A Land without a Crucible: How to Appropriate Cultural Collapse

In Trump's America, liberals have been reduced to 1) begging for money from the government, blind to the military-industrial complex's willingness to give them as much or as little money to keep them occupied as long as defense expenditures grow (one dollar for you, ten dollars for me); and 2) antagonizing every different-minded man, woman, and child on their quest to save the country. 

Warren Hinckle's characterization of American liberals has never been more apt: in 1973, he called them "horror[s]" because of their tendencies towards "self-righteousness and self-importance." (Another Hinckle gem: asked why he worked in conservative bars frequented by police officers, he responded if anyone could find a good liberal bar, he'd visit one.) 

Today's liberals can tell you about the Gulf of Tonkin but not why such an incident would be allowed to occur, or why otherwise intelligent people would feel compelled to engage in such maneuvers. Some might know about "domino theory" but not why it--and laying down dead body after dead body--would be considered reasonable in light of all available intelligence. I've heard the best minds of my generation rail against biased media (aka propaganda) using the terms "collateral damage" and "cultural misappropriation" without irony, captaining the English language to advance misunderstandings down empty harbors. Modern-day radicals are more likely to go apoplectic over a friend's recycling habits than wedding diamonds that, even if not bloody, destroy the earth while tilting local economies into de facto slavery. (Yes, Australia has done well with mining--it's the lack of economic diversification without proper safeguards that's the issue.)

Banally, America's intellectual malaise isn't intentional, making it harder to identify villains and vanquish them. I recently attended a Berkeley, California event celebrating books and, one might assume, critical thinking. Yet, every interview was the equivalent of a slow pitch softball game (no offense to softball players, some of the toughest athletes out there), as if organizers believed their primary job was to ensure audience members wouldn't face foul balls of complexity. Lesson: never choose interviewers who are friends or colleagues of the speaker. There's a reason journalism exists (existed?) as a profession--to create independence and therefore more freedom to ask difficult questions. Perhaps sponsors believed if they weren't nice, speakers wouldn't return, but anyone incapable of discussing potential deficiencies in his or her ideas isn't worth inviting back. 

Another lesson: whether intentional or unintentional, the result is the same. (Bonus, on war: "What does it matter to the dead, the orphans, and the homeless whether the mad destruction is wrought under the name of totalitarianism or the holy name of liberty or democracy?") None of the book festival's inanity was by design, or rather, everything was done to maximize happiness and to promote ideas. (At least they didn't require people to submit questions on index cards or limit themselves to two minutes.) 

At one booth, I discovered a book selling for 17.95 USD available for 9.99 USD online and asked for a discount. The vendor said he couldn't compete with Amazon because "we can't lose money on every book we sell." I responded that after building the online infrastructure, including the delivery infrastructure (initially subsidized by consumers paying for shipping), Amazon and publishers were both making money pursuant to an agreed-upon price split. It's true Amazon's R&D expenditures and forays into new areas (e.g., a mobile phone) cause it to report losses, but Amazon is no longer losing money on most book sales, especially not on the Kindle. (It does take a loss on some books like Harry Potter but gains brand loyalty as a result of its discounts and events.) Hoping to engage on a difficult question, I wondered out loud how brick and mortar bookstores could compete in a modern capitalist economy. Devoid of ideas, the vendor shrugged his shoulders and gave me a curt goodbye as his final rebuttal. At no point did he reveal any shame in opening the conversation with a misrepresentation. If we are living in a post-truth society, the cause is our post-humility culture. 

Former NY mayor Michael Bloomberg in National Geographic.

At another event, cultural appropriation was mentioned negatively, inspiring a well-meaning African-American audience member to explain the issue was rooted in economics. Meanwhile, none of London's black or brown residents would think to complain about their city's most popular food, the colorful chicken tikka masala. (It's as if the British have bigger fish and chips to fry.) Unbeknownst to most Americans and Europeans surrounded by dozens of foreign restaurants is a real-life government conspiracy: stealing the best people and ideas from other countries by any means necessary. Such a plot has existed since humans realized it was easier to steal than to invent, to build, or even to maintain the infrastructure--both physical and abstract--necessary to accept change gracefully. 

