Robert’s been the shock doctrine expert around here, but I can spot a well-considered plan when I see it.  The basic principle behind how to get a shock doctrine done, and move the state away from providing services, is to create some sort of emergency, say that we have to do X and Y, or else.  Our current situation certainly gives us the “or else” component of that.  In truth, much of the shocking was already completed, mostly by majority votes by the Democratic members of the Legislature and our Democratic governor.

But all that majority stuff is short-term, and can be reversed.  When you play for keeps, you have to think long-term strategy.  But you can’t just come out and say that we are hoping to shock the system. No, you have to create a “coalition” that wants to “bridge the divide” between the parties.  It would probably be headed up by some business organizations, and they might even call for tax increases.  Of course, there’s always a catch…

A business coalition pushed Wednesday for a grand state budget compromise that essentially merges Gov. Jerry Brown’s budget and GOP demands for long-term pension and spending controls.

The group of 12 — which dubs itself the Coalition for a California Financial Workout Plan — said voters should be allowed to decide on tax extensions as well as permanent fixes that address the “underlying conditions that got California in trouble.”

Members include the Silicon Valley Leadership Group, Los Angeles Chamber of Commerce, Bay Area Council and Sacramento Metro Chamber.

The coalition outlined a “Five-Point Plan” that includes tax extensions, a long-term spending control, reductions to public employee pensions, changes in the California Environmental Quality Act and a shift of responsibilities to local governments. The group also suggested that state leaders address abuses in redevelopment agencies and enterprise zones without eliminating them.

“We urge the Governor and the Legislature to respect voters and taxpayers by giving us an honest budget plan by June 15th, along with a structural reform plan that puts California back on the right track,” the letter concludes. “That’s a workout plan we are willing to support in the ballot booth.”(SacBee)

See now, isn’t that convenient.  The business groups get pretty much everything they want, most of which were the strings the Republicans had been dangling.  And in reality, they didn’t want to see the end of the taxes, because that would hit them pretty hard as well.  So, huzzah for business groups.

But not so huzzah for the rest of us.  Rather than addressing each of these issues independently, we have to slam them all together when the Republicans have leverage.  It’s just a repackaged ransom note, but this time there’s a nice bow on top in the form of the seal of approval of some business organizations.  But let’s take a look at this Ransom 2.0:

1. Spending Control – Spending control is poor planning in disguise.  While our spending has increased by a few percentage points over the last 30+ years, we are still looking at spending a lower rate of GDP in California than we’ve done for a generation.  Here’s the thing about spending, as we develop, and as we improve, we should be providing better services.  We shouldn’t simply settle for what worked last year.  Twenty years ago, we didn’t need a bunch of computers in every classroom. Now we do. I’m not calling on us to spend every penny we get, I think a rainy day reserve fund is a terrific idea (check out SF’s!).  But you achieve budget stability through long-term planning and stability, where the people and their representatives (not a super minority) can reasonably plan for the future.  And hopefully we can provide better schooling and park services for Californians every year.  We’re Californians, We’re Americans, we shouldn’t just settle for standing still.  If you wanted real reform, you’d call for true majority government.  Heck, maybe even demand a 5 year budget outline with some specificity, but a hard cap is simply DOA.
2. Pensions – Gov. Brown has already proposed a pretty robust pension reform plan.  And while the discussion can be tough, that’s a good starting point.  Let’s have the discussion, and work something out.  But let’s do it the right way, not through some rushed budget process.
3. CEQA – Again, let’s have that conversation, but that isn’t the budget, and shouldn’t muddle budget negotiations.  CEQA has served us well in the past, but perhaps we want to tweak it here or there.  But we must avoid throwing out the baby, as well as dirtying up the budget bathwater.
4. Realignment – Well, um, this is pretty much what the Governor has been proposing all along.
5. Redevelopment and Enterprise Zones – It’s pretty convenient how this comes back up again in the context of a business coalition.  After all, while there are some very good redevelopment projects, it’s hard to get boondoggle funds without the redevelopment agencies.  There might be new ways, but the agencies are just so, umm, there.  Now, it’s probably a bit unfortunate that we are killing them entirely.  But, really, something has to go, right? Right?

