All posts by Robert Cruickshank

Budget

Susan Kennedy: “Our revenue stream is way too progressive.”

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As the shock doctrine attack on California unfolds, members of the Schwarzenegger Administration are signaling their long-term plan to radically remake California as a Randian paradise for the rich and a desperate hellhole for the poor and the middle-class. Arnold’s budget plans are all designed with one purpose in mind – to make rich pay less and everyone else pay more.

We’ve been over his completely insane budget cuts proposals, which are all focused on taking away the safety net for the poor and the middle class and making them spend more money on vital services.

Now, in an interview with Carla Marinucci, Susan Kennedy reveals the other half of the “screw the poor” strategy – an overt call for an even more regressive tax structure:

She appeared particularly upbeat on the prospects and potential impact of the bipartisan Commission on the 21st Century Economy  headed by Gerry Parsky, the former assistant Treasury Secretary and current UC Regent who is a partner in the Los Angeles-based Aurora Capital Group.

The Parsky commission, made up of a dozen individuals, has been charged with studying ways to remove the volatility from California’s tax system.

“If they’re bold and fearless..it could tackle one of the most significant issues we face..the volatility of our revenue stream,” she said. “I’m actually really excited (about the outcome)”..”I haven’t seen this level of willingness and urgency” in a long time on that issue.

Asked what she’d like to see from the tax commission, Kennedy didn’t hestitate. “Flatness,” she said. “Our revenue stream is way too progressive.” But no matter how you slice it, she said, changes that come out of it may be seen as “a tax increase to the middle of the structure.”

There you have it – Arnold’s plan is to cut the services the middle-class needs while raising their taxes in order to give the wealthy and even bigger tax break. In that sense his higher ed funding plans are perfectly sensible – by planning to eliminate Cal Grants and jack up fees even further, he’s foreshadowing California’s future, where the dream of prosperity and economic security is enjoyed only by the top 5%. It’s a recipe for the Brazilification of California.

The Parsky commission, as I have explained before, is rigged to produce this very outcome. They are part of a concerted effort to use “volatility” as a kind of concern trolling to suggest that wealth taxes, a proven and effective method of taxation, are bad – and that we need to sock it to the poor and the middle class, even though numerous examples from history prove that when you shift the tax burden onto those least able to pay, social collapse follows.

In that vein it’s worth noting some pushback against the “volatility is bad” nonsense that Kennedy and Parsky are pushing. Bob McIntyre of Citizens for Tax Justice, in his testimony before the commission, slammed the idea as making the system more regressive and doing nothing to promote economic growth:

Over any reasonable time period, a progressive income tax, including taxes on capital gains, has been by far the most stable, most growing source of revenues for states. One reason why this is true is that at least since the late 1970s, the rich have been getting much richer, although not by the same amount every year. In addition, even without changes in the

distribution of income, a progressive income tax, even one indexed for inflation, rather naturally keeps up with the economy….

So if the income tax, and particularly the capital gains tax, is the one bright spot in California’s long-term tax picture, why would anyone want to cut it? I have no doubt that for many who favor eliminating or sharply reducing California’s income tax on capital gains, the real motivation is that they simply favor lower taxes on the rich – even if that means higher taxes on everyone else.

And that’s the real issue here. The concerns about “volatility” are really just neoliberal economics phrased in another way. The belief that if we cut taxes and regulations on the rich, everyone else will benefit. We’re experiencing an economic crisis that is directly caused by, and proves the failure of, those asinine policies.

McIntyre explains that the “volatility” of taxing the wealthy is overstated, especially in the longterm. But is “volatility” even a problem? As the California Budget Project notes quoting Board of Equalization chair Betty Yee, “tax volatility is a good thing“:

As Yee mentions, if Californians want to avoid exacerbating the income gap between high- and low-income Californians, any discussion of tax fairness must also include a consideration of another kind of volatility: the daily uncertainty many low- and middle-income Californians are experiencing about their jobs, their houses, or the choice to put food on the table or pay the energy bill.

“Volatility is what they’re experiencing day-to-day,” Yee said.

As far as I can tell, this whole concern trolling over “volatile” revenues is merely an excuse to produce a more regressive tax policy and worsen the actual volatility problems, which is the boom-and-bust cycles of economic security and public services for the working Californians who should be the focus of our tax and spending policies.

California

Responding to Erwin Chemerinsky on the Constitutional Convention

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The Dean of the UCI Law School, the eminent and rightly respected Erwin Chemerinsky, claims a Constitutional Convention will fail in today’s LA Times. He draws upon his experience chairing an LA City Charter revision commission in the late ’90s to suggest that although California’s Constitution is clearly broken and in need of change, a Convention will come apart on the same political rocks that have previously prevented change:

My experience as chairman of a similar convention — an elected commission created in 1997 to propose a new Los Angeles city charter — makes me skeptical that a constitutional convention can provide a solution to the serious problems that face the state….

Even if there is a constitutional convention, and even if it does come up with a coherent and meaningful package of proposed changes, it’s uncertain that that package would ever be adopted. There are countless controversial issues that could doom it….

I have no real objection to a convention. I just don’t believe we can count on it to solve our problems — and certainly not in a timely fashion.

Chemerinsky’s points are worth considering, even if I ultimately disagree with them. Neither myself nor the Courage Campaign (where I work as Public Policy Director) believe that a Convention is the only way to reform the state. Chemerinsky calls for putting an initiative on the ballot in 2010 to eliminate the 2/3rds rule, and both myself and the Courage Campaign completely agree with that. Restoring democracy to the initiative process cannot wait for a Convention. It needs to happen as soon as possible.

