Calitics - Front Page

The California Problem

Robert Cruickshank — Mon, 06 Jul 2009 18:30:00 GMT

Once upon a time, way back in the spring of 2009, there was a lot of talk of "green shoots" and the promise of economic recovery. Well, that theory seems pretty much shot to hell now, as there is growing recognition that, in Nouriel Roubini's words, "the green shoots are mostly yellow weeds." Unemployment continues to rise, and the economic indicators that implied a possible turnaround seem to have been little more than side effects of another Goldman Sachs bubble.

And as a result there's more and more talk of a "third stimulus" across the left blogs, including Paul Krugman, especially as people come to realize just how stupid it was to gut the February stimulus by taking out the all-important state stabilization funds. As realization dawns that 50 Herbert Hoovers are wiping out the effect of the stimulus by state budget cuts, the necessity of federal aid to the states is becoming obvious.

Unfortunately, some commentators are still stuck in "blame" mode, and haven't yet grasped the need to move beyond blame and toward action that can prevent a full-blown Depression. Take Ryan Avent, for example, who opines today that California is the obstacle to a new stimulus aimed at rescuing the states:

The huge obstacle to getting this done, however, is California. California is the state in the worst shape, and it's also the state no one wants to help, because its problems stem from terrible institutions and a horribly dysfunctional government. They're not just cyclically screwed; they worked very hard to get themselves into this mess, and the rest of America, quite reasonably, doesn't want to bail them out. But this is a problem for the rest of America, because rare is the state that couldn't use some additional help right about now.

This sort of argument is becoming depressingly familiar. As we pointed out yesterday most Californians weren't able to vote in the June 1978 election that approved Prop 13, and many who voted yes didn't know what they were doing. More significantly, Californians have never been given the chance to vote again on Prop 13 as our political leadership convinced itself that it could cut a series of deals in the name of asset bubble centrism and avoid both financial collapse and being overrun by the Jarvisite hordes.

Californians routinely vote for tax increases, especially at the local level, and would do so much more often if the right-wing hadn't blocked the majority from governing the state by the 2/3rds rule. Folks like Ryan Avent offer a superficial understanding of California's problems, unfamiliar with the fact that we have a center-left electorate governed by a center-right system and a Democratic Party whose leadership has been frankly afraid to challenge that status quo.

But as wrong as Avent is about the details, his "blame all Californians and let them rot" attitude is quite familiar, even widespread, among national elites, including ostensible liberals. I say "ostensible" because a core tenet of liberalism is the notion that government should provide second chances.

Avent does offer a somewhat sensible basis for a solution:

This is the part where I'd recommend a negotiated, conditional aid package to California, combined with a broader state budget resolution authority designed to facilitate countercyclical aid in situations like these. But at this point, I kind of think that California is screwed, and that by extension America is screwed, and will suffer a longer and more painful recession than is necessary thanks to the intractable politics of the issue.

And such a package is precisely what many of us in California want. We recognize that we need the federal government to use its leverage to break the impasse in Sacramento. But we're worried about the conditions. With Larry Summers in charge of economic policy, the conditions are likely to resemble a 1990s IMF bailout, demanding massive cuts to the public sector - cuts that will merely worsen the recession, as the Sacramento region is discovering.

The fact that many other states are facing budget meltdown may be enough to overcome the previous hesitance of the feds to offer California anything that smacks of a "bailout". And if that assistance came with appropriate and progressive conditions - that California place a repeal of the 2/3rds rule on the ballot, that corporate tax loopholes be closed, that education and health care no longer face cuts - then it would be a significant step forward.

Unfortunately we may not be at the point yet where this is possible. Avent blames "intractable politics" but I would argue the problem is instead intractable assumptions. Too many people are still out to play the blame game, or like the Obama Administration, are more afraid of right-wing criticism than of the political repercussions of a slide into Depression.

It would help if national observers would look past the superficial assumption that all Californians were party to the reckless economic, fiscal and political choices of the last 30 years, and instead realize that avoiding a national Depression and fixing California's problems are not mutually exclusive, but instead are mutually reinforcing.

Dan Walters & Prop 13: A Confusing Duo

Brian Leubitz — Mon, 06 Jul 2009 15:12:15 GMT

Dan Walters has an apology piece for Prop 13 this morning. Apology piece is being a bit generous, as it is more of a "LEAVE PROP 13 ALONE" kind of thing. He notes that its critics demand piece-meal reform because a complete repeal won't pass. Well, yes, Dan, we DFHs are pretty crazy that way, we aren't into tilting at windmills and have a strange compulsion to go where victories are easiest. Shocking!

By the way, I don't think you will find many liberals who would say that a complete repeal of Prop 13 would be a bad thing. I support a full repeal myself, anyway.

But once you get beyond tactics, Dan has fun with numbers, citing the large increase of property taxes since 1978. He notes that:

Since then, property taxes have risen 800 percent to more than $50 billion, according to data from the state Board of Equalization - far faster than other revenues, thanks to new construction and transfers.

Of course, he doesn't note whether this is in inflation adjusted dollars or not, so I'll assume it isn't. So, knock off a big chunk right there. Further than that, this is a more meaningless statistic. Yes, property taxes have gone up a lot, because there is a lot more valuable property in California today than there was 30 years ago. THere are more homes, more office buildings, lots more strip malls, and even a few more gas stations. So, yes the property taxes have gone up substantially because there are many new properties. In other words, this is a completely irrelevant statistic.