So, what have we got here? Well, not a whole lot new, just another brick along the road…

The White House

1600 Pennsylvania Avenue NW

Washington, DC 20500

Re:  California

Dear President Barack Obama and First Lady Michelle Obama:

Good evening, I’m sure you get hundreds of these per day, pleas to intervene via policy and politically to mitigate horrible situations.  Especially from those who live on the gulf.  I grew up in that region myself and feel terribly for those who live there still.  

Now I live in Sacramento and work as a state employee – general counsel to an agency within California state government.  I just learned that Governor Schwarzenegger and his staff decided to order pay cut to the minimum wage for all California state employees.  Which, because of the FLSA, means no payment whatsoever to attorneys.

I am in my fourth year of practice and graduated with $150,000 in undergraduate and law school debt.  I put myself through UC Berkeley and Pacific McGeorge School of Law, working part-time through all seven years of school.

My wife is a third-grade teacher at a charter school in Natomas, an ethnically diverse school district within the City of Sacramento.  Her students have improved during each of the four years she has taught there and the parent board decided she should be certified as a teacher for the gifted and talented.  Abigail is in her fifth year of teaching – the first was spent in a moribund, bureaucracy-bound school district that is now on the verge of bankruptcy.   She didn’t fit in.  

She graduated with only about $15,000 in educational debt because of the generosity of her father, a long-time employee of the City of Los Angeles who was able to buy a house for his family of four in Los Feliz, near Chavez Ravine.  They were also able to buy another house in Santa Rosa in the North Bay Area in which they are now retired.  Howard and his wife DJohn Jr.tha live on one pension and one social security check along with some income derived from savings during his career.

I contrast that with the situation my wife and I now face.  Two salaries barely make ends meet.  And, unlike many of my co-workers, our salaries are well within the definition of “middle class.”  

But our house is 54% underwater ($160K upside down).  Yet, we pay our mortgage every month although now I suspect we may file for bankruptcy.  State workers exhausted any savings cushions they may have had during the last 18 months of furloughs.  Even with the 15% percent furlough wage cut ($1,000 per month) that the Governor has improperly withheld from my checks for the last 18 months.  

We also have a 14-month-old baby boy.  Well, a toddler really which means we get to incur another $900 per month bill for daycare on top of the lost furlough money.  

Moreover, I’m not sure that California is a state in which I want John Jr. to grow up.  But my mother grew up in San Diego and my wife is a California native.  And my law license lacks reciprocity with any other state so I’m invested in trying to help California (or studying for another bar exam).  And by helping California, helping my family (and avoiding the aforementioned bar exam).  I forgot to mention the school district Abigail works for, like many school districts across the state, faces near term bankruptcy.

You likely know that Meg Whitman, a corporate shill who wants to abolish government, is the Republican Candidate for Governor.  And that our party is running ex-Governor Brown.   Ms. Whitman has already spent approximately $91 million dollars trying to buy the office in which a political notice who has wreaked havoc on the state trying to bully his way into a legacy rather than work with the diverse stakeholders who make up the state.

Ms. Whitman would be, in the parlance of your last campaign, “more of the same.”  California cannot afford another 4 years of political posturing and angry ranting from an ego-maniacal, unethical, individual.  Governor Brown, although certainly not the shining star of our party we were hoping for, is inestimably better than the alternative as he knows how government works, its place in the scheme of our society and is ethically beyond reproach.  I’ll take that after more than 7 years of dysfunction.  The state is broken; but not beyond repair.

But we are tired.  Tired of fighting to keep our heads above water financially.  Fighting to keep our student loans current.  And our mortgages.  We’d love to replace my wife’s 1990’s era Civic with a newer car but we can’t afford a monthly payment on a used car, even with a low rate from our credit union.  The safety advances alone make it a worthwhile purchase but one long-deferred.

Struggling to find time, with two parents working in public service, both with graduate-level educations, to raise our child and to volunteer in our community.  Wishing that we had the money to take a vacation or to enjoy the many three-day weekends of the last 18 months, the sole benefit of the Governor’s illegal furlough program.  

And we fight on.  To satisfy our financial obligations, charging those necessities that our salaries won’t cover.   Eventually we hope the California courts will restore our lost wages with interest, as that would just about offset the debt we’ve accrued.  We now face losing more than half of our combined monthly income due to the Governor’s latest payroll order.  That order will push us over the edge.

You could help in two ways.  One in your capacity as President of the United States and one in your capacity as the leader of the Democratic Party.  

