Wednesday, July 22, 2009

Canary, meet Coal Mine.

Somewhat lost in the federal health care/war funding/global warming/wise Latina raree show was the sad little, noxious little budget deal worked out in California this Monday.It has to say something about who we Americans are and what we're becoming that the best idea that the Golden State's best and brightest (okay, we'll exempt Da Governator from that, but, still, We the People of California elected his Austrian ass) could come up with to "balance" the state budget was to rob their own counties and municipalites blind, to kick the poor and sick in the crotch, and to cut nonessentials like teachers, garbagemen, cops, paramedics and highway maintenence workers (in the state that practically invented Car Culture, no less...).

You can read all about it in the linked LA Times editorial, but even that supposedly liberal news organ seems to have developed collective amnesia about a couple of salient points.

1. The "we're broke, we just don't have any money, we HAVE to cut your food stamps (AFDC, Head Start, fill-in-the-blank...) or die, you silly Negroes..." meme goes all the way back to the toxic little property tax time-bomb the California GOP wired up in 1978, Proposition 13. We here in Oregon then devised our own little suicide pact, Measure 5, clearly on the conviction that if California was going to be Tom Fool and lead the best plan for us was to be Jack Fool and follow.

The direct result of this was to save Ma and Pa Goober a couple of hundred dollars a year on their rancho deluxe out there near McMinnville while giving Pacific Gas and Electric, Flav-R-Pac, and Megacorp Development an immense windfall of untaxable largesse, which, of course, they immediately rushed out to donate to the widows, orphans, disabled, and mentally ill that the now-tax-strapped state government had to chuck off the welfare rolls and out of the state institutions, colleges and job training programs they could no longer fund, so that the poor devils didn't have to beg for change at the top of the on-ramps of the roads the state could no longer maintain.


2. California compounded their own stupidity by then crafting a 2/3rds supermajority rule for passing legislative revenue measures, which has effectively prevented the state from passing any NEW revenue measures since 1996.

I love this little cartoon because of what it says about the mindset of the people who are fond of this situation. The cartoonist wants us to see that the Republican elephant is a simple but wise old soul, doing his math like a good householder and making his expenditures meet his income, and the Democratic donkey is a maddened policy wonk, all goofy for taxing everything moving to fund kooky-spooky crunchy granola frills.

But the cute little exercise fails when you realize that Jumbo's "a = b" is a logical fallacy. "a" isn't "a", it's "x", and "b" is "y". The animals in the legislature can - unlike the prudent household - change their income and outlays to meet their needs. So, in a sense, it's the donkey's frantic figuring that represents what a real government has to do: try and figure out what it needs versus what it wants, and then what it can take in versus what it would like to take in. The elephant isn't being simply honest; he's being simpleminded, he's using an axe to craft a budget rather than a woodcarving tool. Which explains a LOT about how Republican "governance" has gotten us here.

And so, here we are.

Imagine a nation in which a small handful of wealthy people live a First World lifestyle.

Their homes are nicely maintained, their roads well paved, their neighborhoods patrolled by polite, competent, professional police officers. They and their neighbors get First World medical care in daintily appointed medical clinics, shop at the best locations, dine, party, work and generally live as well as any human society in the 21st Century can arrange.

Then imagine that the bulk of the nation lives in precarious, decaying cities, towns and countrysides, prey to the collapsing, badly maintained public roads, buildings and utilities around them. Their lives are made more random by the capricious nature of their public "servants": seldom present and, when appearing, typically bribeable or even worse, merely indifferent. A fraying middle class lives squeezed between the wealthy, who despise them and the poor, who envy and hate them. Their political power is notional, their involvement in their own government negligible, they are useful only as fodder for the wealthy.

But you don't have to imagine this. All you have to do is travel south, east or west, to find dozens of impoverished Third World nations where this condition is the standard. Every craptacular little dictatorship or oligarchy the U.S. Army helped me vacation in, from Panama to Egypt and points between, featured this vast disparity between the rulers and the ruled. This wasn't a bug; it was a feature.Democracy cannot exist in a feudal society. It dies, or is killed, by the desperation, foolishness and ignorance of the peasants and the greed, venality and indifference of the nobles.

