost of subscribing to it (almost $130/year), its analysis is pretty much the voice of the bland political center (or "centre") of Western social democracies: corporatist, socially liberal, environmentalist, pro-bank, and pro-bureaucrat; what Fabian Tassano would call "mediocratic". Rather than making provocative arguments in favor of a robust free-market stance, it instead seems to serve as a thin intellectual veneer to make those in the political mainstream feel more sophisticated. A friend of ours calls it "The Statist" for a reason.

Last week, the magazine published a special report on the future of the state, entitled Taming Leviathan, which included an article on California's failings. The whole article is here, but we'll run down the lessons The Economist feels the world can learn from the Golden State.

First, we have a messy structure of government, meaning that the overlapping powers of cities, districts, counties, and the effects of voter initiatives on local and state government, makes responsibilities and accountability unclear. We generally agree with that, but The Economist doesn't follow through its implications: if California suffers from too much overlapping authority, why not just hack away at the extraneous offices and agencies? Like the consultants in Office Space, we're happy to help out with a little housecleaning. The magazine also doesn't ask whether centralizing the same powers in fewer hands would be an improvement.

Second, our government is "out of date". Basically they argue that the government's structure is inadequate to the needs of such a large population, but offer no clues as to what a more "modern" government might look like, apart from mentioning that some European governments were redesigned following the world wars. Um, what kind of idiot looks to the bankrupt and increasingly xenophobic states of Europe as an ideal? This section reads like someone wrote it at 6 am with a hangover.

Third, special interests have too much power. Well, sure. But doesn't that really suggest that the government is too intrusive and bloated? A smaller government, by definition, wouldn't have this problem. But The Economist never asks this question.

Fourth, too many rules and taxes. Again, we agree. But The Economist sees this as a problem of complexity, not volume; it's not the laws and taxes themselves that are the problem, but that they're too "cumbersome". It says a lot that these folks don't see the connection between this problem and the one before it.

Fifth, gridlock in Sacramento. Let us pause to shake our heads. Really? The problem in California is that its government implements new regulations and taxes too slowly? A journalist who grasps the concept of checks and balances is truly a rare creature.

Sixth, the middle class and elderly benefit at the expense of the wealthy and the poor. When you're reading any missive from the bland political center (sorry, "centre"), the paragraph about "inequality" is almost a given. We think the argument is nonsense: all the people richer than us that we know are richer because they work harder, they're smarter, or they've taken risks we haven't. Taking political favors out of the equation, inequality is part of the natural order of things. In any case, The Economist makes no effort to explain why this is a problem specific to California.

Seventh, successful people here don't care enough about their community. Apparently those of us who do well "show a profound contempt for [our] government", do little to "beautify our environment", and are more inclined to go elsewhere. Hmm. Maybe smart, talented Californians despise their government because it deserves it.

And finally, Californians want more government but low taxes. Again, this only supports our contention that the state has a spending problem, not a revenue problem. If Sacramento wanted to avoid this situation, it wouldn't have made so many foolish promises on the "more government" end.

Friday, March 25, 2011

Give In to the Dark Side, Fresno Bee

We loved this post on the Fresno Bee's editorial blog, entitled "Legislature Continues to Earn Part-Time Status". The whole thing is worth reading, but basically the author, Jim Boren, calls for a ballot measure limiting California's Legislature to part-time status, perhaps even to meeting only biennially, as well as a move to a unicameral system.

We like these ideas, and would encourage Mr. Boren to keep going. If scaling the Legislature back to part-time doesn't seem like it would do any harm, it begs an obvious follow-up question: why do we need them at all? We started asking ourselves similar questions back when the Kindergarten Cop started issuing IOUs in lieu of cash in 2009, and again when he mandated furlough days for state workers: how badly do you really need something when you can stop spending on it with no ill effects, especially when you're already someone who's spending more money than you have? It may be time to face the reality, with California is closing in on "socialist banana republic" status (think Bolivia with better wines), that its long experiment in top-down bureaucratic micromanagement of our lives has been an expensive disaster.

We're not advocating for outright anarchy here (yet), but what would be the harm in dissolving the legislature and executive in Sacramento, and repealing all the laws they enforce, assuming that all governing authority would then devolve to the local level? The ridiculous public pension obligations currently hanging over our heads would disappear, as would all the absurd regulations and taxes strangling our economy. And the corruption that Sacramento's centralized authority fosters would likely evaporate, for two reasons: one, local governments couldn't shovel any other locality's tax dollars toward their friends; and two, local politicians are much more directly answerable for their actions that state politicians are (see Bell, City of).

Granted, insofar as various communities could legislate as they pleased, it would be a tough day for the statists in our midst, who would lose a critical means of inflicting their visions of utopia on everyone else. Liberals on the coast would have to live with the idea of rednecks in the mountains carrying firearms and hurriedly imprisoning low-level drug offenders. And conservatives would have to live with the thought of gay marriage running rampant in the churches of San Francisco and Los Angeles. But the day statist Californians began to learn to mind their own business would be a good day.

Brown's Budget Cuts, in Perspective

As reported across California, Jerry Brown signed a first round of budget cuts into law yesterday. These are being reported (here and here, for example) as $11.2 billion in cuts. However, as Steve Harmon of the Contra Costa Times notes, this isn't exactly true. There were only $8.2 billion in cuts; the other $3 billion consists of internal loans and "spending shifts", also known as accounting gimmicks.

So before anyone posits that this represents a serious change of direction for Sacramento, keep these simple facts in mind:

1. A $26 billion deficit and $8.2 billion in cuts means that the state still intends to spend $18 billion more next year than it has right now.

2. The only tangible cuts have carefully avoided the bureaucratic corruption and the pension obligations that are major sources of the deficit, and seem clearly intended to frighten voters into supporting a continuation of the status quo.

Thursday, March 24, 2011

Dumb Economists: Recovery Just Around the Corner, Sort Of

Apparently those of you in northern California need not fear the state's weak economy or the debt bomb called public pensions that's due to explode at any time. According to a new report published by the McKinsey Global Institute, San Francisco and San Jose are likely to be among the world's 25 wealthiest cities. They neglect to explain why this makes any sense, unfortunately. The whole argument is framed in terms of projected GDP, which is both impossible to forecast and a terrible indicator of real wealth creation.

Also, they only predict this will be the case by 2025. So hang in there, California. Only 14 more years of recession to go.

GSL's Worst Person of the Day: LA Times' George Skelton

If you need another reminder why you should be happy that the traditional news outlets are dying a slow, painful death, check out this editorial in today's LA Times, from one George Skelton.