In your official capacity you could assist approximately 240,000 California state workers by asking the Department of Labor to intervene in the litigation pending in several state appellate courts, including the state Supreme Court and to issue an opinion letter on the Governor’s proposal to cut all hourly workers to minimum wage and all exempt workers to either the minimum salary-basis test of $455 week or to zero (for doctors and attorneys as they are not subject to the salary-basis test of federal law).  

In your capacity as the leader of our party, perhaps either yourself or your lovely First Lady could visit our once-Golden state to campaign on behalf of Mr. Brown.  He needs help to beat back Meg’s attempt to make an outright purchase of the Governor’s office and its attendant powers.  Which I’m sure she would use to undermine the nation’s recovery at every opportunity.  Perhaps not intentionally but that would be the certain effect.

All the Best,

John Adams

P.S.  Apropos of absolutely nothing, I volunteered for your campaign as a poll-watcher on election day in Nevada.  Glad we won there.

Cc: Senators Feinstein and Boxer

Congresswoman Matsui

I suppose the only good news to come out of last night, and indeed this entire cycle of budget nightmares, is that we are not alone.  Several other states missed their fiscal year deadlines.  Illinois has no budget and no plans to enact one; Pennsylvania may not be able to pay state employees due to a failure to reach agreement; Arizona got a budget in under the wire, but the Governor has not indicated whether or not she’ll sign it, because it doesn’t include a sales tax increase she sought; Ohio approved a temporary 7-day budget as legislators continued to wrangle; Mississippi left their utility regulatory agency unfunded; Connecticut’s Governor signed an executive order to keep the government running despite no budget.  We can take little solace in these difficulties other than to note that the national erosion of tax revenues combined with balanced budget agreements make the situation almost impossible for many states, particularly the large ones, and because of the threat to any economic recovery that would result from massive reductions in state spending and services, the door may crack open for a second federal stimulus package that specifically targets state budgets.  I don’t think we’re quite there yet, but the crisis reaches a whole new level starting today.

First of all, this is the first day that budget cuts from the previous agreement in February take effect for fiscal year 2009-2010.  These include major reductions in health and human services:

SSI/SSP grants for low-income seniors and people with disabilities will drop by 2.3 percent, cutting the maximum grant for an individual from $870 to $850 per month. A previous SSI/SSP grant cut took effect in May, reducing maximum monthly grants for individuals from $907 to the current $870.

CalWORKs grants for low-income families with children will be cut by 4 percent, reducing the maximum grant from $723 to $694 per month (the same amount as in 1989) for a family of three in high-cost counties. CalWORKs grants have been frozen since 2004-05.

Dental services for most adults in the Medi-Cal Program will be eliminated along with seven other benefits, including eye exams and incontinence creams and washes. (Last week, a trial court judge in Sacramento County ruled against a group that sued to stop the cuts from taking effect.)

Grants on those who make the least are the most stimulative to an economy, because that money gets spent quickly.  Now it’s drying up.

Of course, there’s also the matter of the still-yawning budget gap here in California, which just got $7 or $8 billion dollars larger, depending on your math.  This means that even more damaging cuts, likely to the most vulnerable elements of society, will ensue, leading to another wave of job loss, foreclosures, and pain.  The Governor and Senate Republicans are completely responsible for that addition to the deficit – consider that $7 billion is MORE than the money at stake to the near-term budget in the May 19 special election – and for the issuance of IOUs, which will add billions in unnecessary interest obligations.

In a nutshell, under the governor’s IOU plan the state pays vendors and others it owes with the equivalent of a post-dated check that is good for the face value of the amount owed plus interest. IOU recipients, for the most part, “sell” their IOUs to a bank for the face value of the check for quick cash. The bank holds onto and then redeems the IOU at a later date, earning millions of dollars in interest.

This type of borrowing is nothing like pulling out the state’s credit card to pay the bills. Rather, this is more like the state going down the street and getting an expensive payday loan.

The Governor’s payday scheme not only makes California the laughingstock of the credit markets, but it unnecessarily puts a black eye on the state’s long-term credit rating.

This means that, for years to come, millions of taxpayer dollars get shoved into the pockets of Wall Street bankers every time we issue long-term debt to build schools or roads, or other needed public projects.

Somewhere in the neighborhood of $6 billion dollars in additional interest alone will be added to the cost of selling bonds that voters have already approved.