California has now chosen, rather than to even mildly discommode the wealthy, to disadvantage the disadvantaged. Rather than even attempt to close the gap between the rulers and the ruled, it chooses to allow the public weal to fall victim to private wealth.

There is a name for this sort of system.

But "republican", it's not.

Ever since the Elevation of Saint Ronnie, our public discourse has been dominated by the idea that "taxes are bad". In this sense, the conservatives that lost the Battle of Watergate won the larger war. They wanted to concentrate power in the nation's elite, and, largely, they have. They wanted to move the nation's laws - if they could not move the nation's people - to the right and, largely, they have.Well, California has reached the conservative state of grace; the state, and those in the care of the state, now exist to serve the needs of the wealthy. We shall see if the result is beneficial for the state and her people as a whole. We shall see.


  1. Chief-

    I am not in any way amazed by this. To be frank, I have come to the sorrowful point in my life there I just see a huge portion of my fellow countrymen (and women) as congenital idiots. Maybe fluoride was dangerous after all. And those that are not in the low teens IQ are so egocentric that they can't see beyond their own noses.

    I am just tired of stupidity. It really has stopped being entertaining.


  2. Why does the USA have such a dysfunctional government?

    I think it is because of the checks and balances.
    Since no elected official is really in charge, there is no stigma for ruining the commons while engorging oneself and ones cronies.

    There is no reward for good stewardship. Indeed, those who try to be responsible are thought to be chumps as the rest of the actors gobble up what the stewards tried to leave to future generations.

  3. It's not too surprising this is the result when new spending can be passed by simple majority while new revenue requires a 2/3rd's vote.

    Compounding that problem is that California, like much of America, has been living high on successive bubble economies. The legislature happily doubled inflation-adjusted spending over a decade all of which was "paid" for with increased revenue originating from the stock market and housing bubbles. (We can pay for it now, who cares about the future!) Since there doesn't appear to be a third bubble on the horizon to save the day and keep revenues artificially inflated, the people of California are essentially fucked thanks to the parochial idiots in their legislature.

    Typically, most of the analysis of California's problems are partisan ones that place the blame everywhere else. The reality is that both sides are wrong - the kind of tax increases required to make up for all the lost bubble revenue are pretty significant and not at all likely to materialize, particularly since California is already a high-tax state. On the other hand a solution via spending cuts isn't really practical either, particularly since the programs likely to get cut are those that are some of the most important, yet often have little political support via unions and other organizations with political power.

    So, while I don't see California becoming a third-world shithole anytime soon, Californians are going to have to sit down to a large plate of consequences that will have to include spending cuts and tax increases. There's no avoiding it and sooner everyone realizes it the better.

  4. Andy: I'll agree with your points except for the notion that Califnia is a "high tax" state. High tax, yes, compared to, say, West Virgina or Texas. But, honestly, most of the truly "low-tax" states are rural shitholes. California used to try and maintain one of the highest urban standards of living in the nation. That's going to change.

    The Europeams, living as they have through centuries of religious, social and poltical upheaval and revolution, figured out ovethe last century that if you want to keep an industrial society stable and happy, there HAS to be a bottom to the hole people can fall in. Fail to close that hole and you get violent rebellion and anarchy. And you don't have to go all the way down to Hunduran levels of inequality to get Honduran levels of dysfunction, especially in a nation that thinks and expects First World mores and manners. The bad times may be closer than we think...

  5. There's a few additional facts I haven't seen mentioned that help to explain California's special place in Hell.

    In the 1960's and 70's California got $2.60 from the US government for every dollar they contributed. This was largely for military bases, personnel, and defense-related research projects. By 2000 the amount had shrunk to $1.70 for every tax dollar paid in, I haven't seen any recent figures but I'm sure that it's lower yet, perhaps as low as $1.20.

    This is a perennial sore point for the Californian delegation to the House of Representatives who are forever trying to raise the amount California receives. They were particularly enraged when Obama declined to bail them out of their state budget woes (I like it but I still can't figure out why he refused when he was tossing great gobs of cash out left and right). If they're made now, just wait a few more years until they drop below a dollar returned for every dollar sent. Minnesota sits near the bottom of state reimbursement at about 60 cents on the dollar and we're not complaining. Too much...

