Monday, December 12, 2011

California's Bear Bones Era - Come view the meager remains of our fathers' and grandfathers' promises

“Why don't you go on west to California? There's work there, and it never gets cold. Why, you can reach out anywhere and pick an orange. Why, there's always some kind of crop to work in. Why don't you go there?”
― from The Grapes of Wrath by John Steinbeck published in 1939.

"This is the most significant step California has ever taken in planning for the education of our youth," Governor Edmond G. (Pat) Brown declared in April 1960 upon signing the bill establishing The Master Plan for Higher Education in California.

"I am proud that with this bill California takes the lead among the nation’s states in giving direction and purpose to higher education," said Brown.

"Many others unselfishly contributed their time and talent to this plan and their efforts have given us the tools to build the finest higher education system in the country" said the governor.

In 1980, 40 years after The Great Depression and 20 years following the adoption of the California Master Plan for Higher Education, 60% of California's families were middle income. Last year 47.9% of California's families were middle income. And all indications are that the number will continue to drop.

According to the Public Policy Institute's study The Great Recession and Distribution of Income in California, here is what The Great California Slump has done to Californian's as compared to what The Great Recession has done to the rest of Americans (click on the image below to see a larger version):

What this chart shows is that the 10% lowest income California families saw a drop in median income of more than 21% between 2007 and 2010. This has created a significant change in what it means to be a Californian as seen in this chart:

Essentially, the spending power of a family's income has plunged for the poorest among us and skyrocketed for the richest Californian's. As the report explains:
Not only did the Great Recession strip away any gains in income at the 10th and 25th percentiles that followed the bust of the dot-com bubble, but it also pushed incomes at these levels to near-record lows. By 2010, families at the 10th percentile had incomes roughly 24 percent lower than the 10th percentile did in 1980, and families at the 25th percentile had incomes 12 percent lower. The 10th and 25th percentiles have not yet fallen to the lows of the 1990s recession, but by 2010 there is no evidence that incomes have yet troughed in the Great Recession.

At the other end of the spectrum, the 90th percentile saw a decline from its 2006 peak. However, the gains at the 90th percentile over the past three decades mean that despite the Great Recession, the 90th percentile of income was still 34 percent higher in 2010 than in 1980. Income declines at this level are also much less severe than the declines experienced at lower points in the distribution. Notably for the 90th percentile, the Great Recession has not as of yet stripped away the recovery made after 2004.

The 75th percentile of income saw larger declines than the 90th percentile during the Great Recession, bringing it to a level last seen in the late 1990s. However, over the longer term, income at the 75th percentile is still substantially higher than it was in previous decades. By 2009, the 75th percentile was earning over 18 percent more than in 1980.
The troubling trend relates to the size of the middle-class which is declining as can be seen in this chart:

The study explains:
Most Californians live in middle-income families. In 1980, the proportion of these families reached a 30-year high of 60 percent, a number that has been trending downward ever since. The percentage of individuals in middle-income families reached a new low of 49.7 percent in 2010.
What this tells us is that the goal of our California grandfathers and fathers as reflected by the writings of Steinbeck and the speeches of Pat Brown were being achieved in the 30-year period from 1950-1980. In the next 30 years, 1980-2010, there has been a slow, but systematic decline in access to the middle class, culminating in the effects of The Great California Slump which I now believe will be the period from November 2007 through late-2017.

