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How Progressives Can Save California…And the Nation

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Californa State Flag

Conor Friedersdorf has a great editorial over at the Atlantic on California’s political and economic situation. As a Democrat (mostly because I’m too lazy to change my registration to Independent) and as someone who PEW described in a study as a liberal, I agree with most of what he wrote about California. Yet, for all that I enjoy Freidersdorf’s editorials, I think he fails because of his libertarian bent and his understanding of history.

As a few examples of why I agree with Friedersdorf’s editorial, I submit these examples:

Regarding the citizen approved non-partisan redistricting committee, I was absolutely outraged by Democratic party attempts to con, manipulate and impede the independent redistricting committee. It was wrong, immoral and highly unethical. I gather from later news reports that it failed; at least I hope so. No seat should be safe for a party or a legislator through redistricting. All people, regardless of partisan or political views, need to be represented fairly.

Moreover, I voted for Prop 5 and thus against the 3-strikes law for the reasons Freidserdorf stated: its economically wasteful as well as unreasonably harsh. Even Superior Court Judges have stated that the 3-strikes law forces penalties, in terms of prison sentences, that are excessive considering the crimes. But California’s prison system was mostly sold off private prison corporations. Thus, private profit motives nearly preclude any sensible changes like rehab, community monitoring, and ankle bracelet monitors for drug and minor infractions. If California enacted the same kind of reform that Texas did to save money, our prison costs would drop dramatically while leaving plenty of room in our prison system for hardened criminals. I have a few thoughts on them as well: like required real, prison fiscally sustaining work, job training and education rather than inmates spending time weight lifting and body building. For example…and this is my bias…ditch the gyms and create sustainable food gardens.

As for the pension funds, I’d like to see state employees given salaries comparable to private industry for that specific job and then have the employees make defined contributions to CALPers. I’d recommend, too, that CALPers investigate/study pulling the funds out of Wall St. firms to create it’s own investment bank where it loaned money to businesses and bought state infrastructure bonds for a reasonable return, a la ND’s state bank.

If state employees no longer need taxpayer funds, as a result of employee only investments and a CALPers investment bank, then taxpayers would be off the hook for employee pension funds, which would make CALPers and state employees more responsible for their own retirement management.

I also believe state workers should not receive retirement benefits until they meet the Social Security retirement age. My brother, who worked really hard and rarely had a day off for the State as a Budget Analyst, retired at 50 with a really good retirement pension as well as a large payout for all the accumulative vacation time he never took. He’s not worked a day since he retired because he didn’t have to…and he’s living quite comfortably as are all retired state workers who retired long before Social Security retirement ages. That’s absurd.

California’s public employee retirement benefits should match the Social Security retirement age. Another point of my agreement with Friedersdorf is teacher tenure. I hate it.

I had a couple of those bad teachers who ended up being a wasting my time and taught me nothing. I’d scrape tenure altogether along with the entire Civil Service System. Both systems exist because of outdated and disproved social psychology thinking from many decades ago (the 30s or 40s?) in which it was believed that if employees didn’t have to worry about being fired, they would do a better job. We now that is wrong.

The fear of being fired provides the additional incentive to work harder and be more productive while complete protection encourages laziness.

California should lead the nation in determining best practices based on recent research, private industry models and what are the best incentives for employees. Research is needed and should be done but in the short term both tenure and Civil Service guarantees should be eliminated. No more working hard until tenure or civil service employment guarantees occur to then become lazy workers as my mother discovered amongst many of her coworkers after she went to work for the State. All workers should be held to private industry best practices standards. Period.

Where is disagree with Friedersdorf are those areas which he exhibits a seemingly youthful naiveté.

Unlike Friedersdorf, I unfortunately don’t have much faith in California Republicans either to deal with California’s real problems of fiscal solvency and rebuilding the state back to the vibrant, thriving state I remember it being when my family returned to CA in 1959.

Admittedly, the state’s proposition ability has made fiscal constraint and budgeting sense much harder, allowing emotional appeals on spending while leading citizens to believe there is no financial penalty to that spending. In the very same election year, I’ve seen propositions approved by citizens that both increased spending while at the same time demanding higher restraints on taxes.

Californians, like the rest of nation over the last 30 some years, came to believe that spending and taxes were disconnected; deficits didn’t matter and a magical belief in growth (i.e., dynamic scoring) would solve all fiscal problems.

