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Introduction:

With the belated victory of Kamala Harris as Attorney General, the full results of the 2010 election are in for California. There many things that progressives can be proud of - a sweep of statewide offices, picking up another Assembly seat, defeating prop 23 and passing prop 25. On the other hand, there are also some major disappointments - the defeat of prop 19 (marijuana legalization), the defeat of prop 21 (a VLF to fund the state parks), the defeat of prop 24 (rolling back corporate tax breaks), and the passage of prop 26 (2/3rds requirement for fees). Prop 26 especially complicates what this victory means for California.

Indeed, our situation is a lot like the national picture after the 2008 elections - we have an executive who straddles the line between the left and right wings of the Democratic Party, a big legislative majority, but not the ability to break the fiscal deadlock and really be able to govern our state.

So where do we go from here?

Finance:

The rather comfortable million-vote margin by which prop 25 passes would make me rather optimistic about the possibility for the passage of a majority-vote revenue proposal. However the failure of every revenue increase - prop 19, 21, and 23 - are daunting evidence to the contrary. Granted that the outcome might be different in a presidential electorate (younger, more minority and working class voters, higher turnout generally), but I think this shows how difficult it will be to thread the needle of the "Program/Government Blindspot" and the prevalence of austerity thinking, even if we link taxation to spending.

In the mean time, California Democrats have a daunting task ahead of them - to balance the budget without doing any more harm to already brutalized public services, and to create the economic growth necessary to ensure that the budget stays balanced. In the short-term, there are four things we can do:


  1. Going back to the Steinberg Maneuver -According to the California Budget Project, Prop 26 doesn't establish a blanket 2/3rd requirement for all fees. A number of fees, including "charges where the feepayer receives a service, product, benefit, or privilege...charges imposed for entrance, use, purchase, or lease of state or local government property, penalties, fines, or other monetary charges resulting from a
    violation of the law, charges imposed for "reasonable regulatory costs" and assessments and property-related fees," are not covered by the 2/3rds requirement. Thus, it's still possible to raise revenue through a two-step process in which said fees are raised by a certain amount by majority vote, then taxes are raised and the fees are lowered by the same amount by a majority vote. The issue here is whether we can get Governor-elect Jerry Brown to sign such measures, given previous statements of his.

  2. We can try again with Ballot Box Budgeting - there's some indication that Brown's approach will be instead to put the budget to a vote as a proposition in a special election. The tricky thing here is how to persuade the public to vote for said budget; Schwarzenegger tried this in 2009 and it was dramatically unsuccessful. Perhaps the 2010 election signals a more realist (and realistic) electorate, but it's a roll of the dice.

  3. Banks - I'vewrittenbeforeaboutthe potential that a state reserve bank offers. That was true before the 2010 election, but it's even more true now. Given the newly-created restrictions on raising revenue, a state reserve bank offers an entirely new possibility, both for resolving the current budget crisis, and for creating the economic growth necessary for California's future development.

    1. I believe that this bank would be even more likely to gain support if, within the state bank, there was created a series of Development Funds - a Green Development Fund, an Education and Innovation Development Fund, a Health Care and Medical Science Development Fund, and so on - that could make targeted investments into key sectors of California's economy, both public and private.



  4. Jobs - with or without financing from a state reserve bank, aJob Insurance fund would fit under the exemption in prop 26 - since the "feepayer receives a service, product, benefit, or privilege," namely eligibility for a job when unemployed. Ultimately, as I have said before, California cannot balance its budget with 12% unemployment because revenues will continue to decline, no matter how much spending is cut. What is needed is a sudden shock to California's labor market, and unemployment being cut in half is that shock - it will pump huge amounts of money into local retailers and other businesses, it will make employers see the ranks of the unemployed in their communities shrinking, and hopefully shift the "animal spirits" of both employers and lenders.


None of these steps is a total solution for the fundamental problem of revenues - given the problems we had with the budget even before the recession. But they will fill the gap so that we can debate the question of majority-vote revenues in an economic climate of balanced budgets, normal levels of unemployment, and higher economic growth.

