For three years now California has embraced austerity budgets. As a result, we have record unemployment, a persistent and deep budget deficit, and have been slashing vital public services that will take years to fix, and risk the creation of much deeper social and economic problems. On those merits alone, budget cuts have been proven a failure.

But now we are seeing some of the most dangerous – literally – effects of the austerity mania. Because local governments have been hit by a double-whammy of lost tax revenues thanks to the recession, and state theft of other funds, many cities are having to make huge cuts to services. Closed libraries are bad enough. Laying off police officers is much worse.

But that’s what several California cities are now doing – including cities hard hit by crime. Oakland recently voted to layoff 80 police officers – unless the officers agree to pension cuts. Some might argue the answer is to slash pension benefits, but that’s not a wise recruitment policy for a police force working in one of California’s most dangerous cities. Cutting benefits and wages is likely to make it harder to attract and keep good police officers.

Even if it were accomplished, it’s only a short-term solution. As it looks like we’re entering the Third Depression, local budgets are likely to be under constant pressure for some time to come. Unless police and fire wages are going to be halved, or pensions eliminated, cities will eventually have to turn to layoffs or new taxes.

Some cities have already won concessions from police and fire departments, and found it’s still not enough to close the deficit. Salinas has been facing a gang war for several years now, with dozens of homicides each year. It is a city racked by unemployment and violence, with the gang warfare rightly seen as a major crisis threatening the city’s future.

Despite this crisis, the city faces a deficit, and after making an initial round of deep cuts to city services and getting concessions from workers, Salinas is going to lay off 1/3 of its anti-gang task force:

Plenty of what the Salinas Police Department’s Violence Suppression Unit does goes unnoticed by law-abiding residents – and that’s the way the city’s gang task force prefers it.

But this summer, those residents may notice something unwanted: a rise in the kinds of crimes the unit fights against.

On June 15, police Chief Louis Fetherolf announced that the unit will lose six of its 16 officers to help the city stave off a $12.4 million deficit for the 2010-11 fiscal year.

This is simply insane. Salinas voters were warned this would happen, but they voted to reject a sales tax measure last November anyway, claiming that there was “waste” in city government that meant the deficit could be closed without impacting public safety. There’s an element of race to that argument, as it was mostly Salinas’s white community arguing against the sales tax, with Salinas’s Latino community arguing in favor of it on public safety grounds.

Yet the public safety cuts will happen in Salinas, as they are elsewhere in the state, because some people remain convinced that less government is better for the economy and for the public. Others believe that public workers are to blame for these problems, and that if we reduce them to poverty wages, they’ll somehow keep us safe anyway.

As I’ve argued, most Californians reject this thinking. Most local tax measures did pass on the November 2009 ballot, with Salinas being one of the few (along with Ventura) that did not. But the belief that cuts are good, that doing things on the cheap is somehow doing them better, is just persistent enough to cause the problems that we see in Salinas and Oakland.

Both cities will eventually turn to a new tax to properly fund their operations, and voters will eventually approve it. But it shouldn’t have to come to that. Sacramento needs to reject austerity, reject Hooverism, and find the new revenues that are needed to provide the robust level of public services that are required to produce economic recovery.

UPDATE: Oh, and today the US Supreme Court ruled that the Second Amendment applies to state and local governments too, opening the door for a wholesale evisceration of California’s gun control laws.

Less gun control + less police + budget austerity = one long, nasty, violent decade for some of California’s most troubled cities.

Here at Calitics I’ve been charting the many ways in which Californians reject spending cuts. The May 2010 PPIC poll showed large majorities supported new taxes in order to prevent cuts to public schools and health and human services programs.

Voters then went out and backed up that opposition to cuts by approving 3 out of every 4 tax measures on the June 8 ballot.

Public opposition to cuts is so strong that it requires significant political manipulation to force them through. That is the essence of the “shock doctrine”, the label Naomi Klein gave to the last 30 years of neoliberal economic policy, aimed at the transfer of wealth away from working people and toward a small elite. Klein explained this was only possible through the taking advantage of a crisis, a crisis usually manufactured by those same neoliberals. As she explained it to Democracy Now!:

The shock doctrine, like all doctrines, is a philosophy of power. It’s a philosophy about how to achieve your political and economic goals. And this is a philosophy that holds that the best way, the best time, to push through radical free-market ideas is in the aftermath of a major shock. Now, that shock could be an economic meltdown. It could be a natural disaster.