Of course, by that time, Schwarzenegger will be out of office, so what does he care?

Harold Meyerson has the must-read of the day about this disaster, pinning the blame where it needs to go – on shock-doctrinaires like the Governor who demand to use this crisis to destroy the public sector.  Read the entire thing, but here’s an excerpt:

Right-wing ideologues see the crisis as an opportunity to shrink government regardless of the consequences. Schwarzenegger is proposing to end welfare, not just as we know it but altogether, and to throw 1 million children off the rolls of the state’s healthy families program. But the consequences of closing the deficit simply through cutbacks will be felt by more than the poor. Already reeling from $15 billion in cutbacks that the state put through in February, many school districts, including that of Los Angeles, have canceled summer school this year. Scholarships that enable students of modest means to attend California’s fabled university system have been slashed. Most of the state’s parks may have to be closed as well.

The terrible irony in decimating the public sector to save the state is that the California that was the epicenter of the postwar American dream was fundamentally a creation of government. Fighting a Pacific war during World War II compelled the federal government to spend billions on California industry and infrastructure, and the state was the leading beneficiary of Pentagon dollars during the Cold War. As Kevin Starr, California’s leading historian, points out in “Golden Dreams,” his brilliant new history of the state in the 1950s and early ’60s, fully 40 percent of all defense dollars for manufacturing and research in 1959 went to California, anchoring the state’s booming economy in a well-paid workforce that was either unionized or professionalized, and seeding an electronics and high-tech sector that was to blossom in the following decades. Building on that prosperity to create more prosperity, Earl Warren, Goodwin Knight and Pat Brown — two Republicans, one Democrat — invested state dollars in schools, universities, freeways and aqueducts that were the best in the world. The Golden State was never more golden.

Today, its governor seems determined to turn that gold to dross. On Monday, the Democrats in the legislature passed a budget that included cuts of $11 billion, levied a tax on oil companies and tobacco, and raised auto registration fees by $15 per car to keep the state parks from closing. Schwarzenegger reiterated his refusal to raise any taxes or fees and said he would veto the budget.

There’s still a chance to avoid IOUs, though I wouldn’t call it likely.  There is no chance to avoid the devastating impact of a broken political process and irresponsible legislating which at this point can only slide California into depression.

I’ve been hearing the California crisis, and the Governor’s response, referred to as a kind of shock doctrine, used to transform the state’s social safety net and radically alter the lives of the poor and downtrodden.  And that’s entirely true.  But not necessarily through the budget cuts, which have met fierce opposition from Democrats and the nascent activist progressive movement.  No, the real shock doctrine is happening behind the curtain, with a proposal engineered with bipartisan support, that will really permanently turn the state into an experiment in Chicago Boys free-market fundamentalism, not unlike the conservative “paradises” created in developing nations, all of which are crashing, by the way.

Last year, the Governor and legislative leaders put together the Parsky Commission, a classic blue-ribbon panel led by Gerald Parsky, a right-wing investment fund manager and professional hack who has consistently been put to use by Republicans in Sacramento and Washington to carry out their radical plans.  He was George Bush’s California campaign chair in 2000 and 2004.  The idea behind this one started from a decent premise – California has a taxation problem, and needs a study group to look into how to reform it so that it’s better equipped to handle boom-and-bust economic cycles.  Supposedly, all ideas – including Prop. 13 – would be “on the table” from this commission, which would seek a more stable solution.

Of course, the fix was in from the start.  Because this panel respected the 2/3 requirement for raising taxes, it sought revenue-neutral solutions, tinkering and shifting the tax burdens rather than reforming them.  So predictably, the end result is a proposal that broadens the tax base while shifting the burden downward onto the lower and middle classes while relieving the wealthy.  The Governor’s Chief of Staff tipped her hand about this previously when she said that the problem with California’s tax structure is that it’s too progressive.

Some of the Commission’s proposals, like broadening the sales tax to include services in addition to goods while lowering the rate overall, make a bit of sense.  But the rest of it is pure right-wing fantasy:

At the 14-member commission’s penultimate meeting in Los Angeles June 16, its members appeared to narrow its potential recommendations, due July 31, to two proposals.

Both would lower the top income tax levels and, in one case, eliminate the state’s corporate tax and the portion of the sales tax pocketed by the state.