A more useful statistic would be the share of the income tax of state revenue. It's way up (PDF). But instead of useful statistics, we get talking points from the California Taxpayers' Association. The fact is that if we split the rolls for commercial properties and merely taxed them at their current assessment, the state would get an additional $7 Billion in revenue for the next fiscal year. Not raising the tax rate, nothing that new properties do not face, just taxing properties based upon what they are actually worth today. It is a move that would actually increase fairness and the business climate for new businesses.

But guess what, you know what has really risen in the past 30 years in California? Well, that would be people. People in California who need schools, who need police, who need firefighters, who need streets and who need all sorts of services the state provides. With many properties taxed like it's 1978, they do not provide for their fair share of services.

While Mr. Walters really enjoys the status quo and pinning blame on the "Capitol political culture that's utterly incapable of acting responsibly", he ignores the facts that the system does not allow for anybody to behave responsibly. Let the majority govern, and see if the public supports it. Instead, the supermajority binds the hands of the legislators.

There are other columnists, though, who see Prop 13 for what it is. Like David Lazarus, who said we cannot afford Prop 13 Capitol political culture that's utterly incapable of acting responsibly. Lazarus said back in 2008, referring to Lenny Goldberg:

What he means is that Proposition 13 allows the state to reach deep into the pockets of people and businesses that buy property at market value. But it does precious little to get a piece of the action from those with long-held properties that have soared in value over the years.

Prop 13 is not only a bad governing principle, it is a bad economic rule. Whether or not Mr. Walters chooses to ignore reality, the fact is that Prop 13 needs to go.

Gary Kamiya On The Crisis

David Dayen — Sun, 05 Jul 2009 22:49:51 GMT

I'm sure many political observers will laud this New York Times magazine article on California's crisis and the men and women who seek to solve it, but I found it oddly pedestrian. The profiles of the candidates reveal little of substance, and aside from displaying the salient fact that Arnold has no interest in the well-being of his constituents, I didn't see the point.

"Someone else might walk out of here every day depressed, but I don't walk out of here depressed," Schwarzenegger said. Whatever happens, "I will sit down in my Jacuzzi tonight," he said. "I'm going to lay back with a stogie."

Overall, I saw too much focus on personality in dealing with what is essentially a problem of process.

Actually, while I didn't agree with all of it, I thought Gary Kamiya had a much smarter take, and it didn't mention Arnold Schwarzenegger or the names of any of his potential replacements more than once. The headline, "Californians are sinking themselves," doesn't seem to match the bulk of the article, which focuses on the dysfunctional governing process.

The immediate source of California's financial problems is a lethal combination of ideology and rules. It is deeply politically divided, and its governmental mechanisms are completely broken. Bay Area leftists stare at Orange County conservatives across an unbridgeable abyss; a large and potent group of anti-government libertarians faces off against an equally powerful group of pro-tax, proactive government liberals. If California, like most states, required only a simple majority to pass its budget, the disagreements between these camps could be worked out; after all, the Democrats control the Legislature. But California requires a two-thirds majority, which gives the GOP, now dominated by anti-government, anti-tax ideologues, veto power over the process. The result is deadlock.
Compounding this problem is California's notorious initiative process, which allows voters to bypass the Legislature and place initiatives directly on the ballot simply by gathering enough signatures. The initiative process was originally passed by voters in 1911 to circumvent the power of the oligarchic railroad trusts by restoring direct democracy. And it still offers citizens a chance to take control of important issues. But it has gone out of control, abused by powerful interests who hire people to collect signatures and ram through bills that no ordinary citizen can be expected to comprehend. By sidelining elected officials, it achieves the worst of both worlds: It gives ordinary citizens, who lack requisite expertise, institutional memory and accountability, too much power, and then forces legislators to clean up their mess -- except that because of ideological gridlock and the supermajority requirement, they can't.

Kamiya looks at the three strikes law and in particular Prop. 13, which he views as the ultimate manifestation of the Two Santa Claus theory, that California can have endlessly lower taxes with endlessly more social services.

This was, in effect, a mass outbreak of cognitive dissonance, an up-yours delivered to government with the public's left hand, while its right hand reached out for Sacramento's largesse. Now, 31 years later, the bill has finally come due. There is no free lunch. If you want good roads, parks, decent schools (California's schools, once the best in the nation, are now among the worst) and adequate social services, you have to pay for them.

Out of this, Kamiya points his finger at the people who voted in Prop. 13 and failed to modify it over the ensuing 31 years, who are "self-centered" and have "not decided what it thinks about the New Deal, or government itself." They need to "grow up," Kamiya says.

I think this ignores the fact that Californians have traditionally been offered precious few choices to rectify the broken system. The Democratic Party essentially has made a pact with themselves to nibble around the edges for three decades instead of confronting the great unmentionable crisis of governance. People see the dysfunctional politics play out year after year and become rightfully disaffected with the system. And they are never told anything from anyone in a position of power to counteract the Two Santa Claus theory, and so they necessarily believe it. I don't blame citizens for responding to their leaders. The problem lies with the leadership itself, or more to the point the lack thereof.

I was 5 years old and on the other coast of the country when Prop. 13 was passed, and I'm not about to bear the brunt of the blame for that decision. I would blame myself if I continued to live with the failure of the political leadership to confront the root causes. But Californians are starting to use movement politics to go around the leadership and force the necessary solutions. The sheer enormity of the problem and the size of the state makes this a difficult option. But the alternative, to acquiesce and wait patiently for the leadership to figure things out, is unthinkable.