That being said, I think Chemerinsky is not taking into consideration some fundamental differences between the LA City Charter review process and a Constitutional Convention for California.

The primary difference is context. In the late 1990s California was enjoying prosperity, and that made it seem like government was working well enough. There was no crisis, no immediate and obvious reason to change the LA City Charter, even though there were certainly ways it could have been improved. In the absence of a sense of crisis, there was no momentum to carry through the proposed changes over the opposition of the interests Chemerinsky alluded to.

We are in a completely opposite situation today. California is suffering from the worst economic downturn since the Great Depression. Our government is distrusted and disdained by large majorities of the population. And the failure of government has been made obvious to everyone. There are two fundamental things that American government must do – protect rights and promote prosperity. California’s government is failing us on both points.

Californians are fed up with the status quo. They are looking for inspiration, hope, and change. A Constitutional Convention, properly convened, limited to focus on structural problems and that proposes sensible solutions, can inspire people to overcome the obstacles to change. Especially since CA in 2009 isn’t LA in 1999.

Chemerinsky is right, of course, that voters might reject the proposals put forward by a Convention. But then that’s the nature of constitution-making in America. The US Constitution came within a hair of being rejected – had a few votes gone a different way in Massachusetts and Virginia, the Anti-Federalists would have prevailed and the status quo would have continued even in spite of the dire economic crisis of the 1780s.

That’s a risk we have to take. California’s government is broken, and now many people are going to suffer as a result. I’m willing to try and fail rather than not try at all.

Budget

Just Say No

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I will be on KRXA 540 AM at 8 this morning to talk about this and other issues in California politics

I don’t know about you, but I can’t find anything in the outcome of the May 19 election that justifies, say, ending welfare entirely, or denying AIDS patients life-saving medicines, or throwing a million kids off of health care, or closing the state park system, or eliminating affordable access to higher education. Can you?

In fact, even though polls show voters emphatically reject that kind of budgeting Arnold Schwarzenegger has gone ahead and proposed it anyway. In his best effort to play the role of a modern-day Herbert Hoover he has decided to interpret the election as a mandate to push through the radical attack on government he has always wanted to lead.

In recent hearings in the Legislature – which in themselves prove the value of an open budget process – the scope of the cuts has become clear, and even legislators who were just last week speaking of the need for cuts are starting to have second thoughts, as Anthony Wright reported:

Some members, like Senator Denise Ducheny, asked whether some of these cuts would not create more costs, as people end up in emergency rooms or elsewhere, even within the budget year. “What makes you think this doesn’t create a cost shift?… Will people just die and we won’t have to take care of them?” she asked.

Senator Mark Leno talked about how the AIDS Drug Assistance Program “literally keeps people alive,” and asked for information about the increased cost of ermegency room visits as a result of the cut. Senator Alan Lowenthal asked if there was a “longitudinal” analysis, and asked for the “long-range implications” of these cuts.

Assemblywoman Noreen Evans was alarmed when she noted that dialysis would be cut for some patients, exclaiming that her father was going through such treatment, and was not optional. She also noted that some cuts, like the elimination of HIV Testing, would have public health impacts. Assemblyman Kevin DeLeon pointed out the cuts to community clinics, arguing that for many Californians, “this is the only safety-net they have.”

As the Sac Bee reports, even some Republicans acknowledge that there is such a thing as a successful government program:

Assemblyman Danny Gilmore, R-Hanford, wrote an opinion piece this month for the Bakersfield Californian telling constituents how to apply to Healthy Families and touting it as a program that works “especially well.”

Of course, the Zombie Death Cult still has its adherents, like Chuck DeVore:

But Assemblyman Chuck DeVore, R-Irvine, said the state must scale back because it cannot afford the benefits it provides. DeVore asserted that overregulation and high taxes have stifled businesses and led to layoffs, while California has compounded the problem with too much public aid.

“When you have an unemployment rate as high as it is in this state, it should be a signal to people to look for jobs in other states with more jobs and a lower cost of living,” DeVore said. “We have had policies subsidizing poverty in this state for years, and we can’t keep doing that.”

And this freak wants to be in the US Senate! The irony is that even his own constituents disagree with him. Orange County residents don’t want their parents to lose dialysis treatment. They don’t want their kids to lose Cal Grants. They don’t want to be barred from going to the nearby beach.

As we have been explaining for months now, these kinds of cuts are suicidal. They will make the budget picture worse by costing more money than the cuts would save. They will certainly make the economic crisis FAR worse by forcing consumers to pull back even further on spending in order to replace the lost state aid. Arnold Schwarzenegger is demanding a Depression.

Unfortunately the legislative leadership has woefully unprepared themselves to respond. Instead of spending the months leading up to the May 19 election talking about protecting Californians against horrific cuts, the Democratic leadership instead went along with Arnold’s scare tactics and made a cuts-only budget sound inevitable – and then doubled down the day after the election.

It’s time for legislators to “just say no” to these cuts. And not say it in order to accept lesser but similarly damaging cuts, but say “no” in order to walk through the wide open door that leads out of the Jarvis nightmare scenario. We have a golden opportunity to bury 30 years of anti-tax nonsense – Californians understand that taxes are necessary to prevent people from dying and to provide economic recovery. There is widespread support for raising taxes on the wealthy, closing the loopholes, and ending a failed prisons policy that costs us billions.

It’s time for legislators to move beyond outrage and to start showing real leadership against this madness. If they want to restore their reputations with voters, the best way to do so is to show that the Legislature still understands common sense and can give the people what they want – a fair tax system that will stop these cuts in their entirety.