The reason that an economic crisis works is because only the “shock” of the crisis enables political power to overcome deep and strong public resistance to the implementation of that agenda. Californians absolutely do not want to see their school budgets cut, but it happens because Californians are told we have to make these cuts or else face fiscal ruin.

Even then, Californians reject these arguments – and they do so even in forums designed to impose a misleading and dishonest agenda of massive cuts to the safety net. That’s what Calitics alum David Dayen found yesterday when he visited the Pasadena meeting of the nationwide “America Speaks” event. Funded by Pete Peterson, who for decades has been trying to make massive and devastating cuts to Social Security and Medicare, America Speaks was intended to gin up public concern about the budget and manufacture consent for cutting those core programs. But as Dayen found, many people in attendance weren’t buying it:

While the cumulative effect of all this tends towards social safety net cuts rather than tax fairness, the crowd in Los Angeles, at least, wasn’t biting at first. In surveying the discussion groups, most people seemed more concerned about the desperate need for more stimulus spending to move the economic recovery forward. They feared a double dip recession without job creation, and fretted about the lack of unemployment insurance extensions to help the less fortunate. “No one is talking about the long-term unemployed,” said one participant. In a nationwide poll, taken by participants through electronic devices at all 19 America Speaks sites, 61% said the government needed to do more to strengthen the recovery, with only 25% opposed. Even with a push poll question asking if participants supported government programs to increase growth “if it increases the deficit,” got a majority, 51%, of the group.

The public instinctively rejects deficit concern trolling, and feels an immediate revulsion to the notion that core public services ought to be cut. Instead they quite clearly preferred progressive solutions that favored economic recovery, rejecting claims that we have to cut spending and worry about the deficit instead:

During the discussions about the long-term budget challenges, there was a greater tendency from the participants to place a greater burden for deficit reduction on those with the ability and capacity to do so. Among the anti-corporate sentiment, someone mentioned that Exxon paid $0 in federal taxes last year. During the scare film about the budget, a few people screamed “Wrong!” when it was suggested that defense makes up 20% of the total budget (that doesn’t include spending on wars). Lastly, people thought that the wealthy weren’t paying their fair share for the commons. Someone mentioned the carried interest loophole, allowing money managers to treat their income as capital gains instead of income, drastically lowering their tax rate. One of those money managers is Pete Peterson, the funder of America Speaks.

Nationwide, the results appear to have been the same. Despite the efforts of the America Speaks organizers to push and manipulate attendees to support right-wing solutions, the results instead showed strong support for progressive solutions to whatever problems Social Security and Medicare might have. From America Speaks’s very own news release:

Reforms that were preferred by participants at the National Town Meeting included options that:

   * Raise the limit on taxable earnings so it covers 90% of total earnings.

   * Reduce spending on health care and non-defense discretionary spending by at least 5%.

   * Raise tax rates on corporate income and those earning more than $1 million.

   * Raise the age for receiving full Social Security benefits to 69.

   * Reduce defense spending by 10% – 15%.

   * Create a carbon and securities-transaction tax.

Most of these are extremely progressive solutions. Given the overwhelming bias of the event toward regressive solutions, it’s no surprise that two of them – cutting spending on health care/non-defense spending, and raising the retirement age – made it onto the list. But it’s obvious that the list is full of very deeply progressive revenue solutions that Americans, including Californians, very clearly want.

I’m fairly confident even the two regressive solutions on the list could be dealt with. Health care costs would be lowered overall with a single-payer system, even though the nominal amount that government spends on it would go up. And it shouldn’t be difficult to argue against raising the retirement age – we don’t have enough jobs to go around as it is, so once people hit their 60’s, it’s time for them to retire and leave the workforce.

Overall the event reinforces the obvious: Californians do not want spending cuts. They want their public services to be protected. It’s a message Sacramento needs to hear loud and clear over the next few weeks as they hammer out a budget deal – a budget that could finally embrace “economic recovery” (a phrase that is forbidden to be uttered in Sacramento) or a budget that would merely repeat the failures of the last few budget cycles and prolong California’s recession in the name of austerity.

Earlier today Brian linked to Meg Whitman’s new attack ad targeting Jerry Brown. The ad calls Brown a failure, blaming him for the budget and economic crisis of the early 1980s, mocking him for losing the 1982 US Senate election (which they incorrectly give as being in 1989 in a fake headline) and losing the 1992 Democratic presidential primary, and blaming him for Oakland’s ongoing problems.

