California’s 2/3 Requirement Hobbles Democracy

In Santa Clara County they want to extend Bay Area Rapid Transit down to San Jose.  To fund this they put Measure B, a 1/8 cent sales tax, on the ballot.  In California all tax measures must pass by a 2/’3 margin and on Election Day the voters approved Measure B by a 2/3 margin.

That would be the end of it, except the vote was very close to exactly 2/3.  For several days it looked as though the measure would fail because it reached a few votes short of exactly 66.66% but when the last ballot was counted the result was 66.78% in favor.  So in the face of a 2/3 vote by the people, a group sued to block certification pending a recount.  Yes, with 2/3 of the public voting for this, a group sued to stop it!

My observation is that this demonstrates something important about the “anti-tax” forces in our state.  Their intent is to hobble our democracy and thwart the will of the people.  It is time for us to take back democracy and return majority vote to tax measures!   

It is nearly impossible to get 2/3 for anything, ever, in an election.  Clearly this 2/3 requirement is about hobbling democracy, not protecting rights.  The public wanted to bring BART to San Jose.  A remarkable 2/3 voted for this, yet a group sues based on the count being close to exactly 2/3.  And in our state legislature the budget process has completely broken down as a 1/3 minority blocks every budget, every compromise and every last attempt to pass sensible measures to run our state!  We are now in a “Fiscal Emergency,” cutting back our schools and laying people off during a recession.  This is exactly the opposite of what we should be doing and of what the public wants, but there is no choice because we are hobbled by rules that anti-government extremists managed to sneak past misinformed voters decades ago.

We must get rid of the 2/3 requirement.  It is time.  Democracy and good government are back in fashion so let’s get on with it!

(By the way, California’s Secretary of State ruled that the law says automatic recounts
occur when the vote count is very close to 50/50.  Since the vote count
was 2/3 the law does not apply even though the election was close. A
judge ruled Tuesday that the attempt to block Measure B came too late.

Stimulate The California Economy And Balance The Budget

California’s unemployment rate has soared to 8.2% — third highest in the United States!  We need to stimulate California’s economy.  We need a massive jobs and infrastructure investment program, rebuilding our roads and bridges and schools and making our buildings energy-efficient, and hiring more teachers and police and firefighters.  We can do this, while balancing the budget at the same time.

How can we do this?  We can raise taxes on big corporations and the wealthy and use the money to stimulate the economy and balance the budget and get things moving again.

Our economic system is not perfect, so over time income tends to concentrate at the top, which makes it harder for most people to get by.  People spend less and things slow down.  We are seeing this today — wealth has massively concentrated at the top, and the consumer is “tapped out.”  No one is buying cars and Christmas sales will be much lower. 

Taxes on the wealthy and corporations fix this by recirculating money that has bunched up at the top.  Taxes provide the resources that We, the People can then use to stimulate the economy and get it moving again.

The corporations will try to say that this tax increase will slow the
economy.  But this isn’t what has happened when this has been done in
the past.  Actually history shows that taxing the wealthiest and
corporations helps our economy.  This is not surprising when you realize that more people with more jobs and money to spend is a good thing in a consumer-driven economy. 

There is a problem, though.  In California we have a rule that we cannot pass any tax with less than a two-thirds vote.  A little over half the people voted to impose this two-thirds requirement — and now 100% of us are hobbled for doing what we need to do to fix the economy.  Instead of stimulating the economy we have to lay off teachers and firefighters and road workers, further worsening the recession, because cutting budgets is the only option available.  Even if 55% or 60% of us would rather hire people and stimulate the economy, we still can’t.

So we need to change this rule.  We need to be able to pass taxes on the corporations and the rich, and get the economy moving again. 

We Prosper From Higher Taxes, Not Lower

I came across the article, Why the Economy Grows Like Crazy Amid High Taxes, by Larry Beinhart, and it says some things that the people of California should hear.