    I think AEL is asking the right question but I don't think he's got the right answer. We've had this system for 225 years and this is only the second or third time we've gotten into such a leadership crunch. I'd say that we've had a bad string of leaders lately, particularly in Congress which has been increasingly avoiding its duties since the Monica Lewinski scandal.

    Actually, Andy, I suspect we're seeing another bubble inflating in New York City right now around Goldman Sachs. They're taking government loans (and paying 0.25 percent interest) and investing them in some surprisingly risky ways that are currently turning out an 8 percent return. But I can't see the bubble getting as big or lasting as long as the last two bubbles so California may be safe for a change.

    Again, I can't see why the Californians are in such a rage about their government or their no new taxes pledge. We here in Minnesota filled our budget gap in a number of ways but primarily by delaying payments to local governments and school districts so THEY had to go out and borrow the money and pay the interest instead of the state.

    This isn't even the first time we've done in Gov. Timmy did the same stunt in 2003-04 and we'd just barely finished paying back local governments and schools when we hit them with an additional $2.7 billion deficit. The estimate for the 2011-12 funding period is a deficit of $6 billion (probably wildly inaccurate). I'd say we've pretty well proven that you can't get out of a depression by cutting government spending and services.

    Chief, according to there are now six states in the union with at least a 20% unemployment rate. My guess is that we'll have at least 10 states in that position by the end of August. I think you're right about the bad times being closer than we think.

  6. Pluto:

    I don't have the stats right off hand (I am busy at the moment), but Califas is one of the states (for lo these past many years, I think), that pays more to the feds than what it takes in. These last years with the tax base crumling might be an exception.

    The Redneck states are the recipients who make out, vis-a-vis the ratio. Heck, someone has to keep those assholes neck deep in Crystal meth and oxycontin, or otherwise, (sniff sniff) they might bust out their shootin' irons and ummmmhh ventilate their estranged unsignificant teach the niggers and spics what for.

  7. The main point I wanted to hammer on with this post is that what we're seeing in CA is the culmination of the "Reagan Revolution" victory over the New Deal. The redneck and cracker element I never expected more from. The real issue I see here is that the last traces of noblesse oblige, of the Rockefeller Republican sense of responsibility of the richest for the poorest, has finally vanished.

    For fifty years we've more-or-less hung on to the great Rooseveltian compromise, whereby the wealthy and the middle class transferred enough of their wealth to the commons (through taxes) and the poor to ensure that the poor and disenfranchised didn't just drop out of the social compact and turn to socialism, communism and anarchism - not an unreasonable fear in the 1930's.

    The fall of communism and the end of history has convinced the Reaganites and their spawn that the revolt of the unwashed is no longer to be feared. Now we can simply forget about even thinking about raising taxes. We just close parks, furlough cops, social workers, teachers and highway maintenence workers, kick women and kids off the government's health care system.

    The wealthy, now secure in their gated communities with their rent-a-cops, private services and communities, could care less. Let the canaille rebel - what was tear gas invented for, anyway? Game over, thanks for playing.

    This is more than just a bend in the road. We've been going here for years. This just signifies the official intent to return to the pre-New Deal America, where it's every sharpie for himself and the devil take the hindmost. Reagan and Gingrich and DeLay and Rush and Coulter and the whole damn crew has been banging this drum for thirty years. With this feeble budget, based completely on penury, passed without even an attempt to return some lost revenues to the state, we've announced our official fealty to the notion that these idiots are the drum majors.

  8. I'll have more to say on this great topic about how my native state has been laid low, but FD Chief is going after Prop 13, so I wanted to let folks how the property tax portion looks from the perspective of a Californian.

    Prop 13 is everybody's favorite whipping boy. And I agree that the formula used for property taxation seems decidedly cockamamie. "Only one percent? What's up with that?" Gee, just think if they didn't have Prop 13, they could increase the property tax percentages to those used elsewhere, and everyone would be happy." Unfortunately, there is a problem with this line of thinking, namely the price of homes in California. Home prices in desirable areas are easily double or triple what they are in other states. And despite common perceptions, wages for professionals—who have to live in those desirable areas because that's where the jobs are—are not double what they are elsewhere. A common myth, but it ain't so.