Stealing and appropriation occur because they allow Country A to gain the benefits of Country B's inventions with as little displacement or sacrifice as possible--at least for Country A. Immigration, something I've heard liberals support, is literally cultural appropriation personified. Unless the goal is to build walls or ghettos--something I've heard liberals oppose--the main reason different people should enter your hamlet or megapolis is so you can discover the best they have to offer until you're the lovely country of Indonesia but without the pollution, traffic congestion, and banking crises. 

Any other philosophy means you support using people for labor without any meaningful exchange of ideas, something Immanuel Kant warned us about in 1781: "So act that you treat humanity, whether in your own person or in the person of any other, always at the same time as an end, never merely as a means." (I remember when liberals told us melting pots and mixing were good for society, then they told us they meant we should be like salad bowls (healthy, with distinct colors), and now I think they're saying we shouldn't mix at all unless everyone pays for every idea they stole. I can't predict the next iteration, but I suspect lasagna will be involved.) 

Why we are discussing imposing informal or formal rules on what people should do or say rather than a more equitable process to capture or spur innovation, I don't know. Such discourse would require complex knowledge of different disciplines, along with sustainable funding mechanisms for new ideas that protect the displaced. To this end, I just want to say one word to you. Just one word. Philosophy. There's a great future in it. Will you think about it?

© Matthew Rafat (2018)

"Our drones will never be called terrorists, and our guns will never defeat nationalism. We change the world by how we look at it." -- Pico Iyer 

Political Cowards: Alameda's Malia Vella

The internet should have ushered in a new era where everyone could more easily access their politicians. Direct democracy could flourish, and voters would become better-informed, freed from the shackles of BigCorp media.

Of course that's not what happened. Instead, most American politicians, beneficiaries of gerrymandering, avoid online debate whenever possible, reasoning there's no upside to engaging with voters who challenge the prevailing orthodoxy. Why not limit your exposure to puppies and t-shirts printed with #Resist instead? In fact, that's partly the approach union-supported politician Malia Vella has taken when called out on her divisive rhetoric. Her Twitter account proclaims herself "Alameda City Councilmember, Wellesley Woman, Teamster, Lawyer, Educator, Culé, Art Lover, & Pragmatic Optimist." (Note: Wellesley is Hillary Clinton's alma mater.) Below is one of Malia's Facebook accounts. 

When I called out her prior mocking use of the hashtag #unionthugs on her personal FB page--which often replicates her official political page--she blocked me rather than engage. When I posted on her Alameda City Council page, she ignored it. Sadly, most American politicians today are mealy-mouthed risk-takers who would make the meekest accountant proud. Such behavior explains why so many Americans outside of California adore Trump. When your alternative is no discourse, any discourse is preferable.

Below are a few snapshots from the discussion--you'll see no admission that her prior conduct was wrong, or an acknowledgment that some voters' concerns about union coercion are legitimate: 

And that's when it got interesting. You see, Malia and are former law school classmates. We're trained to debate and use logic. My point is you cannot complain about Trump's language online while engaging in similar propaganda tactics yourself.  




Let's analyze Malia's logic. She's correct that not everyone associated with a particular incident is required to comment about the topic, but she still doesn't get it. A politician who has mocked people--including Trump, who's challenged labor unions' corruption--can't wash her hands clean when someone presents evidence that maybe, just maybe you shouldn't mock legitimate issues, especially when they concern the special interests who helped get you elected?

By not engaging publicly and by relying on carefully tailored images rather than practical issues to engage voters, politicians have created their own safe spaces. Meanwhile, in other countries, Cebu City's Tommy Osmena takes on all comers on Facebook and demonstrates no fear.

It is stunning that other countries have taken America's ideals of free speech and rigorous debate and utilized them better on American-owned social media than most American politicians. California in particular seems to attract a large share of political cowards because it's a one-party state. It wasn't always this way. 