Green Economy:

Now that AB32 and CEQA (California Environmental Quality Act) are safe from Prop 23, we need to do more to show thereal possibilities of a green economy. This means making it fast and seamless to develop sustainability, through the creation of expedited approval and categorical permits for model projects.It also means establishing special zoning rules in transit corridors to allow for sustainable, energy-efficient, high-density development.

This doesn't mean dismantling regulations in the name of the environment, but rather shifting the direction of regulation away from NIMBY no-growth, which only encourages sprawl and wasteful development, towards in-fill building of affordable housing in already-developed areas while protecting undeveloped land. It also means - and here is where environmentalists need to reckon with the realities of class and race - getting rid of the tools of modern class (and racial) discrimination: zoning rules that limit building heights to two-stories or less, that ban unrelated individuals from living in the same house (to prevent renters and subdivision), that establish minimum lot sizes to mandate , or that mandate the construction of garages. In other words,ending exclusionary zoning and encouraginginclusionary zoning.

Finally, it means supercharging public investments into green energy, mass transit, and other sustainable ventures. A statewide version of LA's 30/10 plan, aimed at speeding up and extending High-Speed Rail and local mass transit would be a huge transformation, both in terms of creating jobs and spurring growth, but also in lowering CO2 emissions and pushing land-use away into energy-efficient high-density development. Large-scale alternative energy projects, like the Beacon Solar Energy Project, San Fransisco's tidal energy project, should be built under public auspices, making use of the newest forms of technology. The advantage to this approach is that it allows the public sector to act as a yardstick competitor to California energy companies, spurring innovation and providing a guaranteed market for green manufacturing firms under democratic auspices.

All of this links together. Without financing, there's not going to be a green revolution in California any time soon. Without new sources of economic growth that don't depend on housing bubbles, California won't get the revenue it needs. In the end, the fight over our budget is really about the future direction of this state - whether we will have a government that can help build a broad economy or a night watchman state that is powerless to prevent corporate greed from running wild.

So let's get to work.

Originally posted to Vikingkingq on Fri Dec 03, 2010 at 07:47 AM PST.

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Comment Preferences

  •  another possibility (3+ / 0-)
    Recommended by:
    Sychotic1, neroden, farbuska

    creating a budget positive single payer.
    there's sure room for a system that made the state money, and cost one heck of a lot less then even the "non-profits"
    not holding my breath

    republicians believe government can't work, when they're in power, they're right

    by askyron on Fri Dec 03, 2010 at 07:56:51 AM PST

  •  Regarding Green Economy and Transportation (2+ / 0-)
    Recommended by:
    Sychotic1, SoCalSal

    In California and the Nation as a whole, there is a major chance to make a difference in both the job situation and the environment coming up: transportation reauthorization, which will set all transposition policy for the next six years.

     

    Why is this important?  Because it is an opportunity to expand public transit, the only historically proven way to improve public health, reduce dependence on follies fuels, improve quality of life and allow legislators to bring home dollars and jobs while doing all three.  It is a winning formula for a lot of groups.

    But the groups need to be mobilized.

    The keys to doing it are jobs and disease (yes disease, not health).  The reasons I think it will work:

    First: jobs

    The House Transportation and Infrastructure Committee (T&I)has a remarkable history of bipartisanship for two extremly relevant reasons:

    Every member of Congress likes to cut the ribbon on  roads, buses and/or rail in his or her district.  So, the committee tends to unite to get as much funding as possible for such projects.

    The T&I committee is also united in its opposition to another committee: the Appropriations Committee.  A couple of surface transportation reauthorizations ago T&I took jurisdiction over the Highway Trust Fund (which provides the bulk of funding for highways and transit programs) away from the appropriators.  The appropriators went predictably batshit, becasue they traditionally control all funding.

    This may seem irrelevant but, remember, we are now dealing with an anti-earmark movement.  Earmarks are traditionally defined as special appropriations.  Everyone still wants them, of course, but no Republican can admit it.  So, where will they get the bacon?  Seems possible they could argue that a transportation project isn't really an earmark, because no funds were appropriated.  Cute, huh?