The subject of this piece is California's enforcement of the so-called "use" tax. For those unfamiliar with it, the use tax is a poorly defined tax on the purchase of goods from retailers outside California. It's like a sales tax you owe California if you buy something in another state, or through an online retailer. While it tends to be enforced for items like cars, online retailers based or holding affiliates in California rarely collect it. The reason for not doing so should be fairly obvious: why would Amazon, for example, jack up the price of a plasma TV to include California's sales tax when another retailer in another state can offer the product without the tax? Online shopping is great, after all, because it allows customers to be incredibly price-sensitive. And Amazon, for one, is serious about not collecting the tax; they have promised the state Board of Equalization (an agency named, apparently, before the Soviet Union's collapse made Marxism seem less cool) to unload their California affiliates if a bill sponsored by Nancy Skinner (D-Berkeley) becomes law.

In Skelton's mind, this is "plain unfair", and he spends the piece screeching about "the state's legal share" like a villian in an Ayn Rand book. (To be fair to George Skelton, he's not alone in his stupidity, as this Huffington Post piece demonstrates.) In his way of thinking, this is the state's money, and the government should simply get aggressive in retrieving it given how much it needs the revenue. And as to the reality that thousands of Internet businesses would be wiped out if Amazon and others left, he says, "So be it." We have only a few points in reply.

1. Why is it that so many discussion of "fairness" boil down to what's fair from the perspective of the government? What about what's fair to all the taxpayers that the state "represents"? If I'm a hard-working, law-abiding middle class guy struggling through the current crappy economy, why is it fair that I should pay a higher sales tax than someone in another state just to ensure that my city's manager can keep his $500,000 salary? Make no mistake: there's no more regressive tax than a sales or consumption tax. So we would ask George Skelton: why do you love bureaucrats more than the poor?

2. When I buy a book from Amazon, only two people are owed any legal share: Amazon is owed money, and I'm owed a book. If a third party wants to try to extract part of that money from either myself or Amazon, without asking for our consent, I only know one word for that: theft.

3. New Hampshire, Alaska, Delaware, Oregon, and Montana have two things in common: one, none of them has a crushing budget deficit on par with California's, and two, none of them has a state sales tax. Why could that be? I mean, California does have the highest general sales tax rate in the country, and they have to be collecting more in use taxes than any of these states, so what gives? The answer, of course, is something we never tire of repeating: California has a spending problem, not a revenue problem. And adding more revenue will only encourage denial of the spending problem and make it worse.

Prop 8 Remains

The SF Chronicle reports that same-sex marriage in California is, once again, on hold. An appeals court in San Francisco has rejected a plea to let the weddings resume while it reviews its decision to suspend the ruling by federal judge Vaughn Walker, who found the 2008 ban (known as Proposition 8) unconstitutional. Whole story here.

We've never had a stake in the issue of gay marriage, but its politics have always puzzled us. We can understand why social conservatives try to use government power to prohibit private behaviors they don't like; getting a third party to use force is what cowards do when they can't justify what they want. But we've never understood why gay-rights groups care so deeply about employing political means to achieve their ends. Specifically, why on earth would you believe that your right to marry whomever you wish comes from any source other than your right to do as you wish with your body? Are those on the anti-Prop 8 side so uncomfortable with the concept of property rights that they believe even this right is something that can only be granted arbitrarily by the state? This disturbs us more than anything the social conservatives do.

Wednesday, March 23, 2011

Do They Get Free Data Plans in Prison Too?

Good to know that we need a special law to make sure our prison guards know we disapprove of them smuggling contraband in to prisoners. It warms our hearts to know that a public union exists to make these people impossible to fire.

(Hat tip to Adrian Galysh)

Cognitive Dissonance and California's Budget

As it becomes clearer that Republicans are unlikely to get on board with Gov. Brown's proposals to extend several state taxes (to their credit) and abolish redevelopment agencies (to their shame), warnings of imminent doom are coming more frequently from the bureaucrats and the pundits. For example, this insipid piece from the LA Times informs us that the tax extensions will cost every Californian an average of $260 a year, if implemented. Never mind that this is, you know, your money, because
[T]he alternative stinks like last week's garbage. Even if the taxes are extended, the state would have to whack roughly $13 billion to make ends meet. Without the tax extension that amount would grow to something like $26 billion.

If it's all cuts, the consequences will be ugly. Public schools would lose about $5 billion, higher education about $1 billion. In a speech last week to the Legislature, Steinberg said, the legislative analyst's office warned "we will have to keep low-level offenders in the community, we will have to eliminate parole, but we will have to do all of that without any resources for local public safety officials…"
But, for sheer unintentional comedy, you really have to give today's prize to the Fresno Bee. In a piece entitled Budget Situation is Approaching 'Armageddon', the editors assure us that a budget impasse constitutes "an off-ramp on the road to economic recovery". Why? Because it "harms state contractors, threatens to shut down more bond-funded construction projects and sends a message that California is perpetually ungovernable." Yes, apparently we'll know the worst is over when state contractors and bond-funded construction workers are breathing easy.

Why is this unintentional comedy? Because it's on the same page as another editorial entitled Those With Money are Winners in State Budget Dealings. The second editorial describes how advocates for the disadvantaged are being politely ignored in Sacramento while their elected representatives go to bat to preserve corrupt redevelopment agencies and tax breaks for businesses in their districts. So, according to the editors of the Bee, the key to California's recovery is to give five more years of more money to the same corrupt morons who are largely responsible for the deficit in the first place.

If you're bright enough to be reading this blog, you're bright enough to realize that you've heard all of this before. When a politician wants more of your money, it's always the children, the elderly, and the infirm who'll suffer if he doesn't get it. Hospitals and schools will close, cities will disband their police and fire departments, Christmas will be cancelled, etc. This is because preserving the status quo is the goal of any sensible politician; spending tax dollars on the public's priorities is an afterthought at best. And make no mistake: what's going on in Sacramento now is a desperate effort by our political class and their cronies in the "private" sector to hold onto a status quo that's treated them well at taxpayer expense. They want to stave off deep spending cuts as long as possible, because such cuts will lead voters to ask tougher questions about corrupt municipal bureaucrats, corrupt CalPERS officials, corrupt redevelopment agencies, unsustainable public pensions, and Sacramento's role in an economy that's largely stagnated for two decades.

And that's the only way a conversation about meaningful reform is going to start: a refusal by the public to keep enabling the status quo. Which is why an all-cuts budget from the Governor would be a good thing.

Tuesday, March 22, 2011

Will California's Government Drive Delicious Burgers Away?

Apparently, Los Angeles-born burger chain Carl's Jr. is looking to relocate its corporate headquarters outside California, due to its frustration with the state's regulatory leviathan and crushing taxes. Story here.

May God have mercy on our souls for driving away the source of such tasty and delightful burgers.

(Hat tip to Adrian Galysh)

Adventures in Legislating: California (Briefly) Reconsiders Economic Suicide

As reported by the SF Chronicle yesterday, a judge ruled that California could not yet implement a "cap-and-trade" system as part of AB32, the 2006 law calling for the state to reduce greenhouse-gas emissions to 1990 levels. Specifically, Judge Ernest Goldsmith ruled that the state had not adequately evaluated alternatives to cap-and-trade. (Note to Judge Goldsmith: Way to make up a completely pseudo-legal justification for your decision.)

