I spoke at yet another Democratic Club meeting on the May 19 propositions yesterday, against yet another member of the California Legislature, Julia Brownley (who I really like and respect).  One thing I sought to make clear to everyone is that we are going back to the drawing board on May 20 no matter what happens on May 19.  The Legislative Analyst already finds the February budget deal to be $8 billion dollars out of balance, and April tx receipts came up $1.8 billion dollars short of the budget projection.  Some of us recognize that this means alternative solutions must be gathered right now, because Democratic legislators will be stuck in the chamber with the Yacht Party on May 20 regardless.

I was heartened to hear Assmeblywoman Brownley note that a majority vote fee increase will probably be part of the solution.  When the Legislature passed this in December, they raised more money than would be sacrificed if Props. 1C, 1D and 1E failed.  An argument could be made that the majority vote fee increase combined with the passage of those props would obviate the need for almost any cuts.  I think that’s faulty reasoning, since 1D and 1E ARE cuts, to vital services that will cost the state more money in the long run.  As for 1C I find it completely unworkable and just a borrowing gimmick.

I do have to say that it would be much easier to swallow this posturing from the ballot measure supporters that they would have no choice but massive cuts on May 20 if everything failed, if they didn’t enable massive permanent corporate tax cuts in the last budget deal…

Corporate tax attorneys are chuckling over the absurd deal in the last agreement that lets multistate and multinational taxpayers decide, each year, how much income they want to report to California. Because this was negotiated in private, with no hearings and no independent expertise brought to bear, the result is a giveaway and a national embarrassment, in a state that had prided itself on a fair, successful corporation tax.

Here’s how it works. Each state typically figures out what percentage of a large company’s business is done in the state, and then taxes that percentage of income. Historically, if 10% of a multistate company’s payroll, property and sales are located in the state, then 10% of its nationwide or worldwide income is subject to tax. In the budget deal, California changed the formula to allow companies to choose to make that percentage based only on sales in California.

…and if they didn’t protect the very corporate interests who are now bankrolling their ballot measures:

The entire architecture of the ballot pact that emerged was heavily shaped by leaders’ desire to please – or at least neutralize – the state’s most powerful political players.

Now, some of those very interest groups protected in the budget deal are bankrolling the campaign to ratify it.

For the oil industry, the package omits a once-proposed 9.9 percent oil severance tax. Energy companies have given more than a million dollars to pass the plan, led by a $500,000 donation from Chevron.

For the liquor, beer and wine industry, increased alcohol taxes were shelved. Alcohol industry heavyweights, such as E. & J. Gallo Winery ($100,000) and California’s Beer and Beverage Distributors ($50,000), have all opened their checkbooks.

For the teachers union, the list of ballot measures includes a separate measure to ensure repayment of deep cuts to schools and protections for top-priority programs. The California Teachers Association has contributed $7 million to the passage of Propositions 1A and 1B.

For casino-operating Indian tribes, the state lottery measure avoids any new games that could threaten their gambling operations. Tribes, who could have been major contributors against the lottery proposition, have kept their checkbooks closed.

In the last budget deal, all the industry-specific taxes, all the service-based taxes that wouldn’t be so regressive, faded away, and the same groups protected by that fade (including practically every sports team, as sporting event-industry taxes were once on the table) ponied up for the special election.  So pardon me if I don’t believe your lament that you’ll just be forced to cut state services, when you found room for billions in tax cuts to the largest corporations in America and protected every single industry that could donate money for ads and mailers.  Let’s just say I don’t buy the image of a legislature with their hands tied.

I don’t know the last time George Will has actually set foot in California, but his complete hash of a column about the state suggests he doesn’t know a thing about it.  Most of it is a rehash of the same tired, false conservative tropes – that job creators are fleeing the state (not, um, true), that state spending is out of control (not, um, true), that public employees and their unions are bankrupting the state (California has the second-lowest number of full-time government employees per capita among all states, so, wrong again, George).  But putting that aside, it is simply astonishing that anyone could write an entire column about California budget issues without bothering to mention the inconvenient fact of the 2/3 requirement for budgets and taxes.  Will’s notion that the Democratic legislature has made the state “liberalism’s laboratory” cannot be reconciled by the conservative veto over any tax hikes or budget solutions.  