Much of these attacks are flawed history. Joe Mathews examines these misleading claims and concludes Whitman should pull the ad:

I want to focus on one particular crime against history that Whitman commits here.

In this ad and in campaign material, Whitman says that Brown’s big spending during his previous two terms as governor (1975 – 1983) was a failure because “his big spending turns a surplus into a billion dollar deficit.”

That’s true — but only in the same way that whoever happened to be mayor of Hiroshima in 1945 might be attacked in future campaigns for “turning a nice Japanese city into a radioactive graveyard.”

The nuclear bomb responsible for turning the Brown surplus into a deficit during his time as governor was called Prop 13. Yes, that’s right–the same Prop 13, the 1978 initiative, that Whitman says she will protect 100 percent. So, by the standards of evidence and argument employed by the Whitman campaign, one would have every right to argue that Whitman, in this ad, is saying that Prop 13 was a mistake.

When Prop 13 passed, local governments no longer had the ability to fund themselves and programs. So the state, which was running a big surplus under Brown, stepped in to bail them out.

If you had read my new article on Jerry Brown’s terms as governor you’d know the truth about these issues. Basically, Jerry Brown took office in January 1975 amid a severe recession caused by the oil crisis. He immediately imposed budget austerity and hoarded a billion-dollar surplus, especially as the late 1970s economic recovery went underway.

But he was unable to deflect the right-wing attack on state government, largely because he refused to ally with liberals to fix property taxes. And so Prop 13 was put on the ballot by Howard Jarvis and Paul Gann as a massive right-wing attack on public services and economic prosperity, using the cover of property taxes and convincing people that a state with a billion dollar surplus could afford a big property tax cut.

Brown’s response to Prop 13’s passage was to spend down the surplus to prevent a collapse of local government and public schools. 30 years later, that collapse is now here, but Brown did succeed in staving it off for a few decades. As a result, California did not become Michigan or Mississippi. Many of us, myself included, owe our education and what economic security we now possess to Jerry Brown’s response to Prop 13, namely his decision to use state funds to save local government and schools.

That’s not to say that Brown handled the whole late 1970s moment well. He didn’t, as my article made clear. But he deserves credit for ensuring California didn’t collapse.

That credit is especially important given the economic situation. Whitman blames Brown for the ugly recession of the early 1980s, but in fact the recession was caused by three people in Washington DC – Jimmy Carter, Paul Volcker, and Ronald Reagan, all of whom embraced neoliberal economic policies that produced a massive and deep recession by 1981 in order to deal with inflation.

California, like the rest of the United States, has never really recovered from that recession. We’ve used successive waves of debt-fueled asset bubbles to generate new jobs, but every time it winds up collapsing. Jerry Brown didn’t help the state avoid that boom-and-bust cycle. But neither did he create it. And his work in preserving public services in the wake of Prop 13 did provide at least another generation of some semblance of economic prosperity.

Whitman doesn’t want people to know these facts – hence her misleading ad. I’ll strongly second Joe Mathews’s call for Whitman to pull the ad. She may be spending $91 million so far on her campaign, but we can at least demand she spend it on honest ads, and not on rewriting history.

I’m not a nationalist or a jingoist, so it’s not on those terms that I object to a Russian billionaire helping keep Fort Ross State Park open. It makes sense from the Russian perspective, as Fort Ross represents their furthest penetration down the North American coast in the early 19th century.

But it is further evidence of totally misplaced priorities in California, where we turn to a billionaire to keep a historic site open to the public, something we can and should be able to do for ourselves:

Viktor Vekselberg, the billionaire president of the Renova Group of companies, a major Russian firm, signed an agreement Tuesday night in San Francisco with Gov. Arnold Schwarzenegger to provide “substantial financial support” to keep Fort Ross open and to provide “a long-standing solution” to Fort Ross’ budgetary difficulties.

The agreement is supported at the highest levels of the Russian government. Vekselberg accompanied Russian President Dmitry Medvedev to the Bay Area on Tuesday to foster ties between U.S. and Russian high-tech businesses.

What’s next – is Monterey going to have to turn to Carlos Slim to keep open our historic adobes and other sites that date to the Mexican era? What about our beautiful state parks – are we going to start auctioning them off to the highest bidder?