Marriage Equality

How We Will Repeal Prop 8

With the truly odious decision upholding Proposition 8, three things are now very clear:

1. California no longer recognizes equal rights.

2. California’s constitution is totally broken.

3. It is time for ALL of us to fight back.

The Courage Campaign, where I work as Public Policy Director, exists to respond to all three of those things.

We are going to work with our partners in the marriage equality movement in the effort to repeal Proposition 8 at the ballot box. We are going to restore equal rights to all Californians. And we’re going to fix our broken constitutional system to ensure this kind of thing never happens again. Below I explain what you can do to help.

(Note: thanks to Adam Green for his comments at Open Left on our online organizing work)  

82.5% of Courage Campaign members voted to go to the ballot in November 2010 to repeal Prop 8. As a result, the Courage Campaign is announcing today its strong support for a 2010 initiative, while respecting that partner organizations are still discussing and deliberating this very important question. No matter when exactly we go to the ballot, we have to make sure that THIS time we get it right.

The first thing we want to do is take our message to the people. The No on 8 campaign never showed the voters of California the people who are affected by this – the tens of thousands of same-sex couples. The first step toward repeal is to show Californians who has been victimized.

It’s time to go on offense. To be fearless in our fight for equality. Starting right now. We are launching this provocative new TV ad in the spirit of Harvey Milk’s call to “come out, come out wherever you are” and proudly tell the stories of the people most affected by the passage of Prop 8 — in moving images set to the beat of Regina Spektor’s beautiful song, “Fidelity.” (See the top of the post for that video.)

And en Español:

If you want more people to see it — contribute $25, $50, $100, $250 (or as much as you can afford) to expand our ad buy immediately in Bakersfield, Fresno, Los Angeles, Sacramento, San Diego and San Francisco.

But that’s just a start. To repeal Prop 8 we have to work our asses off to organize ahead of a repeal vote. We’re asking folks to take this pledge to do so and gather 1 million for equality:

We, the undersigned, are united in our refusal to accept a California where discrimination is enshrined in our state’s constitution.

We pledge to repeal Prop 8 and restore marriage equality to California.

What does this mean? What are we planning to do?

The Courage Campaign has taken a lead role in the fight to repeal Proposition 8, mobilizing hundreds of thousands of Californians to sign petitions, organize local media events and share their stories. Since January, the Courage Campaign has been training and empowering marriage equality activists across the state at “Camp Courage” training events as well as building 24 “Equality Teams” across California — serving the organizations and individuals that are fueling the movement toward marriage equality.

Here’s how it works:

Conducting Intensive Training: The Courage Campaign is leading the effort to train volunteers to become field organizers through a program called Camp Courage. Modeled after Camp Obama, these intensive one or two-day programs have been instrumental in channeling the enthusiasm of activists into effective action. More than 700 activists have been trained in Los Angeles, Fresno, San Diego and Oakland. Seven more Camp Courage trainings are planned, with a minimum of one per month for the next year. Camp Courage will next be in Sacramento and East Los Angeles.

http://www.couragecampaign.org…

Coordinating Online: The Courage Campaign is using the same online organizing tools the Obama campaign used to contact, identify, and persuade voters (Blue State Digital and the Voter Activation Network). The project aims to put well-supported voter file technology and voter contact tools directly in the hands of marriage equality activists. The shared database of the VAN, as well as the tools found at the Courage Campaign’s Equality Hub, will allow for coordinated field efforts to maximize one-on-one contact with voters.

http://www.couragecampaign.org…

Mobilizing Volunteers: For the past two months, volunteer organizers have been talking with voters one-on-one in 15 counties, including 7 in the Central Valley and Sierra Foothills – counties where Prop 8 won significantly. So far, these Equality Teams have walked in more than 30 canvasses statewide, with more taking place every weekend. These teams will be the backbone of any future campaign efforts.

http://www.couragecampaign.org…

Building for the Long-Term: The Courage Campaign is dedicated to building a permanent online and offline progressive political infrastructure.  We have full-time field staff located across California supporting the efforts of 24 volunteer Equality Teams.

Partnering with Progressive Organizations: The Courage Campaign also has worked with several people and organizations that have become lead sponsors of Camp Courage, including the Human Rights Campaign, CREDO Mobile, Honor PAC and the Dolby Family. The Courage Campaign has also partnered with nearly 100 progressive organizations to promote Meet in the Middle for Equality, a major rally that will take place in Fresno the first Saturday after the California Supreme Court rules on the legal challenges to Proposition 8.

http://www.meetinthemiddle4equ…

The Courage Campaign believes that by training community organizers and sharing resources like staff support and access to the voter file, we can win — not just in Los Angeles, or San Francisco, but in the heartland of California.

This isn’t the Courage Campaign’s movement. It’s your movement. It’s our movement. We’re just here to help.

We’re going to repeal Prop 8. We’re going to restore equal rights. We’re going to fix what is broken here in California. And “we” equals you and me – ALL of us.

The time to act is now.

Uncategorized

Things Fall Apart

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Today California is witnessing an interesting convergence of events. As the state legislature begins to debate whether to destroy prisons, education, or health care, the eyes of most Californians will be trained on downtown San Francisco, where the California Supreme Court is going to issue its ruling on Proposition 8.

Both events signal the failure of California’s system of government. The system that creaked along for the last 30 years has now failed at the core tasks of an American government – to protect the rights of the governed, and to promote prosperity.

The victory of Prop 8, the dire economic crisis, and the looming collapse of our public services are all the product of a singular failure: the inability to respond effectively to the rise of a political movement bent on destroying the fabric of postwar California. I am referring, of course, to movement conservatism. California’s politics, dominated by a centrism determined to uphold the status quo, felt it had tamed the right-wing beast. It was wrong, and we are suffering the outcome of that massive miscalculation.