    Say you're a well-educated person working in high tech in Silicon Valley, making a very good salary. But it isn't really all that much more than what your counterparts in Austin or Raleigh-Durham are making. Here's where the reality of housing prices hammers your quality of life and the plans you need to make about saving for the kids' college and for your retirement.

    You buy a house. In a desirable area, you're going to pay $700K minimum. Meanwhile, your counterpart in Austin or Raleigh can buy a newer and bigger house, in just as desirable an area for $350-400K. Twenty percent down on a $700K house results in a $560K mortgage, while the percentage down on a $400K house results in a $320K mortgage. Do the math.

    Just to handle debt service, the Silicon Valley guy has a monthly nut that's more than a thousand bucks higher than the Austin guy. Prop 13? The one-percent cap means his property taxes will be $7K a year. But that's not all! If he's bought a 15-20 year old house—not at all uncommon—he inherits all of the previous years' add-ons by local governments. He's probably going to end up paying $8K a year.

    Is $8K a year too little? I don't know. But what I do know is that people in California making great salaries struggle to make ends meet. We're not talking Hollywood here. We're talking hardworking professionals, who end up living a middle class life on an upper middle class salary, all because of housing prices. Prop 13 was designed to address this problem. And millions of Californians share my opinion that Prop 13 is all that's keeping the wolf from the door. Absent Prop 13, the rapacious politicians and the handout crowds would devastate the housing market and drive countless numbers of professionals out of the state. Remove Prop 13 and California would actually be a third-world enclave

    All for now. More to follow. BTW, Pluto, your figures, if they were ever accurate, which I question, are out of synch with reality. California gets about 80 cents on the dollar from the fed.

  9. Publius: The problem with Prop 13 is that is used a sawed-off shotgun to kill the tax mosquitoes sucking off the homeowners. The homeowner issue I can understand; your house isn't a revenue generator. To get taxed more every assessment for something which is (until you sell it) a cash-sink just SEEMS wrong.

    We did the same thing here in Oregon. Like I said, it saved Joe and Molly a couple of hundred dollars. You had it much, much worse in CA because your housing bubble was exponentially worse than ours. But, still, the savings would have been relatively minimal if your housing market hadn't gone insane.

    The limits entirely missed the people who were making big money out of tiny office spaces.

    And the HUGE winners were the big agribusinesses, commercial and industrial firms and utilities who saw their property assessments shrink from millions to thousands.

    Prop 13 would have made sense if you'd have done what several smart people proposed here in Oregon: a split-roll property tax. You would divide properties into (basically) things that help make money and things that don't. The former are taxed fairly thoroughly, the latter, not. But the big economic interests that helped bankroll the initiatives managed to obfuscate the difference and make their little pile on the stupidity of the voters, as always.

    And now - as I said above - rather than try and revisit any of this, we just grin and kick the people who can't fight back - the poor, the sick, the kids, the elderly, the people who need the sort of services that states, counties, and cities provide - dead square in the ass.

    What a great country...

  10. Might I offer that "Government" is people. A subset of the population, generally elected by the population. Government isn't stupid or domineering, or anything. People are.

    How stupid? Perhaps this recent exchange in the Senate debate on requiring all states to allow people licensed in another state to carry a concealed weapon to do so in their state gives an example:

    Sen. Chuck Schumer, D-N.Y., said his state, with its more stringent requirements for a concealed weapon, should not have to accept gun carriers from states with few or no restrictions.

    Senator Thune (R-SD) responded that "Central Park will be a much safer place" if someone from South Dakota could carry a gun in the New York City park.

    If logic such as this is part of what the sponsor of legislation that seriously abridges states' rights uses to promote his legislation, then the US is intellectually handicapped. And, that such a topic should consume as much time and energy as it did when the economy is in a shambles and 48 million Americans do not have medical insurance is testament to the pathetic state of our society and the folks selected to manage it.