Unsurprisingly, Will (who probably got paid handsomely by the Howard Jarvis Taxpayers Association to write this drivel) rejects the May 19 ballot measures, as do Calitics.  But he completely and totally misreads the issues facing the legislature, the structural constraints upon them, and the solutions necessary to move the state forward.  Showing himself to know nothing about California, maybe Will should stick to lying about climate change repeatedly.

The Yacht Party’s public relations staff scored a coup by getting one of their press releases into print about those mean, nasty legislators spending all our tax dollars.  Now, it turns out that some of the cost-cutting measures put forward by these Republicans have a bit of merit.  But it’s all a matter of scale.  These measures would produce savings in the millions of dollars, which is a lot to the individual blogger who really welcomes your donations (hint, hint), but not so much to a nation-state of 38 million.  However, missing from the litany in this article is any measure that would actually put a dent in the budget crisis, like a broader-based sales tax that captures what people consume.  AB178, which was also squashed this week, could have added anything from $2 billion-$5 billion to the General Fund.  In other words, it would take more than 1,000 bills of the likes of Jeff Denham’s AB44, to abolish the Integrated Waste Management Board, to have the impact of Nancy Skinner’s AB178.  But million and billion sound alike, so the Waste Management Board bill gets in the paper, while the squashing of the bill that would raise almost as much as Prop. 1C all by itself gets… nothing.

More of the essentially conservative slant of the media.

Arnold Schwarzenegger will not support a Democrat.  He never has since he became Governor, and he never will.  He said he could support Dianne Feinstein for Senate in 2006, and didn’t.  He said he could support Jerry Brown for Attorney General in 2006, and didn’t.  He markets an image of post-partisanship that the national media swallows whole.  Republicans hate him, because they believe that crap, but Democrats are too smart to buy it, so they hate him too.

Please stop this.

Thanks.

In 2007-08, I wrote a monthly series of House race roundups here in California, taking a look at the races with the highest potential to change members of Congress.  This cycle, there are promises from the national Democrats that they will pay attention to a number of seats in California held by Republicans, and with the statewide races at the top of the ticket looking favorable for Democrats, and Republican registration collapsing throughout the state, in theory we should see some more movement.  But many of these elements were true the past two cycles, amounting to little.  Because it’s a statewide officer election year, I will also do a statewide races roundup at a later time.  But for now, let’s take a look at the seats most likely to flip in 2010, starting with seats currently held by Democrats, few of which are in play.  In addition to those “threatened” by Republicans, I’m including two seats where I’ve heard rumblings about primary challenges to incumbents.

A word on the notations.  PVI refers to the Cook Political Report’s Partisan Voting Index.  I’ve also included the Presidential performance from last year and the particular Congressional performance, where applicable.  That information is available for the whole nation at this link.

flip it…

DEMOCRATIC-HELD SEATS

1. CA-11. Incumbent: Jerry McNerney. PVI: R+1. 2008 General: Obama 54-44. 2008 Congress: McNerney 55-45.  I keep seeing this seat on Republican target lists, and the NRCC has dropped robocalls in this district, but I really think the Republicans would be wasting their money.  Jerry McNerney actually slightly outperformed Barack Obama in the district in beating the hapless Dean Andal.  Andal won’t bother with a challenge this time around, and while former Assemblyman Guy Houston has been mentioned as a candidate, I think McNerney has solidified his position and raised enough money to scare off any challengers.  SAFE DEM.