Since Howard Jarvis’s 1978 victory, the unavoidable armageddon that Prop 13 initiated was frequently postponed through a series of short-term financial gimmicks as well as an unprecedented era of cheap credit that enabled prosperity to be offered to the middle-class in spite of wage stagnation. When the cheap credit vanished and the toolbox of gimmicks was exhausted, we were left with our present crisis, and the fundamentally right-wing nature of state government could no longer be masked or ameliorated.

To continue the story David Dayen began yesterday, Howard Jarvis never did live to see the massive spending cuts he hoped the legislature would be forced to produce. Beginning in 1980 a new political consensus was forged by Speaker Willie Brown and the next three governors – Democrat Jerry Brown and Republicans George Deukmejian and Pete Wilson. The consensus  revolved around California’s version of late 20th century centrism – made possible by, and totally reliant upon, the appearance of “growth” driven by asset bubbles. Those bubbles allowed Sacramento to paper over the loss of tax revenue and offer economic growth.

The 1980s saw the construction of the model. Sprawl was used to provide affordable housing. Special tax systems were set up to pay for suburban schools – the 1982 Mello-Roos Act – which were funded as long as there was enough credit to sustain sprawl. The loss of property tax revenue led cities to shift toward retail, further promoting sprawl (big box stores, malls). The jobs and spending created by sprawl provided enough prosperity to keep voters happy and the politicians in power. For those who were left behind – those living in the city centers, people of color, and the poor – 1978 had been partly about their political and economic marginalization, and the majority of Californians embraced it as part of the deal.

The ideal feature of the centrist system, from the view of its practitioners, is that it apparently neutralized the right-wing revolt of 1978. Low taxes could be paired with preservation of core services, albeit at a slightly reduced level, and thereby avoided another Jarvisite outburst. Well-paid consultants could run statewide TV campaigns to force the public to accept the consensus, without having to do the messy work of engaging a grassroots that would challenge the centrist status quo.

When the system came crashing down in 1991-92, the centrists found it possible to cut a deal to keep things going. Pete Wilson and Willie Brown had much in common, and were able to hammer out a package of tax increases and spending cuts that got a 2/3 majority. I don’t romanticize that deal, but instead use it to show that it confirmed to the centrists that the system they’d built in 1980s could withstand crisis as long as everyone was willing to sit down and make a deal, damn the consequences.

However, the right-wing wasn’t sleeping. In 1990 they managed to convince a bare majority of voters to approve Prop 140, a radical term limits measure that should have fallen afoul of the “revision” rule. But the real moment of change came in 1994, when the far-right in the Republican Party grabbed control of the agenda and launched a massive attack on Latino Californians. Pete Wilson wholeheartedly embraced the attack, and although it brought Republicans gains that year, it was a victory to make Pyrrhus jealous. Latinos registered for citizenship and to vote in massive numbers, and beginning in 1996 what had once been a state whose politics were fairly balanced shifted massively to the Democrats.

As long as Republicans stood a reasonable chance of winning control of California’s legislature or its electoral votes, Democratic deal-cutting with Republicans could be sold to the base as a necessary move to stave off the Jarvisite hordes. But after 1996 this became less and less plausible. The California Republican Party became a captive of the extreme right, even more than usual, and in one of its last acts before leaving power in 1998, pushed through a massive and reckless series of tax cuts.

Democrats, still believing in the ’80s model of centrism even though their moment had now arrived, stupidly went along with the deal. Their own approach to state politics dovetailed with the dominant Clintonism – that the right-wing was something to be appeased and never fought. It helped that another asset bubble had given the appearance of permanent prosperity, even though wiser heads had tried in vain to tell the legislature that the tax revenues of the dot-com boom were impossible to sustain.

In 2002 the bottom fell out again. But instead of sitting down and cutting another deal, Republicans held out in an effort to destroy their Democratic opponents. They succeeded in recalling Gray Davis. But Democrats did not learn the lesson. They believed in centrist deal-making and in asset bubbles. So once more into the breach they went, enabling Arnold out of a hope that by doing so they could sustain the political arrangements of the ’80s and ’90s without having to confront the ghost of Howard Jarvis.

But the center did not hold. The asset bubble, the biggest one yet, burst. And the right-wing had learned how to manipulate the rules it had set into place over the previous 75 years to ensure that any deal that would be made would be made on its own terms.

American centrist politics is a politics enabled by prosperity. As long as the economy does well, Democrats and Republicans can generally agree on pro-business policies. Democrats promise to not pursue social democracy, and Republicans promise not to be too mean. After 1980 that promise was junked, and the party set about undermining the Democrats at every turn. Yet the Dems never seemed to understand this, and still believed that their former partners really wanted to work with them, instead of stick a knife in their back.

The disappearance of prosperity has made California centrism untenable. It has exposed the machinery of our state’s government to be deeply right-wing and undemocratic. It leaves Democrats with only two choices – embrace Jarvis as their own, or embrace FDR.

As has happened in Washington State (under a Democratic governor! who has massive legislative majorities!), California Democrats have chosen Jarvis. They are trying to put the same old centrist spin on this turkey:

I hope the bipartisan cooperation between the Legislature and the Governor that went into this effort will continue as we move forward – the people of California clearly expect us to work together to get the job done. And we will. Speaker Karen Bass, 5/20/09

But this is not possible. “Bipartisan cooperation” is a fiction in a California experiencing a Depression, governed by a right-wing Constitution, and where actual political power is exerted by an insane right-wing cult determined to destroy prosperity and individual rights.