Beinhart make some very good points. first, he points out that if you look at the periods of higher taxes, you see that these are the very periods when the economy does much better. He writes,

Examples include World War II and the Truman-Eisenhower years, when it
was around 90 percent, and the Clinton years, when it was high relative
to the preceding and following administrations.

He also points out that big tax cuts are often followed by bubbles and crashes, like the big crashes of 1929, 1987 and 2008.

Beinhart says that one reason for this is that low taxes encourage businesses to distribute profits rather than reinvest them in their companies. When taxes are low the owners have incentive to grab all the cash they can out of the company.  But when taxes are high every dollar they take out of the company is immediately reduced.  If the money stays and is reinvested in the company the company’s value grows and can later be taken as capital gains.  As a former business owner I understand how this works. 

Beinhart writes,

With high taxes, the only way to retain the bulk of the wealth
created by a business is by reinvesting it in the business — in
plants, equipment, staff, research and development, new products and
all the rest.

The higher taxes are (and from 1940 to 1964 the top rates were around 90 percent), the more this is true.

This creates a bias toward long-term planning.

If
a business is planning for the long term, it wants a happy, stable work
force. It becomes worthwhile to pay good wages and offer decent
benefits.

So low taxes cause companies to only think a few months ahead and sacrifice their long-term good for short-term gain, instead of planning to be in business year after year.  Also, low taxes encourage a fast-buck climate in which takeovers and disruption rule.  Beinhart writes that when the Reagan tax cut era took over,

It was no longer enough for a business to be a reasonably good business, making steady, reliable profits.

Indeed,
that became a very bad condition for a business to be in. It made it a
target for takeovers by people who were willing to milk them of their
profits.

There is a lot more over at the article, so go read the rest.

This holds important lessons for Californians.  Along with Beinhart’s observations, there are other reasons to think that low taxes harm the economy.  For one, it is the nature of our economic system that a few people can come into possession of huge shares of the wealth.  This dries up the economy because regular people don’t have enough of a share of the wealth to allow them to spend much on consumer goods, etc.  We are seeing this happening today.  On top of that we are seeing the government forced by tax shortfalls to lay people off just at the time we need more people to be able to buy houses, cars, etc.  Taxes provide jobs and redistribute the wealth in multiple ways, so that regular people CAN buy houses, etc.

But in California we have rules that don’t let us raise taxes, even though we can see that we need the income so that the state can keep teachers, firefighters, roadworkers, etc. employed!  We as citizens actually tolerate rules that keep us from asking corporations and wealthy people from pitching in to help fix the economy!  It is time for us to start looking at how to fix these rules that hobble us during times of economic emergency.
 

The Press Is Fogging The Reason For The Budget Stalemate

Friday morning’s San Francisco Chronicle story, Legislature’s approval rating at a record low, illustrates why California’s budget impasse continues. From the article,

“Democrats and the minority Republicans have hunkered down, with neither side willing to make the compromises needed to put together a budget plan that can garner the required two-thirds support.”

The budget problem is that reporting like this keeps the public from understanding what is happening in Sacramento.
Here is what is happening with the budget:

  • The Democrats have offered plan after plan, accepting deep budget cuts, some borrowing and offering various ways to raise revenue.
  • The Governor has offered a plan, with deep budget cuts, borrowing, and a temporarysales tax increase.
  • The Republicans have refused to compromise, refusing any budget that raises any revenue at all, not even asking the extremely wealthy to pay the same sales taxes that the rest of us have to pay.

It is just that simple. The Republicans have been blocking the budget and they are getting away with it because the press refuses to report that the Republicans are blocking the budget. If the press reported this simple fact public pressure would build and the Republicans would have to yield.
Update – A comment on the possible budget “compromise”: It just kicks the can down the road by delaying dealing with our problems. It doesn’t fix anything, and cuts essential services from the people who need government most. In fact it just makes it much, much harder to solve the problem in the next budget because it steals revenue from next year.