    States are suffering because, as previously pointed out, we have no Nelson Rockefellers in office any more. I was acquainted with the man, both socially and professionally in one major public works project. He was not only aware of events over the immediate horizon, but wanted the input of others on same, because "I am not omniscient".

    Today's elected critters simply engage targets of opportunity to remain in office. All the states are suffering revenue shortfalls. Alaska, for example, has suffered a 72% drop in tax revenue because they pinned their "free ride" on taxing oil revenues, which have dropped significantly, as we all know. Who would want to be the governor of a state that is facing a 72% revenue drop? We know at least one person who doesn't want this job.

    We have been conditioned to do the public sector mission ass backwards. We begin by saying what we are willing to pay, and then try to figure out what we can do with that much money. Since taxes and government are inherently bad, we should obviously pay as little as possible. Rather than designing a world class education system and try to figure out how to fund it, we simply look for ways to spend less on the matter, or shift the burden to a different governmental entity.

    And, as to cries of "socialism", the very fact that Alaska received $1.84 in Federal spending for every $1.00 in taxes Alaskans pay into the federal coffers sure sounds like "redistribution of wealth to me", and I'm sure it would to a resident of NJ, whose state received $0.64 in federal spending for every federal tax dollar they pay.

    But people are content as long as you don't tread directly on their toes, and the fabricated reality you feed them paints the other guy to be the villain.

    The objective of our modern day elected officials has been to keep as many people as possible "fat, dumb and happy". Unfortunately, that is an impossible task. The masses may be dumb, but they will realize when they are no longer fat and/or happy. More and more people are falling into hard times. No amount of Rovian propaganda will convince a bankrupted by medical bills person that everything is OK, because it isn't. As the numbers of people in dire straits increases, the stability of our country decreases. It may take time, but we are on a collision course with something unpleasant.

    The problems in Calif are indicative of what a bone headed, self-serving culture we have become - nationwide.


  11. Hey Al, where did you get those numbers of federal redistribution of tax dollars?

    I remember finding them a while back (was deeply impressed by the changes in California over the last 30 years) but couldn't find them again when I needed them for my earlier post.

  12. Pluto-

    Note that they were for 2005. I'm a lazy researcher and looked no further.


  13. Thought I'd get in my two cents on Prop 13

    I reside in the Great State of New Jersey, which has no bounds on property taxes. Property taxes are the main mechanism for cleaning a wallet. The average annual property tax bill in my county, which is not all prosperous, is over $10K a year. A reasonable starter house is $400K, having property taxes of $8K/yr. A 'made it' house, a step below McMansion, goes for ¾ Mil, paying over $15K/yr in property taxes

    I've lived in the same house for almost thirty years; long ago paid off the mortgage. Paying almost twice what I paid ten years ago. When I'm sixty six there is a program to freeze property taxes, subject to income restrictions.

    I didn't buy the house to speculate, but rather live there and raise a family. Matter of fact, we bought the house during the interest rate craziness of the early 1980s, with a mortgage interest rate of 15¼%. The rates came down, property values went up and we refinanced with a conventional mortgage. Never had a home equity line.

    I was faced with having a job relocation to the DC area. When we investigated the taxes, interestingly enough with people I knew in the Reserves, we found that the tax bite would be the same, just from different pockets. Our sales tax isn't on food or clothing, although it is now high. State income taxes aren't bad and some of the property taxes are rebated; there aren't any personal property taxes.

    Still, the property taxes are outrageous.

  14. FDChief,

    The Reagan Revolution won? I completely disagree. Consider that in California inflation-adjusted spending-per-capita has gone up almost every single year for more than two decades and has only recently begun to trend downward because of CA's fiscal problems. Spending per-capita on the federal side has gone up almost every single year as well since the end of WWII (when there was a huge spike). That is the antithesis of the "Reagan revolution."

    Additionally, California has one of the most progressive tax systems of any state owing to its progressive income tax.

    So where is all this extra money going? I think a significant chunk is going into healthcare and education - two areas where costs have grossly outstripped inflation for decades. How much is attributable to that? I have no idea but my sense is that is the biggest reason.