The rough beast whose hour has come is that of Howard Jarvis, who has now converted the Democratic leadership to his theories en masse. The best lack all conviction except that which is Jarvisite; the worst are full of passionate intensity, as Glenn Beck and Newt Gingrich and company have shown in the aftermath of the May 19 election and as they will certainly show should we get a just ruling from the CA Supreme Court today.

And that is why we see a growing divide between the Democratic leadership and the grassroots. A grassroots that found it could beat the right-wing in a transformative national presidential election sees no reason why it cannot accomplish the same thing at home in California. The people of this state never were Jarvisites – half the electorate wasn’t eligible to cast a ballot in 1978 (and hell, many of us weren’t even born yet), and they have shown no inclination to embrace the right-wing proposals that we are now told are inevitable.

There is nothing inevitable about California going the way of the Weimar Republic. But the failure of political leadership is total. The only thing that is inevitable is that the people of this state will not tolerate this situation any more, and will force change. The question before us is whether the change will be progressive or reactionary. Jarvisism in a bipartisan mask is a form of the latter, no matter who tells us we must accept it.

with apologies to Yeats

Budget

Et Tu, Arne?

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As the crisis in California worsens, the state that may have done more than any other to elect Barack Obama president – donating enormous sums of money and time, fanning out across the nation to push swing states into the blue column – is finding that the love is not being reciprocated.

First it was Treasury Secretary Tim Geithner rejecting a Treasury backstop for CA short-term borrowing. Now it’s Education Secretary Arne Duncan, who is planning to head a $5 billion effort to improve public education in America – an effort he says California won’t be a part of:

A handful of states will soon be chosen to take part an intense, $5 billion experiment to improve schools that the federal government is calling “Race to the Top” – but California will be lucky if it gets to participate, U.S. Education Secretary Arne Duncan said today during a visit to San Francisco.

“Honestly, California has lost its way,” Duncan told dozens of the state’s mayors and education officials who packed into San Francisco City Hall. “The long-term consequences of that are troubling.”…

He said California’s fiscal crisis – in which schools are being forced to cut programs and lay off teachers – means the state has a long way to go before it is regarded as a state that can show others how to make public education shine.

“I have huge hopes for what California can do,” he said. “I’d love to have California at the table, but California has things it needs to change.”

In itself those comments are totally reasonable. California has undeniably lost its way – under 30 years of conservative anti-tax policy, we have slowly starved our schools of funding and set up a day of reckoning that has finally arrived. Instead of leading the nation in education, as we once did, we’re now bringing up the rear, as those who benefited from CA’s generous education policies in the 1960s and 1970s now refuse to fund it for the next generation.

We can all agree with Arne Duncan that CA is facing a severe crisis and that our government’s unwillingness to support its schools is detestable. And yet the troubling thing about Duncan’s statement is that it suggests the federal government isn’t going to to much to help.

This comes on the heels of a growing trend of liberals dismissing California’s problems as something we created, and therefore something we must solve on our own. You can see the attitude everywhere from the comments section at Daily Kos to the editorial page of the New York Times. The general attitude is “you guys made your bed, why are you crying to us for help?” (Although to be fair, the NYT does support some form of federal aid.)

The Obama Administration, judged by the statements of Secretaries Geithner and Duncan, seems to agree. The administration that moved heaven and earth to rush bailout money to Wall Street is showing little interest in helping California avert meltdown, even though budget shortfalls like ours have blunted the effectiveness of the federal stimulus and that mass layoffs, a weakening of the safety net and a destruction of educational opportunity will undermine economic recovery. If Obama thinks he can have a national economic recovery with the largest state acting as deadweight, he’s out of his mind.

Obama’s emerging attitude toward the states – that they’re largely responsible for themselves – is counter to the tried-and-tested role of the federal government in managing economic crisis. In fact, the entire reason we have the federal government we do is because of the failure of individual states to deal with the economic crisis of the 1780s. The Constitution was written precisely to provide a common national recovery strategy. President Franklin D. Roosevelt revived this model during another major crisis in the 1930s, using federal aid to help the states recover – but to also force changes in the way they did business.

In other words, to refuse to use the power of the federal government to meaningfully aid the states is to misunderstand the purpose of the federal government. And while Obama hasn’t totally abandoned the states, neither does he seem to understand the need for a much more robust federal intervention. It’s not just California – every other state has a budget crisis of varying severity. Left unchecked the 50 Herbert Hoovers that govern the states will wind up embracing deeper spending cuts, making it difficult to see where economic recovery will come from.

It’s not just for California’s sake, but for the sake of the nation as a whole, that the Obama Administration needs to reassess its attitude and policy toward the crisis in the states. The approach of “we’ll give you some help but you have to do all the rest” might have worked in the 1990s, but it is a recipe for disaster today. It’s time Californians who worked so hard to elect Obama saw a return on that investment, instead of a dismissal of our problems.

Uncategorized

Shorter Arnold: Enjoy Your Depression!

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The budget deficit became a full-blown crisis yesterday, as Arnold Schwarzenegger proposed pushing the state into a Depression by making massive and economically insane cuts to spite an electorate that has once again rejected him and his ideas:

After he announced Thursday that he would abandon plans to borrow $5.5 billion by issuing short-term revenue anticipation warrants, or RAWs, Schwarzenegger’s Department of Finance presented options for additional cuts in testimony before the joint legislative budget conference committee.

Options included eliminating the Healthy Families program that provides medical, dental and vision care to needy children; eliminating the state’s welfare-to-work program, CalWORKs; eliminating the Cal Grant program of college aid; eliminating general fund support for state parks; and trimming the number of inmates, rehabilitation programs and other costs of state prisons.