2. CA-36. Incumbent: Jane Harman. PVI: D+12. 2008 General: Obama 64-34. 2008 Congress: Harman 69-31.  The recent Jane Harman scandals, documented here at Calitics, are really not the only reason she is seen as ripe for a primary challenge: there is an impression in the district that she may retire, with local electeds licking their chops.  But if she does run, she will have challengers.  Marcy Winograd, who got 38% of the vote in a 2006 primary with Harman, has announced an exploratory committee.  And Crooks and Liars blogger John Amato, advancing a story in The Hill, has emerged to say he’s considering a run.  I talked to John last night and he appears to be serious.  Harman has more money than God, and if she truly wants to stay in Congress she won’t mind spending it, so this is a long shot.  But national progressive groups think that CA-36 can do better than “the best Republican in the Democratic Party.”  The question is whether local activists will agree; I’m not sure they’re quite there yet.  SAFE DEM; LIKELY SAFE HARMAN.

3. CA-37. Incumbent: Laura Richardson. PVI: D+26. 2008 General: Obama 80-19. 2008 Congress: Richardson 75-25.  If progressives really want to find a bad, vulnerable incumbent, they could look directly to the east of Jane Harman’s district.  Laura Richardson is a bad lawmaker, who voted for the FISA Amendments Act and other conservative pieces of legislation.  What’s more, she’s an embarrassment to the district, having defaulted on eight houses since 2004 and, reportedly, having used her position in Congress to rescind the sale of her foreclosed home and return it to her.  Her monetary acumen extends to her campaign finances.  Unlike most incumbents, Richardson is currently $300,000 in debt in her campaign account.  This seat is ripe for a young, fresh progressive who has a cleaner record and a better commitment to the district’s needs.  Nobody has yet emerged, but they should.  SAFE DEM; LIKELY SAFE RICHARDSON.

REPUBLICAN-HELD SEATS

1. CA-44. Incumbent: Ken Calvert. PVI: R+6. 2008 General: Obama 49.5-48.6. 2008 Congress: Calvert 51-49.  Bill Hedrick shocked the political world by almost beating corrupt Rep. Ken Calvert in a race that fell off of everyone’s radar screen.  Hedrick just announced that he’s running again to finish the job, and I had a chance to chat with him at the CDP Convention in Sacramento.  He said that “something is occurring in the Inland Empire” – a combination of the bad economy, demographic shifts and a general distaste for Republicans – that bodes well for his campaign.  Hedrick actually won by 5% in the Riverside County portion of the district, which is where more voters reside; but he lost the southern Orange County portion by a healthy margin.  The registration figures in the OC part of the district is 90%; in Riverside, it’s 50%.  Clearly there is potential to increase registration in Riverside and overwhelm Calvert with numbers.  Hedrick is a solid antiwar progressive, who supports a modern Pecora Commission to investigate the financial crisis, real refinancing options for people facing foreclosure, robust stimulus to get the economy moving again, and an end to American occupations abroad (he has two sons and two daughters-in-law who, between them, have 10 tours of duty in Iraq and Afghanistan).  Clearly he’s going to run on Calvert’s support of TARP, which should be interesting.  The fear is that Hedrick won’t have the funds to compete.  He raised only $150,000 total last cycle, and with this race now on the radar screen, he’ll need to do better.  But Hedrick appears to have a plan for expanding the donor base and using his army of volunteers to make up the gap and beat Ken Calvert in 2010.  LEAN REP.

2. CA-03. Incumbent: Dan Lungren. PVI: R+6. 2008 General: Obama 49.3-48.8. 2008 Congress: Lungren 49-44.  This is a ripe opportunity in search of a Democratic candidate.  In 2008 Bill Durston held Dan Lungren under 50% in a campaign that only got the attention it deserved at the last minute.  Demographically speaking, more and more people in the district have registered Democratic in recent years, and if Durston was running again, he would be a top challenger.  Unfortunately, Durston is unlikely to run owing to medical issues.  Actvisits have tried to entice John Garamendi into abandoning his CA-10 bid and run in this district, where he’s actually one of the largest landowners.  But that also appears unlikely.  It should be noted that there is an announced candidate here, Dr. Amerish Bera.  But the hot rumor at the Convention was that Phil Angelides would enter the race, making it a matchup of former statewide gubernatorial candidates.  I later heard that rumor was probably bunk.  But this should happen!  Angelides, who has become an evangelist on energy and climate issues, has a huge donor list he could activate, a progressive policy profile, and actually matured as a candidate (not that you would know it from the media) in 2006.  He would bring name ID to this race like nobody else.  It’s time to draft Phil.  LEAN REP.