When a questioner called out JFK's Catholic religion as potentially problematic, his supporters in the crowd jeered at the woman who questioned his loyalty. It was JFK himself who calmed the crowd, insisted on answering her question, and then delivered an inspiring response. Today, liberal American politicians claim to appreciate and even to idolize JFK while taking no risks whatsoever in political discourse. Meanwhile, voters worldwide have spoken. Except for the UK's Theresa May, they have demanded authenticity, even at the expense of civility and pragmatism. Admittedly, their choices seem atrocious when compared to the genteel politicians of yesterday. And yet, given the choices they've had, especially in California's political echo chamber, their approach makes sense: bravery over cowardice, bluntness over political correctness. Perhaps there's hope for the future after all. 

Bonus: from Alta Magazine (2019), 

April 2019

California Spending

Imagine a place where everyone knows they have a spending problem, no one cares, and no one minds passing the financial consequences to their children. Welcome to California.

Fun facts: California paid out $2.1 billion in bonuses, overtime, and other extras in 2007. (See SF Chronicle, Erin McCormick, A1, June 30, 2008.)

A Superior Court Judge makes $178,789 a year; an Appellate Court Justice makes $204,599 a year; and a state Supreme Court Justice makes $218,237 a year. All state judges are eligible for generous pensions, dental benefits, health benefits, basic life and AD&D insurance, supplemental life insurance, vision service plans, long term care insurance, a voluntary tax savings program (FlexElect), and a savings plus program (a Thrift Plan, i.e., a 401K, and a Deferred Compensation Plan (IRC 457)).

Volokh Conspiracy on TX v. California

More on Texas v. California here. (The comments are especially fun to read.)

Californians used to dismiss Texans as back-water denizens with too much color on their necks. How quickly things change. Here's Bill Watkins echoing Meg Whitman:

Bill Watkins, executive director of the Economic Forecast Project at the University of California at Santa Barbara, has calculated that once you adjust for population growth and inflation, the state government spent 26 percent more in 2007-08 than in 1997–98. Back then, “California had teachers. Prisoners were in jail. Health care was provided for those with the least resources.” Today, Watkins asks, “Are the roads 26 percent better? Are schools 26 percent better? What is 26 percent better?”

I subscribe to the print edition, so here's another interesting tidbit from William Voegeli:

California government workers retiring at age 55 received larger pensions than their counterparts in any other state (leaving aside the many states where retirement as early as 55 isn't even possible)...The latest report shows 5,115 lucky members in this six-figure club [of government retirees receiving at least $100,000 annual pensions]. The state's annual bill for polishing their gold watches is $610 million.

California's public sector unions have obviously done quite well for themselves. As one person commented, "The dues paid to Club California buy benefits that, increasingly, are enjoyed by the staff instead of the members." The worst part? No one seems to care. Even my highly educated friends, who should know better, don't care.

Government Workers Double-Dipping

The LA Times' Patrick McGreevy exposes public sector double-dipping here.

David Turner retired as a state fire chief in 2004, went back to work for the state firefighting agency two days later and is still employed there. He collected $65,229 in salary in the last fiscal year in addition to a state pension of $105,000.

Paul W. Anderson is a psychiatrist at Napa State Hospital who retired two years ago from the state Department of Mental Health. His pension is $117,840. He also received $104,200 in state wages in the last fiscal year.

"Public service" work now allows some people to earn almost a quarter of a million dollars a year. Astounding, isn't it?

California Dreamin' Over?

The Guardian has a somber story on California's decline here. Read it and weep. And then do something about it. Here's a short "To-Do" list:

1. Do not pass any more propositions that require taxpayer funds [without accountability]. In the alternative, make sure you read the actual text of any proposed laws/propositions before you vote in favor of them. If you can't understand a proposition's actual language, vote against it. Force legislators to use plain language statutes.

2. Do not allow the state government to get bigger--it's big enough already. If you don't believe me, look here and here.

3. Whenever someone starts talking about California's so-called education crisis, remind them about Proposition 98. Prop 98 requires California to use a large portion of the growth in General Fund revenues for K-14 education. Basically, Prop 98 forces California to use at least a certain percentage of its revenue for education, even if California needs funding for other projects, and even if it constrains funding for other portions of the state's budget. Prop 98 passed (barely) with a 50.7% vote and amended the state Constitution, Article 16, Section 8. Here's subsection (a):

From all state revenues there shall first be set apart the moneys [sic] to be applied by the State for support of the public school system and public institutions of higher education.