No Fireworks for the 4th

Robert Cruickshank — Sun, 05 Jul 2009 01:00:00 GMT

Usually at this time of day the cars start filling the streets of my quiet Monterey neighborhood. Families spill out, carrying lawn chairs and blankets and hot drinks, headed for the hill on the lower Presidio just above the municipal wharf to watch the annual fireworks display. Sure, it's a bit cheesy, and last year was a bit obnoxious when the woman brought the boom box belting out the Sousa and Lee Greenwood, but the city's fireworks display was also a small yet meaningful moment of a community coming together, and it was always the highlight of the evening.

But not this year. Monterey, like several other cities around the state, have canceled the fireworks display because of budget cuts.

I don't exactly oppose the move. Sure, city fireworks displays were a key part of getting people away from using their own fireworks and losing a hand, but as Monterey city officials noted, it's not a difficult decision to cancel the fireworks to preserve other programs:

Kay Russo, director of Monterey's recreation and community services, said the exact opposite. She thought it was more important than ever to use public funds to provide services to citizens....
A $7.5 million budget deficit for this fiscal year has forced $6 million in program and service cuts, layoffs and employee concessions totaling an additional $1 million, said Anne McGrath, city spokeswoman.
"Given the fiscal environment, I know that people will miss the fireworks display, but they understand this has to be done," McGrath said.

And judging by the reaction of my friends and neighbors, McGrath is right. I couldn't justify spending the money on fireworks and policing the event that could otherwise go to keep city employees on the job, keeping the library open more hours, and so on.

A canceled fireworks display doesn't compare to the 900,000 Californians who lost dental coverage this week, the 26,000 teachers who aren't going back to work this fall, the disabled Californians who are losing their caregivers and their support checks.

And yet they all share a common link - they've been sacrificed in order to protect the wealthy and corporations from a tax increase. Social values of education, health, and community gatherings are all being undermined and denigrated by a state government which has decided, without any public discussion, that spending cuts are a necessity. Even those localities that would like to raise their own taxes to keep teachers in the classrooms or ensure their neighbors and families have health coverage cannot do so, because nobody in government is willing to challenge the bogeyman that is Prop 13-induced system of government that prevents tax increases no matter the cost.

So Monterey isn't going to have fireworks this year. Perhaps it's a good thing - the sea otters will be pleased. But if our community wanted to do something else - improve bus service, fix our schools, build the long-desired train to the Bay Area, open a community health clinic - we are prevented from doing it, because we are effectively prevented from raising the money to make it happen. We cannot make collective decisions any more, we cannot take community action to do something as important as saving our schools or something as small and ultimately insignificant as holding a fireworks display. We are stuck with a false and rigged choice - cut schools or health care - because the biggest choice of all, whether to tax wealth or not, is not a choice we are free to make.

It's hard then to not see the canceled fireworks display as a symbol of a broader social collapse happening all around us. On the day we celebrate 233 years of independence, and almost 163 years to the day since the US took possession of Monterey and brought California into that independent nation, the 4th of July seems almost funerary. There isn't much to celebrate, certainly not here in California, where our national holiday feels hollow.

We are a center-left state and nation governed by a center-right politics - and in California, by a government that gives conservatives veto power even though they represent just 33% of the population. On a day when we are supposed to celebrate our freedom, it is rather ironic to realize that in California in 2009, unless you are wealthy you aren't really free.

Independence Day: The Open Thread

Open Thread — Sat, 04 Jul 2009 02:00:00 GMT

The Home of the Free and the Brave Turns 233 tomorrow! w00t! Let's get to the links:

* The special election to replace Ellen Tauscher (CA-10) will be September 1. That will also be the day to replace former Asm., now Sen., Curren Price in AD-51 (PDF). (h/t to SoS Debra Bowen's CASOSVote Twitter feed)

* Apparently the Governor's latest bugaboo is his old bugaboo: waste, fraud and abuse. Arnold thinks it is time to bring that up, despite the fact that his own California Performance Review showed that there really isn't that much waste, fraud and abuse. At a time when we need real action, Arnold is dithering around the edges.

* The annual summertime revenue anticipation notes will be even more complicated due to our budget crisis. Further complicating the issue is Arnold's petulance by revoking Controller John Chiang's ability to issue revenue anticipation warrants, which have a longer time horizon.
* Kamala Harris gets a good story in the LA Times, which some might consider a make-up for this story.

* For your consideration this weekend: The SF Mime Troupe kicks off their summer show "Too Big to Fail" tomorrow in Dolores Park in SF. I (Brian) saw the sneak preview today, and it was quite enjoyable.

"If You Don't Make $150K, Maybe You Shouldn't Be Living Here"

David Atkins (thereisnospoon) — Fri, 03 Jul 2009 21:03:39 GMT

John Cole wondered today what goes on in the heads of the Republican wealthy elite. It didn't seem possible to him that the people who control the purse strings could be so stupid or short-sighted as to truly believe the crap they spout to their base and to Fox News-watching public.

Well, once in a while a wealthy Republican lays it out in such a way that the depth of their greed and arrogance cannot be hidden. When the truth is laid open, it becomes clear that they are just as stupid and short-sighted as their rhetoric makes them out to be.

Every Friday at 11AM, I am a guest co-host (in my capacity as President of the Ventura County Young Democrats) on KVTA 1520 in Ventura, CA for half an hour along with Brian Leshon, Communications Director for the local Democratic Party. Our show is called Reality Check, and is sandwiched comfortably in between Fred Thompson and Sean Hannity, thus providing a flicker of light in a sea of AM talk radio darkness. We talk about various topics every week usually related to state and local issues, with particular emphasis on economy and taxes.