Those proposed cuts would be an act of madness. As we have discussed numerous times here on Calitics, cutting those kinds of programs would cause deeper economic crisis by forcing low-income and middle-income families to spend more money on their health care and education, and thereby spend much less on consumption. The result would be to pour pesticide on the so-called “green shoots” of recovery.

As Joseph Stiglitz and Peter Orszag explained, tax increases on the wealthy are preferable to budget cuts in a situation like this. Instead Arnold Schwarzenegger is openly proposing that California be pushed into an outright Depression. And if that happens in California, it is difficult to see how the US as a whole can avoid getting pulled down with it.

It’s theoretically possible this is a negotiating ploy by Arnold – but I can’t tell what the real goal is. My own view is that Arnold actually believes in this right-wing “drown government” stuff. He has been trying to apply the shock doctrine to California for some time now, and his economic policies have always been fundamentally right-wing.

There are three other factors at work here. The first is the growing evidence of the Obama Administration’s total failure to grasp the severity of the situation in California – or a lack of desire to do anything about it. Treasury Secretary Tim Geithner made it clear that he doesn’t care what happens to our state:

Schwarzenegger did not comment directly on U.S. Treasury Secretary Timothy Geithner’s testimony before a House panel Thursday that no loan guarantees would be forthcoming absent an act of Congress.

While not the deciding factor in Schwarzenegger’s decision to pull back, apparently, Geithner’s disclosure could have dimmed prospects for obtaining loans by a state with a sagging credit rating and reeling economy.

This is becoming a disturbing trend with the Obama Administration on a range of issues – punt to Congress, and then refuse to actively push Congress to act (another good example is repeal of “Don’t Ask, Don’t Tell”). This is especially ludicrous coming from Geithner, who was quite happy to pour taxpayer money into banks but can’t be moved to back economy-saving programs in California even though it would cost the Treasury nothing to do so.

The Obama Administration, by this action and its willingness to give Arnold what he wanted on eliminating the stimulus rules to screw homecare workers, shows that it is essentially clueless when it comes to the unfolding crisis here in California – a crisis at least as serious as the auto industry crisis.

The second factor is the growing rightward tilt of the Legislative Analyst’s Office under Mac Taylor. This probably deserves its own post, but Taylor’s budget analysis is a fundamentally right-wing proposal that includes this rather stunning statement:

We agree with the Governor’s choice not to propose any additional tax rate increases. The Legislature, however, could still increase ongoing revenues by making targeted changes in tax expenditures and tax administration. In addition to the Governor’s fee proposals, we suggest other ways to offset General Fund costs by implementing proposals to charge users appropriate fees for government services.

While that seems a coded endorsement of the “majority vote budget”, it’s also a deeply right-wing approach by rejecting the sound economic advice mentioned above on increasing taxes on the wealthy. Obviously it would help if someone in the capitol were pushing those kind of taxes. Unfortunately, the LAO is still seen as a credible and independent source of budget analysis, even though under Taylor it no longer fills that role.

The final factor is the failure of Bass and Steinberg on the messaging front. They lost the battle for the May 19 propositions and they now appear to have lost the messaging war. Although Sen. Mark Leno claimed the Democrats were done enabling Arnold, the leadership’s statements on Wednesday wound up bolstering Arnold’s emerging narrative that voters demanded cuts. Bass and Steinberg ought to have made a strong case for minimizing or preventing cuts, but that either did not occur or was not successful.

The public is sick and tired of conservative policy – that’s why Obama still commands high approval ratings, and why DC politicians still poll better in CA than Sacramento politicians. But the state is drifting over a cliff due to a lack of leadership against Arnold’s policies. It’s too late to recall him. We’ve already demanded his resignation. But what we really need is strong progressive leadership to stop the slide of California into another Depression.

So far, that leadership is non-existent.

Budget

Why Are Cuts Posed As Inevitable?

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I will be on KRXA 540 at 8 to discuss this and other topics in California politics

Last night I was on Angie Coiro’s Green 960 show to discuss the failure of the May 19 propositions and where we go from here. Opposite me (virtually speaking) was Sen. Mark Leno, although we agreed much more than we disagreed (which is how I prefer it!).

Leno said something quite interesting, and unfortunately the best I can do right now is to paraphrase it. He said something to the effect of “for too long Democrats have been Arnold Schwarzenegger’s enablers,” that they haven’t done enough to push back against him.

I think that’s a welcome and truthful admission. And yet I wonder if the enabling has completely stopped. Republicans are busy pushing their narrative of what happened on May 19, that voters rejected taxes and demanded spending cuts. Unfortunately, Democratic leaders appear to be enabling this point. Certainly Senator Darrell Steinberg and Speaker Karen Bass have said that they don’t believe that is what happened and that voters want to protect key government services. And yet the rest of their statements, as David Dayen explained yesterday, are unhelpfully claiming cuts are inevitable:

Legislative leaders in both parties said drastic cuts will be made to close the gap, although Democratic lawmakers hinted that bridging the gap with cuts alone may be too difficult in a $92 billion general fund budget.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, said he agrees with the scope of Schwarzenegger’s proposed cuts, which total about $9.8 billion. The big debate, he added, will be over how to close the rest of the gap.

Steinberg is signaling a fight over the rest of the hole beyond $9.8 billion. But it doesn’t strike me as wise to even concede that amount in cuts.

As I’ve explained before, spending cuts are an extremely damaging way to “balance” the budget. Mass layoffs and cuts to core services will actually exacerbate the economic crisis and in turn exacerbate the collapse of tax revenues. Further, polls have shown massive public support for taxing the wealthy and corporations. Why aren’t Democrats starting there?