While we'd like to see this as a move embracing the reality that lots of people live in California and economic progress is good for them, we're not chilling any Veuve Clicquot just yet. For one thing, continued reference to cap-and-trade as a "market-oriented" mechanism (there's even one in the first paragraph of the Chronicle piece) illustrates how far we are from bringing economic literacy to environmental policy. Forcing private businesses to buy emissions permits from a government body, with the government determining the number of permits available, and entrusting that body to impartially regulate the emissions each firm produces, is exactly the sort of pseudo-private crony capitalism we see at work throughout the US economy. Regardless of whether it employs cap-and-trade or another mechanism, AB32 will trust government regulators to tame the excesses of businesses that pollute the property of others; apparently, it's not a problem that no regulatory body in history has ever succeeded in managing an industry without either being bought off by the people it was regulating, or strangling the industry with rules. If you truly care about the environment, you should find this sad, as privatization and strict property rights (i.e., actual "market-oriented" mechanisms) are far more likely to foster wise stewardship of natural resources.

The other reason we're not optimistic concerns the folks who brought the lawsuit to stop cap-and-trade in the first place: "environmental justice" groups who find the system insufficiently draconian. To these folks, wise stewardship of the environment is not the primary goal, but a pleasant secondary effect of limiting economic activity and the generation of wealth. And the end result of the policies they advocate would be a California in which the only carbon emissions came from people rubbing sticks together to create heat.

Were we feeling charitable, we'd guess that AB32 will ultimately have no effect on carbon emissions, as the corruption built into the system enables favored businesses to do as they please and the state's budget prevents meaningful enforcement of its provisions. But in reality, we think it's probably likely that the state will have 1990 levels of greenhouse gases by 2020. Not because the law will work, but because it will drive so many productive individuals and firms out of California.

(Hat tip to Ron Bailey at Reason Hit & Run)

Monday, March 21, 2011

Anarchy in the UKCA? Not Quite

We've been closely following recent developments down in Bell, but it's important to remember that the 2010 taxpayer revolt against corrupt LA County governments (referred to by one blogger as la fiesta de té) has involved numerous nearby cities as well. One of the more interesting is the even-tinier town of Vernon. Like Bell, Vernon spent 2010 in the news due to scandals about city officials' excessive salaries. What's especially interesting about this, however, is what many LA politicos propose doing about it: dissolving Vernon as a municipality.

If that were the whole story, we'd be inclined to think, "Damn! You can just dissolve a government for being hopelessly corrupt? We can think of some places we'd start with before Vernon!" But sadly, that is not the whole story. Vernon, you see, is a unique place. It has a population of about 100, most of whom are city employees. Yet unlike many other cities in southern LA County, Vernon is not at all poor. It is home to a large number of manufacturing concerns and city-owned utilities, and generates an immense amount of revenue through them. Hence the interest from Los Angeles.

In the face of opposition from Vernon business owners and union representatives, the LA City Council recently backed off from a plan to annex the city outright. Now, however, the same politicians are throwing their weight behind AB 46, a proposal from Assembly speaker John Perez which dissolve all cities with fewer than 150 residents. How many California cities meet that criterion, you might ask? Just one. If enacted, the bill would turn Vernon into an unincorporated part of Los Angeles County. As Dan Walters of the Sacramento Bee notes, Perez is the cousin and political ally of Antonio Villaraigosa. We're sure this is just a coincidence.

A Glimmer of Hope for the GOP in California?

It doesn't mean much, but Ron Paul won the California GOP's presidential straw poll on Saturday. Though they're currently only slightly more relevant than the Whigs in California politics, Republicans in California have at least done one thing to give us hope that they're not entirely hopeless.

Sunday, March 20, 2011

LA Times: Traffic Must Suck Equally for All

We've always seen freeways, particularly in heavily populated parts of California, as a classic illustration of the Tragedy of the Commons. For those unfamiliar with the concept, the original example refers to grazing cattle: when a field of grazing land is made freely available to all, the end result is that all the cattle men bring their cows there and graze it as fast as possible. The moral is that failing to attach a price to the use of something scarce means that consuming or hoarding all of it as quickly as possible is the only sensible thing to do. And this is how it goes with freeways, isn't it? The traffic seems to be uniformly bad year after year, and periodically we succeed in bellyaching enough to get lanes added and new freeways built. Yet the freeways stay jammed no matter what. This is usually blamed on two popular villains in California life: suburban sprawl, and other drivers being jerks. But no one asks whether we might have such awful traffic because, you know, everyone wants to use the freeways and it's free to do so. No one brings up the Tragedy of the Commons.

As such, we tend to be sympathetic to proposals involving the privatizing of highways: the best way of reducing traffic and preventing the deterioration of roadways is to attach a price to their use. (Walter Block, of course, knows far more about this than myself.) Others, of course, advocate tolls on public highways as a way for municipalities and states to generate revenue. We're less enthusiastic about this idea. Yet this moronic editorial from the LA Times shows us just how far we are from any rational consideration of this subject. It concerns a proposal to allow solo drivers on congested stretches of the 10 and 110 freeways in Los Angeles to pay to drive in carpool lanes. The fees would, of course, go to the MTA. Yet the proposal faces stiff opposition:
Opponents of the plan see something fundamentally undemocratic and inequitable about such "congestion pricing." Freeways are a public benefit, traditionally available to all. Yet now, critics say, the roads would be operated under a two-tier system that would allow those with money to speed to their destinations while poor people would watch unhappily from the traffic-jammed sidelines. What's next? Wealthy people paying for faster ambulance service or buying their way out of jury duty? Both Rep. Gary G. Miller (R-Diamond Bar) and Rep. Maxine Waters (D-Los Angeles) have said they will try to block the demonstration project even though it is in the late planning stages. Waters says it sets up "a traffic system of haves and have-nots."
As Nancy Pelosi might say, are you serious? We can't be offered the chance to pay for a premium service with our own money, because it would mean we're receiving a premium service and others aren't? With this kind of stupidity, no wonder our state is broke and our traffic sucks.

Next Up: An All-Cuts Proposal from Gov. Brown?

The Sacramento Bee wonders about Jerry Brown's promise to propose an all-cuts budget, as it appears more likely that his some-cuts-and-tax-extensions proposal is not going to fly.

Of course, conspiciously absent from the proposed-cuts party are any meaningful reforms of the state's hopeless pension system. Or the elimination of job-killing environmental regulation. Instead, the nonpartisan Legislative Analyst's Office has suggested cutting things like sports programs at community colleges (clearly, we will have to ask ourselves what monsters we've become when we're no longer paying for community college sports). So, if you still had any doubt, the dog-and-pony show going on in Sacramento right now is simply about trying to make this year's numbers add up; a serious discussion of how we got into the mess we're in, and what changes are needed to make California a prosperous, dynamic place again, are not on the agenda.