Does any company determine its spending based upon what might happen in a year or three or five years? No, they take a hard look at their market and, if they’re smart, make a strategic decision on where to spend their money. They don’t make fiscal decisions based on magical market predictions, which is exactly what Republicans across the country, and most specifically in Congress, now demand. Dynamic scoring, which the GOP pushes, is a lie based on an unproven economic myth of unknown growth. Yes, budgeting for an entire year is hard to do when no one knows what the future will bring which is why the most accurate numbers and predictions must be available.

That is why the California proposition system must to be reformed to bring some reality to it. Overall, the idea that you can get something for nothing, based on magical growth numbers, has caused much of the state’s fiscal problems. And very liberal Democrats have added to this fantasy along with their Republican fellows who said tax cuts were all that was needed to fix the state’s fiscal woes. Hidden accounts or lock boxed accounts no longer make any fiscal sense. Our Legislature must be free, regardless of voter propositions, to make economically fiscal sense of all money flowing into the state and end those that no longer are fiscally appropriate or feasible or necessary.

Right now, I’m praying the State’s Democratic majority will become more fiscally responsible and demand real, true accounting and be willing to say to the citizens that if voters want more spending, it’s going to mean higher taxes. But I don’t have much hope.

As a result of term limits, few if any legislators understand the budget or the budget process which means that few if any candidates understand the budget and all the hidden accounts. As has been noted in numerous news accounts, legislators now rely upon bureaucrats and lobbyists to teach them about the budget and often to write budget legislation. Our California legislators no longer have the knowledge they need to perform their job, and just about the time they begin to understand it, they’re termed limited out for another neophyte. Nevertheless, California citizens seem to getting that message…slowly.

As studies have begun to show, Californians are beginning to realize that our enormous number of propositions and gerrymandered districts caused legislative problems that have accumulated over the last 30 some years which led our state’s fiscal problems.

But California will never be able to resolve its fiscal problems until the state – and by extension the entire country – ends its reliance on special interest election funding, whether that funding comes from teacher and prison guard unions or from corporations or from other groups whose ideology has been totally debunked by mainstream economics. Citizens United and the whole notion of SuperPacs and lobbying dollars for all special interest groups must be overturned and made illegal.

TR described in his autobiography how a system of campaign financing, which closely resembles that which now exists, corrupted the political system during his early political career and before. He described it quite eloquently in his autobiography and showed examples of how it corrupted the public good. Right now, we are right back to where TR looked onto the political system and saw massive corruption on both sides of the political aisle. Nothing can be accomplished to reform our political process nationally or within California until well-funded special interests are barred from elections and lobbying.

Perhaps Freidersdorf fails to understand the special interest money that historically has led to the state’s fiscal dysfunction, but I’m old enough to have learned the history of it…and it ain’t pretty regardless of whichever side of the aisle you choose.

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Mea Culpa

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colfax1

Dear Readers,

For the last couple of weeks, I’ve not posted anything to my blog. Not even about those little known stories the mainstream media tends to ignore…and I love. It’s not that those stories don’t exist. Heck, plenty of them exist everywhere; just look at any issue of Wired Magazine’s Wired Science blog. I’ve just been occupied elsewhere.

I admit to having “liked” Bruce Bartlett’s facebook page which supplies me with endless conversations (and articles) on economics and politics as well as the absurd. Of course, I still read the news every morning in the Washington Post (especially Wonkblog) as well as The Atlantic, The New Republic, The American Conservative, Bloomberg, and a few others like the Financial Times and the Economist.

But over the course of the last year I’ve become more involved in volunteering my expertise to community non-profit groups. My little, rural town in the Sierra Nevada foothills can’t afford paid services for the help it needs. We’re still suffering from the severe recession.

Wages are below median average for California, and industry, as we generally think of it, is practically unknown here. For years, Colfax, where I live, was ruled by a “no expansion” crowd that hamstrung local businesses and the community at large. Finally, that hold is breaking as a result of the Great Recession. Businesses, hard hit by lack of customer revenues, are finally speaking up and demanding revenue growth in order to stay in business and to fill the empty storefronts. Residents are seeing the need to build sustainable businesses that can help support necessary, and even desired, community services.

I’ve spent most of my adult years in large towns where governmental actions made a huge difference in both the local economy and in people’s lives. When governments partner with the business community, local service non-profits, and residents great accomplishments occur that better the lives of everyone in the community. The current Tea Party inspired, Ayn Rand anti-government fad fails to acknowledge the many benefits government provides communities via increased demand revenues and stabilizing taxes.