Under one proposal, what the commission refers to as Tax Package 1B, all Californians would pay a 6 percent income tax rate. The state’s wealthiest residents currently pay 9.3 percent with lower percentages as earnings fall.

The effect of the proposal would be to increase the taxes on Californians earning less than $100,000 to broaden the tax base.

The state’s 8.8 percent corporations tax would be eliminated, as would the 5 percent of the sales tax the state retains […]

A new “business net receipts” tax makes up for much of the lost revenue from the sales and corporation tax eliminations.

“Business net receipts” taxes are essentially a value-added tax.  And one estimate predicts that it would take in $28 billion dollars annually.  But everything must be revenue neutral, so in a time of crisis, the Parsky Commission would go to a FLAT TAX and eliminate the corporate tax rate, as well as possibly cutting the capital gains tax.  It’s impossible to see this as anything but a giant wealth transfer from the rich to the poor.  Simply impossible.

Useful idiots like the folks at Calbuzz prefer not to actually take sides on an issue when just splitting the difference between left and right automatically provides the best practice every time.  Their somewhat illuminating article about all of this betrays a bias toward that wise “sensible centrism” that ends up orienting toward crazed right-wing solutions every time.

The political play is to produce a tax reform bill so clean it can be introduced in both houses with assurances no one will be allowed to bog it down with amendments.  Democrats will be able to avoid drastic program cuts and Republicans can claim they’ve cut taxes.  The bill breezes through both houses on an up-or-down vote and bada bing it gets signed by Arnold and everybody goes to dinner.  No muss, no fuss, no partisan fingerprints […]

Getting a consensus recommendation from the commission, which includes conservatives like former Reagan economic adviser Michael Boskin and liberals like Santa Cruz County Treasurer Fred Keeley is by no means guaranteed. Even if commissioners do agree, their proposal will be fly-specked by lefty groups who will dislike elements that are not progressive, and industry groups, who will push for business-friendly changes.

As a political matter, forcing an up-or-down vote on a package in the Legislature would address what-about-me objections from all quarters, in the same way as the prohibition on amendments to congressional legislation produced by the military base closure commission in the 1990s finally solved that intractable problem. (Or like a Pete Wilson-Willie Brown deal from days of yore in Sacramento.)

After all, the impending bankruptcy of state government should be sufficient to show players at every point of the political spectrum not only that sweeping change is needed, but also that everyone will have to compromise to keep California from sinking into the 9th Circle of Hell.

This is “the midpoint between two points always works best” pop politics masquerading as serious thought, and what else would you expect from a duo who can spin a whole article out of a picture of two politicians smiling.  Somehow, “lefty groups” arguing against the literally insane idea of a flat tax has the same moral and intellectual equivalency of business groups trying to wiggle out of a way to pay their taxes.  A flat tax would very clearly shift the burden of taxation to the middle class, and practically every taxpayer would actually see their tax burden increase except the few at the top.  But because we’re in crisis, and everyone will have to “sacrifice,” surely we should ram through a right-wing fantasy, turning California into Latvia, Estonia and Lithuania, all of whom have flat tax systems.  How’s that working out for them?

Over the last decade, Eastern European countries became darlings of the far right by instituting free-market economic policies designed to break convincingly from their Communist past. The so-called Baltic Tigers-Latvia, Lithuania, and Estonia-garnered worldwide plaudits for a number of free-market reforms, led by the imposition of a flat-rate income tax, especially from the American right. “The flat tax is making a comeback,” trumpeted the conservative National Review. The three nations are “leading a global tax reform revolution,” said the right-leaning Heritage Foundation […]

Too bad for them that it hasn’t worked out. Latvia, which has a flat tax of 25 percent, and Lithuania and Estonia, which have 21 percent tax rates, are all in deep economic trouble. They all have huge government budget deficits, a sign that they took in too little in tax revenue to cover their costs, primarily state expenditures to provide a generous welfare state. Conservatives might argue that they didn’t slash welfare benefits enough, but there is no dispute that the flat tax didn’t provide the expected revenue.

This is the future that would be put into place – with a no-amendment, up-or-down vote – under the Parsky Commission.  Somehow, the elected legislature of the people cannot be trusted with tax law, but an unelected, unaccountable blue-ribbon commission should be empowered to create this radical change in law with no public input.  That’s the wise and sensible solution.  Because we can’t have all this messy “democracy” mucking up the need to protect the rich and transfer wealth downward more radically than any proposal ever seen in America.  California Budget Bites has more.