Saturday, March 19, 2011

Los Angeles Confronts its Deficit

Tim Cavanaugh at Reason Hit & Run discusses Miguel Santana, the Chief Administrative Officer for Los Angeles and the man charged with closing the city's jaw-dropping $350 million budget deficit. (Note: that's the deficit after the city cut 4,000 employees.) Santana is expected to make public budget recommendations on Monday; Cavanaugh describes his plan as follows:
Interestingly, Santana ranks pension reform last among his four highest-priority items – because pension savings don’t help the city’s dire current finances. His first order of business is to make the city’s reserve fund permanent (“because then we’ll have to make the corresponding cuts”); the second is to reduce discretionary services and focus on core services; and third is to bring in more private contractors.
We expect the second and third priorities, especially, to go over like a fart in a car among LA politicos. Yet one proposed cut that Cavanaugh focuses on illustrates the problem of spending sanity there: $7 million for school crossing guards. Seriously; the city of Los Angeles spends $7 million in salary, benefits and pension for a service that was performed free of charge and perfectly well by students or parent volunteers when we were growing up. And yet the city taxpayers hoping to see this spending cut will be relying on Antonio Villaraigosa's political courage

Hat Tip of the Week: Adrian Galysh

We wanted to thank our good friend Adrian Galysh for helping to spread the word about this blog. We've known Adrian for many years, but for those who don't know him, he's devoted a great deal of his own time and money to promoting the cause of liberty in California. Most recently, he ran as the Libertarian Party candidate for State Senate in District 20 (San Fernando Valley) in 2010. He ran a tremendous campaign, and at one point was polling double digits in a Democrat-dominated district. Since the election, he continues to work closely with other grassroots liberty advocates throughout Southern California. Also, he's a first-rate guitar player; I'd recommend going to hear him play if you get a chance.

So, thanks again for the help, Adrian. Much appreciated.

Friday, March 18, 2011

New Poll: California Not the Best Place to Live

At least that's the conclusion of a new study conducted by Field Poll and UC Berkeley. In this poll, only 39% of Californians surveyed ranked the state as "one of the best places to live". This is the second-lowest such score in the Poll's 45-year history, and the lowest since 1992. The current survey also found that almost 4 in 10 respondents had experienced a deterioration in their personal finances, nearly three times the proportion seeing an improvement. Interestingly, all rhetoric aside, most reported that immigration to the state had had no real impact on their quality of life.

Let's put this in perspective: this is going on all over the United States, and it's really the same story here as elsewhere. Aside from some notable exceptions (including the innovators of Silicon Valley), Americans everywhere are coming to grips with the uncomfortable reality that most of the "prosperity" they've seen in their lifetimes has been an illusion created either by the military-industrial complex, or by the monetary manipulations of the Federal Reserve. Of course, to the extent that Californians seemed especially blessed by both of these illusions, their abrupt end was bound to hit harder here. And these days, the spectacle of Californians struggling to use our corrupt, toxic political system to maintain the fiction of wealth without effort is being played out everywhere else in the country. So we're not inclined to think this says anything particularly unique about our state. We will simply hope that the current crisis ultimately leads more Americans (whether in California or elsewhere) to embrace independence, honest effort, and self-sufficiency. Because if that happens, not only will we live in a freer and more civilized society, we'll still have perfect weather, majestic scenery, beautiful people, wonderful communities, a fascinating culture, and great food.

Oh, and Happy Friday!

Bell Taxpayers Get Slapped in the Face Once More

Today the SF Chronicle reports that the federal judge in the Bell corruption case is leaning towards dismissing the lawsuit brought against the city's recalled Mayor and seven other former city officials. In his tentative ruling, Superior Court judge Ralph W. Dau wrote, "The conduct alleged by plaintiff in support of its first cause of action may be reprehensible, but it is not actionable in civil court."

So, it's looking like there will be no recovering the millions of taxpayer dollars these slimy politicians voted to give themselves.

Yet another reason why that government is best which governs least: democracy sometimes does a lousy job of taming our leaders' worst excesses.

Thursday, March 17, 2011

Municipal Service Outsourcing Comes to Orange County

We're sure this isn't the last such story we'll hear, but the city of Costa Mesa will be laying off about half its employees within six months. This follows on some other interesting developments:
  • The small L.A. County city of Maywood has laid off all city employees
  • San Carlos in San Mateo County has contracted out its fire department
  • Colton (San Bernardino County) is looking to outsource its police services
  • Long Beach is exploring the possibility of contracting for its street sweeping
These are baby steps, of course, but anytime even a faint whiff of market discipline blows through the halls of municipal government in California, we can't help but smile at it.

If Those in Our Government Went to Public School in California, They're Used to Grades Like This

The U.S. Public Interest Research Group released the results of a study of state-government transparency. California's grade: D+.

While this gets a big "no shit!" from those of us who try to blog about California politics, it's nonetheless worth emphasizing. This money quote from a consumer advocate at CALPIRG should be required reading for those of us who aren't concerned about where our tax dollars go:
"If Californians look hard enough at the budget voted on today they’ll notice some serious holes in their ability to follow the money. Billions of dollars in tax breaks and economic development subsidies are spent every year with no disclosure to the public of who gets them or how much they get."
Ouch. That is definitely D+ work.

Deconstructing Barry

The steady trickle of jury-selection news out of San Francisco reminds us that Barry Bonds' perjury trial is scheduled to start next week. Knowing that there's no chance of compromising the jury pool, we thought we'd review the chain of events leading up to this trial.

1. At various points in the history of baseball, players have discovered new ways of improving on their abilities. Pitchers learned to throw spitballs, hitters learned to cork bats, and everyone fought fatigue with amphetamines. In addition, surgeons developed new techniques to enable players to continue performing past their natural limits. And, of course, some players got LASIK surgery. The distinction among all of these "performance enhancements", determining what's "cheating" and not-cheating, has been more or less arbitrary. At one point, players figured out that taking anti-inflammatory medicines allowed them to work out harder and more frequently. For whatever reason, this has fallen into the cheating category.

2. From 1993 to 2007, a guy named Barry Bonds played left field for the San Francisco Baseball Giants. During that time, Bonds was best known for two things. One, being an insufferable, surly jerk to fans, teammates, and journalists alike. Two, being arguably the greatest baseball player who ever lived.

3. Sometime around 1998, in the middle of a Hall of Fame career, Bonds allegedly began to use anti-inflammatory medicines. It should be noted that steroid use was not prohibited in baseball until 2002, and was not considered a punishable offense until 2005. From 1998 on, Bonds' production soared from "awesome" to "otherworldly", as he set new records for single-season and career home runs, all within the rules of the game.