For me, when my local community chose to develop an Art Walk which promoted both local artists and main street businesses, expand the reach and profitability of our annual July 3rd Independence Day Celebration (yeah, I know it’s a day ahead of the real thing), and develop a community-wide business plan to promote our city, I volunteered. Unlike the Ayn Randers out there, there’s more to a good life than just me…and the financial perks I personally am getting. I saw these non-profit activities as a chance to rebuild and renew our business community.

Certainly, Social Security and Medicare made it economically possible for me to spend my time on efforts to help my community develop and become more profitable. Without those earned insurance benefits, as they currently exist, I’d be bankrupt…and be left wondering what to do to survive. It’s not that I didn’t save in retirement accounts throughout my 40-some working years. I had. I invested the maximum amount the federal government allows each working year. Regardless, between 2001 and 2009, following the great crash, I lost nearly 2/3s of my retirement savings. Over that decade, I continually bought more shares via my retirement accounts, but the values (profits) decreased. The end result became my need for these two primary insurance benefits into which I paid for over 40 years.

Nevertheless, those insurance benefits now afford me the ability to spend many hours each week voluntarily working for my cash-strapped community, rather than solely worrying about how I’m going to pay the bills or how to survive another month. I’m not forced to go begging for state or federal assistance. Or made to feel like I’m the lowest of the low for needing help. I still have my dignity and the knowledge that I’m taking financial care of myself.

But I’m no hero, by any means. Those earned insurance programs now have just provided me the means to the end of helping my community at large.

Strikingly, my community volunteering increased my skills far beyond what I learned during my career…and I really enjoy all I’m learning in the process of doing. Sure as heck beats vegetating and waiting to die!

But I guess, for me anyway, I feel valuable again. I feel like I really can make a contribution to my community and my fellow citizens…and that makes me feel important and good about myself.

I understand my senior’s path isn’t the same for everyone. But it’s working for me and adding to the renewal efforts of my community while not increasing costs. Most of all, though, I’m getting far more personal satisfaction out my volunteer activities than I’m putting in terms of time and my increased skills.

McConnell Busted on Research Report Suppression

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Senate Minority Leader Mitch McConnell (R-KY)In September, the Library of Congress’ Congressional Research Service released a study to Congress which showed there was little discernible growth affects from low taxes. Mitch McConnell and the GOP objected to the report and, for reasons yet unknown, the report was removed from the non-partisan CRS website. (Report pdf)

The study, though, is important as the nation continues to discuss tax rates and how they affect growth.

Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%.

There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.

However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.

Timothy Noah, of The New Republic, adds this to the discussion:

The New York Times reports that on September 28 the Library of Congress’s nonpartisan Congressional Research Service withdrew, under pressure from Senate Majority Leader Mitch McConnell, R.-Ky., and other Senate Republicans, a widely-circulated study concluding that since 1945 tax cuts have had no measurable impact on economic growth. […]

Please note that Hungerford’s study didn’t say there is no relationship between tax cuts and economic growth. It said there is no discernible relationship. He is hardly the first academic researcher to make this observation. The conservative economist Martin Feldstein went fishing for such a relationship in a 1989 paper about economic growth under Ronald Reagan. Feldstein’s paper, coauthored by Douglas Elmendorf, current director of the Congressional Budget Office, reached pretty much the same conclusion (though Feldstein and Elmendorf did suggest that tax cuts could effect the “composition” of economic growth). “We really don’t have any evidence that [personal income tax rates have] any effect on growth,” Berkeley economist Alan Auerbach told Business Week in September. “A lot of the research showing otherwise is based on theoretical calculations.” There isn’t even any discernible evidence that capital gains rates affect economic growth. Hungerford made that observation in a 2010 CRS report, but others have said so, too.

If you can’t find any evidence that tax cuts foster economic growth, then any belief that they do must be based purely on faith. The CRS report’s true offense is to question the religion that favors tax cuts to cure any and all problems. For any congressional agency to venture an opinion about such doctrine violates the Constitutional separation between church and state.

Senate Democrats have demanded a hearing to learn why the report was taken down at the behest of McConnell and other GOP senators. As a nation locked in discussions over effective marginal tax rates and national debt, this information from the CRS would affect the discussion. The public needed this information in order to make an informed decision about the country’s future. McConnell was wrong to demand that it be pulled from the CRS website.

Written by Valerie Curl

November 2, 2012 at 8:01 AM

Extra! Extra!

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Mitt RomneyStill think Romney is better on taxes and economy? Maybe you should think again.

Romney has been touting a 2006 tax plan that he says proves his plan will work, according to a report in Roll Call.

