Ham Murabi
Plumbing the Depths
- Joined
- Nov 12, 2002
- Posts
- 23,159
Any rebuttal?
July 13th, 2009, 4:59 pm · 5 Comments · posted by Steven Greenhut (OC Register)
---------------------
Congressman Tom McClintock offered remarks in Washington, D.C., on Friday to
the Competitive Enterprise Institute and Pacific Research Institute that
clearly illustrate why California is facing such a large fiscal mess. His
beginning joke is so funny because it is so true:
"I know that everybody likes to poke fun at California - but I can tell you
right now that despite all of its problems, California remains one of the
best places in the world to build a successful small business. All you have
to do is start with a successful large business."
Here is the rest of the speech:
Laugh if you will, but let me remind you that when these policies finish
wrecking California, there are still 49 other states we can all move to -and yours is one of them.
I should also warn you of the strange sense of déjà-vu that I have every day
on the House floor as I watch the same folly and blunders that wrecked
California now being passed with reckless abandon in this Congress.
We passed a "Cash-for-Clunkers" bill the other day - we did that years ago
in California.
Doubling the entire debt every five years? Been there.
Increasing spending at unsustainable rates? Done that.
Save-the-Planet-Carbon-Dioxide restrictions? Got the T-Shirt.
To understand how these policies can utterly destroy an economy and bankrupt
a government, you have to remember the Golden State in its Golden Age.
A generation ago, California spent about half what it does today AFTER adjusting for both inflation and population growth.
And yet, we had the finest highway system in the world and the finest public
school system in the country. California offered a FREE university
education to every Californian who wanted one. We produced water and
electricity so cheaply that many communities didn't bother to measure the
stuff. Our unemployment rate consistently ran well below the national rate
and its diversified economy was nearly recession-proof.
One thing - and one thing only - has changed in those years: public policy.
The political Left gradually gained dominance over California's government
and has imposed a disastrous agenda of radical and retrograde policies that
have destroyed the quality of life that Californians once took for granted.
The Census Bureau reports that in the last two years 2/3 of a million more
people have moved out of California than have moved into it. Many are
leaving for the garden spots of Nevada, Arizona and Texas. Think about that.
California is blessed with the most equitable climate in the entire Western
Hemisphere; it has the most bountiful resources anywhere in the continental
United States; it is poised on the Pacific Rim in a position to dominate
world trade for the next century, and yet people are finding a better place
to live and work and raise their families in the middle of the Nevada and
Arizona and Texas deserts.
I submit to you that no conceivable act of God could wreak such devastation
as to turn California into a less desirable place to live than the middle of
the Nevada Nuclear Test Range. Only Acts of Government can do that. And
they have.
You can trace the collapse of California's economy to several critical
events: the rise of environmental Ludditism beginning in 1974; the
abandonment of constitutional checks and balances that once constrained
spending and borrowing; and the rise of rule by public employee unions .
There are other factors as well: litigation, taxation, illegal immigration -
but for the sake of time let me concentrate on the big three.
The first was the rise of environmental Ludditism with the election of a
radical new-age leftist named Jerry Brown as governor of the state - an
election that also produced overwhelming liberal majorities in both
legislative houses.
Like Obama today, Brown lost little time in pursuing his vision of
California - an incoherent combination of pastoral simplicity, European
socialism and centralized planning. At the center of this world view was a
backward ideology that he called his "era of limits" - the naïve notion that
public works were growth inducing and polluting and that stopping the
expansion of infrastructure somehow excused government from meeting the
needs of an expanding population. Conservation replaced abundance as the
chief aim of California's public works, and public policy was redirected to
developing irresistible incentives for the population to concentrate in
dense urban cores rather than to settle in suburban communities. Brown
infused his vision into every aspect of public policy, and it is a testament
to his thoroughness and tenacity that its basic tenets have dominated the
direction of California through both Republican and Democratic
administrations.
He cancelled the state's highway construction program, abandoning many
routes in mid-construction. He cancelled long-planned water projects,
conveyance facilities and dams. He established the California Energy
Commission that blocked approval of any significant new generating capacity.
He enacted volumes of environmental regulations that created severe
impediments to home and commercial construction, empowering an incipient
no-growth movement that began on the most extreme fringe of the
environmental cause and quickly spread This movement reached its zenith
with Arnold Schwarzenegger and the enactment of AB 32 and companion
legislation in 2006. This measure gives virtually unchecked authority to
the California Air Resources Board to force Draconian reductions in carbon
dioxide emissions by 2020.
This has dire implications to entire segments of California's economy:
agriculture, baking, distilling, cargo and passenger transportation, cement
production, manufacturing, construction and energy production, to name a
few.