4. In 2003, Greg Anderson of the Bay Area Laboratory Cooperative (BALCO) was indicted in U.S. District Court on charges of distributing steroids to numerous athletes. Anderson, of course, was Bonds' trainer. In his grand jury testimony, Bonds denied knowingly using performance-enhancing drugs.

5. In 2005, following the BALCO investigation and Jose Canseco's crappy book, Congress began issuing subpoenas to baseball players, in order to embarrass them publicly. The lack of any legal authority to do this was, apparently, not a problem.

6. In 2006, Bonds discovered the consequences of not sucking up to sports journalists. In a book called Game of Shadows, reporters Lance Williams and Mark Fainaru-Wade illegally disclosed grand jury testimony in detailing Bonds' use of anti-inflammatory medicines. This was followed by Jeff Pearlman's hatchet job Love Me Hate Me. A healthy dose of character assassination leading up to . . .

7. In 2007, Bonds was indicted for perjury and obstruction of justice, for lying about steroid use in his 2003 testimony.

So, what we have is this: a great athlete (if a dreadful person) with his reputation destroyed and the details of his personal life laid out in public without his consent, years of his life wrapped up in litigation, all so that the U.S. government can continue to dictate what substances Americans put in their bodies.

Apocalypse Now or Apocalypse Later?

Since we really enjoy the use of Book-of-Revelations-style rhetoric to describe public finance, we're curious about what's coming next from the Governor, following the mixed reception his proposed cuts received from the Legislature yesterday. While lawmakers accepted roughly $7.4 billion in cuts (primarily to social services), they balked at cutting redevelopment agencies to the tune of a further $1.7 billion. In other words, Sacramento is willing to part with things like welfare-to-work and Medi-Cal, but good luck keeping our legislators away from where the real graft lies. More important, though, is to remember that this budget is no long-term solution. The underlying troubles in California - its bloating public sector, its ticking time bomb of pension liabilities, its hostility to private enterprise - will still be alive and well even if voters approve the cuts in June.

So, stay tuned for what comes next. We can only hope it involves a speech like this.

Wednesday, March 16, 2011

Today's Lesson in Fiat Currency

We were amused by this story from Mira Mesa (San Diego County): a man named Thierry Cahez, upset with his bank, paid off a $6,500 credit card bill in pennies.

Apparently he was turned away by several branches before finding one that would accept the pennies. Of course, depending on how many of those pennies were pre-1982, it's possible that the copper in the pennies was worth as much as 2.5 times the amount he paid. The bank really should have been thanking him.

Today's the Day: Legislature Votes on the Brown Budget Proposal

Today is indeed the day the California Legislature votes on Jerry Brown's plan to extend tax increases as a way of helping to close the state's budget gap. It's not clear how this one's going to shake out, but we'd be happiest if the Guv's plan is rejected. First, the obvious: a state that has struggled with economic growth since (basically) the end of the Cold War does not need increased taxation. But more critically, the Brown proposal requires us to believe that Sacramento will spend the increased revenue wisely, and, well, they have a small credibility problem as that goes. Drastic cuts to both programs and taxes are the only way to ensure that this state lives within its means, and we're not seeing any evidence of that from this plan.

Tuesday, March 15, 2011

Government Prohibition of Medical Marijuana is Alive and Well in California

If you have even a cursory understanding of the law regarding medical marijuana, you might think you're fortunate to live in California. After all, voters passed Prop 215 way back in 1996, which legalizes the drug for medical uses in the state. And you may have been encouraged by this 2009 Justice Department memo, which appeared to suggest that people dispensing marijuana in compliance with state law wouldn't have problems with the DEA. Well, this story from the Marin Independent Journal suggests that the federal government has another way of shutting down legal dispensaries: the IRS.

According to Section 280E of the Internal Revenue Code, no deductions or credits can be claimed by businesses "trafficking in controlled substances". So, medical marijuana dispensaries across the state are being audited, and the Marin Alliance for Medical Marijuana in Fairfax has been told it owes millions in back taxes for 2008 and 2009 after auditors disallowed all its business deductions (e.g., buying marijuana, hiring staff, paying for office space, etc.).

Steve D'Angelo, director of the Harborside Health Center dispensary in Oakland, says, "If the IRS were to aggressively interpret 280E, it has the potential to close down every medical cannabis dispensary in the United States. If you can't deduct your rent, your payroll, licensing fees, et cetera ... you're going to be taxed out of existence." Harborside has been under IRS audit for a year.

(Hat tip to Jacob Sullum at Reason Hit & Run)

Prop 13 and California's Political Dysfunction

We were intrigued by this piece in the Sacramento Bee a couple days ago. Most criticisms of Prop 13 follow the same generic "it bankrupted California!" template. Joe Mathews and Mark Paul, however, point to the transfer of power from localities to Sacramento that it created. To explain:
By slashing local property tax revenues, putting up higher barriers for local passage of taxes and bonds, and giving the Legislature the authority to divvy up remaining property tax dollars, Prop. 13 was the Great Centralizer.

After Prop. 13, the state took over the primary duty for funding schools, which were left with little local tax revenue of their own, and it relieved counties of paying a share of some health and welfare programs. Where once there had been largely separate and relatively well-defined pots of revenue – one labeled "local," the other "state" – there was now a single hydraulic money system, as vast as the state's waterworks, with the Legislature controlling the sluices and pumps.
Mathews and Paul then take on the myth that partisan venom is responsible for the dysfunction in Sacramento; instead, they point out that the centralized system created by Prop 13 functions exactly as intended.
Liberals have never mounted a full-scale challenge to the system because centralization – with the state taking a greater role in funding and regulating schools and health and welfare programs – represented a liberal dream of equalization come true (even though, in practice, state control has been more about leveling down than raising up). Conservatives came to accept big government in Sacramento because they hated taxes more.

Issues once settled at city hall fill the state agenda. Take the example of infrastructure. Because of Prop. 13, local governments could no longer sell general obligation bonds, repaid through the property tax, to build the public infrastructure – everything from roads to firehouses – needed to sustain growth. To the dismay of builders, local officials turned, as an alternative, to kludges like impact fees on developers to pay for those things. That brought the developers and builders and their political allies scurrying to Sacramento for infrastructure solutions that didn't land on their shoulders.


There is no real opposition in Sacramento to this way of governance. The beneficiaries of the system include virtually everyone who shapes communication with the California public about how state government works: lobbyists; strategic consultants; public relations experts; fundraisers and party planners; the reporters and pundits. These players take different sides in contests over who gets what from government. But they are all on the same side when it comes to preserving the centralized system that supplies the lucrative work of fighting these never-ending battles.
Most critically, Prop 13's tax limitations have had the effect of strengthening the public employee unions whose bank accounts and pension funds currently runneth over:
Prop. 13 and successor measures (Proposition 62 in 1986 and Proposition 218 in 1996) took taxing authority away from local elected officials, leaving them with the reduced responsibility of spending dollars whose amount was set in Sacramento or by the voters. Without the power to tax, local governments were less of an immediate threat to local pocketbooks. It was no longer necessary for business and taxpayer groups to watch them so carefully.