FINALLY! The Republican Budget Proposal

Last week, after months of blocking every single budget and budget compromise the Republicans revealed a budget proposal of their own. This was months later than it should have been, and does little good at this point. Of course it was widely panned and was voted down.
So what was in their budget? They offer a few new cuts — beyond the Governor’s already proposed cuts — in the “big government” they complain about. They refuse to raise revenues from any source.
Mostly, what the Republicans want to do is borrow. This is the big, responsible solution they offer: more and more borrowing. They want to borrow $2 billion from future lottery revenue. This, of course, means that $2 billion won’t be there when needed because they have been borrowed and spent it now.
It costs money to borrow. We have to pay interest. We also have to pay back the borrowed money. This adds up.
Remember, much of the current budget shortfall is because we are already paying interest on previous borrowing. All those bonds that Schwarzenegger floated to meet previous shortfalls without raising revenue were certainly not free.
But there are also other costs. The Republicans offer cuts in health care, assistance to the disabled (including housecleaning and home care) and of course help for the poor. Those cuts mean layoffs and income cuts and these will ripple out through the ecosystem that depends on the purchases these funds would have meant. This at a time of pending recession.
This is all instead of asking rich yacht and private jet buys to pay the same sales taxes the rest of us pay on everything we buy.
This is all instead of asking big oil companies to pay a fee to drill oil in our state to sell back to us for huge profits.
This is all instead of asking huge corporations to pay a reasonable commercial property tax.
This is all instead of asking vastly wealthy individuals to pay their fair share in return for the wealth they gained from the infrastructure that all of us built.
Shame on them. A small minority has been able to block California from passing a budget. They use money from these vastly wealthy individuals and corporations to run deceitful ads to keep just enough of them in office to block the things that will help the people of California restore our infrastructure and economy, just so a few wealthy interests can have a few extra bucks.

Governor Schwarzenegger v.s. “Republican Right-Wing Talk”

Not content with blocking the budget, the right is going after the Republican Governor for trying to govern. See Schwarzenegger engages in talk-show tussle,

Schwarzenegger tried to defend new taxes as necessary because the state was still paying off debts incurred by predecessor Gov. Gray Davis. But the hosts pressed further and suggested that Schwarzenegger abandoned his original mission of fixing the state’s fiscal situation in order to pursue environmental goals.
That seemed to upset the governor, who maintained that his environmental policies had nothing to do with the state budget.
“This is absolutely absurd what you’re saying right now,” Schwarzenegger said. “….You’re living in the Stone Age if you think that the environmental issue has anything to do with the budget or the declining economy worldwide.”
“Don’t lie to the people,” Schwarzenegger added. “That’s all I can tell you, don’t lie to the people. Don’t pull wool over their eyes. It’s nonsense Republican right-wing talk.”
That prompted the “anesthesia” joke. Schwarzenegger underwent anesthesia Saturday when he had arthroscopic surgery to repair cartilage in his right knee.

In fact the state is paying off debts incurred by Governor Schwarzenegger, but at least he is trying to move the far-right Republicans off of their “no taxes under any circumstances” ideology. The Governor is trying to govern and should get credit for that, even if it is governing from the right. The far-right that is the rest of the state’s Republican Party apparently doesn’t want government at all, especially not government-by-the-people. There are lots of people. They want a one-dollar-one-vote approach favored by corporations and the rich who have lots of dollars.

Schwarzenegger Makes Recession Worse

A post by Texas Nate over at MyDD, Schwarzenegger Makes Recession Worse, says,

Let’s take a look at the situation. Democrats have proposed a way to close California’s $15.2 billion deficit:

They want to raise $8.2 billion by boosting taxes on the wealthiest Californians and corporations, and say another $1.5 billion can come to the state through an amnesty on tax scofflaws.