This week we talked about the California budget disaster, the IOUs being distributed now on account of Ahnuld's intransigence, and the David Binder research results proving that the recent California special election was not an anti-tax revolt, a fact that continues to receive far too little play in state and local political media. As part of this discussion, I mentioned the fact that Calfiornia's tax system is regressive, including the fact that our high marginal state income tax rate of 9.3% is placed on a bracket extending all the way from $45,000 to $999,999, making it one of the most insanely regressive state income taxes in the nation. I suggested that the rate be reduced on all those from $45K to $99K or so, and tiered upward from there. You can hear the podcast of the whole show here.

Toward the end of the discussion, an articulate, seemingly intelligent woman called in to defend six-figure income earners, and in the process demonstrated the depth of the arrogance and selfishness that are at the heart of the wealthy Republican ethos.

CALLER: "One of the gentlemen said that if you made six figures, you can help out a little more. If I were making six figures in Dubuque, I could pretty much agree with him. But oh my gosh, if people with combined incomes between their husband and wife, etc., are making six figures in Ventura County, they're just comfortably affording a very modest home."
ME: "You know what, let me apologize, let apologize because I was being very shorthanded. You are absolutely correct. Though I would point out that the taxes aren't on combined income, they're individual, so we're still talking individual here, but you're absolutely correct."
CALLER: "You throw a couple of your kids in there too and it's like, wait a second, a family of four needs to be making $150K just to live comfortably."
ME: "I agree 100%. And the only tax increases that we're talking about say on the national level were people making $250,000 alone--not combined--alone, $250,000 or more. But that said, you know, it's really difficult to say that in Ventura county you need to be making combined income of $150,000 or more just to live comfortably with two kids."
CALLER: "I mean, if you're buying a home."
ME: "Absolutely if you want to buy a home, and that's a problem, isn't it? Because then you're talking about property values and all those things, but you've got to realize that the vast, vast majority of the people, even in California, are not making anything --anything--close to that kind of money. You know, I'm not."
CALLER: "Well, maybe they shouldn't live here then!" I mean, if you can't afford a home here and stuff, maybe you should live where it's cheaper.""

This is the Republican mentality in a nutshell: the only people that matter are the people in the Ownership Society. If you're not part of that elite Ownership Society club, you not only don't belong influencing public policy, you don't really deserve to be breathing the same air. If you happen to occupy the same space as a wealthy Republican elite, you had best stay out of the way and not complain about the lot granted to you. You serve at the pleasure of the elite. And if that means additional public employee furloughs and teacher layoffs in order to protect their precious marginal rate, then so be it.

It is worth noting that in 2007, prior to the economic crisis, the median household income in Ventura County was just over $72,000. Our official unemployment rate now stands at 9.5%. Yet people like our educated and prosperous caller have absolutely no shame saying this sort of thing on the air.

Now, this caller was your typical gated community upper-middle-class "pull-the-ladder-up-behind-me" Republican. Taken to the national level and the wealthiest elites, the ultimate goal is at best a rentier state, and a corporatist state at worst, enforced through military power allied with the state to prevent popular revolt (hence Rush Limbaugh's adamant desire for an Honduras-style military coup to topple our own elected government).

Or, as one wealthy Republican put it at a national business conference I attended a few years ago in Washington, D.C.:

The goal needs to be to put everyone's savings into stocks. If everyone owns Halliburton, then we wouldn't have all these problems. People would say, "hey, I own that: it's mine!" and they wouldn't cause so much trouble over it.

It would be a pleasant fiction to believe that the other side of our two-party system were not quite so venal, quite so short-sighted, and quite so extreme in their views of the ideal society. But it's simply not the case.

The people who hold the purse strings and dictate the policies of the Republican Party cannot be compromised with, because their vision of society does not and will not include anything but the most meager scraps for 95% of the population. These are people who see Gordon Gekko as a hero and role model. It's no use looking behind the curtain to determine what reality they really believe in. Their worldview really is as scary as it looks.

Get Yer Souvenir IOUs Today!

David Dayen — Fri, 03 Jul 2009 18:14:56 GMT

Bloomberg reports that people are lining up for those souvenir Arnoldbucks.

Controller Chiang said the warrants can be transferred between individuals, setting up the possibility that a secondary market for the IOUs may develop. Already ads are appearing on Web sites such as Craigslist offering cash for the IOUs at below face value.
In such a transaction, the person who gets the IOU would get most of the cash they were due the state, while the person buying the IOU might then hold onto it until maturity and earn the face value plus the 3.75 percent interest.
At least one person offered to buy an IOU at more than face value as a keepsake.
"I am interested in purchasing a 'State of California IOU' as a souvenir," the ad reads. "I figure it would be an interesting thing to have around when my grandchildren are fighting over my stuff after I'm dead and gone. I will pay two times face value (up to $100, or $50 face value) for a warrant/IOU."

Of course, after July 10, the deadline that banks like BofA and Wells have given for exchanging these IOUs for cash, souvenirs may be the only value for these IOUs for a few months. Maybe Arnold will go to a baseball card convention and sign them himself!

Here's another FAQ about who receives IOUs and who does not. The unemployed, SSI/SSP recipients, state employees and retirees, IHSS and Medi-Cal providers will NOT receive IOUs. Welfare recipients, contractors with the state, local governments, and income tax refund recipients WILL get them. Felix Salmon made a handy chart that suggest the haves will keep getting paid and the have-nots won't, and that's somewhat true, but some have-nots who have the benefit of their services being partially provided by the Feds will get paid as well. In general, where you stand does depend on where you sit, in this crisis. This again makes clear that the idea of California debtholders, who get priority of payment in the state constitution over everything but education, getting stiffed by the state is a ridiculous one that pretty much cannot happen, and lowering bond ratings should be rightly seen as Wall Street gouging.