We, too, were promised an explosion of "green jobs," but exactly the
opposite has happened.
Up until that bill took effect, California's unemployment numbers tracked
very closely with the national unemployment rate. But since then,
California's unemployment rate began a steady upward divergence from the
national jobless figures. Today, California's unemployment rate is more
than two points above the national rate, and at its highest point since 1941.
The second problem is structural: the collapse of the checks and balances
and other constitutional and traditional constraints on government spending
and borrowing.
Let me mention a few of them.
The State Supreme Court decision in Serrano v. Priest severed the use of
local revenue for local schools and invited the state take-over of public
education. AB 8 of 1979 - the legislature's response to Proposition 13 -
essentially did the same thing to local governments generally.
This means that vast bureaucracies have grown up over the service delivery
level, wasting more and more resources while hamstringing teachers in their
classrooms, wardens in their prisons and city councils in their towns.
Next, constitutional constraints on fiscal excesses began to fall. In 1983,
Gov. George Deukmejian approved legislation to remove the governor's ability
to make mid-year budget corrections without having to return to the
legislature. The loss of this provision exposed the state to chronic deficit
spending by removing any ability of the governor to rapidly respond to
changing economic conditions. In 1989, Deukmejian sponsored Proposition 111
that destroyed the Gann Spending Limit that had held increases in state
spending to inflation and population growth. If that limit had remained
intact, California would be enjoying a budget surplus today.
The disastrous tax increases by Pete Wilson in 1991 and Arnold Schwarzenegger this year were made possible by this tragic
blunder. Finally, we've watched the constitutional budget process that had
produced relatively punctual and relatively balanced budgets for nearly 150
years collapse in favor of an extra-constitutional abomination called the
big five.
That new process, that began under Pete Wilson and has culminated under
Arnold Schwarzenegger bypasses the entire legislative deliberative process
in favor of an annual deal struck between the governor and legislative
leaders behind closed doors and handed to the legislature as a fait
accompli.
This short-circuits the separation of powers that is designed to discipline
fiscal excess and it literally bargains away the line-item veto authority of
the governor. It is a process that allows legislative leaders to extract
concessions from the executive that would not be possible if the separation
of powers were maintained. With the checks against excessive spending broken
down, borrowing became the preferred method of public finance. The
Constitutional requirement that all taxpayer-supported debt be approved by
voters began to erode in the 1930's, when a depression-era Supreme Court
decision allowed the state to run a temporary deficit in the event of an
economic down-turn - as long as the shortfall was addressed in the following
fiscal year. This practice was narrowly construed until the Wilson
administration began using it to justify spreading out a single year's
budget deficit over several years.
During the 1980's, Gov. Deukmejian began employing a legal fiction called a
"lease revenue bond," to circumvent constitutionally required voter
approval.
Although Proposition 13 still protects property owners from unsustainable
increases in their property taxes, most of the other fiscal constraints are
now gone, and California has entered a period of unprecedented public debt
to finance an unprecedented expansion of state government.
The third factor that also can be traced back to the 1970's was the radical
transformation that took place in the nature and power of the state's public
employee unions. Until that time, state law prohibited public employee
strikes against the public and prohibited collective bargaining or closed
shops.
During the Jerry Brown era, a series of collective bargaining acts handed to
public sector unions all the rights and powers of private sector unions -
but without any of the natural constraints on private sector unions. The
unions soon brought these newly-won powers to bear to elect hand-picked
officials to state and local office.
Today, political expenditures by public employee unions exceed all other
special interest groups, while they hold compliant majorities in the state
legislature and most local agencies.
The result has been radically escalating personnel costs and radically
deteriorating performance.
The impact on governmental services has been devastating. Despite exploding
budgets, service delivery is collapsing. Firing incompetent teachers has
become a virtual impossibility, adding to the deterioration of educational
quality. Essential services can no longer be performed because labor costs
have made it impossible to sustain those services.
Today, California is like the shopkeeper who leased out too much space,
ordered too much inventory, hired too many people and paid them too much.
Every month the shopkeeper covers his shortfalls with borrowing and
bookkeeping tricks. Ultimately, he will reach a tipping point where
anything he does makes his situation worse Borrowing costs are eating him
alive and he's running out of credit. Raising prices causes his sales to
decline. And there's only so much discretionary spending he can cut.
That's the state's predicament in a nutshell. California's borrowing costs
now exceed the budget of the entire University of California and it is
increasingly likely that it will fail to find lenders when it must borrow
billions to pay its bills at the end of this month. Ignoring dire warnings,
Gov. Schwarzenegger and legislators from both parties earlier this year
imposed the biggest state tax increase in American history.