Operating with little scrutiny from their own residents or from the atrophying commercial news media, local governments dominated by their employees made pay and pension commitments they could not keep.
We don't have much to add to what Mathews and Paul have already written. The corruption caused by centralizing power at the level of state government, and the degree to which that has turned California into a land of rent seekers, is there for all to see. All of which merely underscores our conviction that the only serious impetus to change our political structure will be imposed from outside Sacramento, in the form of a fiscal collapse.

Monday, March 14, 2011

GSL Movie Review: Inside Job

We don't usually depart from our normal routine of reporting on political and economic news specific to California, but we saw the Oscar-winning "documentary" Inside Job over the weekend, and decided to break with our regularly scheduled programming to offer our thoughts. In light of the economic illiteracy we've seen in other reviewers showering the film with praise, we felt the need to say something.

To say that Inside Job plays loose with both facts and logic is being generous. To its credit, the movie at least makes this obvious right off the bat by telling us the story of Iceland's 2008 collapse. In the film's re-telling, Iceland was an ideal of modernity, with happy, prosperous people, no crime, clean industry, and spectacular scenery, until the state-run banks were privatized and the evil rich bankers made billions off of bad loans before driving the country's economy off a cliff. The anti-privatization line ignores, of course, that the whims of politicians are just as dangerous for one's savings as the incompetence of lenders. More importantly, it completely ignores the role of central banking in Iceland's downfall, which makes the rest of the argument laughable. It's simply impossible to understand Iceland's situation without considering the effects of implicit government guarantees of mortgages, artificially low interest rates, and bailouts of failing banks. (For those interested in really learning what happened there, the fine folks at the Ludwig von Mises Institute have published this excellent book.)

But that's what the rest of the movie has in store: the meltdown of the U.S. property market and subsequent banking crisis were caused by "deregulation", and by evil, greedy traders and CEOs on Wall Street, who wiped out their customers and their own companies to enrich themselves. This interpretation of events, though popular, is so blind to the underlying facts and causes of the crisis that it's hardly worth the trouble of picking it apart. Tom Woods and others have, of course, worked through the true nature of the bust more eloquently than we ever could, so we won't rehash the full story ourselves, beyond making a few key points.

First, deregulation. Given that this word is like a dogwhistle to liberals, you'd think that one of them could produce a long list of relevant regulations that had been weakened or repealed in the years leading up to the crisis. Yet, unsurprisingly, Inside Job is long on outrage and very, very short on specifics. The best they can do is to cite the partial repeal of the Glass-Steagall Act in 1999, and even this argument weakens on examination. The repeal (known as Gramm-Leach-Bliley) merely eliminated a provision that prohibited commercial banks and investment banks from existing under the same corporate umbrella, a provision that exists nowhere else in the world; other elements of Glass-Steagall, including those prohibiting commercial banks from underwriting or trading in securities and those prohibiting securities firms from taking deposits, were left intact, and other laws exist to prevent investment banks from unloading toxic securities onto commercial affiliates. Are we really supposed to believe that this repeal created some new sort of trading activity whose effects brought the world's financial system to its knees? The makers of Inside Job clearly hope so, because this is it as far as examples of deregulation go. Other practices associated with the crisis, such as derivatives trading, securitizing mortgages, and fractional-reserve banking, were legal long before it began.

Second, greed on Wall Street. Aside from the obvious problem of blaming the 2008 crisis on this (i.e., greed in finance did exist before 2001), the film ignores the government's extensive efforts to encourage risk-taking and entrepreneurial error. Were some traders, bankers, and CEOs so profit-hungry that it compromised their judgments? Absolutely; yet given the presumption of a taxpayer bailout in the event of heavy losses, these individuals had every incentive to take on as much risk as possible, as riskier debt carries higher interest rates, so should anyone have been surprised? Were some of these people vastly overpaid relative to their performance? No doubt (a word to bankers: if the Fed is lending you money at essentially zero interest, and you're lending it with interest, and you can't make money on that deal, you're not doing it right). But that's a matter for the CEO, the board, and the shareholders to decide, and there are compelling arguments supporting "excessive" CEO pay; criticizing these arrangements from afar is nothing but whining and envy.

Ultimately the film suffers most from its omissions, both of fact and of logic. Some of these are amusing - for example, any movie that devotes significant time to traders' appetite for prostitutes, yet interviews Eliot Spitzer and Barney Frank without a trace of irony, is hard to take seriously. Some are silly - the film rips the Treasury for bailing out AIG, yet moments later rips them for not bailing out Lehman. And, as a former PhD student in economics, we (okay, I) found their assertion that econ departments "teach deregulation" to be stunningly dishonest (note to the filmmakers: econ students all have to take macro, which is essentially the mathematization of government regulation). But other omissions are not so trivial. Most fundamentally, Inside Job expects us to believe that three decades of government interference in the housing market, through legislation such as the Community Reinvestment Act, agencies such as FHA and HUD, and the implicit taxpayer backing of loans via Fannie Mae and Freddie Mac, all of which were explicitly intended to degrade lending standards, had no effect on the quality of mortgage loans. It expects us to believe that trading firms' appetites for risk were unaffected by the expectation that their cronies in government would cover their losses with bailouts. And it expects us to believe that a decade of loose monetary policy from the Federal Reserve had no effect on the public's appetite for debt or the willingness of banks to make dubious loans. All of which is jaw-droppingly naive, if not worse.

The film's solution to these problems is no less naive. Meaning that it's standard left-wing boilerplate: get the Wall Street lobbyists out of DC, and tighten regulations to keep these things from happening again. We hardly know where to start with this. If we have corrupt, ineffectual bureaucrats more loyal to their friends in industry than the public, how is giving the same people more money and power the answer? Especially when we have approximately zero historical examples of bureaucrats successfully regulating an industry without being bought off by it? (It's almost like power is corrupting or something.) But more importantly, can we expect regulators to effectively tame an industry's worst impulses if doing so runs counter to the interests of the elected officials who appoint them? Don't forget: our friends in Sacramento and DC want a growing economy at all costs, with growth defined as rising prices and wages, a booming stock market, low interest rates, and low unemployment. If this growth is entirely an illusion created by inflation, or by rewriting the rules to favor their campaign contributors, our leaders are more than willing to bet that we won't hold them accountable for it. Any advisor or regulator who tells a politician to do something in restraint of "growth" is likely to lose an otherwise easy job very quickly.

Given all this, we give Inside Job no stars. To quote a more enlightening film, "I award you no points, and may God have mercy on your soul".

Saturday, March 12, 2011

High-Speed Rail Boondoggles, March 12, 2011 Edition

The LA Times reports that California is making a big push to snag the high-speed rail funds rejected by Florida, to support the construction of a rail line from San Francisco to Los Angeles.