And I'll allow Karen Bass to explain exactly who's responsible for this particular outcome of IOUs and lowered bond ratings.

Small businesses, students, seniors, and taxpayers will all start receiving IOUS. This shameful day didn't have to arrive. In fact, Governor Schwarzenegger had several opportunities to prevent it.
On June 12 Governor Schwarzenegger unilaterally blocked the Controller's authority to secure short-term loans to avoid the cash crisis. He said, "let them have a taste of what it is like when the state comes to a shutdown -- grinding halt."
On June 25 after the governor called Senate Republicans to his office for private meetings, $4 billion in immediate cash solutions that had been passed on an overwhelming bipartisan majority in the Assembly were killed in the Senate.
Most recently, the governor vetoed a comprehensive package of budget solutions supported by majorities in both houses of the legislature that would have resolved the $19.5 billion deficit, left a $4.0 billion reserve, avoided the cash crisis and prevented IOUs [...]
We did offer, as a sign of good faith, to begin work immediately on reforms regarding restructuring Medi-Cal and eliminating fraud in the IHSS program. We also committed to working with the governor on other reform legislation for him to sign. But the governor wouldn't take "yes" for an answer. So California businesses, taxpayers and students will be receiving IOUs simply because Governor Schwarzenegger thought it was more important to immediately force last minute changes such as reducing future employee pensions, fingerprinting elderly and disabled Californians who receive services, and denying kids food stamps if their families can't access a computer to sign them up for the program.

See Noreen Evans for more.

The budget gap grows by $25 million a day and we have wasted billions of taxpayer dollars because the Governor wants to teach everyone a lesson. I hope that IOU secondary market is bigger than eBay, because those suffering with the consequences of dysfunction are going to need the help.

Prop 8 Remains in Force, Judge Wants Speedy Trial

Brian Leubitz — Fri, 03 Jul 2009 15:41:01 GMT

Saying that he wants the case to proceed beyond his court quickly, Judge Vaughn Walker denied a request for a preliminary injunction against Prop 8.

Walker on Thursday rejected a request from the Boies/Olson team that he suspend enforcement of the gay marriage ban while the challenge to it proceeds.
He said he agreed with California Attorney General Jerry Brown and Gov. Arnold Schwarzenegger that allowing gay marriages to resume now would create unnecessary confusion for the state and same-sex newlyweds if Proposition 8 is upheld down the road.
But Walker added that he wants to put the case on an accelerated timetable because it involves serious civil rights issues. He directed lawyers for the two couples and the ballot measure's sponsors to report back to him in writing by Aug. 7 with the issues they agree on up front and those that would need to be resolved at trial.
***
"I am reasonably sure that, given the personalities in this courtroom, this case is only touching down in this court and it will have a life after this court," Walker said. "What happens here is in many ways a prelude to what happens later." (AP 7/3/09)

For the time being, there are no new marriages. This, of course, did not surprise anybody, as that particular tack seemed a long shot from day one. As for when the trial will be completed, well, when federal judges want a speedy completion to a case, they have ways of making that happen to a limited extent. However, there really is no guess as to when it will emerge from Judge Walker's court as too many variables are at play.

Of course, Olson and Boies have intended this case for an audience of 9, but that is still a couple of years away, even with a speedy trial at the district court level. The courts should be the last refuge from the tyranny of the majority, and the fact that Prop 8 violates several provisions of the Constitution mean that it should be struck down. However, we should not rely on the courts in this instance; we are going to have to win a ballot fight at. Whether in 2010 or 2012, or whenever, a victory for marriage equality in California is only a few years away. And as California goes, so goes the nation.

July 2 Open Thread

Open Thread — Fri, 03 Jul 2009 01:30:00 GMT

I'm assuming that the holiday weekend posting schedule will be light, so for the time being, this will have to tide you over.

? The SEIU and the California School Employees Association are Google surging against the Governor, carpet-bombing the Web with ads calling for a budget solution. But until they call for an end to process rules that cut against any reasonable solution, I can't see how they succeed.

? Meanwhile, national Republicans are running ads against Central Valley Democrats in Congress linking them to the water crisis. Which isn't entirely a federal issue, and even in Washington isn't really a Congressional issue, but why would national Republicans care about consistency? By the way, Dennis Cardoza and Jim Costa can defend themselves.

? In CA-50, the fallout from that raid on a Francine Busby fundraiser has intensified. The Sheriff's deputy who blasted people with pepper spray ought to be disciplined, if not outright fired.

? Here's the inevitable California's economy will send businesses out of the state article. In this case, it may well be, such is the depth of the budget woes, but in this case, it probably has more to do with the collapse of public education and classes that teach basic skills that would inhibit business growth, a function of constant Norquistian budget-cutting.

? An openly gay seaman at Camp Pendleton was found dead in a suspected homicide this week, another consequence of the Don't Ask Don't Tell policy, as a member of the military who is gay cannot get the kind of counseling needed or even report harrassment due to their sexuality.

The Inevitable Tax Drop

David Dayen — Thu, 02 Jul 2009 23:28:54 GMT

You can almost set your watch by it. The state budget picture is a mess, Democrats ask for a balanced solution, Republicans hold their ground and say no, Democrats don't have the vote so they let it go. It happens practically every single year, and it's happening again, according to CapAlert:

Gov. Arnold Schwarzenegger and Senate President Pro Tem Darrell Steinberg said separately Thursday that they are optimistic a budget deal can be struck within several days.
The tone of their comments marked a stark contrast to Capitol fighting over the last few weeks between Democrats and Republicans over bridging the state's $26.3 billion budget gap.
Steinberg also said Democrats had given up any attempt to increase taxes on tobacco or establish an oil severance tax [...]
The Senate president said that Democrats no longer are pushing for a 9.9 percent tax on oil extraction or for hiking the state's tobacco tax by $1.50 per pack.
"We would like to see an increase in the tobacco tax and the oil severance tax as a solution, but in this chapter that's not realistic and it's not what we're holding out for," Steinberg said.