It’s important to note that this all stems from the revenue-neutral demand embedded in the proposal.  Otherwise, it could never pass because it would need a 2/3 vote.  So somehow, a flat tax, elimination of corporate income taxes and slashing of capital gains taxes get thrown into the mix, something that nobody outside the fringe far right would ever endorse.  The 2/3 rule, AGAIN, prevents a real solution.

If you wonder why I oppose a so-called “bailout” for California, it’s because in addition to everything else, that attacks the wrong problem.  We need a major restoration of democracy in the state, and instead we get “solutions” that don’t reflect the desire of the citizenry.  That’s why only a local grassroots movement to finally remove the structural barriers, not a one-time cash infusion, will work.

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.

(I’ll be on the Bay Area’s Green 960 tonight with Angie Coiro to talk about the budget mess. I should be on around 7:15. You can stream live here. – promoted by Brian Leubitz)

After a few failed attempts at a vote on the most recent majority vote package, the Governor is threatening a veto if he doesn’t get some “stimulus.” By way of explaining what the Governor’s words really mean, please just replace the word “stimulus” with “screw California’s workers.”  After all, it’s not like Schwarzenegger thinks we can give some sort of tax break or anything, no he’s talking about cutting overtime to employees, allowing shorter breaks, and generally taking a machete to worker’s rights in this state.  So, you know, we’ll be “stimulated.”

Both houses of the Legislature attempted to get a vote done last night, but that was pushed back to this morning:

Both houses of the Legislature were to convene this evening to vote on a new Democratic budget plan that raises taxes without two-thirds votes but the sessions were delayed as legislative leaders negotiated for a signature from Republican Gov. Arnold Schwarzenegger.

Schwarzenegger reportedly was demanding concessions from Democrats on regulatory and labor laws that business groups have been demanding – changes that the Democrats’ allies in labor and environmental groups strongly oppose. (SacBee 12/17/08

This really is a strange situation, the Governor knows that he has a bit of leverage on this with the Legislative Republicans out of the picture, so he’s back to his right-wingish self. Attacking labor and quietly expanding the Chamber of Commerce’s stranglehold over the Horseshoe, he really is getting a knack for this. And yet, the situation is such that negotiation on these terms is mandatory, despite the fact that Arnold’s ridiculous “Car Tax” BS caused all of this.  Shock Doctrine anyone?

Meanwhile, Tony Strickland, showing his true stripes, has got the Howard Jarvis Taxpayer’s, and other assorted rightwingers all ready for a lawsuit against the proposed deal. If you happen to be in the Capitol, check out their presser this morning at 10 in Room 4203. If this gets a signature, we will surely see a lawsuit about 3 seconds afterwards. And no amount of Arnold cozying up to Jon Coupal on Prop 11 will avoid that.

UPDATE: Shane Goldmacher is reporting that Speaker Bass thinks the Governor will sign the bill as revised.  The bill includes some, but not all, of the Governor’s “stimulus” ideas.

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

George Skelton holds Arnold responsible for the worsening political climate in Sacramento in his column in today’s LA Times:

Overrides of any bills are humiliating and extremely rare — the last one was 29 years ago when Jerry Brown was governor — and generally are regarded as symptoms of gubernatorial weakness.

Schwarzenegger has vowed to retaliate by vetoing “hundreds of bills” passed by the Legislature in the closing days of its session, measures close to many lawmakers’ hearts.

At that point, the Capitol would be heading into nuclear winter.

But rather than write the easy column – blaming everyone for the crisis and calling for some moderate solution – Skelton digs deeper and takes Arnold to task for his posturing and particularly his tendency to increase his demands once the Legislature has given him what he wants:

And what’s this all about? Besides the governor trying to escape any blame for a bad budget and position himself standing up to an unpopular Legislature?

The state already has a rainy day fund. The Legislature agreed to increase it significantly and to transfer into the pot unexpected “April surprise” revenue exceeding 5%. The dispute is over when and how the money can be extracted from the fund. At least, that was the dispute.

Democrats agreed Wednesday to Schwarzenegger’s demand that the fund be tapped only when the state is collecting insufficient money to pay for current services, according to one source familiar with the negotiations. But then Schwarzenegger — seemingly itching for a fight — asked for more.