This whole situation is just further evidence of the need to pass the state parks initiative on the November ballot. Originally conceived by John Laird, it will provide a small increase in the vehicle license fee to fully fund our parks, reduce the enormous maintenance backlog, and allow any Californian with a registered vehicle to access our parks for free.

Californians can and should be able to maintain our state parks and historic sites in perpetuity. The fact that Arnold Schwarzenegger turned to a Russian billionaire is a major embarrassment for the state of California and should cause us all to hang our heads in shame – at least until the state parks initiative passes in November.

We’re starting to get a better picture of what will and will not be on the November 2010 ballot. Back on New Year’s Day I thought we might be facing a “ballot initiative thunderdome” but now it looks like it’ll be a bit less of a Hobbesian war of all against all come November.

Here’s what has already qualified, according to Secretary of State Debra Bowen’s office:

• $11 billion water bond

• Cannabis legalization

• Extending Prop 11 commission to redistrict Congressional seats

• State parks funding initiative

• And as of today, an initiative to finally ban state raids on local government funding.

(Unfortunately, the sequence of qualification means cannabis legalization won’t be Prop 20, unless the Legislature itself puts one more initiative on the November ballot.)

Several initiatives are pending signature verification:

• Majority vote budget

• Closing recent corporate tax loopholes

• Extends 2/3 rule to cover fees

• Eliminates Prop 11 commission

• Dirty Energy Proposition (AB 32 repeal)

Assuming these qualify, and the deadline is later this week, that would mean at least 10 initiatives for the November ballot, double the number we had in June. Four of them would involve different sides of the same issue – one initiative would roll back the 2/3 rule (for budgets), another would extend it to fees. One would eliminate the Prop 11 commission, another would extend its purview to Congressional races too.

Some initiatives we thought might be on the November ballot aren’t going to be there. One of these is the parental notification initiative – perhaps after 3 consecutive defeats the anti-choice, anti-woman forces are finally having trouble getting people to take them seriously.

Another one that didn’t make it is the term limits extension initiative.

And of course, other high-profile reform efforts appear to have stalled out for 2010, including the constitutional convention and the California Forward reform package.

It’s always possible that, as in 2009, the final budget deal will include reforms or constitutional changes that need to be approved by voters, so we could see a couple more initiatives for November.

But overall, the ballot initiatives will continue the theme of corporations trying to rewrite state law for their own benefit (water bond and dirty energy prop) from the June 8 election. It will also give voters very clear choices on how to proceed with reforming our state government, and will finally start the process of rolling back our ridiculous and costly “law and order” policies with cannabis legalization.

It should certainly be an interesting battle on November 2.

Like any centrist pundit, George Skelton runs hot and cold. Sometimes he gives too much credit to the right-wing and their ideas, but other times he cannot resist the need to debunk myths with facts. In his column in Monday’s LA Times, we get Skelton the debunker, showing that the attack on public workers is not going to produce any meaningful budget savings:

Based on my e-mail, many people believe that the way for Sacramento to make ends meet is to cut state employees’ salaries by, say, 10%. Well, in the last year, most have been cut by 14% through furloughs. And the state still has a $19-billion projected deficit.

For the fiscal year starting July 1, Gov. Arnold Schwarzenegger is proposing to cut salaries by 5%, require workers to contribute an additional 5% of pay to retirement and cut the workforce by 5%. That would save a mere $1.8 billion.

Even if Schwarzenegger could fire every state employee under his control – roughly 230,000 – it still wouldn’t balance the books.

Skelton mentions that over 70% of the state budget goes to local governments and schools, which is a result of the backfilling of lost local revenues when Prop 13 passed. While some critics may be thinking of unnamed bureaucrats working in a Sacramento office, the most common state worker is a teacher, a nurse, a police officer, a firefighter. Those are people whose pensions are in the crosshairs.

And what of those pensions? As Skelton proves, they’re a drop in the bucket:

And those pension costs? The governor has budgeted $3.8 billion in state contributions for the next fiscal year. But only $2.1 billion of that would burden the bleeding $83-billion general fund. The rest would come from self-sustaining special funds.

So even if employee pensions didn’t cost the state a cent – an impossibility – the savings would fill only 11% of the general fund deficit hole.

OK, but what about the favorable pension deals made in 1999? The governor’s recent pension pacts roll back those deals for the unions that agreed to the governor’s pact. But how much does that help the budget?