Read that Constitutional provision carefully, and don't ever let anyone whine about California education--not only are the kids set, the Constitution puts them first in line for money. And if any government employee--including a teacher--starts whining about pay, remind him/her that state employees' pensions and health care benefits are helping bankrupt California. Side note: it's not like government workers, including teachers, are going to be destitute if we cut their medical benefits and reduce their pensions--CalPERS already has almost $200 billion for state workers' pensions. Yes, that's "billion" with a "b." Guess who paid all that money? If you work in the private sector and paid taxes, you did. Do you have a pension, a relatively safe job, and the possibility of lifetime medical benefits? I'm just sayin'.

4. Stop trying to divide the state by race or immigration status. We're all in this together. No one's going to be happy if we try to deport millions of people, because mass deportation would require us to separate mothers from their American-born kids. It won't happen anyway, so what's the point of bad-mouthing your neighbors? Turn your attention to helping everyone assimilate, regardless of race.

5. Spend your money on local businesses. Use yelp.com to separate the wheat from the chaff. 6. If you're really brave, consider a Treasury Note or a California bond. These investments will hurt you if inflation hits, but some of the bonds are yielding more than average money market rates.

That's all for now. Vaya con dios. We may need divine intervention to help get us out of this mess, but we'll get through it.

Bonus: The LA Times' Patrick McGreevy exposes public sector double-dipping here. Interesting stuff, isn't it?

California's Budget Crisis Continues

An interesting perspective from Assembly-member Jim Beall, Jr. in Campbell Times (June 2009, page 19):

The state's biggest cost driver is prisons. The prison budget has doubled in the past decade to $10 billion. The state has 173,000 inmates, which is roughly equivalent to locking up everyone in the city of Ontario [California]. We spend roughly $45,000 on each prisoner, which is just about what it costs to send a student to Yale. Yet, California has a 70 percent recidivism rate...what we are doing now isn't working...

The state's 2009-2010 revenue is chiefly derived from personal income taxes accounting for almost half--49 percent; sales and use taxes make up 34.6 percent; corporation taxes represent 10.7 percent; the rest come from a myriad number of sources.

Two thoughts:

1. The war on drugs is bankrupting the state. The state spends huge sums jailing thousands of drug addicts.

2. The pro-law-enforcement mentality post-9-11 may have caused D.A.s to prosecute more non-violent offenders, knowing juries would be more fearful of anyone suspected of a crime.

To be or not to be a libertarian--more Californians should be asking themselves this question.

More on California's problems here.

California Dreamin': Fiscal Irresponsibility

This is old news, but still worth sharing, because of California's upcoming special election:

http://online.barrons.com/article/SB123941269948510457.html

Chris Street, treasurer of Orange County, Calif., warns if the federal government backs California's debt, the market for city bonds will be harmed. "Why would anybody buy the debt of a local issuer if they can get federally backed debt sold by the state?" he asks. He should know. The OC declared bankruptcy several years ago. Barron's is too smart not to notice the irony of quoting an OC official about the demand for municipal bonds.

Just in case you forgot--the CS Monitor reminds you that taxpayers back and insure government employees' retirement plans. Ultimately, every dollar that goes to them--the police, firefighters, and teachers--comes out of our pocket. Other states besides California also pay disproportionate amounts for their public pensions, showing the system itself is fundamentally flawed. For example, Illinois had $40.9 billion in future general and special obligation bond debt service as of June 30, 2006 ($22.7 billion principal and $18.2 billion interest). $10 billion of that–almost half of the principal--was tied to public sector pensions. (From http://www.wh1.ioc.state.il.us/fiscalcondition/DebtLevels.htm.)

Meanwhile, in California, things keep getting worse:

San Jose officials said Tuesday that the tanking stock market could force taxpayers to pony up as much as $50 million extra the following year to cover losses in the city's retirement funds.