It's never going to be realistic in ANY CHAPTER. Republicans know exactly how to play this game. Their votes are needed for tax increases, so if they hang together they cannot lose. The Democrats haven't figured out how to shame the Yacht Party or make them pay for their votes, giving them no reason to do anything but hijack the process. You'll notice that as a result of this horrific experiment in governance, California is operating worse than practically every other state in the union.

We've seen this kind of "it's almost over" trial balloon on many occasions, so I wouldn't put on the party hats just yet. But somehow at the end of this process, somebody will step up to a microphone and claim how reaching agreement is a sign of success. No. It's a sign of failure. A failure to responsibly manage the state's finances, reflected by the worst economy in 70 years. The only lesson that can be learned from this process is that it's fundamentally broken.

P.S. You'll be thrilled to know that Schwarzenegger still sleeps well at night.

Schwarzenegger and I then repaired to a tent that he had put up in a courtyard next to his office, which allows him to smoke cigars legally at work (no smoking is allowed inside the Capitol). The tent is about 15 square feet, carpeted with artificial turf and outfitted with stylish furniture, an iPod, a video-conferencing terminal, trays of almonds, a chess table, a refrigerator and a large photo of the governor. Schwarzenegger reclined deeply in his chair, lighted an eight-inch cigar and declared himself "perfectly fine," despite the fiscal debacle and personal heartsickness all around him. "Someone else might walk out of here every day depressed, but I don't walk out of here depressed," Schwarzenegger said. Whatever happens, "I will sit down in my Jacuzzi tonight," he said. "I'm going to lay back with a stogie."

This is the guy who dares to chide others for not doing their job.

Arnold Owes You

David Dayen — Thu, 02 Jul 2009 20:50:56 GMT

The IOUs are on the verge of being distributed. The Pooled Money Investment Board met today to hash out the terms for the IOUs, and surprise, there were some differences. The Governor wants a paltry 1.5% interest rate for the IOUs, and flexibility on repayment until as late as June 2010. That would be worse than a 1-year CD. Controller Chiang supports the staff recommendation of 3.75% interest rates and repayment in October. Chiang won. The board approved his terms.

The reason to offer a more attractive interest rate is to ensure that banks will actually cash them. Wells Fargo and Bank of America announced they will accept them, but only until July 10; after that, it's anybody's guess. Golden 1 Credit Union and Tri Counties bank of Chico also agreed to accept the warrants. This article gives a good rundown of how the IOUs will work. If your bank won't cash them, you're basically stuck with a piece of paper until October.

The most important question, of course, is why we're going down this costly route at all, when the Assembly and Senate Democrats fashioned a solution to avoid this. The answer is that the Governor wanted some leverage, the people be damned.

If the stigma of issuing IOUs triggers a budget deal in the coming days, Gov. Arnold Schwarzenegger might find redemption in his strategy of quashing a stopgap solution that would have avoided those non-cash payments.
But if no budget deal emerges soon, Schwarzenegger will have helped saddle the state with a lower credit rating and have nothing to show for it.
As a negotiating strategy, Schwarzenegger is counting on public pressure to mount against the Legislature as California issues IOUs today for only the second time since the Great Depression. The Republican governor could have backed legislation to avert IOUs this week, but he demanded that lawmakers solve the entire budget problem, which grew Wednesday to $26.3 billion [...]
Schwarzenegger wanted a full budget deal, and part of his calculation was likely that IOUs ramp up the stakes and force lawmakers to reach that goal sooner. Without IOUs, he figured lawmakers might have delayed compromise on the rest of the package, costing the state in a different way.
"If he had signed the stopgap measures, the Legislature would have gone home for Fourth of July weekend and come back when the threat of IOUs came up again," said Tim Hodson, executive director of the Center for California Studies at California State University, Sacramento. "I'm sure the governor went over this and thought: Are the consequences of the delay worse, and would he have lost the leverage that he has now?"

Well, this is a game played with people's lives. If banks won't cash IOUs, you can be sure Rite-Aid won't accept them. Or landlords. Or health care providers. In addition, this little power play cost taxpayers between $2 and $7 billion dollars, which I don't see Schwarzenegger going into his wallet to cover.

Rather than shock doctrine the legislature into making major policy changes as a condition of passing a budget, a more likely scenario is that this train wreck will spark reform efforts to finally get off this perpetual track of hijacking and stubbornness.

If California has become ungovernable, and teeters now on the brink of bankruptcy, it is due less to excessive spending than a deficit in democracy - the very essence of which is majority rule. A simply worded, one-paragraph initiative to restore majority rule in the Legislature might well prove resoundingly successful with a crisis-weary electorate. And while it may not be sufficient in itself to repair the state's balance sheet and fix its broken governance, restoring majority rule is the necessary first step toward ending gridlock, renewing public confidence, and preventing extremists of whatever stripe from holding future legislatures hostage to their own narrow agendas.

More on the "Loophole" and Prop 13

Brian Leubitz — Thu, 02 Jul 2009 17:56:30 GMT

I wanted to add a little more about this "loophole" I discussed earlier. For starters, let's look at how residential properties are transferred. It's a relatively simple transaction, leaving the banks out of it, as the mortgage is a deal between the purchaser and the bank, it really is a two parties, simple transfer. The purchaser pays the seller for the parcel. It's easy to see that there was a transfer there.