But the grand savings? All of $72 million a year. And only $43 million of that helps the general fund.

Skelton’s mythbusting of the “pensions are the problem” argument is truly epic. He deserves a ton of credit for writing it. But even though he has destroyed the myth that pension costs are behind the state budget deficit – a deficit caused instead by 30 years of artificially low tax rates and the worst recession in 60 years – I don’t expect facts to slow down the desire to attack public workers.

Some of that is due to the right-wing’s interest in using this crisis to gut government services, and break the politically powerful unions that have played such a key role in preserving Democratic power in California.

But there are other factors at work. Joe Mathews, who as far as I know isn’t an anti-union ideologue, gets at some of these other factors in his response to my Sunday article:

Cruickshank’s piece also frames the pension argument in an interesting way — a way that we don’t hear enough about. Like many people on California’s pro-labor left, he sees public pensions not as a cost but as an opportunity–a standard that can be used to push private sector wages and retirement benefits up so that more people join the middle class. To this way of thinking, the business community’s attack on pensions isn’t about protecting taxpayers — it’s about keeping private sector wages and benefits lower.

This is a good summation of my views. And history bears this out. It’s the same approach that FDR took to dealing with the Great Depression, which pulled the nation out of the doldrums and restored some growth before a hasty and ill-advised return to austerity in 1937 crashed the economy. Ultimately, these kind of wage-growing and job-creating policies produced the basis of the prosperity enjoyed for nearly 30 years after the end of World War II.

Mathews goes on:

I think there’s at least a grain of truth in that perspective. But to my (admittedly middle of the road) ears, it sounds a bit too much like an irresponsible liberal answer (we can’t cut spending because it hurts the economy) to the conservative mantra (tax hikes are always bad because they hurt the economy).

This is because what I’m saying swims against the tide of 30 years of economic discourse that has now become thoroughly obsolete.

Many pundits are too busy fighting the last war. By the end of the 1970s, it became accepted wisdom that the problem was the liberal state created in the New Deal had grown too large, was taxing too much and spending too much. The way out of the era’s stagflation, it was said, was to remove the waste and excess. “Small is beautiful” – or as Jerry Brown put it in 1976, “I’m not conservative, I’m cheap.” Americans came to believe that the answer to an economic crisis was to spend less, and that would produce restored growth.

It’s debatable if this was ever really true. As we know, the US economy never actually recovered from the early 1980s recession; only a succession of debt-fueled asset bubbles made it look like there was any job or wage growth.

Which brings me to the point I made on Sunday: in an economic crisis characterized by too much debt and low wages, we need to return to a policy of government stimulus, and strongly oppose any policy that might further erode wages. That includes attacks on pensions.

I didn’t come to that conclusion on my own. Economists who have studied similar crises have reached the same conclusion. Richard Koo studied the Japanese “lost decade” and coined the theory of a “balance sheet recession” that can only be resolved through government-provided stimulus, since the private sector has no willingness to borrow any new money:

In an ordinary, garden-variety recession, as we learned in school, the private sector uses money more efficiently, and a budget deficit is considered bad. But when the private sector is completely absent and paying down debt at zero interest rates, and the government doesn’t borrow this money, what happens? Even a child would understand the whole thing could collapse. The only way the government can turn this economy around is to do the opposite of the private sector — borrow the money the private sector saved and spend it, which means fiscal stimulus. That’s what saved Japan from entering a Great Depression.

This is a totally different situation than what was faced in the 1970s. Yet the reflexive policy prescription from many centrists and conservatives is to return to the 1970s, slash spending and wages, and hope for the best. In a balance-sheet recession, that merely leaves the private sector with less resources to repair its balance sheet, even though government can and should make up the difference.

These stimulative responses may sound like an “irresponsible liberal answer” – but only if we refuse to move beyond the outdated theories of the 1970s.

Of course, as Mathews notes, my arguments may not be picked up by either gubernatorial candidate in 2010:

Cruickshank’s argument deserves more attention. His views follow classical economic lines — when times are bad, government should do more, not less. But that’s an argument we, unfortunately, are not hearing (or having) in California, where the gubernatorial nominees of both parties claim that the state’s problems would be solved if the government were more frugal.

Mathews is probably right here. We know why Whitman backs austerity – she’s a corporate CEO, that’s all they know how to do, and they don’t care about the consequences for working Californians. As to Jerry Brown, he too may be fighting the last war. Let’s hope he’s ready to fight and win this one.