3. CA-50. Incumbent: Brian Bilbray. PVI: R+3. 2008 General: Obama 51-47. 2008 Congress: Bilbray 50-45.  As you can see, Obama took this district by a decent margin, and Bilbray barely hit 50%.  Francine Busby, who ran in 2004 and 2006 and then took a cycle off, has returned to run for Congress, and she had a bit of visibility at the Convention.  Busby has OK name ID, but this district has always seemed to me to have a ceiling for the Democratic candidate around 45%.  I’m happy to be wrong, of course, and hopefully Busby has learned from her past races and is able to break through.  Of course, Bilbray is sure to resurrect the “You don’t need papers for voting” comment that hurt her in a special election in 2006 (which was twisted by the right, incidentally).  LIKELY REP.

4. CA-26. Incumbent: David Dreier. PVI: R+3.  2008 General: Obama 51-47. 2008 Congress: Dreier 53-40.  The profile of CA-50 and CA-26 are similar.  And in both, a Democratic challenger will take a third run at the incumbent.  Russ Warner announced at the Red to Blue dinner that he will run again and build on his efforts against David Dreier in 2008.  In a conversation with Warner, he told me about meeting David Dreier a few weeks ago for the first time.  Dreier asked him, “Are you running against me again?”  Warner replied, “You ran against me, David.”  Dreier said, “But you lost.”  Warner: “Oh yeah?  You’re the one who spent $3 million dollars.  Who lost?”  Indeed, Warner did succeed in draining Dreier’s war chest.  Unlike last cycle, Dreier comes into the race with only $700,000 cash on hand.  Obviously these seats require two or three-cycle efforts, so it’s good to see Warner back.  And with national help, who knows?  LIKELY REP.

5. CA-48. Incumbent: John Campbell. PVI: R+8. 2008 General: Obama 49.3-48.6. 2008 Congress: Campbell 56-41.  John Campbell, who by the way loves him some Atlas Shrugged, is kind of a nonentity in Congress, and apparently doesn’t show himself much at home either.  Steve Young has done yeoman work building the party in this area in recent years.  And now, Beth Krom, an Irvine City Councilwoman, will run to win this seat.  Krom is battle-tested – she’s had 5 races over the last decade – and she has capably performed in the largest city in the district.  Krom actually outraised John Campbell in the first quarter of 2009, and she looks to build on that success.  We had a nice interaction with Krom at the CDP Convention, and she led off with a classic line: “This district has the largest cluster of diverse cultures in Orange County, it’s 30% Asian and East Indian, and John Campbell has never spoken to somebody who doesn’t look like him.”  She talked about her affordable housing strategies in Irvine, and the green strategies that have won national acclaim.  Folks in Orange County told me she’s the best candidate they’ve had to go up against a Republican incumbent in years.  Watch this race.  LIKELY REP.

6. CA-45. Incumbent: Mary Bono Mack. PVI: R+3. 2008 General: Obama 51-47. 2008 Congress: Bono Mack 58-42.  I thought Julie Bornstein really underperformed in this district in 2008, but Mary Bono Mack is kind of a slippery character.  She always adds enough votes to her resume to give the appearance of moderation (sometimes by voting for right-wing motions to recommit and then voting for the final bill so it looks like she’s a supporter), and given that she’s married to a Floridian and lives in Washington, she rarely comes back to the district.  This time around, Palm Springs Mayor Steve Pougnet, a gay father of two, has announced a run, and he will focus on “jobs, jobs, jobs.”  This area shares the profile of a lot of California, with high unemployment and lots of foreclosures.  Pougnet’s challenge will be to actually get Bono Mack on the record.  LIKELY REP.