But commercial properties are far more difficult. There are several scenarios where it becomes difficult to answer what seems like an easy question: Was the property transferred? The transfer triggers a reassesment, and usually higher revenue for that county. Let's consider a couple of those situations, but these are not the only tough questions on when to reassess:

1) Purchase of a Corporate (or other legal) Entity

Here, the question is what was sold? Did the acquiring company merely purchase stock? Or should the property be considered as having sold since there is a new owner? Take the sale of the Equity Office Group. I used to work in one of the Equity Office buildings in fact. In 2007, the Company was sold to the Blackstone Group, a private equity firm. Yet, Equity Office (EO) was a vast company, and sold for $39 Billion. So, was the purchase of EO a transfer of the properties in California? Did Blackstone simply purchase stock in EO, or did they purchase a bunch of properties? If so, what is the value of the properties? How do they attribute money for each of the buildings that EO owns?

This question is still open for debate. Blackstone made some of this a bit easier by selling off some of the properties, but a complete resolution on these kinds of cases is really tough for the affected assessors.

2) Partial Transfers

There are a few partial sales in residential property, but it is far more common in commercial property. Real estate investment trusts (REITs) allow several owners to own a building or a group of properties. What if one of the large participants in the REITs leave? You might have a new majority owner of the property, yet is there a transfer?

These cases end up in court frequently, and often the owners of teh property can vastly change without triggering a transfer and a reassessment of the property. Homeowners generally can't avoid these reassessments, and besides the fact that commercial properties sell less often, this slight of hand is why commercial properties pay so much less today in comparison to residential properties.

The Facts Speak for Themselves

Phil Ting is fond of citing a statistic:

30 years ago in San Francisco, commercial property owners contributed the majority of property taxes, 59%, and residential property owners contributed 41%. Today, we see the reverse: commercial property owners contributed just 43% of property taxes in 2008 while residential property owners contributed 57%. (SF Chronicle 5/21/09)

That statistic should be somewhat shocking to voters who were around to remember the 1978 vote. Looking back at the information from that vote, you'll see the advertising and ballot argument focused on keeping poor granny in her house. Yet Prop 13 was always a project of the corporations and the landlords. Howard Jarvis was whiling away his time as the lobbyist for Los Angeles Apartment Owners Association, incidentally where the Yes on Prop 13 HQ was located, when he emerged from obscurity. The Apartment Owners funded Prop 13, and commercial property owners will be sure to protect it from attack.

If Prop 13 is to be reformed, it must come from homeowners and renters that are being slagged with higher taxes. It should come from those who use services, like our K-12 education system, higher education, and the state parks. It needs to come from a well-informed populace that sees Prop 13 for what it is: A Corporate Power Grab.

This discussion is not to say that the "loophole" is necessarily the biggest issue relating to split roll. It isn't, it is just one way that the corporations have found to use the system that Prop 13 put in place to avoid paying their fair share.

CA-45: Bono Mack Being Hunted

David Dayen — Thu, 02 Jul 2009 16:02:44 GMT

I noted this in my June Congressional races roundup, but it deserves a little more attention.

Mary Bono Mack has in her career adeptly threaded the needle, voting mostly with the right but surprising on just enough bills every year to appear moderate to her district, which went for Barack Obama in 2008 and has a PVI of only R+3. But her yes vote on the Waxman-Markey climate and energy bill has incensed conservatives, so much so that they are waging jihad against not only Bono Mack but her Congressman husband, who by the way voted against Waxman-Markey.

So it was probably a bit of a shock to her when she saw the headline above that I captured in a screen shot from the Republican Party blog, Red State: Mary Bono Mack Should Be Burned In Effigy And Voted out Of Office. It was written by Georgia Republican Party operative Erick Erickson and something tells me Erickson isn't about to endorse Palm Springs Mayor Steve Pougnet, who's not just gay, but married (to another man) and happily raising their two children! Too far a stretch for Republicans who seem to always be involved with "opposite marriages," or whatever they call the degrading situations traditional marriage sanctity defenders like Mark Sanford, David Diapers Vitter, Larry Craig and John Ensign are in.
Erickson and the fringe loons on the furthest reaches of the non-criminal right are so upset with Bono Mack that they are threatening to not just defeat her but to go after the right-wing extremist husband to boot! He demands that she vote against health care reform and against the energy bill when it comes back from the Senate-- where it will probably be watered down and look more acceptable to mainstream conservatives!!!-- or face the consequences.
"Otherwise, we beat her and her husband at the polls.
Yes, you heard me. We can get at Mary Bono Mack in two ways-- her district and that of her husband. He should feel the heat just as much as her."

Now, Erickson is a silly person. And his frothing at the mouth is unlikely to result in any change in CA-45. However, I wonder if they can entice some far-right activist to run in the primary. Gary Jeandron, who lost to Manuel Perez convincingly in 2008, is supposedly preparing for a rematch. But AD-80 is far less cordial to Republicans than CA-45 is. And maybe enough foot-stomping tea partiers can persuade him - or some other teabagger - to challenge Bono Mack in the primary. As one of only 8 Republicans to vote for the Waxman-Markey bill (and one of them, John McHugh, is about to become Barack Obama's Secretary of the Army), the wingnuts don't have many targets. Bono Mack may have poked her head up on the wrong bill.

This could be a good time to check out Steve Pougnet.