It’s clear to me what’s happening here. Arnold took one look at the Field Poll that showed 15% approval for the Legislature and decided now was the time to play hardball. Knowing that legislators would not be interested in prolonging budget fight that causes Californians suffering so close to an election, he is pushing hard, shock doctrine style, for his right-wing reforms.

The Legislature has its share of blame for this crisis – Republicans who used the 2/3 rule to hold the state hostage are the prime culprits here – but Skelton is right to refocus our attention on the role Arnold has played in helping break California’s government at a time when strong, decisive government action is needed to save us from the economic abyss.

Of course, the problems with our government are structural. Perhaps it’s time for more fundamental forms of change – changes to the way our state’s government operates. We can’t keep doing this any longer.

The “emergency cuts” discussed here yesterday are expected to pass both chambers of the legislature today and go to Arnold for an expected signature. Education, public transit, and health care face the bulk of the cuts, but most of the plan involves “creative accounting” to defer certain expenditures to the 2008-09 budget year, stabilizing the state’s cash flow for the remainder of the 2007-08 year.

That leaves the big fight – the “big kahuna” as Fabian Núñez called it – for the 2008-09 budget. Unfortunately, Núñez is already trying to prepare Californians for acceptance of the Republican frame on the budget, that it must be closed through cuts. As quoted in the Bee article linked above:

“This is just the icing on the cake,” said Núñez before the committee vote Thursday. “What’s coming in the budget year are devastating cuts.”

Núñez has spoken of a 50-50 split between new taxes and cuts to close the budget, but these are  not necessary. In fact, no cuts are necessary. The California Tax Reform Association has identified $17 billion in potential new revenues that would help ease our budget crisis, without firing a single teacher, denying health care to a single child, or closing a single state park. When I mentioned to Steve Maviglio that the yacht tax loophole closure wasn’t a big deal he claimed that the 2/3 rule blocked more useful tax measures.

But what he hasn’t considered is that 2/3 can still be achieved, even for tax hikes, even when you need Republican votes to get it. You have to force the Republicans to vote for it. Back them up against a wall, with a massive public campaign. Already teachers are mobilizing public campaigns to fight the cuts, and over the next few weeks, a coordinated campaign could push the Republicans into a corner where they either have to insist on unpopular cuts and thereby risk their seats in the November election, or go along with a mostly-taxes budget solution.

How do we know this would work? It’s what Republicans do to Democrats all the time in Sacramento and DC.

When Núñez says instead we should prepare for “devastating cuts,” he is kneecapping these efforts to provide public unity and to educate the public as to why our revenue shortfall has led California to economic crisis. No Democrat should EVER be telling the public we might need budget cuts, certainly not at the outset of what will be a long fight. What is needed most is unity and mobilization, and the only way you accomplish that, as Dave Johnson agrees, standing together and articulating progressive solutions – not parroting right-wing spin.

As I’ve argued before, Arnold is trying to “shock doctrine” us on the budget – create a crisis that is actually the vehicle for pushing through radical changes we would otherwise never accept. As Naomi Klein as well as the WGA have pointed out the only way to resist the shock doctrine is to stop speaking in a language of crisis, start speaking instead in a language of unity and determination to build a better future, and to actually remain united in the face of those trying to divide you.

It’s time that Sacramento Democrats understood this. They have a golden opportunity to both reverse 30 years of decline and to benefit at the ballot box by doing so. But if they insist on accepting the Republican frame that spending cuts  must be the primary method to close the deficit, they’ll accomplish neither.

As you may have noticed from recent posts, I’m a big fan of Naomi Klein’s new book The Shock Doctrine. It’s one of the best books published this decade, and provides perhaps the best overview of the last 30 years yet offered. Her argument is essentially this:

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. It could be a war. But the idea, as you just saw in the film, is that these crises, these disasters, these shocks soften up whole societies. They discombobulate them. People lose their bearings. And a window opens up, just like the window in the interrogation chamber. And in that window, you can push through what economists call “economic shock therapy.”

She also links this to torture – quoting from CIA interrogation manuals that explain how the application of shock can open a window in which the subject is weakened and suggestible, a window that torturers or free market economists can use to push through a radical agenda that might otherwise be resisted. This works on individuals, societies…and labor unions.