Things look even worse in the longer term, as city officials say the cash-strapped general operating fund could have to pour tens of millions of additional dollars into the city's two pension programs by 2013.

If it's not painfully obvious by now, the current government retirement system--which is tethered to the vagaries of the stock market--is untenable. It promotes civil war between taxpayers, Wall Street, and government employees. We need to eliminate the special pension plans given to public sector employees and let them have the same retirement plan most private sector workers have--namely, a 401k or a 403b plan. In exchange, taxpayers can boost some government salaries, which are easier to track and not tied to the stock market.

As for the upcoming special election, California's governor wants Californians to vote "yes" on all the measures in the upcoming special election. I've already voted by absentee ballot, but I voted "no" on some measures. I am sick of my legislature not being able to handle basic accounting. When your income declines, you need to cut expenses. Will Sacramento ever learn third grade math?

Bonus: Robert Frank on people buying property.

Bonus II: Steve Malanga on public sector unions:

http://online.wsj.com/article/SB124227027965718333.html

California's Budget Crisis

The WSJ had a scathing op-ed on California's budget crisis:

http://online.wsj.com/article/SB123491737158404543.html

Oh, the lack of accountability.

CA Bonds Downgraded Again

S&P downgraded California's debt again:

http://online.wsj.com/article/SB123306751662819585.html

http://www.latimes.com/news/local/la-me-budget4-2009feb04,0,2705277.story

California's debt is now the lowest rated in the entire United States. What does this mean for investors? If you don't think California is going to default, you may be able to get good prices on California bonds. As a California resident, however, I am disgusted--and I even predicted this bond downgrade here (on December 19, 2007):

California’s bond ratings have gone from AAA to single A and are approaching status that is slightly above junk.

I apparently live in a state where legislators can't agree that cutting spending is essential to achieving a balanced budget. My representatives must believe they don't have to exercise fiscal discipline. This stance is troubling when the recession guarantees that state tax receipts will be lower than previous years. Where's Mr. Smith when you need him?

California's Tipping Point?

[Note: this post has been revised since its original publication.]

Investors should be worried. California's unemployment rate just skyrocketed, and Bay Area employers are laying off thousands of employees. As the eighth largest economy in the world, California and its consumers move worldwide markets. Shannon Love writes about California taxpayers and tax consumers here. Ms. Love talks about a tipping point, which is reached when state employees achieve enough power and money to dictate to the people. Once this tipping point is reached, she says, "it is only a matter of time before civil servants become civil masters."

Former Presidential nominee Barry Goldwater said it even better: "A government that is big enough to give you all you want is big enough to take it all away." I've echoed similar concerns here and here. Despite the danger of overweening government, nothing seems to jolt the average American citizen and voter into action. This is particularly distressing, because informed citizens seem to have become apathetic to the government's siphoning of taxpayer dollars.

Take this 1/22/09 SJ Mercury news op-ed, for example. The writers chastise a San Jose City Councilmember for trying to rein in profligate spending and public sector union demands. However, in promoting more government benefits, they reveal just how stunningly fat government employees have become.

Mr. Bruce De Mers and John Diquisto write: "[M]ost police and fire retirees left public service well before the advent of 90 percent retirements." [Emphasis added.] There's no way to escape the reasonable inference from this statement. We are being told that at least some current police and fire retirees will receive around 90% of their salary after retirement. This isn't an uninformed slip--Mr. De Mers is president of the Association of Retired San Jose Police Officers and Fire Fighters, so he knows his numbers. The writers forget to mention the lifetime medical benefits also given to police and firefighter retirees, but after getting 90% of your salary in retirement, why add fiscal insult to fiscal injury? I can't find a non-executive private sector worker in San Jose who gets 90% of his salary at retirement and lifetime medical benefits--and I'm an employment attorney, so I've met my share of San Jose workers. (As I explain below, I am not against paying police officers and firefighters high salaries--I am against paying any public employee hard-to-calculate and unpredictable benefits.)

But let's get back to the article. It contains the usual platitudes, such as, "Panic is not productive. Promoting panic is a disservice to the public." Informed people should read between the lines. Our government officials want us to remain calm--while they dig deeper into our pockets. Unsurprisingly, the writers resort to the public safety argument: "Attacking retirees who risked their safety to make San Jose one of the safest big cities in America may feel good. [T]hat doesn't make it right."