As pension reform heats up, both here in California and in Congress, it’s important to understand the underlying economic context – and why slashing benefits would be a stunning act of madness, likely to prolong our recession and budget problems instead of solving either one, at the expense of our basic standard of living.

We live in an economic era characterized by too much debt, itself a symptom of low wages and high costs of living. Although much of our media discussion of economic policy is still locked in the 1970s, obsessed with an obsolete worry about inflation, the reality is that households are not making enough money to pay the costs of living in 21st century California.

High taxes aren’t the problem – how could they when taxes are at their lowest point in 60 years? No, the problems come from elsewhere. As Dave Johnson showed in charts, wage stagnation that began with Ronald Reagan has led to a decline in the savings rate and a massive concentration of wealth at the higher end of the income scale.

Meanwhile, the cost of living has soared. Gas prices are now permanently at a level unimaginable at any time after 1981, and are likely to rise for the foreseeable future. Health care costs are still rising at an unaffordable rate. Even with the market crash, housing is still unaffordable to most Californians unless they’re willing to move to the urban fringe, savings which are canceled out by the cost of the commute.

Overall the economic situation is that of what Richard Koo called a balance sheet recession – where the private sector is scaling back on spending to purge debt, creating a long-term recessionary environment. The only solution is to increase wages and create more jobs. The absolute last thing you want to do is to slash wages – or pensions, for that matter.

Cutting pensions would be like taking a shotgun, aiming it at our feet, and pulling the trigger. It would cause a cascade of economic problems that would dramatically worsen our economic crisis.

But that’s exactly what some people are now arguing needs to be done. Last week Governor Arnold Schwarzenegger announced a pension reform deal with several state employee unions, including AFSCME. The deal preserves current pension payments, and creates a two-tier system whereby new hires pay more of their wages into the system. It’s not an ideal solution, but it’s better than the alternative.

In assessing the pension deals, California political commentator and friend Joe Mathews argues that the deals don’t go far enough, and that what’s needed is to slash the benefits of current workers.

Below the flip is my explanation of why this is a very reckless approach, and if implemented, would produce long-term recession.

Here’s Joe Mathews’ response to the pension deals:

Current workers, particularly baby boomers, are virtually certain to get so much more out of the system than they pay into it that they ought to be arrested for generational theft. They need to take more of the hit for this. That’s a difficult position to take, politically and legally, but it’s also the right one.

I could not disagree with this more strongly if I tried. There are many things wrong with this assessment, and I’ll take them in turn.

First, the “generational theft” argument. Generational theft is a very real problem. Young folks, those of us under 35, have been systematically robbed for the last 30 years. Our K-12 education was weakened through budget cuts. We were made to take on unaffordable student loans to get the same university education that our elders received for a fraction of the price. Older generations use Prop 13 to subsidize their own wealth while making it almost impossible for younger Californians to purchase a home of their own. When teabaggers in their 50’s complain about debt because of the burden it will leave to the young, they are shedding crocodile tears, because they are systematically destroying the future of those same young people they misleadingly claim to care about.

But that does not mean the answer is to engage in our own generational warfare by slashing their pensions. Already many retired Californians struggle to make ends meet. Too many have to choose between pills and other costs, including housing costs. Cutting the pensions of those already retired would merely redistribute those costs onto everyone else, working people already struggling with low wages and high costs of living.

Mathews didn’t appear to be calling for slashing pensions to those already retired, but for those currently working. But the outcome would be the same anyway. I’m 30, and my parents are in their mid-50s. One is fully vested in CalSTRS, the other has lost most of their 401k retirement to the market downturn. I cannot possibly imagine how my economic future would be improved if they had less money at retirement. I’d have to make up the difference if they had medical costs, housing costs, or other costs that they might struggle to afford of their state pensions and their Social Security benefits are slashed.

In fact, it would be yet another form of generational warfare against my generation if the pensions of my parents and their generation are slashed.

The better solution is to go after the massive wealth possessed by the top end of the income scale. California is still an extremely wealthy state. We just don’t tax most of that wealth, and we should. Yet Mathews argues we shouldn’t do it. Nowhere in his column does he indicate higher taxes should be on the table. Mathews suggests that the wealthy and corporations should “give back,” but frames it as a general call for sacrifice, when in fact we need a fundamentally different approach to taxation that seeks new revenues from the rich without slashing benefits for others.