And I can assure you that the Laffer curve is alive and well. In the first
two months after the tax increase took effect, state revenues have plunged
33 percent.
Although there are many obsolete, duplicative or low priority programs and
expenditures that the state can - and should - do without, there aren't
enough of them to come anywhere close to closing California's deficit.
Sadly, California has reached the terminal stage of a bureaucratic state,
where government has become so large and so tangled that it can no longer
perform even basic functions.
Fortunately, we have a model that we know works. A generation ago, it
produced a high quality of public service at a much lower cost. It
maximized management flexibility and it required accountability at the
service delivery level. It recognized that only when commerce and
enterprise flourish can we finance the basic responsibilities of government.
Restoring this efficiency will require a governor and a legislature with the
political will to wrestle control from the public employee unions, dismantle
the enormous bureaucracies that have grown up over the service delivery
level, decentralize administration and decision making, contract out
services that the private sector can provide more efficiently, rescind the
recent tax increases that are costing the state money and roll back the
regulatory obstacles to productive enterprise.
Alas, we don't have such leaders and even if we did, the systemic reorganization of the state government can't be accomplished overnight.
Restructuring the public schools would take at least a year; prisons at
least two; and health and welfare three to five years before serious savings
could be realized.
This brings us to the fine point of the matter. What Churchill called
history's "terrible, chilling words" are about to be pronounced on
California's failed leadership: "too late."
A federal loan guarantee or bailout may be the only way to buy time for the
restructuring of California's bureaucracies to take effect, but the
discussion remains academic until and unless the state actually adopts the
replacement structures, unburdens its shrinking productive sector and
presents a credible plan to redeem the state's crushing debt and looming
obligations.
Without these actions, federal intervention will only make California's
problems worse by postponing reform, continuing unsustainable spending and
piling up still more debt.
In short, if California won't help itself, the federal government cannot,
should not and must not.
And before anyone gets too smug at California's agony, remember this:
Congress is now enacting the same policies at the national level that have
caused the collapse of California. So whistle past this cemetery if you
must, but remember the medieval epitaph: "Remember man as you walk by, as you are now so once was I; as I am now so you will be." The good news is
there is still time for the nation to avoid California's fate. If anything,
the collapse of California can at least serve as a morality play for the
rest of the nation - unfortunately in the form of a Greek tragedy
July 13th, 2009, 4:59 pm · 5 Comments · posted by Steven Greenhut (OC Register)
---------------------
Congressman Tom McClintock offered remarks in Washington, D.C., on Friday to
the Competitive Enterprise Institute and Pacific Research Institute that
clearly illustrate why California is facing such a large fiscal mess. His
beginning joke is so funny because it is so true:
"I know that everybody likes to poke fun at California - but I can tell you
right now that despite all of its problems, California remains one of the
best places in the world to build a successful small business. All you have
to do is start with a successful large business."
Here is the rest of the speech:
Laugh if you will, but let me remind you that when these policies finish
wrecking California, there are still 49 other states we can all move to -and yours is one of them.
I should also warn you of the strange sense of déjà-vu that I have every day
on the House floor as I watch the same folly and blunders that wrecked
California now being passed with reckless abandon in this Congress.
We passed a "Cash-for-Clunkers" bill the other day - we did that years ago
in California.
Doubling the entire debt every five years? Been there.
Increasing spending at unsustainable rates? Done that.
Save-the-Planet-Carbon-Dioxide restrictions? Got the T-Shirt.
To understand how these policies can utterly destroy an economy and bankrupt
a government, you have to remember the Golden State in its Golden Age.
A generation ago, California spent about half what it does today AFTER adjusting for both inflation and population growth.
And yet, we had the finest highway system in the world and the finest public
school system in the country. California offered a FREE university
education to every Californian who wanted one. We produced water and
electricity so cheaply that many communities didn't bother to measure the
stuff. Our unemployment rate consistently ran well below the national rate
and its diversified economy was nearly recession-proof.
One thing - and one thing only - has changed in those years: public policy.
The political Left gradually gained dominance over California's government
and has imposed a disastrous agenda of radical and retrograde policies that
have destroyed the quality of life that Californians once took for granted.
The Census Bureau reports that in the last two years 2/3 of a million more
people have moved out of California than have moved into it. Many are
leaving for the garden spots of Nevada, Arizona and Texas. Think about that.
California is blessed with the most equitable climate in the entire Western
Hemisphere; it has the most bountiful resources anywhere in the continental
United States; it is poised on the Pacific Rim in a position to dominate
world trade for the next century, and yet people are finding a better place
to live and work and raise their families in the middle of the Nevada and
Arizona and Texas deserts.