    So the problem, as I see it, isn't a violation of the social compact - indeed benefits in most areas have increased and not decreased since the 1930's - the problem is that every year we are paying 5-9% more to get the same level of benefit as the previous year. Spending per student is also rising in most areas, yet student performance doesn't seem to be improving.

    All the Rockefellers in the world can't make that sustainable at the federal or state level, nor can the wealthy in this country be expected to make up the difference indefinitely. Medicare is going to be insolvent in just a couple of years unless something is done soon to control costs and that is just the beginning. Healthcare, in particular, is eating up a tremendous portion of our GDP and it's only going to get worse. All that extra money spent at the federal and local level simply to maintain the status quo is unavailable either for tax decreases or spending in other areas.

    So the political issue, as I see it, is neither the Dems nor the GoP are able to recognize the fundamental problem here, which is that costs are outstripping inflation, and have outstripped inflation for decades. The pols have been able to manage until now, but the chickens will soon come home to roost if something isn't done. "Progressives" seem to believe the wealthy are not only a bottomless pit of revenue to fund their agenda, but seem to believe the problem of rising costs is the result of supposedly low tax rates and not costs above inflation. The "conservatives" are operate under the illusion that it's possible to cut spending while costs are rising at two-to-three times the rate of inflation. To do that they would have to cut services every single year.

    The problem, IMO, is cost growth in the two areas where government spends most of its money: Education and Health care. Until rising costs can be controlled then none of these other problems can be solved and we will all be on an unstable fiscal footing.

    So in the end, Chief, I think what's threatening the social compact is not republicanism or the Reagan revolution, but 3-4 decades of politicians doing nothing about rising costs for two of the most central services provided by our government. How long can we continue to pay 5-9% extra a year for the same services? Not very long.

  15. Publius,

    Good comments on housing costs. I've lived all over the country but not California. You can also look up the BAH rates for various areas to compare housing costs. My family is in Ohio right now and our BAH is about $1600. Most areas in California are about twice that rate, which really tells you something. Our last duty station was in San Antonio, TX. The rate there was about $1400 a month and one could buy a brand new, modest 4 bedroom suburban home in one of those cookie-cutter developments for as little as $125k while "McMansions" were about $250-300k. Meanwhile a friend in California bought a tiny 60 year-old "starter" home a few years ago in the Bay area for $400k. No thanks. If the military sends us to California that's no problem, but I can't see us willingly moving there unless me or my wife can get a premium salary to cover not only the mortgage, but the income tax, which, for us, would probably be another $8k a year. Without the additional pay it would just lessen our standard of living. California is certainly a great place to live, but it's not that great.

  16. I live in California.
    I also live in Silicon Valley.
    I commute from Milpitas to Palo Alto every day on 237, avoiding the parking lot known as 101, I continue West on 237 to El Camino, whereon, I hang a sharp right, and tool on up to, what I and my coworkers lovingly call, the "Salt Mine."
    I've lived in this state since my parents moved us here in '72, lived in the same basic geographical location of North San Jose, Milpitas for past...37 years?
    Good lord, has it really been that long?
    I've seen this valley change.
    I've watched 680 get put in, I've traveled 17 when it was considered the best place for tire companies to test their tires and show how wonderfully tough they are, and the worst part of it all...I watched as the orchards...acres and acres of orchards just get ripped out, and replaced with homes.
    I've worked in a whole lot of different jobs here, and I've traveled a lot over the state...and the one thing I have to say is that assigning blame for the woes of California would be simply to say that the politicians are to blame, but really, thats not it.

    People have moved here from all over...I suppose it takes a special kind of someone to move here and put up with the outlandish prices for everything...but the one thing I can say is this: The people are to blame for his mess.

    They loves them, fire protection, police protection, parks, libraries, and road work, etc...but paying for it..."oh no, no, no...just go to the money tree and pull the money off to pay for my services."

    It's the electorate...sweet, nice people, but still, dumber than salt.

  17. But Regan said we can have everything and still have lower taxes. As the rich got richer, the money would appear out of nowhere to provide for everyone else. You mean he was wrong?