It’s in this context that two recent posts from the United Hollywood blog should be understood. In it, they explain the basics of management, union-busting strategy – that a successful anti-union strategy relies on precisely these tactics of terror, disorientation, and shock to destroy worker solidarity. That the writers appear to understand this could give them a powerful advantage in their ongoing strike, and these insights not only suggest how unions can win, but how the shock doctrine and union busting are inextricably tied together.

Details over the flip…

First is a post excerpting an e-mail from Tim Lea regarding AMPTP strategy:

The AMPTP strategy…is to gain control over ‘New Media’ by breaking the unions. First us, then the rest. Then the Internet will be a non-union town.

In his book Confessions of a Union Buster, Martin Jay Levitt details the techniques he learned in his many years attacking unions. A key element is the demoralization of the union members during any industrial action against the company. Taking away people’s hopes, their aspirations for a quick resolution to any labor dispute – that was Levitt’s job. “If you can, make the union fight drag on long enough, workers…lose faith, lose interest, lose hope.”

According to Robert Muehlenkamp, an SEIU Local 1199 organizer at Harper Grace hospital in the 70’s, where Levitt was hired to consult management:

“Union busters wield great power through a program of terror and manipulation – people don’t, can’t possibly know what’s going on and who’s telling the truth…. The first time this happens to regular people, they’re terrified.”

And terror is the goal. The union buster hopes to control employees by employing terror.

This is, of course, precisely the situation we find ourselves in today. We are the example that is being used to intimidate the other unions. The studios want the actors, the directors, the Teamsters, IATSE, all to look at our struggle and see us lose. See us fractured and divided. With the hope that they will be frightened by what they see, and accept whatever deal the studios offer.

The emphasis is mine, and it reminds me EXACTLY of what Naomi Klein is describing in the shock doctrine. Terror and manipulation…”the first time this happens to regular people, they’re terrified” – that is the exact phenomenon that Klein believes has been repeatedly employed over the last 30 years to push through radical neoliberal economic policies. Whether it was Pinochet’s coup against Allende, the September 11 attacks in the US, the collapse of the Soviet Union, or Hurricane Katrina, the result is the same – societies are terrorized because they are experiencing something alien, frightening, something they never expected they’d face.

WGA West Board of Directors member Tom Schulman provides details about how union busters employ the shock doctrine in negotiations in a post, also from yesterday, in which he took copious notes from a chief negotiator for management in another sector of the entertainment industry:

Tactics:

* Lower the expectations of the other side, divide and conquer.

* Raise and lower the expectations of the other side, divide and conquer.

* Do everything possible to destroy the credibility of the other side’s leadership, divide and conquer.

* Use confidants and back channels to go over the heads of the stronger leaders to the softer targets. Divide and conquer.

* When you figure out the other side’s bottom line, offer a fraction. It’s surprising how many times that stands.

Sound familiar? If you examine the recent “leaks,” comments, and press releases from the other side, you’ll realize this is exactly the strategy the Companies are employing against us today. And why not? It’s worked for them for the last 20 years! They are putting us on an emotional roller coaster by raising and lowering our expectations, attacking our leaders, trying to pit the town against us, refusing to move on the issues that matter to us, bragging about their generosity when the opposite is true, fear mongering and claiming we’re going to ruin this industry – hoping we’ll splinter, lose faith in and attack each other, negotiate against ourselves, and cave.

Again the emphasis is mine, and hopefully you can see what I saw – a link to the “terror and manipulation” described above. These negotiating tactics are primarily designed to shock the rank and file, and the coaliton that supports the strikers. The act of rapidly raised and dashed expectations, of dramatically dividing workers and coalition partners, are all aimed at producing a moment of shock that will allow management to gain the upper hand and conclude negotiations on favorable terms – or to break the union entirely.

Schulman went on to write:

But this time, in every way possible, we must let them know we’re on to them and their strategy won’t work. We understand their game, our solidarity and resolve are greater than ever, and we’re going to stay strong – and reasonable – until we get a fair deal.

And sure enough, soon after Schulman’s post, Carlton Cuse – showrunner for Lost – came along to put to bed rumors that he was going to break solidarity, instead announcing he was ceasing any and all work on his show to stand in unity with the writers.

The key to beating the shock doctrine is to understand what is coming, to not let a disorienting event damage your unity and defense of your values, and to understand that the shock always wears off. As long as the writers do those things, they will have that much better a chance at victory in what will still be a long and difficult struggle – and perhaps point the way forward for the rest of us.