This has stopped the California population growth from population migration. For better or worse, more people are leaving California than moving in from other states and foreign countries. Instead our population growth of not quite 1% comes from a lower death rate than birth rate. As Sacramento Bee columnist Dan Walters recently noted:

  • Three-quarters of those babies are being born to nonwhite mothers, which means there's a widening generational gap between a fast-aging and shrinking white population and a young and still-growing nonwhite segment.
  • While Asian American and white kids are doing relatively well in public education, the data on academic achievement and high school graduation are miserable for Latino and black kids, which could mean a looming shortage of trained and trainable labor if and when the recession ends.
  • The combination of demographic factors and recession are producing an increasingly stratified society with a predominantly white and Asian overclass, a largely Latino and black underclass and a shrinking middle class, as new studies by the Public Policy Institute of California graphically demonstrate.
This is a trend that is dangerous, it is a trend that would have been unacceptable to the grandfather, Edmund Brown, and to the father, Governor Pat Brown. That the son Jerry "Moonbeam" Brown was Governor when it started (1975–83) and is Governor again is troublesome.

Brown is a 73-year-old man who is the oldest currently serving governor in the United States. He has no children and is married to a 53-year-old woman, Anne Gust Brown, who also has no children. His wife (who plays a significant role in his administration) is the Former Chief Administrative Officer and Executive Vice President of Gap Inc., a corporation that operates the Gap, GapKids, babyGap. GapBody, Banana Republic, Old Navy, Piperlime, Athleta, Gap Outlet, Gap Generation and Banana Republic Factory Stores. During her tenure clothing for these companies were made in Cambodia, China, Colombia, El Salvador, Hong Kong, India, Indonesia, Mexico, Moldova, Peru, Phillippines, Turkey, and Vietnam and the company was embarrassed when The Observer published an accurate article headlined Indian 'slave' children found making low-cost clothes destined for Gap,which embarrassment was handled so well that TIME published a followup article headlined Gap Threatens India's Clothing Boom.  They live in the Oakland Hills in a home purchased for $1.8 million.

Brown, by almost any comparison from a prominent family, is a 1964 Yale Law School graduate who passed the state bar exam on his second attempt and whose only meaningful jobs have been Mayor of Oakland, California Secretary of State, California Attorney General, and Governor of California.

A bachelor in his first term as Governor and as Mayor, Brown was a darling of the press
  1. because he dated high-profile women, the most notable of whom was the singer Linda Ronstadt, and
  2. because he staged appearances at high profile technology events appearing to be the cool technology and environment guy.
In fact it was the combination of these two facts that earned him the name "Governor Moonbeam."

Many ...ok... I would call him a celebrity. Generally the press treats him as a celebrity. Few attempt to relate current events to what happened, to what he did and failed to do, when he was Governor the last time or even when he was Mayor. If he weren't so old, after serving his current stretch as Governor, he'd be a good candidate for "Dancing with the Stars."

Unlike his Irish immigrant grandfather, unlike his Governor father, he has no vision for his non-existent grandchildren. He offers no vision for any other Californian's grandchildren. The vision he has offered recently is him running for another term as Governor in 2014, while the State Government he heads today is in crisis. But rather than lead during a crisis he monitors the public opinion polls to make sure he is a winner even if the State isn't.

Because of opinion polls, while the less wealthy among us are being pushed from their homes or the State Universities that were part of his father's plan or from senior care centers or from medical care facilities for children, he is proposing for the period of 2013 through 2017 to raise the sales tax plus raise the income tax on the wealthiest among us to raise about half the revenue the state needs.

He is doing this by personally sponsoring an initiative measure.He's doing an initiative because supposedly during the budget process in 2011 he discovered to his shock and amazement that the Legislature hasn't been able to do anything significant related to the State Budget for a decade other than overspend.

And apparently nobody but me finds his self-admitted ignorance appalling since from 1999 through 2007 he was Mayor of California's eighth-largest city and from 2007 to 2011 he was the Attorney General of California. He must have been doing these jobs from a cave.

The problem Moonbeam will have with this unimaginative tax initiative to be voted on in November 2012 is that six other proposed tax increase initiatives have already been submitted to the Attorney General and at least one more is expected (along with over 80 other initiative proposals on various subjects).

Few of these initiative proposals will do anything to reverse the decline of the California Middle Class. But in a future post I'll explore the multitude of tax and budget initiative proposals.

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