Having talked with several legislators in Sacramento yesterday, they feel chastened, and they understand that voters are angry with them. And yet I’m not quite sure they understand the risks they’re running. A raid on local government money alone could produce open revolt (of the political kind) against the state legislature. Such a raid will push dozens of cities into bankruptcy and worsen planned cuts to police and fire services. That’s a recipe for even deeper public anger with the Legislature.

Democrats in particular need to think about the medium-term before accepting cuts as inevitable. Many Dems believe a 2/3 majority is winnable in 2010. It is certainly within the realm of possibility – but Democrats also risk endangering their own position by causing a massive “throw the bums out” backlash in the November 2010 election.

The Democratic leadership should instead finally stop the enabling, as Leno recognized was necessary, and start assertively proposing their own better solutions. The reason many Democratic voters sat on their hands on May 19 was because they weren’t given anything positive or hopeful to embrace. There were no progressive solutions offered, and nothing that would have suggested a line would be held. Voters want something to rally behind. Taxing the wealthy in order to protect schools and health care services and local government seems a good place to start.

The special election was the exact opposite of the November election. Whereas Barack Obama got himself elected president by empowering millions, building a grassroots movement that made voters feel they were a respected part of the process, and by offering a hopeful message of change, he generated major enthusiasm even though he offered  solutions that the Republicans thought they could easily oppose.

California voted 61% for Obama and his agenda of taxing the wealthy and sustaining the government safety net in our time of need. That needs to be the Democratic model moving forward. Cuts aren’t inevitable. Republicans have been rejected as wild extremists by most Californians. Democrats have the space to assert a less ruinous and more assertive budget agenda. Starting off by conceding that cuts and not new taxes should be the solution unfortunately doesn’t help them either solve the budget or improve their fortunes  in 2010.

Budget

Courage Campaign’s May 20 Strategy

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I work for the Courage Campaign

With the predictable failure of the five budget propositions, it’s time for progressives to step up and lead the fight to not only fix our budget, but replant the seeds of economic growth, and rebuild confidence in our government.

There are two broad elements of a May 20 strategy – policy and attitude. As President Obama has demonstrated, they must be intricately linked to be effective.

Voters rejected a campaign of fear. They showed they won’t respond to scare tactics. Either they’ll vote no, or stay home. Progressive organizations, like the Courage Campaign, instinctively understand that. We organize to empower and offer solutions.

Despite what some like to claim, progressives have always had an alternative to the May 19 initiatives in mind. The Courage Campaign has proposed a three-step process to fix the state:

1. Majority vote for budget and taxes. The Courage Campaign has been advocating for an end to the 2/3 rule for a long time. Today we’re partnering with CREDO Mobile and the League of Young Voters to offer a Declaration of Democracy for a Majority Vote Budget. It’s time that we brought democracy back to the legislature. We all know that the 2/3 rule prevents us from passing good budgets. But it also undermines public confidence in the legislature, since nobody can be held accountable and since the 2/3 rule produces unworkable compromises that voters immediately see right through.

Some may claim voters are not yet ready to support this change. Some recent polls suggested there are majorities or near-majorities in favor of restoring democracy. More fundamentally, it’s time to build a movement to fix the mess. Courage Campaign doesn’t expect this to happen overnight. That’s why we’re recommitting ourselves to a long-term organizing effort to get this done.

2. Restore responsible taxation of the wealthy and corporations. Some may argue that the public doesn’t support repeal of the 2/3 rule for taxes and budgets. What better way to build public support than show the consequences of the conservative veto than by making a strong push to demand the wealthy and corporations pay their fair share? Besides, one of the key reasons our budget is in crisis is because we have been cutting taxes on those with the greatest ability to pay. This makes state revenues heavily dependent on consumer spending from working- and middle-class people, spending that is volatile to short-term economic dislocation.

California needs to follow the tax policies of President Barack Obama and reverse three decades of giving tax breaks to the wealthy and to large corporations.

Under Republican governors Ronald Reagan and Pete Wilson, the highest income earners in this state paid taxes at a higher marginal rate than they do today. Now, an individual making $900,000 pays the same tax rate as someone making $50,000. Oil companies pay the same property tax rate as an elderly homeowner – and unlike Alaska and Texas, oil companies pay no tax on the oil they extract in California. This is absurd and it must change.

Republican legislators will scream and cry, but will they actually vote no on these popular taxes? If they do, we set up victories in 2010. If they vote yes, we help ease the existing budget mess.

3. Convene a Constitutional Convention. The state needs a broad range of changes to the way its government operates. But more fundamentally, it needs a constructive process to produce those fixes. We’ve gone about as far as the gimmicky special election approach can take us. A Constitutional Convention allows the entire state, whether they’re delegates or not, to engage in a debate about the core issues of how our government should react to a 21st century crisis.

We don’t believe a Convention should tackle social issues or human rights, but if it’s focused on fixing our budget and government, on providing more democracy and participation in the public sector, then we can finally get this state moving in the right direction. Of course, the delegates need to represent the state’s diversity, and voters will rightly have the final say. But it’s better than the status quo, and will help provide a better state.

Finally, attitudes matter. It’s time we got aggressive. Democrats should NOT accept cuts as inevitable. They should NOT assume Republicans are inflexible. The Zombie Death Cult is living on borrowed time. President Obama has shown that Republicans are unpopular and vulnerable. We would be fools to not take advantage of that unpopularity here in California. Remember that Republicans have been in steady decline in both registrations and election outcomes since 1996. We can beat the conservative attack on California – if we realize we’ve had the tools to do so all along.

Below the fold is the email we sent our members this morning.

Dear Eden —

It’s the day after. How are you feeling?