7. CA-46. Incumbent: Dana Rohrabacher. PVI: R+6. 2008 General: McCain 50-48. 2008 Congress: Rohrabacher 53-43.  Dana Rohrabacher remains crazy, but he managed to survive a major challenge from Debbie Cook in 2008.  Cook has shown no indication that she will run again, and because this seat is not one of the eight “Obama Republican” races that national Democrats have targeted, it is unlikely they will offer much in recruitment if Cook looks elsewhere.  Still, if Cook does change her mind, this race would move back onto the radar screen.  SAFE REP.

8. CA-04. Incumbent: Tom McClintock. PVI: R+10. 2008 General: McCain 54-44. 2008 Congress: McClintock 50.3-49.7.  Obviously the chances in this race rise or fall on the entry of Charlie Brown into the race.  Brown was in attendance at the CDP Convention, and he publicly mulled a run at an event with Gavin Newsom in Placer County recently.  So he hasn’t closed his mind to the option.  Meanwhile, McClintock has been as obstructionist and nutty as you’d expect.  I particularly enjoyed his Baghdad Bob claim that California didn’t have a water shortage.  Locally, sources tell me that McClintock is not well-liked by his fellow Republican electeds, who aren’t getting their phone calls returned.  But it all hinges on Brown.  SAFE REP.

9. CA-24. Incumbent: Elton Gallegly. PVI: R+4. 2008 General: Obama 51-48.  2008 Congress: Gallegly 58-42. This seat has been trending to the Democrats for some time, but the right candidate to challenge Elton Gallegly has yet to emerge.  Last year Marta Jorgensen raised very little in her race and still took 42%.  Gallegly is always a threat to retire – he actually did it in 2006 before being coaxed back – so that option remains as well.  Small businessman Shawn Stern has announced so far.  SAFE REP.

10. CA-25. Incumbent: Buck McKeon. PVI: R+6. 2008 General: Obama 49-48.  2008 Congress: McKeon 58-42. Much like CA-24, this expansive district his been trending Democratic.  In fact, no seat has a closer registration gap that’s currently held by a Republican.  But the Democratic Party infrastructure just seems to be lacking out here.  Jackie Conaway raised I think $10,000 total for her entire race last year.  She still managed 42% of the vote against Buck McKeon.  There is certainly a profile of a Democratic candidate that could attract serious votes out here.  But that person does not yet exist.  Meanwhile, McKeon thinks Barack Obama broke into his house, or something.  SAFE REP.

Riffing off of Brian’s post referencing the horror show of a Field Poll, where Californians polled apparently think we can balance the budget through spending cuts but don’t want to cut anything (a sort-of companion PPIC poll basically shows the same thing, with respect to nobody wanting education cuts but nobody wanting to pay for increases), this should be a very familiar outlook to people.  It’s at the heart of the two Santa Claus theory, proposed by Jude Wanniski, a Republican economist, during the time of Ronald Reagan.  

By 1974, Jude Wanniski had had enough. The Democrats got to play Santa Claus when they passed out Social Security and Unemployment checks – both programs of the New Deal – as well as when their “big government” projects like roads, bridges, and highways were built giving a healthy union paycheck to construction workers. They kept raising taxes on businesses and rich people to pay for things, which didn’t seem to have much effect at all on working people (wages were steadily going up, in fact), and that made them seem like a party of Robin Hoods, taking from the rich to fund programs for the poor and the working class. Americans loved it. And every time Republicans railed against these programs, they lost elections […]

Wanniski decided to turn the classical world of economics – which had operated on this simple demand-driven equation for seven thousand years – on its head. In 1974 he invented a new phrase – “supply side economics” – and suggested that the reason economies grew wasn’t because people had money and wanted to buy things with it but, instead, because things were available for sale, thus tantalizing people to part with their money. The more things there were, the faster the economy would grow.

At the same time, Arthur Laffer was taking that equation a step further. Not only was supply-side a rational concept, Laffer suggested, but as taxes went down, revenue to the government would go up!