I submit to you that no conceivable act of God could wreak such devastation
as to turn California into a less desirable place to live than the middle of
the Nevada Nuclear Test Range. Only Acts of Government can do that. And
they have.
You can trace the collapse of California's economy to several critical
events: the rise of environmental Ludditism beginning in 1974; the
abandonment of constitutional checks and balances that once constrained
spending and borrowing; and the rise of rule by public employee unions .
There are other factors as well: litigation, taxation, illegal immigration -
but for the sake of time let me concentrate on the big three.
The first was the rise of environmental Ludditism with the election of a
radical new-age leftist named Jerry Brown as governor of the state - an
election that also produced overwhelming liberal majorities in both
legislative houses.
Like Obama today, Brown lost little time in pursuing his vision of
California - an incoherent combination of pastoral simplicity, European
socialism and centralized planning. At the center of this world view was a
backward ideology that he called his "era of limits" - the naïve notion that
public works were growth inducing and polluting and that stopping the
expansion of infrastructure somehow excused government from meeting the
needs of an expanding population. Conservation replaced abundance as the
chief aim of California's public works, and public policy was redirected to
developing irresistible incentives for the population to concentrate in
dense urban cores rather than to settle in suburban communities. Brown
infused his vision into every aspect of public policy, and it is a testament
to his thoroughness and tenacity that its basic tenets have dominated the
direction of California through both Republican and Democratic
administrations.
He cancelled the state's highway construction program, abandoning many
routes in mid-construction. He cancelled long-planned water projects,
conveyance facilities and dams. He established the California Energy
Commission that blocked approval of any significant new generating capacity.
He enacted volumes of environmental regulations that created severe
impediments to home and commercial construction, empowering an incipient
no-growth movement that began on the most extreme fringe of the
environmental cause and quickly spread This movement reached its zenith
with Arnold Schwarzenegger and the enactment of AB 32 and companion
legislation in 2006. This measure gives virtually unchecked authority to
the California Air Resources Board to force Draconian reductions in carbon
dioxide emissions by 2020.
This has dire implications to entire segments of California's economy:
agriculture, baking, distilling, cargo and passenger transportation, cement
production, manufacturing, construction and energy production, to name a
few.
We, too, were promised an explosion of "green jobs," but exactly the
opposite has happened.
Up until that bill took effect, California's unemployment numbers tracked
very closely with the national unemployment rate. But since then,
California's unemployment rate began a steady upward divergence from the
national jobless figures. Today, California's unemployment rate is more
than two points above the national rate, and at its highest point since 1941.
The second problem is structural: the collapse of the checks and balances
and other constitutional and traditional constraints on government spending
and borrowing.
Let me mention a few of them.
The State Supreme Court decision in Serrano v. Priest severed the use of
local revenue for local schools and invited the state take-over of public
education. AB 8 of 1979 - the legislature's response to Proposition 13 -
essentially did the same thing to local governments generally.
This means that vast bureaucracies have grown up over the service delivery
level, wasting more and more resources while hamstringing teachers in their
classrooms, wardens in their prisons and city councils in their towns.
Next, constitutional constraints on fiscal excesses began to fall. In 1983,
Gov. George Deukmejian approved legislation to remove the governor's ability
to make mid-year budget corrections without having to return to the
legislature. The loss of this provision exposed the state to chronic deficit
spending by removing any ability of the governor to rapidly respond to
changing economic conditions. In 1989, Deukmejian sponsored Proposition 111
that destroyed the Gann Spending Limit that had held increases in state
spending to inflation and population growth. If that limit had remained
intact, California would be enjoying a budget surplus today.
The disastrous tax increases by Pete Wilson in 1991 and Arnold Schwarzenegger this year were made possible by this tragic
blunder. Finally, we've watched the constitutional budget process that had
produced relatively punctual and relatively balanced budgets for nearly 150
years collapse in favor of an extra-constitutional abomination called the
big five.
That new process, that began under Pete Wilson and has culminated under
Arnold Schwarzenegger bypasses the entire legislative deliberative process
in favor of an annual deal struck between the governor and legislative
leaders behind closed doors and handed to the legislature as a fait
accompli.
This short-circuits the separation of powers that is designed to discipline
fiscal excess and it literally bargains away the line-item veto authority of
the governor. It is a process that allows legislative leaders to extract
concessions from the executive that would not be possible if the separation
of powers were maintained. With the checks against excessive spending broken
down, borrowing became the preferred method of public finance. The
Constitutional requirement that all taxpayer-supported debt be approved by
voters began to erode in the 1930's, when a depression-era Supreme Court
decision allowed the state to run a temporary deficit in the event of an
economic down-turn - as long as the shortfall was addressed in the following
fiscal year. This practice was narrowly construed until the Wilson
administration began using it to justify spreading out a single year's
budget deficit over several years.