Newsflash: if more police kept cities safe, or if police were even a substantial catalyst for safety, then New York City, Oakland, and Baltimore would be almost crime-free. (Last time I checked, they had plenty of police officers.) In reality, police and firefighters are just two components in the public safety analysis. The determinative factor in public safety is the composition of the residents themselves--especially their education levels. For example, imagine a city with 1,000 cops and 1,000 gang members, most of whom lack a college degree. Will there be more violent crime in that city, or in a city with 50 cops and 50,000 accountants, doctors, and engineers? And yes, that's a rhetorical question.

Most Santa Clara County residents have a college degree--61%, by some accounts. College-educated adults tend to be less interested in drugs and dangerous behavior, and somewhat more likely to be married. These traits generally lead to law-abiding behavior.

Ultimately, the police and firefighters' unions do Santa Clara County residents a disservice when they claim to be the primary cause of our safety. It's almost as if they are saying, "Pay us off, and you'll be safe. Don't pay us off, and, well...who knows?" Combine financial self-interest with political power, and you have a ready-made recipe for oppression, or at least government-sanctioned extortion.

Investors must realize that public sector retirement benefits are a stock market issue, not just a political issue. Continuing generous government benefits will affect stock market gains in several ways. First, public sector retirement plans aren't necessarily linked to the stock market--CalPERS, for example, can invest in hard assets, like timber and land, as well as other investments unavailable to ordinary people. (CalPERS controls around 239 billion dollars, and its investment decisions move markets.) Having a separate, two-track retirement system allows government to invest taxpayer money with little regard for the retirement prospects of ordinary citizens. Consequently, while non-government investors must rely on an ever-increasing stock market to retire, public sector unions and their employees are not so inhibited. Not being similarly situated, they may take actions to inhibit corporate profits and, in turn, stock market gains.

In fact, there is no question that continuing government's generous retirement benefits will drain taxpayers, providing them with less discretionary income. General Motors (GM) and Ford (F) are two analogous examples. Like the United States, they have deficits and are losing money. Just like government unions, the UAW lavished their employees with generous retiree benefits during flush times. As a result, until 2007, a Ford (F) employee's average hourly wage was $71.00/hour--but with only $29/hr going to actual wages. Around forty percent (40%) of the total hourly wage went to retiree benefits and health insurance programs. (See WSJ, 1/22/09, A12.) Meanwhile, foreign automakers pay around $49/hr to their employees and still manage to create better products and have better service.

Basically, GM and Ford became non-competitive (at least until declaring bankruptcy and/or gaining union concessions) because they offered generous retirement and medical benefits based on overly optimistic actuarial projections. The costs of their programs--like America's public sector pensions--are linked to the life expectancies of retirees and future profits/tax revenue; therefore, without a crystal ball, true costs are difficult to predict.

Since it's difficult to ascertain the exact costs of benefit programs--which, like construction projects, often take longer and usually go over budget--prudent persons would favor cutting hard-to-measure benefits and then increasing present-day salaries.  If the private sector--with its self-interested, sophisticated shareholders--couldn't restrict union health and retirement benefits to a manageable level, what chance does California have? After all, unions in California have heavy influence over a majority of California legislators. To be clear, I am not anti-union--I am against unpredictable and hard-to-calculate government costs, especially costs that are passed off to future generations. We simply cannot expect the government to consistently and accurately predict the lifespan of all government workers, the number of its retirees in any given year, or the future health and medical conditions of all of its retirees. Yet, in order to accurately predict future costs in any system that provides pensions and lifetime medical benefits to millions of people, the government would have to act as a financial soothsayer, which it has been unable to do.