Neither concept made any sense – and time has proven both to be colossal idiocies – but together they offered the Republican Party a way out of the wilderness […]

Democrats, (Wanniski) said, had been able to be “Santa Clauses” by giving people things from the largesse of the federal government. Republicans could do that, too – spending could actually increase. Plus, Republicans could be double Santa Clauses by cutting people’s taxes! For working people it would only be a small token – a few hundred dollars a year on average – but would be heavily marketed. And for the rich it would amount to hundreds of billions of dollars in tax cuts. The rich, in turn, would use that money to import or build more stuff to market, thus increasing supply and stimulating the economy. And that growth in the economy would mean that the people still paying taxes would pay more because they were earning more.

There was no way, Wanniski said, that the Democrats could ever win again. They’d have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections.

In the intervening 35 years, we have had no progressive leader in California, no Democratic leader, challenge that ridiculous theory in any meaningful way.  Instead, over and over again, Democrats must lead the charge killing off the two Santa Clauses, filling budget deficits by raising taxes or cutting spending, frequently the latter.  And while other factors have contributed to Democratic dominance in recent years, the ideological theories of Santa Claus conservatism remain.  And Democrats and Republicans alike have ingrained them into their lizard brains, either by believing in them, or believing that everyone else believes in them and there’s no way to change that.

In truth, public opinion, particularly in such a low-information state like California, is quite malleable.  But nobody has bothered to discredit the Two Santa Claus theory, the idea that we can have all the services we need and the lowest taxes possible.  Of course, the insidious dynamic of the two-thirds rule, putting Democrats both nominally in power but subject to a conservative veto, has made a Democratic message impossible, so constrained it is by the straitjacket of an ungovernable system.

Now, the out for the believers in two Santa Clauses is that government can just do more with the money they have, through better efficiency.  Nobody would argue that government is perfectly efficient – I don’t see anyone leaping to defend spending $580,000 on unused office space – but the savings from that efficiency exist on the margins, and would do little to really impact our woefully low per capita state spending on areas like K-12 education.  So we get bullshitty ideas like cutting lawmaker pay (the Governor jumped all over that one), or trashing the state’s Waste Management Board, which has become a waystation for termed-out legislators to pull in a nice salary.  These “efficiency” maneuvers would do absolutely nothing relative to the budget deficit.  And the areas that would make a dent, like a broader-based sales tax that catches everything we consume, if off-limits because of special interest lobbying:

The declining “yield” of the state’s sales tax is one cause of California’s ongoing budget deficits. Since 1960, the revenue raised by each one percent state sales tax rate has fallen by about one-third. The reasons for the decline are two-fold. First, consumers now spend a larger share of their incomes on services, which are largely untaxed, rather than goods, which are subject to the state’s sales tax. The second reason is the rise of internet sales, including purchases from out-of-state retailers, that don’t collect the tax on sales made to California consumers. Estimates suggest that California loses $2 billion to $5 billion per year from untaxed internet sales – enough to make a significant and lasting dent in the state’s chronic budget woes.

In light of this fact, one might think that a bill that attempts to narrow a loophole that provides preferential treatment for businesses located entirely outside of California would be a “no brainer.” Unfortunately, this appears not to be the case. Assemblymember Nancy Skinner’s AB 178 is similar to a recently enacted New York law, would require businesses such as Amazon.com that enter into “affiliate” relationships with California-based entities to collect California sales tax.

At a time when California faces significant budget shortfalls and California retailers face declining sales, you’d think a bill that makes it possible for the state to actually collect taxes that are legally owed and that limits an incentive for Californians to buy from businesses that don’t employ a single Californian would be greeted with open arms. Unfortunately, opposition from tech industry lobbyists has left the measure’s future in question.

Ultimately, we have a serious problem.  Our citizens get almost no public policy information from media, our state capitol is too often run by corporate interests, our Democratic leadership cowers from advocacy to disabuse citizens of false notions, and our Yacht Party is completely crazy.  This is not insurmountable but requires leadership.  We elected a President by 61% of the vote in California who was derided as a socialist.  Attitudes can be changed.  But someone has to stand up and speak.