Put another way, California is seeking funds for an economically dubious project that will almost certainly run out of money before it's anywhere near complete. At which point it will no doubt try to sell the public on more junk debt so the process can continue.

Your Social Security Taxes Go . . . Directly to Jail?

File this one in your "There's No Way This Could Ever Be Abused" folder.

The Fresno Bee recently reported on a program that funnels Social Security dollars directly to jails and prisons nationwide. Here's how it works: according to the article, persons who spend more than 30 days in jail or prison lose their eligibility for payments from Social Security, including checks for retirement, disability, SSI, and survivors' benefits, but the SSA has no way of directly tracking them down. However, through something called the Incentive Payment program, the SSA essentially pays a kickbackbounty to jails and prisons who report their inmates' names, birthdates, and SSNs. The Fresno County Sheriffs have collected roughly $48,000 since July 2010 through the program, while Merced County makes as much as $8,200 per month in these bounties.

Three thoughts:

1. Gee, we always thought that we had to pay Social Security taxes because paying into a massive Ponzi scheme was part of our duty as citizens, to ensure that the elderly wouldn't die poor. (Ok, we're being sarcastic; we've never actually thought this.) Good to know that (non-elderly, non-retired) law enforcement bureaucrats get to skim some of that money without our consent.

2. There's no chance we'll see an upward drift in sentencing lengths, even for trivial or victimless crimes, or in the standard of evidence required to obtain a conviction, in communities participating in this program, right? I mean, there's no way judges would work together with prison officials to do something that both the prisons and federal government want, right?

3. Surely those who spend as few as 31 days in jail on trivial offenses, as well as those wrongfully convicted and released, are no longer obligated to pay into Social Security. I mean, they've served their debt to society (and then some, in the case of the latter group); the government wouldn't expect people to keep contributing 12.4% of their earnings to a program they weren't eligible for, right? Right?

BREAKING: Prosecuting the Drug War Exposes Police Officers to Corruption

There are reasons why bloggers make fun of traditional media outlets. One such example appeared yesterday in a Chronicle editorial titled "Bay Area police forces need to follow rule of law". Way to take a provocative stance on something, Chronicle editors.

The piece outlines growing scandals in Contra Costa and San Francisco counties, in which narcotics officers are alleged to have conducted illegal searches and seizures, and stolen and sold drugs including steroids and methamphetamine. In San Francisco, the allegations have been credible enough to lead D.A. Gascon to drop dozens of cases. Unfortunately, the Chronicle stops short of offering any but the most tepid and milquetoast of criticisms. ("Police departments have always had their bad actors and their scandals." So ... boys will be boys?) Basically, they advise urging the police to try really, really hard to not break the law in pursuing drug crimes:
Apart from more oversight, there need to be clear and strict consequences for police officers who engage in this kind of misconduct. The police need to understand that with enormous power comes enormous responsibility, and that they can't be allowed to get away with breaking the rules they are meant to enforce.
In our view this misses the forest for the trees by a wide margin. The bigger issue is unavoidable: when you have a victimless crime like the drug trade, no one reports it to the police. This means the police need to strike out into the community to try to find the crime, a process which is inherently vulnerable to corruption, to the extent that it relies heavily on the discretion and benevolence of the officers involved. It too easily becomes an entrepreneurial venture, in which officers can make extra money by selling seized drugs on the side, or in which they can be bribed into taking sides in conflicts between rival gangs, and they can generally get away with abusing their power for long periods of time because of the latitude they receive from the criminal justice system. If, as a commmunity, we want to avoid a major source of police corruption (and free officers up to prosecute, you know, actual crimes against citizens and their property), it's time to strongly consider the possibility of withdrawing government force from peaceful citizens and their desire to consume certain plants.

Friday, March 11, 2011

Our Condolences

Our thoughts and prayers go out to all the victims of today's massive earthquake in Japan. To those reading this from our beach cities, please take whatever precautions are wise with respect to the tsunami.

Thursday, March 10, 2011

Jerry Brown's "War of All Against All"

We loved this: If the Legislature doesn't put his tax extension proposal on the ballot in June, Gov. Brown predicts the end of days. If the Leg can't pass the measure to extend income, vehicle, and sales tax rates for five more years, then Brown will propose "an all-cuts budget": one that closes the $26.5B budget gap entirely through spending cuts. What then, Governor?
"Then the Democrats change [the all-cuts budget] and put in gimmicks. Then I veto it. Then everybody sits there until we run out of money. It's not going to be a pretty sight. It's like one-two: No tax, all cuts, gimmicky budget, veto, paralysis."

Then political interests and ideologues launch an all-out war of ballot initiatives, he forecasts.

"There'll be initiatives on taxing wine and beer and oil companies," he says, "and a split roll" — taxing commercial real estate higher than residential. "And Republicans will counterattack" with anti-union measures and efforts to undermine the public sector.

"There'll be an unleashing of left and right forces. Everyone will come out fighting. California will become a battleground…. It'll be a war of all against all. The loser will be the people of California."
Hmm. Maybe giving people in Sacramento the power to control your life and your property is a bad idea after all?

Wednesday, March 9, 2011

LA Times on Jerry Brown's "Austerity": Liberalism, A-OK!

The LA Times today published this insipid editorial criticizing Gov. Brown's proposed spending reductions, specifically its cuts in social service spending. If you're a fan of basic logic, your head may explode from all the unfounded assertions (e.g., "safety-net programs . . . benefit society as a whole", "an inadequate safety net is likely to lead to higher dropout rates, more incarcerations and less productivity by those who can't obtain needed services") and fallacies (e.g., doctors and hospitals find it next to impossible to pass on the costs of caring for Medi-Cal patients to privately insured patients, and as Medi-Cal rates are already among the lowest in the nation this hardly represents a new state of affairs; also, reductions in spending increases are not the same things as cuts). Moreover, the editors stop short of taking a stand against the cuts, so we're not entirely sure what their point is; if there's "no practical alternative" to cuts that include Medi-Cal, preschool. child care, and welfare, then why all the complaining? Instead, we're left with this money quote:
The political realities in Sacramento make it impossible to avoid shrinking California's safety net. But it's not a solution to the state's budget problems; it's just laying the groundwork for something worse.
Now, we realize that liberals in California and elsewhere view social services as a means of increasing dependence on government, rather than a way of actually solving any individual's problems, so we're not suggesting you take the Times' concern for the poor seriously. But we hear and read things like this often enough that we want to respond. So, some thoughts:

1. We can understand easily enough how a person can look out at California and be troubled by the idea that unemployed people are struggling to pay their bills, that children aren't learning the basic skills they'll need to be successful as adults, or that people can't get access to medical care they need. But we have to ask: is large-scale extraction of the property of private individuals without their consent really a necessary feature of any solution to these problems? And are these the only solutions? Is a pile of unearned cash and a cottage industry of social workers really the best way to help the unemployed? Are the needs of children really best served by public education (i.e., a massive jobs program for teachers and the world's largest and most dangerous day-care program)? Given the abysmal results of these programs and their complete lack of incentive to improve, I have to imagine the answer to most of these questions is "no".

