Wednesday, April 25, 2012

What's the purpose of an economy? A 2012 reminder what "a recovery" means in the lives of real people.

In October 2009 post here, a question was raised was: "What's the purpose of an economy?"

As I review headlines in the news media, it's obvious that the typical reporter covering the economy doesn't ask that question. And as I read the headlines in the news media, it's obvious that California's politicians don't ask that question.

To review, in that post I offered two different perspectives on the "purpose" of an economy. The first perspective is that of most 21st Century economists and international corporations.

It is about statistical data related to something called "productivity" measured in terms of computers recording data, data that could be about the production of food for people.

But it could be and, in the economic data we see reported, is frequently about robots that produce more robots designed to produce robots creating income for corporations retained in the bank accounts those corporations. The benefits of productivity are quantified only in the sense that electronic numbers representing value transfer between the producer and the entity receiving the product are acknowledged. In an obvious sense today, everything that the economists measure are really the results of computers exchanging data.

The other perspective is data about how well the economy is servicing the general populace as they attempt to meet their material needs. This can be found in statistics examining how well the economy is distributing among the people the resources necessary to acquire food, clothing, housing, health care, and education.

The following graph is a reminder that here in California, while The Great California Slump appears to have bottomed out, we are nowhere near a recovery if the purpose of an economy is to provide our people with income needed for food, clothing, housing, health care, and education.

It's nice that new unemployment claims are down. It's nice that the number of foreclosures is down. It's nice that as reported per capita personal income in California "grew at the fastest rate in five years during 2011" and is now only 4.75% below 2007, though we know it that income is distributed less equitably than in 2007.

Let's just not forget that we have a 1.4+ million job recovery gap and are not likely to see that number change significantly in this decade.

While The Great California Slump has bottomed out, it is not over, our economy has not recovered. As I wrote here in a previous post:
...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.
We are in the era created by Jerry Brown and his generation, not in the era created by Pat Brown and The Greatest Generation.

Tuesday, April 24, 2012

Moonbeam's unrealistic wishes and dreams will be very destructive

We are approaching government budget season here in the State of California, so again it's time to dream, to pretend, and to not engage in any in-depth thought about our future.

 On May 30, 2010, I posted the following:
It's fitting that Disneyland was created in California.

It's fitting because we now have two branches of state government that live inside the Magic Kingdom of the late 1950's - in two "lands" far away from reality. The Governor's Office has been relocated to Fantasyland. The Legislature has relocated to Tomorrowland.

Way too many of the voters of California also live inside the Magic Kingdom - in three radically different worlds far away from reality and incomprehensible to each other.

Some live in Main Street USA, a fictional early 20th century Midwest town totally without a corresponding community reality in 21st Century California.

Some live in Frontierland hoping to confront the challenges of the 21st Century with a muzzle loading rifle while wearing a coonskin cap - a reality that never existed in California even when Ronald Reagan was Governor.

Some live in Adventureland where crocodiles, hippos, and other "African Queen" dangers, completely foreign to and absent from 21st Century California, fill people with fear and consume tremendous amounts of their psychological energy.
On April 3, 2011, I posted:
It's clear now, with the election of Jerry Brown, Californian's put the perfect Governor in Fantasyland - Governor Moonbeam - to replace The Gubernator.
California had serious budget problems when Brown was running for Governor in 2010. Almost all those problems stemmed from his pandering to the public and the press when he was previously Governor (1975-83).

For whatever reason, Californians refuse to believe this. The mainstream press, as was the case before, seems to think Brown isn't the problem. But slowly, some old-timers have started remembering openly, such as Sacramento Bee columnist Dan Walters who recently wrote:
While Brown opposed Proposition 13, the era's landmark anti-tax measure, he quickly embraced it after its passage in 1978, declared himself to be a "born-again tax cutter," and sponsored a hefty state income tax cut as he sought re-election to a second term.

Whether California was under siege from crime is questionable, but Republicans bludgeoned Democratic politicians as soft on crime, and Brown didn't want to be a victim.

He and legislators responded with lock-'em-up crime measures aimed at putting more felons behind bars. California's prison population, about 20,000 inmates, started climbing, and late in his governorship, Brown agreed to place a small construction bond issue on the ballot.
What Walter's didn't explain was that one of the reasons Prop 13 passed was a repeating of a descriptive term "obscene state surplus" coined by Moonbeam 1.0's fellow Democrat Jesse M. "Big Daddy" Unruh.