Instead he makes this sound like we have no alternative but to cut pension benefits. Remember what he said in the section I quoted above:

They need to take more of the hit for this. That’s a difficult position to take, politically and legally, but it’s also the right one.

It’s neither necessary nor right that current workers see their benefits cut. We have choices, and one of those options is to raise taxes on the wealthy to bring in the revenue we need to sustain current pensions.

Of course, we also have to remember that the current bill for pensions is artificially inflated because of the recession. If we have economic recovery and growth, then state pension funds will be in a much stronger position. But if we give in to the desire to have widespread austerity, recovery will collapse, the state budget deficit will grow and persist, and the pension funds will continue to struggle.

California’s unions understand this basic reality. Mathews argues they don’t:

But these unions are one important part of the problem. While they don’t always seem to recognize it, they have a strong interest in being part of solutions to make state government fiscally solvent.

And yet the solution being proposed – slashing benefits – will do absolutely nothing to make state government fiscally solvent. It will mean there’s less money available to spend, meaning less sales tax revenue. Less consumer activity means there’ll be less jobs available, meaning less income tax revenue. With fewer jobs available, and wage stagnation, and now the added financial burden of paying the costs of retired family members that used to be borne by the pensions and other state services that have been cut, younger folks won’t be able to sustain the economy. Retirees and baby boomers will have to sell their homes for the cash, and in a recessionary environment where the young aren’t able to afford the present market value, home values will spiral downward, causing further economic ripple effects as well as reducing property tax revenues.

It is a senseless outcome. California’s unions are absolutely right to fight it. While they are framed as solely defending the wages and benefits of their members – as if there was anything wrong with that – these unions are also defending the economic prosperity and fiscal viability of the state of California. Their unwillingness to embrace deflation and depression should be lauded, not chided.

Mathews concludes by reasserting his claim that slashing benefits is necessary to our state’s future:

But savings on pension obligations can’t be the only money that elected officials and voters grab to balance the budget and put the state on a better long-term footing. Everyone needs to give back — from those who rely on public services to the wealthy and corporations, who have seen their taxes cut even as Californians experience government service cuts and income and sales tax increases.

Of course, those income and sales tax increases have not damaged the state’s economy. Since they went into effect in April 2009, the state has experienced a very halting and slow recovery – but it has not slid deeper into the recession. Had those tax increases not been accompanied by Hooverism – including but not limited to the loss of nearly 30,000 teaching jobs – California might be starting a more robust economic recovery.

More importantly, the notion that “everyone needs to give back” just doesn’t make sense given our economic distress. We’ve already given back too much. We gave back our wages. We gave back our ability to afford health care and housing and transportation. We gave back the robust public sector services that created widespread prosperity in the 1950s and 1960s. We gave back affordable, quality education. And too many of us have given back our future.

No, it’s time for someone else to give back. It’s time for the wealthiest Californians, and the large corporations, to give back. For 30 years now they have benefited from economic policy designed to take money and benefits from the rest of us and give it to those who already have wealth and power. Mathews agrees the wealthy and corporations should give back – but that ought to be the centerpiece of the solution, instead of being linked to a downward spiral in living standards and economic prosperity.

We are now experiencing the predictable outcome of such policies – the worst recession in 60 years, an intractable downturn. The way out isn’t to worsen the crisis by slashing pensions. The way out is to return to the sensible tax rates of the 1950s and 1960s and make the rich pay.

It’s the right choice for California. Let’s hope that’s the choice we wind up making.

I consider this a major victory for progressive economic policy advocacy. Dianne Feinstein is backing off her comments from yesterday in which she appeared to argue that the long-term unemployed were merely lazy and that we should start considering withdrawing their benefits if they couldn’t get a job in the worst recession in 60 years. For a refresher, here’s how the Huffington Post reported the quote:

“We have 99 weeks of unemployment insurance,” Feinstein said. “The question comes, how long do you continue before people just don’t want to go back to work at all?”

Feinstein communication director Gil Duran emailed me today to say the quote was incorrect. He indicated that Feinstein did not say the word “want” and that the quote came from “an impromptu press gaggle” that apparently made her true context and intent hard to read. He pointed to the Wall Street Journal’s article as being more accurate. Here’s what they said:

Sen. Dianne Feinstein (D., Calif.) was among those Democrats who supported the bill Wednesday. But she said a growing number of lawmakers weren’t as willing as they were during the recession to extend jobless benefits, especially with the mounting national debt. Europe’s debt crisis has shoved the issue back into the spotlight.