During the 1980's, Gov. Deukmejian began employing a legal fiction called a
"lease revenue bond," to circumvent constitutionally required voter
approval.
Although Proposition 13 still protects property owners from unsustainable
increases in their property taxes, most of the other fiscal constraints are
now gone, and California has entered a period of unprecedented public debt
to finance an unprecedented expansion of state government.
The third factor that also can be traced back to the 1970's was the radical
transformation that took place in the nature and power of the state's public
employee unions. Until that time, state law prohibited public employee
strikes against the public and prohibited collective bargaining or closed
shops.
During the Jerry Brown era, a series of collective bargaining acts handed to
public sector unions all the rights and powers of private sector unions -
but without any of the natural constraints on private sector unions. The
unions soon brought these newly-won powers to bear to elect hand-picked
officials to state and local office.
Today, political expenditures by public employee unions exceed all other
special interest groups, while they hold compliant majorities in the state
legislature and most local agencies.
The result has been radically escalating personnel costs and radically
deteriorating performance.
The impact on governmental services has been devastating. Despite exploding
budgets, service delivery is collapsing. Firing incompetent teachers has
become a virtual impossibility, adding to the deterioration of educational
quality. Essential services can no longer be performed because labor costs
have made it impossible to sustain those services.
Today, California is like the shopkeeper who leased out too much space,
ordered too much inventory, hired too many people and paid them too much.
Every month the shopkeeper covers his shortfalls with borrowing and
bookkeeping tricks. Ultimately, he will reach a tipping point where
anything he does makes his situation worse Borrowing costs are eating him
alive and he's running out of credit. Raising prices causes his sales to
decline. And there's only so much discretionary spending he can cut.
That's the state's predicament in a nutshell. California's borrowing costs
now exceed the budget of the entire University of California and it is
increasingly likely that it will fail to find lenders when it must borrow
billions to pay its bills at the end of this month. Ignoring dire warnings,
Gov. Schwarzenegger and legislators from both parties earlier this year
imposed the biggest state tax increase in American history.
And I can assure you that the Laffer curve is alive and well. In the first
two months after the tax increase took effect, state revenues have plunged
33 percent.
Although there are many obsolete, duplicative or low priority programs and
expenditures that the state can - and should - do without, there aren't
enough of them to come anywhere close to closing California's deficit.
Sadly, California has reached the terminal stage of a bureaucratic state,
where government has become so large and so tangled that it can no longer
perform even basic functions.
Fortunately, we have a model that we know works. A generation ago, it
produced a high quality of public service at a much lower cost. It
maximized management flexibility and it required accountability at the
service delivery level. It recognized that only when commerce and
enterprise flourish can we finance the basic responsibilities of government.
Restoring this efficiency will require a governor and a legislature with the
political will to wrestle control from the public employee unions, dismantle
the enormous bureaucracies that have grown up over the service delivery
level, decentralize administration and decision making, contract out
services that the private sector can provide more efficiently, rescind the
recent tax increases that are costing the state money and roll back the
regulatory obstacles to productive enterprise.
Alas, we don't have such leaders and even if we did, the systemic reorganization of the state government can't be accomplished overnight.
Restructuring the public schools would take at least a year; prisons at
least two; and health and welfare three to five years before serious savings
could be realized.
This brings us to the fine point of the matter. What Churchill called
history's "terrible, chilling words" are about to be pronounced on
California's failed leadership: "too late."
A federal loan guarantee or bailout may be the only way to buy time for the
restructuring of California's bureaucracies to take effect, but the
discussion remains academic until and unless the state actually adopts the
replacement structures, unburdens its shrinking productive sector and
presents a credible plan to redeem the state's crushing debt and looming
obligations.
Without these actions, federal intervention will only make California's
problems worse by postponing reform, continuing unsustainable spending and
piling up still more debt.
In short, if California won't help itself, the federal government cannot,
should not and must not.
And before anyone gets too smug at California's agony, remember this:
Congress is now enacting the same policies at the national level that have
caused the collapse of California. So whistle past this cemetery if you
must, but remember the medieval epitaph: "Remember man as you walk by, as you are now so once was I; as I am now so you will be." The good news is
there is still time for the nation to avoid California's fate. If anything,
the collapse of California can at least serve as a morality play for the
rest of the nation - unfortunately in the form of a Greek tragedy