Seems reasonable to me. One would think the best thing to do if you disagree with something is to offer an alternative. That doesn’t seem to be the case for California Republicans:

Republicans oppose any new taxes but have yet to offer their own budget proposal, said Assembly Budget Committee Chairman John Laird, a Democrat. “It’s time for the legislative Republicans to tell the public how they would balance the budget,” he said.

Exactly right. Instead California Republicans have fallen into line with their leader in the governors mansion; disagree, complain, argue, kick and scream, but refuse to offer any alternative.
The Governor’s plan does nothing but hurt even more Californians facing a bad economy and an even worse housing crisis. Playing with the lives of state employees to score cheap political points, its no wonder the Government is having such a difficult time trying to get a budget deal in place.

Exactly right. Go over to MyDD to read the whole post.

Budget Analyst Rips Lottery Borrowing Scheme

Yesterday I wrote that the Governor’s plan to borrow from future lottery revenues is a risky gamble — yet another scheme to put off the need to ask corporations and the wealthy to pay their fair share of taxes.
The Legislature’s budget analyst doesn’t like the scheme either. From Monday’s Sacramento Bee, Governor’s lottery plan could hurt school funding, analyst says,

The Legislature’s budget analyst on Monday called Gov. Arnold Schwarzenegger’s lottery proposal “flawed” and warned lawmakers that money for public schools could fall short of current levels under the plan.
… Currently, lottery profits benefit public schools, from kindergarten to community colleges. Hill wrote that the Schwarzenegger administration made “overly optimistic” assumptions about the potential growth in lottery sales. She warned that public education funding “would fall well short of their current levels — perhaps by $5 billion over the next 12 years combined.”

Back to the drawing board.

Gambling On Budget – What If We Lose?

The headline article in Sunday’s San Jose Mercury News: A winning bet on lottery money for Schwarzenegger?
FOR GOVERNOR’S BUDGET PLAN TO WORK, TICKET PROFITS MUST DOUBLE

The article discusses ways to increase lottery sales so the Governor can borrow from future revenue to pay today’s bills. (And we get to pay huge investment bank fees for the privilege of borrowing our money from our future.)
The article does not discuss the consequences of the possible failure of this wild plan to base the state’s financial future on gambling revenue. If it fails we will still owe a huge amount of money to the big Wall Street firms, but will have even less revenue coming in to pay the additional interest and principal. We’re talking about the possibility of bankruptcy here, folks.
The article does not discuss the consequences of using marketing methods to push gambling to California’s low income citizens. We already know there is a gambling problem just from the amount of advertising that is being done today. Now lottery-pushers are talking about online betting, allowing use of credit cards so people can go into debt, and increased advertising. This can only lead to terrible victimization of people who are susceptible to gambling addiction.
Mostly, though, this Sunday headline article does not discuss realistic ideas for raising revenue to pay for the state’s schools, roads, police, firefighters, courts, health care facilities, DMV workers, environmental oversight and the rest of the absolutely necessary things that our state government does for us. These ideas include asking the wealthy to pay the same sales taxes when they buy yachts and jets that the rest of us pay when we buy clothing and cars and necessities, or asking the big corporations to pay realistic property taxes on commercial real estate, or asking the oil companies to pay something when they pump our oil out of the ground and sell it back to us, or closing some of the loopholes that allow big corporations and wealthy to escape paying their share of taxes.
Nope, instead of looking at realistic revenue ideas we’re all being distracted by this silly lottery scheme.

A Short Comment On The Governor’s Lottery Borrowing Plan

The Governor wants to borrow future lottery revenue to help pay this years bills.
If we pay this years bills with next year’s revenue, then there is that much less revenue next year to pay next year’s bills.
It’s time to realize that borrowing to pay future bills doesn’t work. This governor’s past borrowing is a big part of why we are in the mess we are in today. Now we owe the money we borrowed and the interest.
There are ways to solve this but they simply are going to have to involve asking the wealthy and corporations to pay their fair share. There is no way around it anymore.
Borrowing isn’t an answer, it’s just a way to cover the problem.