2. We've never understood why some people view spending on government social services as some sort of virtuous act that reflects well on them personally. Don't you have to do something of your own free will before someone can admire (or blame) you for it? As an aside, we have a friend who's going through a hard time, and we've been passing him/her about $200 a month to help with rent. Just because that's what friends do. Because this isn't government-provided welfare, our friend actually sees all $200 (rather than whatever slips through the bureaucracy), and we aren't being forced to do anything we don't want to. Neither of these things is true of government money spent on my behalf and without my input.

3. It's also interesting to us that most liberals we know give almost nothing to charity, and rarely volunteer their time, even as they enthusiastically support government programs that provide the same services. Without insulting anyone personally, we think this illustrates an unfortunate dark side to the "progressive" mindset. Are the poor and disadvantaged really so icky that, rather than helping them yourself, you want the government to do it, even though (a) government social services invariably crowd out private charities, meaning that the poor are dependent on the government and vulnerable whenever states like California spend themselves into oblivion; (b) bureaucrats have a long history of ensuring that a large portion of funds never get to program recipients; and (c) the programs themselves are nearly always ineffective, and they often have unintended consequences that worsen the original problem?

4.If you really care about helping the disadvantaged and creating a more just society, you need to allow them the freedom to succeed or fail on their merits, and to live their lives as they see fit. Which, more than anything these days, involves getting the state (and all the coercion and intrusion it implies) out of their way, rather than trying to guide them safely to a better tomorrow. Government social services are a classic example of a solution that's worse than the problem it aims at. If you reward a person's behavior materially, you can expect to see more of it; welfare benefits are no different than any other monetary incentive. And similarly, if you punish behaviors like hard work and saving, you'll see less of them as well. Regardless of your feelings about the wealthy, their saved, invested capital is an essential ingredient in the creation of future wealth and the job opportunities and rising living standards that come with it. Taxing away their wealth only gives the poor fewer options for changing their circumstances. The same goes for any other hard-working people trying to succeed by their own effort.

UPDATE: For Whom the Bell Tolls

In a heavy turnout, Bell voters recall Mayor and three sitting members of City Council.

Whether it's a change for the better remains to be seen. But it is good riddance.

Tuesday, March 8, 2011

For Whom the Bell Tolls

Last summer, the city of Bell experienced a rare moment of national attention. Unfortunately, not all publicity is good publicity, and these days Bell, a blue-collar South LA town of roughly 37,000, is best known for its spectacularly corrupt, plundering government and citizen anger in response to it. Among the delightful behaviors the city's "public servants" inflicted on the taxpayers were:
  • City council members voting themselves some of the highest salaries in the nation, with prize petunia Robert Rizzo valuing himself at nearly $800,000 a year. Two things to note: this is twice what the President of the United States makes, and Bell is one of LA County's poorest cities.
  • Coordinating the submission of fraudulent absentee ballots in at least two city elections.
  • Police abuses, including massive pension fraud and targeting Latino residents for minor traffic infractions (often charging them huge fees to retrieve towed cars).
  • Shaking down local businesses.
  • Assessing illegal property tax rates and sewer fees.
Well, today is the day that Bell's residents get to vote on whether to recall these slimy bastards, and who they'll choose to replace them. The LA Times quotes one voter as follows: "Everything that's been going on with the scandals and all these little things that have been coming out, it just encouraged me to come out and make a difference -– see if we can vote for somebody better and improve the city".

While we obviously hope that today's votes are a step in turning Bell's fortunes around, we're not optimistic. Meaningful changes that begin at the ballot box are never changes for the better.

Monday, March 7, 2011

(Lack of) Food for Thought

While we're inherently skeptical of research involving vague metrics like "food hardship", we thought it was worth noting the release of this study from the Food Research and Action Center. The verdict for California? One in five residents surveyed reported not being able to afford enough food in the past year, with the highest such proportions found (unsurprisingly) in the Fresno area and the Inland Empire.

We're sure this has absolutely nothing to do with the state's overbearing environmental regulations and taxes, and their predictable effects on the ability of private businesses to operate successfully here. Just as we're sure it has nothing to do with the Federal Reserve's frantic efforts to destroy the American dollar.

Something to think about any time you're tempted to believe that politicians are better able to run your life than you are.

Sunday, March 6, 2011

What's that Analogy about Two Wolves and a Sheep Voting on What's for Dinner?

The cover story of Reason magazine's March issue is a lengthy write-up from Tim Cavanaugh regarding the pension and budget crises currently facing California. The first part of the piece is a fairly standard rehash of the situation, the type of story that could be written about half the states in the country: a multi-billion-dollar budget hole, high unemployment and recession, exploding public pension liabilities arising from years of foolish fiscal policy and bargaining, etc. What's interesting, though, is the section in which Cavanaugh describes ongoing reform efforts. Unlike reform plans in states like Ohio and Wisconsin, which have arisen from the anti-government sentiment associated with the Tea Party, the Californians leading the push are many of the same people who create the original mess.

The whole article, here, is worth reading, but for us this was the money quote:

[The current pension reform movement] is a revolt led by the supporters of big government. At every level, Californians want assertive government. Republican farmers demand cheap water and more than $2 billion a year in subsidies. Unionized TV and movie productions command incentives such as $500 million in tax credits. In popular referenda during the last five years, California voters have voted themselves nearly $100 billion in bonded debt. The acceptable question is no longer whether to spend but what to spend it on.

This is why the most aggressive lobbying for pension reform is coming not from fiscal conservatives but from progressives, who see the logarithmic cascade of pension liability as a threat to public parks, environmental programs, and rail transit.

For anyone disposed to taking the state's fiscal problems seriously, this has two troubling implications. First off, it should dispel any hope (however laughable that hope might be) that the state's Republicans intend to function as an opposition party representing the interests of the taxpayers. But it also suggests that any "solution" to the problem is unlikely to include spending cuts or measures to limit future spending. Ultimately, Democrats and other liberals in California view the state's excessive spending, taxation, and interference in private life as desirable, not problematic. To them, this is a question of figuring out where to forcibly extract the funds to pay for whatever vision of utopia they believe the government can create.

We will eagerly await a festival of schadenfreude upon seeing the public unions get fucked over good and proper. And one can dream that they'll learn from the experience that living by the sword doesn't always turn out well. But the article underscores, for us, the hopelessness of expecting California's problems to be solved through its electoral-politics machinery. The end to our fiscal woes and bloated government is far more likely to come through crisis. Probably one of the bankruptcy/municipal-debt-default variety.