Unruh, then State Treasurer who previously was the powerful Speaker of the California State Assembly from 1961 to 1969, was displeased with Brown. Brown was pleased with himself because of the surplus. He had refused to use any of it to offset huge rises in property tax revenue created by extreme real estate value growth.

It was the first time the voters who approve of Brown discovered they dislike his policy. But somehow, California voters had by 1978 begun to separate in their minds politicians from policy.

Proposition 13 passed and, despite denials by anti-tax politicians and bloggers, became the basis of the financial problem that plague our State and local governments.

And as Walter's points out, the State's problems were exacerbated by "let's don't try to lead, let's get reelected" policies regarding crime and prisons adopted by Brown and his fellow Democrats in the Legislature back then.

As Walter's goes on to explain without offering any opinion on future implications, confronted with horrendous prison overcrowding the U.S. Supreme Court ordered the State to fix the problem including reducing the prison population to "only" 137.5 percent of design capacity by mid-2013. Brown and the Legislature have responded using a policy they call "realignment" which is a euphemism for "passing the buck" by sending lower-level felons from prison into county jails and maybe, or maybe not, funding the costs the counties will incur.

Oh, and they plan to ask the U.S. Supreme Court to permit 145 percent of design capacity, which would allow 5,000 to 6,000 more inmates. In other words, our political leaders are telling us it's ok to house in our prisons nearly 50% more people than they were designed to house.

The Bee in another article tells us about the Moonbeam-led State Corrections Department:
Officials estimated the department would see its workforce cut by about 6,400 staffers as a result of the long-term plan, and allow the prison system to meet the requirements of court-ordered mandates on crowding, health-care and mental health by the end of next year.
If you believe this, I have some State-owned bridges to sell you.

In the meantime, Governor Moonbeam and the Legislators are singing a blue tune about the fact that the budget is out of balance by some amount between $7 billion to $14 billion. In another recent post, Walter's noted:
With the state budget mired in deficits, Gov. Jerry Brown and legislators, especially his fellow Democrats, are searching under every fiscal rock for money to spend.

That search has spawned an odd syndrome involving what could be three big pots of money – a competition among liberals over how they should be spent if, indeed, they materialize.
What Walter's is telling us is that it's an election year. Our legislators are struggling to keep reality from intruding on the State Budget until after November.

The sad part of the situation is that in January 2011, newly-reelected Governor Moonbeam could have presented a balanced proposed 2011-12 Budget. Yes, the cuts in schools, care for the aging and the young, courts, wildfire fighting capabilities, etc., would have been drastic, maybe even catastrophic. But by this year, California's self-destructive middle class voters would have been forced to confront reality.

Now Moonbeam and the Democratic Legislature have taken California's government services down a road preferred by the radical right. They are offering a completely inadequate, useless "tax the rich and the poor" tax increase initiative measure which they tell us with a straight face will prevent further cuts.

While singing his blue tune about the budget, Governor Jerry "Moonbeam" Brown keeps up a deception, but sometimes I wonder of these song lyrics apply:
The result of this deception
Is very strange to tell
For when I fool the people
I fear I fool myself as well!
In the meantime, California's once-proud public education system - from pre-school to graduate school - has become a shadow of the promise it offered the children of The Greatest Generation.

In the meantime, California's progressive programs to care for the elderly, the disabled, and the children of poverty are becoming comparable to Mississippi's.

In the meantime, California's once-strong, booming economy that existed from 1950 through 1980 has completely stagnated, buried in goofy ideas about taxation, environmentalism, and "green" potential.

At the risk of repeating myself too often:
We are approaching government budget season here in the State of California, so again it's time to dream, to pretend, and to not engage in any in-depth thought about our future.

It's fitting that Disneyland was created in California.

It's fitting because we now have two branches of state government that live inside the Magic Kingdom of the late 1950's - in two "lands" far away from reality. The Governor's Office has been relocated to Fantasyland. The Legislature has relocated to Tomorrowland.

Way too many of the voters of California also live inside the Magic Kingdom.