  18. In 1960, the marginal tax rate for people earning over $400,000 was 90%. Adjusted for inflation, that's just under $3M. In 2009, the marginal tax rate for people earning $3M (excluding capital gains) was 35%. And there are many more tax loopholes today.

    The share of total income for the top 10% of earners was steady at about 33% from 1957 until 1982. In 1982, when a certain former actor was in office, that share started trending upward to 50% in 2006.


    - If Reagan didn't engineer this revolution, he sure didn't stop it.

    - While the 'well' of high income earners may not be bottomless, it's one hell of a lot shallower than it was for most of the past 50 years.

    - If income redistribution is class warfare, than as Sam Walton said, "My class is winning."



  19. JP,

    I think you are missing my point. Whatever one thinks about marginal federal tax rates, increasing them to any level one would like does not solve the underlying structural problem of costs greatly outpacing inflation.

    Also, the real crisis is in entitlements, so rather than raise marginal tax rates, it would be better to expand FICA to cover all income.

  20. Discussions about what each state receives from the federal government versus what it sends to DC is skewed by the Corps of Engineers Civil Works budget. I've represented my town, as a volunteer, on a local government flood board for several years. I'm now on officer of that board and up to my eyeballs in annual federal appropriations, earmarks and stimulus spending, not to mention state matching funds. Met a lot of interesting people, not only on the Hill, but surprisingly high in DA. It's not s simple as it looks at first glance.

    If you look at the FY10 Civil Works Budget, big bucks go to: Katrina damage, Mississippi River projects, Sacramento River, and New York Harbor dredging. Nobody is going let the Mississippi go into disrepair. The Sacramento River is rebuilding of poorly designed and constructed levees years ago by other than the federal government. For instance, you should build a levee with clay fill, not sand and gravel or whatever else is (cheaply) available. New York Harbor is going to remain viable as a port. The days of finger piers jutting into the Hudson are long gone, it's now huge container terminals on the Jersey side of the harbor and that reach needs to be deepened. It's foolish to unload on the other side and then ship it back across the Hudson for shipment to the interior of the country.

    When we look for annual funding, congressional delegations from other states see that we get funds for the Port of New York, Delaware River projects, and beach replenishment, the latter a sacred priority for any coastal state with a tourist industry. It's easy to get the hairy eyeball from other congressmen.

    The stimulus spending caused screams for the coastal states because no beach restoration money was included. The other strange part is that the states have to cough up their project match (75% federal, 25% state) before the stimulus money flows. We had problems getting our match, I can see the difficult choices in California.

    I'm not suggesting that some states don't get more funding than they deserve. It's that these water projects screw the numbers up big time.

  21. I tried to cut and paste links to thge civil works budgets but they didn't take. They are:


  22. Andy: I'm not particularly fond of the "let them eat cake" attitude that the greed-is-good ethos of the Reagan years spawned in the wealthy. But I'm not particularly fixated on soaking their trust-fund-bloated asses, either.

    My purpose in highlighting this loathsome little arrangement was simply to point out this:

    The industrialization of the United States - i.e. the creation of the modern U.S. - was, in effect, a long, hard-fought war between those people who owned the sources of wealth and those who labored to create it. I won't pretend I don't have a side here; my people have been proles since their laird (or their lord) decided that sheep were more profitable than they were and forced them out of their croft in Lincolnshire in the 18th Century and out of their steading in the Highlands in the 19th Century.

    The proles took a pretty good beating up until the 20th Century, when the combination of War and Depression knocked some of the stuffing out of the oligarchs. We wound up with the social contract - including things like JP's highly confiscatory tax rates for the rich - we had from the 1930's to the 1980's. Helped by WW2, even the wealthy seemed to find that we managed to be quite the little engine of prosperity.

    But I don't think the wealthy EVER liked the idea that social peace was being bought with their riches. After all, the Pinkertons and the National Guard had dealt with those damn strikers and Bonus Army marchers and anarchists and the other proletarian scum, hadn't they? One little Depression and everyone gets all whiney about Grandma starving and the kids dying of the croup and suddenly we're expected to all hold hands and sing Kumbaya, eh?