About yesterday’s special election in California, that is.

Angry? Sad? Depressed? Apathetic?

You have good reason to feel all of the above — this special election resolved nothing. California still faces a massive budget deficit. And, try as they might, our state legislators will likely fail to close the gap because the system in which they operate is inherently dysfunctional.

This election wasn’t about taxes, despite what the right-wing noise machine wants you to believe. The reality is that Californians rejected a broken government — the failed system that forces our state legislators to call special elections in the first place.

The legislature cannot do its job because unlike 47 other states, it cannot make budget decisions by a majority vote. As a result of the ridiculous 2/3rds requirement for passing a budget, a small cabal of right-wing Republicans hold California’s budget hostage year after year after year.

Government fails when it isn’t democratic, as the 2/3rds rule repeatedly proves. That’s why the Courage Campaign, CREDO Mobile and the League of Young Voters are declaring today that it’s time to bring democracy to California’s broken government. We’re calling it the “Declaration of Democracy” and we need your support to make it a success:

DECLARATION OF DEMOCRACY: Budgets and taxes should be approved by a majority vote of the legislature

Are you with us? If you support this declaration for a Majority Vote Budget, please join us by signing your name to it now:

http://www.couragecampaign.org…

Despite what defenders of the rule requiring a 2/3rds vote to pass a budget or find new revenues claim, the rule does nothing to promote collaborative solutions. All it does is force the legislature to make bad deals that make the state’s crisis worse. The ballot measures that voters rejected yesterday were a typical product of the 2/3rds rule. Only small states like Rhode Island and Arkansas have a similar rule.

California is suffering because the right-wing uses the 2/3rds rule as a conservative veto to block progressive change, to create a regressive tax structure, and to prevent us from meeting social needs and rebuilding our economy. That’s not fair and that’s not democratic.

It’s time for immediate solutions and long-term reforms to end our budget mess. That’s why, starting today, we will:

Press for adoption of a Majority Vote Budget to close the existing deficit.

Demand that California’s wealthy and corporations pay their fair share of taxes to help protect our teachers, our students, our elderly and our sick.

The Courage Campaign, CREDO Mobile, and the League of Young Voters are teaming up to ask you to add your name to this Declaration of Democracy for a Majority Vote Budget. Are you with us?

http://www.couragecampaign.org…

This is just the start of our campaign to fix California. Thank you for helping us restore democracy to our state.

Rick Jacobs

Chair, Courage Campaign

Budget

California Bailout Talk Ramps Up

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As we prepare for the inevitable yet welcome defeat of at least 5 of the 6 propositions on today’s ballot (come on No on 1F!) talk is growing of federal aid for California’s budget mess. Of course, had the US Senate not gutted the state stabilization funds in the stimulus bill we might not be in this mess, but hey, Olympia Snowe and Arlen Specter had to be appeased! Ezra Klein, himself an Orange County native, offered his take on a “bailout”:

As a Californian, I find this argument comforting. But as a Californian, I find the need for this argument extremely troubling.

California, which like many other state and local governments is still experiencing extreme budget problems, has an economy larger than all but about 10 countries. Even without the actions that the federal government has already taken to provide corporate bailouts, there is little likelihood that Washington, D.C., could or will allow a default in the municipal bond market to occur in the current economic and financial environment. In fact, through the stimulus bill and other actions, the federal government has already taken a number of steps to make that less likely.

…That said, a lot of companies that proved too big to fail weren’t too big to change. Wall Street was given compensation caps. GM had to renegotiate its labor contracts. If Washington is going to bail out the Golden State, it should make the money contingent on structural reforms that leave the state better able to balance budgets in the future. This should be like an IMF intervention (maybe Simon Johnson has some thoughts?).

California’s legislature is in a strange position: It needs a two-thirds vote to raise taxes but also has to fund ballot propositions that require a simple majority of an uninterested public. The majority party in the legislature, in other words, can neither control how much money it raises nor how much money it spends. That’s not a sustainable state of affairs.

As I’ve been writing about here at Calitics recently, this is not a far-fetched possibility. It is entirely possible that DC could use this as leverage to force Arnold to accept a majority vote budget. There’s no legal way for the federal government to force our Constitution to change, but as with most forms of federalism post-1933, the power of the purse is usually sufficient.

What concerns me much more is Ezra’s comment “this should be like an IMF intervention.” The sad irony is “IMF interventions” themselves were invented to deal with a default of an American government – in this case New York City in 1975. Lots of folks remember Gerald Ford’s famous “Ford to City: Drop Dead” moment where he refused a federal bailout for NYC. Few know the follow-up to that story, where the bondholders took Milton Friedman’s theories for a test drive. They demanded and received massive cuts to social services in exchange for renegotiating the city’s debt. The successful model was then used on Mexico, Argentina, and many other countries.

We’ve seen workers crammed down in the auto bailout and seen homeowners get screwed in the bank bailout. I am not confident that a federal bailout of CA would avoid similarly nasty outcomes.

From what I can tell the most likely outcome is something less than an outright “bailout” that could stabilize things for a little while, but not solve the deeper problem. Congress is likely to come up with some solution by which the Treasury backs California’s short-term Revenue Anticipation Notes. That might be enough to avert a near-term cash crisis. It won’t be enough to right the ship.

Of equal importance is the upcoming fight over the stimulus rules. It is critically important that the Obama Administration refuse to bend those rules. Republicans are already demanding that we be given a waiver from the rules in order to make massive cuts to social services and education, cuts that were forbade as a condition of accepting the stimulus.

Otherwise Arnold Schwarzenegger’s efforts to play the role of Fernando de la Rúa will come to fruition. And that’s the last thing we want.