It appears that Californians have become moonbeams themselves, believing these Magic Kingdom song lyrics:
When you wish upon a star
Makes no difference who you are
Anything your heart desires
Will come to you

If your heart is in your dream
No request is too extreme
When you wish upon a star
As dreamers do
Unfortunately, embracing Governor Moonbeam's unrealistic wishes and dreams will be very destructive.

Thursday, April 5, 2012

Good grief folks, it's California. Don't support wise public policy!

Sometimes I wonder if California really is run by the crazies.

So far, two of the state's major newspapers have literally said we cannot support carefully crafted, wise public policy basically because Governor Jerry "Moonbeam" Brown, the Democratic Legislative Leaders, and teachers unions prefer unwise, poorly designed public policy.

We have two competing initiative measures circulating to get enough signatures to get on the November ballot.

One was prepared by Molly Munger and supported by the California PTA. Munger's measure would increase income taxes in a progressive manner on every income earner in California except the poorest workers among us. It is the one tax increase measure now circulating specifically aimed at improving California's economic future by educating California's children for a 21st Century economy.

In February the Sacramento Bee's Editorial Board said: "Munger makes a compelling case that this is a once-in-lifetime chance to invest directly in the improved education of California's children." But that wasn't good enough for them to back Munger's measure over the one proposed by Governor Moonbeam. They clearly said it would be better to focus on dumping more money into the State General Fund as the measure sponsored by Governor Moonbeam would do.

So far, in the past week The Los Angeles Times has published an Op-Ed piece and a piece by their Capitol Journal columnist explaining that Munger's measure is better but we have to support Moonbeam's.

The venerable Times Capitol Journal columnist George Skelton explained as he tells Munger to step aside (emphasis added):
No public poll — or recent private survey that I'm aware of — shows Munger's tax initiative with any real chance of passing voters' muster in November.

...Munger became increasingly frustrated with Brown after repeatedly trying to unite with him on a school funding proposal and being rebuffed.

Actually, Munger's tax measure makes more public policy sense than Brown's. It just makes less sense politically.
Of course, Skelton has repeatedly endorsed Moonbeam's measure and attacked Munger. This is the first time he's clearly acknowledged: "Munger's tax measure makes more public policy sense than Brown's." How could people know Munger's measure is better? Up to this point, not by reading Skelton in the Times.

The other piece published in the Times was an Op-Ed piece by Jim Newton in which he says:
Both measures start with the recognition that California is deeply in debt and that even years of cutting haven't brought it into balance. Brown would address that shortfall with a combination of a sales tax increase and a tax hike on income of more than $250,000 a year. In economic terms, that's not an ideal approach. It increases the tax burden on the poorest Californians, who pay a greater percentage of their incomes in sales taxes and who can least afford to pay higher taxes, and the richest Californians — those whose incomes gyrate most wildly with the economy and thus contribute to the instability in the state's revenue collections.

Munger's proposal, by contrast, avoids sales taxes altogether and boosts state income taxes by 1% across the board. That still means that high-income taxpayers would shoulder most of the burden because the income tax is progressive, but they wouldn't shoulder all of it. And taxpayers at all levels would have to chip in. That's more stable and more widely distributed than Brown's plan....

Brown's plan has the advantage of focusing its burdens on the poor, who don't vote much, and the rich, of whom there aren't very many....

...Munger's pitch is simple: California's educational system is tragically broken, and voters, even voters who don't usually like taxes, have said they are willing to pay something to fix it.
But nobody in the press has even hinted at the idea they'll support Munger's measure over Moonbeam's.

It's sad, really. If you read Munger's measure which practically nobody does, it offers serious solutions to our biggest economic problem and does so in a manner designed to avoid the problems of our dysfunctional State Government.

It wisely cuts out of the decision-making process politicians in the serially floundering Legislature plus the Governor, leaving it all to school boards.

Because it relocates to local school boards decision-making on how within certain guidelines the money is to be spent, it cuts the statewide union lobbyists out of the picture, forcing local teachers to work with locals school boards.

And it prevents the new funds from being used for administration.

And it even gets more taxes from the wealthy even though the press generally says Moonbeam's measure is a "tax the rich" measure.

And it.... I could go on and on, but I've already done that in a previous post.

It's disturbing that our serious, responsible California press can't support Munger's measure, though they admit it is much better public policy, because according to them the voters would prefer to extract money from the poorest working people among us, as well as from the richest among us, to dump into the State General Fund for the Legislature and Governor to play with.

Yeah, right.