“We have 99 weeks of unemployment insurance now. The question becomes how long do you continue it before people just don’t go back to work at all?” Sen. Feinstein said.

I’m not sure how much this actually changes. Even without the word “want” in there, the quote does seem to suggest that she worries about unemployment benefits being a kind of permanent benefit to those who do not work, and the Senator does appear to be falling under the sway of the new Hoovers who want to throw the country into a Depression by removing stimulus before we have a full recovery.

I’ll leave it to you all to decide where she stands. Regardless, I see this as a big victory for progressives, as we have begun to set a narrative that suggests Democrats cannot place deficit concerns over supporting the spending we need to put people back to work.

UPDATE: Here’s the full statement Feinstein released today regarding this issue:

Senator Feinstein believes that unemployed Americans want jobs, not unemployment checks. She has voted for every single extension of unemployment insurance during this downturn because she knows that there is currently one job opening for every five out-of-work Americans, according to the Department of Labor. Some 880,000 people have been unemployed for 27 weeks or more in California, which has a 12.6 percent unemployment rate – one of the highest in the nation.

Senator Feinstein is concerned about the deficit, but she also understands that unemployment insurance is a financial lifeline for millions of Americans right now. Given the dearth of available jobs, a sudden cessation of unemployment benefits would be financially devastating to many people.

Senator Feinstein is working hard to make sure Congress enacts policies that will promote economic recovery, create jobs across multiple sectors of the economy and keep America’s economy strong in the 21st century.

Three of California’s leading political websites have invited the two major-party candidates for governor to participate in the state’s first Blogosphere Debate.

Calbuzz, FlashReport and Calitics, in partnership with the College of Social Sciences at San Jose State University and the Commonwealth Club Silicon Valley, today sent a letter outlining the debate to Mike Murphy and Steve Glazer of the campaigns of Republican nominee Meg Whitman and Democratic nominee Jerry Brown.

Here’s the letter that was emailed today:

Dear Mike and Steve,

 

On behalf of Calbuzz, FlashReport and Calitics, we are pleased to invite Meg Whitman and Jerry Brown to participate in a two-person, first-ever California Blogosphere Debate. The College of Social Sciences at San Jose State University and the Commonwealth Club Silicon Valley will also serve as debate sponsors.

 

As you may know, the Washington Post has named Calbuzz, FlashReport and Calitics the three leading political web sites in California. Collectively we provide on a daily basis a full range of political perspectives and analysis, from conservative to moderate to progressive.

 

We have secured Morris Dailey auditorium at San Jose State University for the afternoon and evening of Monday September 13th (with back-up possibilities on the 14th and 15th). The specific time of the debate would be decided later in consultation with the campaigns, but we anticipate a 60-minute event, scheduled at a time between 4 pm and 7 pm. The format, with final details to be determined, would likely include the following:

 

— Moderator: John Myers of KQED (pending approval from KQED)

— One questioner each from Calbuzz, FlashReport and Calitics

— Two-minute opening and closing remarks from candidates                                    

— One question for both candidates from each panelist with two-minute responses

— Two questions for each candidate from each panelist with two-minute responses

— One minute rebuttal from each candidate for each question                                  

— Introduction, follow-ups as permitted by moderator and closing statements.

 

This means each candidate would field six questions: three common questions for both candidates and three questions specific to each candidate. Both candidates would have an opportunity for rebuttal on every question.      

 

We envision candidates standing at podiums with television lighting. Neither candidate would use scripts, notes or props although they may take notes during the debate. A pre-arranged coin toss would determine the order, with the candidates given the option of opening first or closing last. We would offer a live feed to any television or radio station or online broadcaster interested in carrying the debate. We anticipate one pool camera crew to shoot the debate.

 

As you’re aware the news industry is in a state of radical transformation, with the internet steadily playing a larger and more significant role in setting the public agenda. We believe that our proposal offers a unique and historic opportunity for your campaigns to play an important role in shaping that agenda, and we hope you will give this invitation your most serious consideration. Please respond by 5 p.m., Friday, June 25.

 

Very truly yours,

 

Phil Trounstine, Jerry Roberts, Jon Fleischman, Brian Leubitz, Robert Cruickshank

We’ll keep you updated on what we hear back from the campaigns.