    So they get to bring home funds and jobs and get credit for it.

    Onward to disease:

    This is the transit part of the equation.  While people get riled up around the "socialization" of health care, they are even more scared of heart disease, lung disease and cancer.  Remember soccer moms?  They are particularly scared about threats to children.  If the public health organizations can be convinced to put their muscle behind this and if there is outreach to support groups for all these problems, you have the makings of a grass-roots effort to improve public transit.

    It doesn't even need to be nationwide, though that would help.  Getting grassroots delegations of construction contractors, union workers, pediatricians, and health officials to visit key  members of House T&I and Senate Banking would start the ball rolling.

    And the Representatives who voted for such a project could take credit for giving their constituents jobs and saving them from cancer.  hard to pass up a chance to be a hero to that many voters.

    The following groups will hit the ground running:

    The American Public Transportation Association (APTA)and its affiliated Public Transportation Advocates in Action

    Reconnecting America

    Smart Growth America

    Transportation for America (T4 America) and its many affiliated organizations

    But they will need help from the following:

    Environmental Groups.  They are very heavily invested in cap and trade and have traditionally made transportation a second priority.  They must be convinced that this need to be revered om the neart term is we want any kind of improvement at all

    Public Health Groups.  Public transit is in the interest of the American Hearth Association, the American Lung Association, the American Cancer Society, and all children’s’ health organizations.  They have begun to look at public transportation, but they must be convinced to make it a top legislative priority.


    The key committees to watch and pressure will be as follows:

    The House Transportation and Infrastructure Committee, which has a genuine long record of bipartisan ship, and whose incoming Chairman, Jon Mica  of FL, is not against transit.

    In the Senate, the following three committees:  Environment and Public Works, with jurisdiction over highways, Banking, with jurisdiction over public transit, and Commerce, with jurisdiction of long range rail.

    This is a chance for a real win.  Monitor APTA’s website for news.

    For background information, see the CRS Report Surface Transportation Reauthorization Legislation in the 111th Congress: Summary of Selected Major Provisions

    Recommended reading for radicals:

    The incomparable Saul Alinsky's Rules for Radicals

    Influence: The Psychology of Persuasion by Robert Cialdini. This is the single most valuable book I have read on how to persuade and how to avoid being persuaded.

    Don't Think of an Elephant!: Know Your Values and Frame the Debate--The Essential Guide for Progressives

    Frank Luntz: everything he’s written.  You have to know the enemy.    Remember the great scene in Patton, when the victorious general shouted: “Rommel! You magnificent son of a bitch!  I READ YOUR BOOK!

    Making the News: A Guide for Activists and Nonprofits

    The Campaign Manager: Running and Winning Local Elections

    How To Win A Local Election, Revised: A Complete Step-by-Step Guide

    Guerrilla Marketing

    Politics is the entertainment branch of industry. -Frank Zappa

    by TheGrandWazoo on Fri Dec 03, 2010 at 08:02:57 AM PST

  •  state bank (1+ / 0-)
    Recommended by:
    neroden

    a la N Dakota?

    "A corporate coup in slow motion..." Chris Hedges on Reagan presidency.

    by lisastar on Fri Dec 03, 2010 at 08:05:38 AM PST

  •  As usual, a dense (and I say that... (2+ / 0-)
    Recommended by:
    trashablanca, bythesea

    ...as a positive) explication of a very important proposal.

    Thanks.

    Don't tell me what you believe. Tell me what you do and I'll tell you what you believe.

    by Meteor Blades on Fri Dec 03, 2010 at 08:15:18 AM PST

  •  Interesting ideas (1+ / 0-)
    Recommended by:
    Sychotic1

    I don't know if I quite understand this "Steinberg Maneuver" of which you speak. From what I know, the exceptions to Prop 26 are going to be more or less for local governments that make agreements with particular parties to pay fees as a condition of a permit, or something like that.

    But the bigger picture is that it's going to be exceedingly difficult to borrow going forward. Based on currently revenues and debts, we're already rated the state most at risk of default on our debts (or a close second). I don't see how we successfully sell any more debt, given that it will be exceedingly difficult to raise anymore revenues.