Unions, both private and public, were originally great ideas (See the film, Harlan County, U.S.A.). However, like most entities with billions of dollars of influence and political involvement, many of the largest unions have become corrupt and unwilling to look at the big picture. If GM and Ford are any indication, California's state budget could end up allocating 40% of our taxes to government retiree/health benefits and still not produce a balanced budget or better service. Like Ford and GM, if the status quo continues, California will become non-competitive. But that's not all. Ford and GM recently considered bankruptcy but were bailed out by the White House at the last minute. Although some California cities have filed for bankruptcy because of overly generous public sector benefits, an entire state has never gone bankrupt. Who's going to bail out California if it goes bankrupt? Will we see the day when California has to offer a 25% interest rate on its bonds to attract investors?

Finally, generous government benefits create major mis-alignments of interest. Having two separate retirement systems--one for Joe the Plumber and another for Sally the Cop--allows the government dangerous leverage against ordinary citizens. The day may come when CalPERS says, "If you don't give us what we want, we'll pull all our money out of the stock market, invest it someplace else, and you can kiss your 401(k)s goodbye." Sound implausible? Until recently, so was the idea that our federal government would give $700 billion to financial institutions without strict oversight. Also, don't forget that just ten years ago, banks like Citigroup (C) looked ready to take over the world. Now, of course, Citigroup (C) sells for around $3/share and is looking for a bailout.

Citizens should develop an eye for non-violent oppression. An oppressive government doesn't need to lock you up or arrest you to control you--it just needs to take enough money from you to buy off politicians and pass laws favoring them over regular folks. Investors, both foreign and domestic, need to stop being calm about overly generous government benefits and take action. Future generations of taxpayers--namely, our children--deserve nothing less.

Bonus: more on California's government unions HERE:

Approximately 85% of the state’s 235,000 employees (not including higher education employees) are unionized. As the governor noted during his $83 billion budget roll-out, over the past decade pension costs for public employees increased 2,000%. State revenues increased only 24% over the same period. A Schwarzenegger adviser [Pat Dando] wrote in the San Jose Mercury News in the past few days that, “This year alone, $3 billion was diverted to pension costs from other programs.” There are now more than 15,000 government retirees statewide who receive pensions that exceed $100,000 a year, according to the California Foundation for Fiscal Responsibility.

Many of these retirees are former police officers, firefighters, and prison guards who can retire at age 50 with a pension that equals 90% of their final year’s pay. The pensions for these (and all other retirees) increase each year with inflation and are guaranteed by taxpayers forever—-regardless of what happens in the economy or whether the state’s pensions funds have been fully funded (which they haven’t been).[Steven Greenhut, WSJ, 1/22/10]

Generous Benefits Will Bankrupt California

From the WSJ, 12/18/08, A4:

Calpers, which stands for California Public Employees' Retirement System, is California's pension fund for government workers. It provides retirement and health benefits to more than 1.6 million state and local public employees. From June 2007 to June 2008, the fund declined from $239 billion to $182 billion. Basically, Calpers lost $57 billion of taxpayer monies. Even with this loss, Calpers has almost $113,000 for each California employee's retirement and health benefits. This amount sounds generous, and it's certainly better than what most Americans have, but the pension is still underfunded. As a result, taxpayers will be forced to pay higher taxes to make up the shortfall, or will suffer inflation and a weaker American dollar as the government prints money to give to itself. In this way, public pensions are ticking time bombs, ready to release dangerous inflation unless something is done.

Congress and state legislatures talk about regulation, but they don't pass laws forcing cities and states to fully fund their pensions and/or to prevent borrowing money from pension funds. I remember Al Gore talking about putting Social Security funds into a "lock box," i.e. a box that is untouchable. Too often, when cities, counties, and states need money to finance a project or to cover a revenue shortfall, they dip into the retirement funds of police officers, firefighters, and other government employees. Eventually, the monies will have to be paid because a) the government employees have paid into the system; and b) the political will to reduce or deny retirement funds is non-existent. Just witness the auto bailout--if we cannot avoid printing money to give to GM and Chrysler, which lost billions of dollars annually, we surely cannot avoid printing money to give to retirees).