According to the study (pdf), tax reform that eliminates deductions and loopholes and reduces income tax rates will slightly increase economic growth over a decade. But the study assumes that nearly all middle class tax breaks — including those for children, mortgages, and employer contributions for health care — are repealed in their entirety:

Under the proposal, all personal exemptions, itemized deductions, personal credits except for the earned income credit, and all above-the-line adjustments to income except for retirement savings deductions and the deduction for self employment taxes would be repealed. The largest categories of deductions repealed are present-law deductions for home mortgage interest expenses, State and local taxes, and charitable contributions. In addition, the exclusions for certain employee fringe benefits, such as employer contributions for health and life insurance, would be repealed. The standard deduction would remain.

The study also found that such a plan would result in the “redistribution” of income tax liability from high-income earners to the middle class. In other words, the tax liability of high income earners would go down while middle income earners tax liability would go up, thus causing a greater transfer of wealth to high income earners. In addition, the promised job growth is only between 1 and 2 percent over ten years (one to two million jobs), while Romney promises that his tax plan will create seven million jobs over four years.

Personally, I still haven’t figured out how he (or the GOP) plans to deal with the following issues when they want to reduce tax rates and maintain revenue neutrality at 20% of GDP:

1) Over the next 10 years the Boomer generation will retire, requiring the federal government to expend up to 24% of GDP and causing either more borrowing or an increase in revenues;

2) We have a huge deficit and debt that needs to be paid down requiring even more revenues than currently exists or the average historic 20% of GDP;

3) Although Romney has not said as much, it’s not an impossible assumption that he agrees with the House GOP that most government functions and programs should be eliminated and dramatically reduced, including product, financial, food and consumer safety; criminal enforcement and policing; transportation and transport safety; health and health research; education; weather prediction, and basic research. The only way for Romney to accomplish revenue neutrality at 20% is to reduce government spending by approximately $5 trillion over ten years. Doing so means eliminating or dramatically cutting back most everyday services we all rely upon that most people don’t even realize are a result of government spending.

Certainly, no one wants to pay more in taxes, but we do have serious fiscal issues with which to deal…and lowering revenues with more tax breaks won’t solve those fiscal issues.

Nevertheless, remember is quote from the legendary political philosopher Adam Smith, in 1776: “The subjects of every state ought to contribute towards the support of the government, as nearly a possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.” – The Wealth of Nations, Adam Smith, 1776.

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If you, as Dems and Independents, care about our country and our people as a whole, then you need to vote in this election. Don’t let this election be bought and don’t let it be given away to special interests because of your apathy. VOTE your ethics and moral beliefs.

Written by Valerie Curl

October 20, 2012 at 9:24 AM

Yes, Another Deep Recession Can Occur

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Romney-Ryan Republican 2012 Candidates

The big news this week comes from the CBO. In leading news stories, the CBO states that another deep recession will occur if Congress fails to make a deal on the sequestration in the budget act passed early this year and multiple other expiring tax and spending bills.

For anyone paying attention, this news is not news. The only thing surprising is that it took this long for the CBO to announce this finding.

Of course, the nation’s economy would not be in this precarious position if Paul Ryan and the House Republicans had not blown up the three debt committees. According to reliable media sources, Paul Ryan played a leading role in ending negotiations because he refused to allow any revenue increases, even as tax revenues are at a nearly 60 year low.

In Eisenhower’s day, Republicans were well known as fiscal conservatives. They believed that tax revenues must meet spending, even when that meant higher taxes because they saw deficits as a real problem for the nation’s health.

During recessions, they spent and asked those who could afford to pay more to do so. There were no off-budget wars. No cutting taxes during a recession for the most wealthy. No demanding spending cuts that would hurt middle and working class families. No asking middle and working class families to sacrifice more than high-income families.

In other words, trickle down, supply side dogma did not exist in the GOP. They were rational economic actors who believed in restraining spending and also in taxing as needed to cover all the expenditures Congress approved.

Unfortunately, those days are gone. Those conservative Republicans have been driven out of the party. Now, the party is controlled by Ayn Randers who believe the nation will only succeed if the most wealthy are allowed to do and act as they wish, without any responsibility to the country or her people. Their attitude clearly marks a desire to return to the 1890s, before Teddy Roosevelt’s progressive Republican era that saved capitalism and began the rise of the middle class.