    You also have the picture even bigger on top of that, which is that other states have been taken over by Tea Party Republicans even more so than in the past, so going forward, every time we try to raise revenues, we're going to be making it that much more difficult relatively speaking for businesses to stay in California, which in the end means even less revenue as the tax base shrinks even further than it already has.

    On top of that, you have the fact that our crisis over the last couple of years would've been ten times worse without federal stimulus assistance, and that's over, and maybe even going the other direction.

    It's going to be rough sledding for the next couple of year -- we'll see what happens.  

    •  Steinberg Maneuver (2+ / 0-)
      Recommended by:
      Sychotic1, neroden

      So, prior to 2010, Senate Majority Leader Steinberg figured out a way around the 2/3rds. You raised fees by a simple majority, and then a second bill that raised taxes by the same amount and then lowered the fees back to where they were. Because the second bill was revenue-neutral, it could be passed on a majority basis. Prop 26 makes it more difficult, but I think it can be done.

      Regarding borrowing - hence a state bank we can borrow from.

      The third point is a facetious one. Businesses are not and have not left California due to taxes, taxes are not the major factor behind business location, and it's a right-wing meme that shouldn't be spread.

      •  A state bank still doesn't print money (0+ / 0-)

        it has to get it from somewhere. Prop. 26 specifically talks about "revenue-neutral" measures that raise taxes, so I don't know how the Steinberg Maneuver survives that. And making all these declarative statements about why businesses do or do not do this or that thing is absurd. Certainly some businesses, or subsidiaries thereof, or operations thereof, have left California for other states, and for you to presuppose that you know every reason that every business left the state, and for certain that taxes played no role in it, is just absurd, and undercuts all of your other arguments.

        •  State banks (1+ / 0-)
          Recommended by:
          neroden

          Create money through fractional reserve lending, using tax revenue, public lands and buildings, etc. as the reserves.

          You raise a point about Prop 26. I don't know if it should still work.

          Regarding businesses leaving the state - this has been studied repeatedly and debunked.
          http://www.cbp.org/... see pages 17-21.

          •  The CPB link does not prove that point (0+ / 0-)

            at all. Their chart shows that for California has the fifth and sixth highest personal and corporate income taxes nationally, and then it just makes the same kind of declaratory statement without evidence to the effect that "substantial numbers" of businesses aren't leaving California that you made above, and it's equally useless.

            Our unemployment rate is right up there with Michigan and Ohio, and there's no reason for it. So much of our economy can't go anywhere -- tourism, agriculture, international trade, people who just want to live. On top of that, we have industries that are still doing well internationally -- high tech, entertainment, fashion.

            So why in the hell do we have ultra-high unemployment and shrinking government revenues? Public policy has to be a factor, no?

            •  No. Public policy is not a factor. (0+ / 0-)

              Prior to the crash, California had low unemployment and healthy revenue growth. The overwhelming reason for California's sinking revenues is that we were the epicenter of a housing bubble popping, and then got hit hard by the credit crunch.

        •  Actually, it can print money. (0+ / 0-)

          Banks routinely printed money prior to the 1930s, and still have the legal power to do so last I checked.

          They can't make it into legal tender, but that's another matter.  California Banknotes would be as good as any other money.

          Read pp. 1-7 of Krugman's _The Great Unraveling_ (available from Google Books). NOW.

          by neroden on Fri Dec 03, 2010 at 09:20:27 AM PST

          [ Parent ]

        •  Business particularly don't care about income tax (1+ / 0-)
          Recommended by:
          Pilkington

          If there is a tax a business cares about, it's the "fixed taxes", the ones which apply whether they're making any money or not.  Those affect business decisions.  Income taxes don't affect business decisions, because they only apply to profits.  (The exception is when the law requires "profits" to be figured in some stupid, unrealistic way, but that only applies to a small minority of inventory-heavy businesses.)

          Read pp. 1-7 of Krugman's _The Great Unraveling_ (available from Google Books). NOW.

          by neroden on Fri Dec 03, 2010 at 09:22:37 AM PST

          [ Parent ]

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