In addition to creating a lock box, the government needs to pare down benefits. Every dollar paid to a government employee means another dollar coming out of non-government employee pockets. Here is a quote from the WSJ story:

Like many residents who work for private employers, Ms. Nolan-Stewart, an AT&T manager, says she is astounded at the generosity of public-employee pensions. "If I were to retire, my retirement would be one-quarter of what I make today for the rest of my life," she says. By contrast, city firefighters and police who retire at age 50 with 30 years of service may retire with 90% or more of their final salary.

The WSJ (12/17/08, A1) also reported that Calpers used leverage (borrowed money) to boost returns; however, using leverage also means that losses are magnified, which may explain the fund's recent poor performance.

So Calpers engaged in a risky investment strategy with taxpayer money, and few Californians seem to care. Americans seem to have been so distracted with Iraq, they forgot about domestic surveillance and protecting our finances from government ineptitude. That's too bad, because history shows that every major empire has collapsed from within, not from an outside threat.

California's Ailing Government

The AP's Judy Lin reports that California faces a $28 billion deficit:

SJ Mercury

And the hits just keep on coming...

California's State Budget

California will raise taxes to stem a massive budget crisis:

http://news.yahoo.com/s/ap/20081106/ap_on_bi_ge/california_budget

Two items in the article tickled my tragedy bone:

1. The additional 1.5% raising of sales taxes. It's being called a temporary tax, but as we know, the government rarely retracts a policy when doing so would mean a reduction in tax receipts. In addition, this tax will fall disproportionately on the poor and middle classes and will discourage holiday spending. I am not opposed to raising sales taxes in general, but now seems like a terrible time to do it.

2. The state's admitted over-reliance on capital gains tax receipts. Apparently, our controller was basing budget projections on an ever-increasing stock market. Are you kidding me? Someone ought to send Sacramento a self-destructing copy of Dow 36,000 pronto. The origins of California's financial and housing crisis come into clearer focus with each passing day--total blindness and overzealous optimism are never a good pair.

California Out of Money?

According to Reuters, California Treasurer Bill Lockyer said the most populous U.S. state's cash reserves may be exhausted near the end of October, and various state-funded services are at risk of grinding to a halt.

Governor Schwarzenegger is apparently going to ask the federal government for 7 billion dollars. Good timing--after 700 billion, 7 billion is going to seem eminently reasonable.

When Californians vote on their various propositions, they should remember California's budget problems (i.e., no money). Almost every Proposition requires more money. When in doubt, vote "no." The only Proposition I will be voting for is Prop 11. Everything else seems to require money Californians don't have.

July 25, 2008: WSJ Letters to the Editor

I've been reading the Wall Street Journal for years, and I've never seen better letters published on the issue of income taxes. From July 25, 2008 newspaper:

By Sim Pace, from Arlington, VA--the spirit of Jefferson shines bright:

"[T]he top 50% of taxpayers paid 97.1% of income taxes in 2006...Isn't that the well-known definition of democracy, the poorest 51% of the population tyrannizing the richest 49%? I suspect Sen. Obama would like to see the pendulum swing even further and have the top third of taxpayers pay all the income taxes, then the other well-known definition of democracy will have been validated: two wolves and a lamb voting on what to have for dinner.

By Bruce Kebbekus from Hotchkiss, CO:

It should be mentioned that letting about half the citizens escape and pay no income taxes will lead, and probably has already led, to voter disinterest and bad government. Too many have no stake in the game.

By Harold Arkoff from Calabasas, CA:

California...receives back from Washington a smaller percentage of income taxes than it pays. A greater burden is placed on the local population to pay for state services which must be paid for by other sources of revenue..."Their fair share" can have more than one meaning. Is California getting a fair share?

What do D.C. and Delaware produce? They are usually in the highest brackets in terms of per capita GDP by state. See

http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm

Delaware has attracted almost all the major banks to its state by having a pro-business platform. Also, most of us didn't elect the Delaware Chancery Court to decide economic legal issues, but its opinions make waves nationally in business matters. This small state and D.C. have made themselves epicenters of influence despite their unimpressive physical statures (D.C. is a swamp after all).I t's commendable to see a small state and a district attract so much business and influence. At the same time, one wonders why California and Texas citizens don't project themselves as well as these smaller entities. Is this a case of Lennie and George, as Mr. Arkoff implies in his letter?