Regardless of GOP spin on the budget sequestration that attempts to blame President Obama and the Democrats, a potential recession need not occur. If Americans really want to put their fiscal house in order and stop a coming recession, these Ayn Rand Republicans, of which Paul Ryan is a leading proponent, must be voted out of office. Democrats, certainly, are far from perfect and are beholden to special interests as well, but they are better at this particular moment for the overall economy and the national budget. Their ideas are better to get the economy moving again, especially in light of the slowdown and recessions in Europe and the slowdown in the BRIC countries.

The U.S. can grow its way out of this slow recovery but only if Republicans, across the board, are defeated in November.

Who’s Really Better on Your Taxes?

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ezra_klein_redo-tax-chart Naomi Robbins/Forbes

The Washington Post’s Ezra Klein posted a revised tax comparison chart, created by Naomi Robbins of Forbes. According to Klein, the result is that the two candidate’s tax plans come through much more clearly.

Romney’s plan is a large tax cut for the top 60 percent, a huge tax cut for the top few percent, and a significant tax increase for the bottom few percent, as he permits a few temporary tax breaks that benefit low-income folks to expire. Obama’s plan keeps the current tax rates for almost everyone but the top few percent, who face a very large tax increase.

It’s also worth noting that these numbers only tell half the story: Romney has promised to offset the cost of most of his tax plan through spending cuts and tax reforms, and so any analysis of who pays is incomplete without those policies. But that information is impossible to graph, as Romney hasn’t released it yet. All we can say is that since Romney has promised to increase spending on defense and honor Medicare and Social Security’s scheduled benefits for the next decade, it’s hard to see how he makes good on that promise without cutting deep into programs for the poor and tax preferences that benefit the middle class, and if that’s right, then the poor and middle class are paying much more than you can tell from the graph above.

Written by Valerie Curl

July 20, 2012 at 10:05 AM

Electric Forecast Calls for Increasing Blackouts

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Energy BlackoutPacific Standard’s Lisa Margonelli reports the US power grid is failing:

Since the early 1990s, according to data gathered by Massoud Amin, an electrical engineering professor at the University of Minnesota, the number of power outages affecting more than 50,000 people a year has more than doubled, and blackouts now drain between $80 billion and $188 billion from the U.S. economy every year. The power grid is slipping backwards to a time when infrastructure was unreliable, and more and more people are talking about going “off the grid” with solar, batteries, and generators as a result. Will this doom the greater grid, and by extension the greater good?

It’s not easy to keep 450,000 miles of high voltage lines up and humming. But the situation has gotten worse over the years because the U.S. has increased the load on its lines while investing less in the system. By Amin’s reckoning, since 1995 the power industry has taken more from its infrastructure than it’s invested; research-and-development spending in the power sector has fallen to just 0.17 percent of revenue. In effect, the power industry has behaved like a low-tech industry—and so it’s becoming one.

Across the power and wonkish sectors, though, there’s a fair amount of agreement that the U.S. needs to make massive investments in the backbone of the grid, as well as in a self-healing grid that can better handle outages (and hackers), and in information technology to make the grid “smart.” Amin estimates this will cost $17 billion to $24 billion over the next 20 years, but will save perhaps $49 billion in outage costs per year and increase energy efficiency to save another $20 billion a year. In other words, as a nation the U.S. would almost make money on the spending.

But in the political climate of the last decade, Americans have not gotten their act together. “We have wasted 10 years arguing about the role of the public and private sectors,” says Amin, “and our competitors have moved ahead of us.” He believes we need a leader who, like Kennedy, can pitch a big investment as a “moonshot,” but laments that “we’ve got gridlock on policy and uncertainty with investment.”

Here’s the takeaway:

Two scary things stand out about America’s failure to shore up its grid over the last 15 years. The first is that the grid’s frailties are getting worse as our weather is getting weirder. The second is that the U.S.’s inability to sort out the right mix of public and private investment and get on with the process of building the grid we need reflects that we no longer quite believe in the common good. It’s not just a power failure, it’s also an optimism failure.

The US used to pride itself as being the first in technology. The first to imagine, solve and create the seemingly impossible. The country that led in research and design and expanding the nation’s capabilities. A country where rich, poor and everyone in between believed they had a stake in the nation’s success: building it; creating new businesses as opportunities arose; expanding opportunities – with federal and state assistance – for everyone who had vision and determination; and in pulling their equitable (affordable) share of the load via taxes.

The current debate over taxes reflects, as Lisa Margonelli writes, that we no longer quite believe in the common good. For the last 20 years or so, the argument has been what am I getting and why should I have to pay for the common good. Perhaps those of us who still take pride in the US need to be asking, if not me…and you, then who?

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