Words into Action: Moving Forward on Prop 13

Brian Leubitz — Thu, 02 Jul 2009 15:12:21 GMT

SF Assessor Phil Ting's "Close the Loophole" event last night was a pretty big success. Turnout was exceptional with an overflow crowd at the SF LGBT Center's Ceremonial Room. It's clear that a lot of people are very, very frustrated with Prop 13. If you missed it, and would like to get more involved, here is the Close The Loophole website and here is the Facebook Page.

Phil Ting spoke for a relatively short time, maybe 15 minutes or so. He briefly explained where his focus lay, the split roll. Basically, the split roll would pull commercial properties out of Prop 13, and change the system for assessing and taxing those properties. Because of the way commercial properties are transferred, in small percentages at a time or by selling a whole company, etc., they can be transferred without being reassessed. Thus, the "loophole" to which Phil Ting refers in his Close the Loophole campaign. All in all, a splitting of the rolls would in the current fiscal year bring in about $7.5 Billion for local governments. It would not resolve the budget crisis in one chunk, but that money spent wisely could have helped us mitigate the crisis.

The key to this meeting however, was building a working group to begin the process towards moving past talk and into action. Let us not hold any illusions, messing with Prop 13 will not be an easy task. Business organizations will spend millions of dollars to defeat a split roll initiative, with some political folks suggesting that the No campaign for a split roll campaign measure could raise over $100 million. It's tough to beat such a large and spendy No campaign, very hard indeed. The only way that happens is to a) have a substantial budget of our own and b) build a grassroots wave of support.

So, after Mr. Ting spoke, the group broke up into work groups to discuss important features of the campaign. I joined the fundraising group, and we went over ideas of whom to reach out to and how we could raise the kind of money that we would need to pass this measure. A coalition group had some good ideas of natural allies and an online organizing group worked on building support through the Politics 2.0 toolset. A policy group also went through ideas, both on the split roll and a further ideas that could be included in a package of reform.

After getting back together to share ideas from the work group, the group committed to reconvening in September. But, we'll need to have more groups like this across the state. So, let's work on getting similar events set up elsewhere. If you have access to a meeting space, and would like to host an event, let's get that going. Feel free to post something here, or shoot me an email. I'll do my best to help you organize an event.

July 1 Open Thread

David Dayen — Thu, 02 Jul 2009 03:00:00 GMT

On to the links:

? A very rare bit of good news: yesterday the EPA finally granted the official waiver for California to implement its tailpipe emissions law, which will allow the state to mandate an average fuel economy of 35mpg for all vehicles sold by 2016. This is a major, long-overdue win for environmentalists who have been working on this for years. One of them, Clean Air Act amendments author Henry Waxman, was admitted to Cedars Sinai Hospital yesterday, so hopefully this will brighten his mood. We at Calitics wish Rep. Waxman well.

? Among other laws that take effect today, Los Angeles inaugurates its half a penny sales tax increase to pay for public transportation projects. Because of the recession, the revenue from this is expected to be lower than at first advertised, and that may affect federal matching dollars.

? Asm. Noreen Evans has a good rebuttal to the Governor's press conference today. Here's a hint: he wasn't exactly telling the truth.

? Here's a good report on yesterday's public hearing over the death penalty, which turned into a day-long debate. Hey wait, didn't the Governor's Department of Corrections put together that public hearing? During a BUDGET CRISIS! That's not leadership...

? A great organization, The Friends of Santa Cruz State Parks, has released a video of people around California opposed to the closing of the state parks. Enjoy -->

? San Francisco has become the first city in America to require composting. Hopefully others will follow. That said, these HIV cuts in Mayor Newsom's budget are obscene.

? Speaking of Newsom, his campaign reports that they raised $1.6 million from over 3,600 donors in the first half of the year. Jerry Brown, who has not yet announced as a candidate, raised significantly more.

? Dr. Howard Dean hits California tomorrow in support of his new book "Howard Dean's Prescription for Real Healthcare Reform." As debate on heath care reform moves forward, this is a vital perspective to include and promote. He'll be at Warwick's in La Jolla at 5pm signing books and meeting with bloggers, so be there or be square. If you can't make it, he'll be back to visit Hollywood and San Francisco later this month.

? A military board in Syracuse recommended a discharge for Lt. Dan Choi, an Arabic linguist, from the National Guard, due to the discriminatory Don't Ask Don't Tell policy. On the flip, CA-10 candidate Anthony Woods, who has been endorsed by Choi, offers his reaction.

"Today, a Military Administrative Board recommended the discharge of my friend, West Point Classmate, and fellow Iraq War Veteran Lt. Dan Choi for refusing to lie to his fellow soldiers, and for refusing to violate the Honor Code to which all Army officers are bound. Lt. Choi is an experienced combat leader and Arab linguist-two things our military desperately needs-- who is ready and willing to re-deploy with his unit. Today's decision only highlights the fact that the Don't Ask Don't Tell Policy" is undermining the strength of our military and the security of our nation.
Having served two combat tours in Iraq and brought all 81 of my soldiers home alive before being discharged under the policy last year, I understand what Lt. Choi is going through all too well.
Since 1993, the careers of tens of thousands of soldiers have ended prematurely because of "Don't Ask Don't Tell"----at a cost of more than $400 million to taxpayers, the safety of combat soldiers deprived of experienced leaders and specialists, and the readiness of a force already stretched thin by two wars and repeated, extended deployments. More than 70% of Americans support its repeal because Americans understand that in a time of war, America 's security is far more important than political expediency.
I applaud Lt. Choi's resolve to appeal this wrong-headed decision, and look forward to leading the effort to repeal this misguided policy as the next Congressman from California 's 10th District."