    So I repeat: the great success of the Reagan Revolution is that we no longer even talk about America as the great melting pot, the leveller of classes and the equalizer of opportunities. California was the canary, the sweet bird of technologic, sun-and-fun, big-government-entitlement-driven Progress, where everyone would have their little Barbie dream house and bask in the Malibu sun; if the actors and producers got a little more Malibu than the others, oh, well - there was enough for everyone.

    Except there wasn't. And now that the fruits of thirty years of convincing the proles that deficits don't matter, than you CAN have guns and butter and great roads AND low taxes have ripened into this foolishness, where, rather than accept that this is a genuine, Depression-quality crisis that MAY require the wealthy to give back some of the gains they accrued during the past thirty years, we simply reflexively throw the people who are and will be hardest hit by this not a life preserver or even a pair of blow-up water wings but a rock and the finger.

    The canary of the New Deal just dropped off its perch.

  23. Just as a comparison . . .

    I live in Portugal, bought a house in 2002 with property taxes deferred for 10 years, so we'll go another three years before they kick in.

    Gas costs about $6 a gallon. Half of that is fuel tax. Fuel tax is about 50% on heating oil as well which we purchase. Fuel tax is the big revenue bringer in Portugal from what I hear.

    I walk to work, the wife works at home. We have one car, a Prius. So fuel costs are not a concern for us.

    The Portuguese attitude is that everyone cheats on their taxes. People brag about cheating on their taxes. There is little feeling of the money going to the good of the community, rather the government is seen as "them" and corrupt, with the people as "us" and while cheating, at the same time doing what is "normal".

    Still there is a high level of cohesion in the society due to the very strong family ties. People rely on family to get them through rough times, while at the same time abusing government services with a "clear conscience". Funny that.

    Al, what's it like in Greece?

  24. FDChief,

    In a sense I partially agree with what you're saying. What we may disagree on is the root cause and what should be done to improve the situation for average Americans. Personally, I'm pretty confident that marginal tax rate decreases had little to do with the problem you identify, so I'm skeptical that raising those rates will do much. Even though marginal rates are low, the contribution to revenue by the top 10% of earners has gone up significantly since 1979. At the federal level, the top 10% of earners contribute 72% of income tax revenue. In 1979 they top 10% contributed 48% of revenue.

    The story is vey similiar in states that have income taxes like California. California has a very progressive income tax which supplies about 1/2 of state revenue. Of that revenue, the top quintile of earners contributes 82%. So when looking at actual revenue collected and not tax rates, the system is actually more progressive than it's ever been. People in the bottom two quintiles essentially little to no tax in California or at the federal level. This, again, is a change from the pre-Reagan era. In 1979 the lowest quintile paid zero percent of of federal tax liabilities. Today they pay -2.9% - IOW they receive tax revenue instead of simply not paying any tax revenue. The second quintile has gone from contributing 4.1% of tax revenue to -0.9. The tax burden in terms of revenue paid has actually gone down in every quintile since 1979 except for the highest.

    The tax base is therefore less broad than it used to be - what this means is that events or conditions which impact rich people's income greatly affects actual tax revenue. Tax revenue is essentially dependent upon the fortunes and incomes of the rich. The consequence is that their incomes tend to decline significantly during recessions and those declines translate into greatly reduced tax revenue. Obviously, these declines probably don't impact their standard of living much, but their income declines nonetheless. That is a "feature" of tax systems that are structured to be dependent on the incomes of rich people, which is exactly the case with California and the federal government (excepting entitlements). So raising marginal tax rates on the rich isn't going to have much effect since the loss of revenue is the result of reduced income. There's only so much increased tax rates can compensate for that.

    Some like to credit Pres. Clinton with balancing the federal budget for a few years during his term. That's a bunch of hogwash. The reason the budget got balanced was because revenues increased. Revenues increased because rich people were doing well and making a lot of money during the dot com boom. The deficits came back before the Bush tax cuts after the bubble went bust. Bush also benefitted from his own bubble, but spent all of it and more on two wars.

    Just to be clear, I don't have a problem with a tax system where the rich provide the vast majority of tax revenues as long as politicians plan responsibly. When your system is dependent on a sliver of society to provide the majority of your tax revenues, one should anticipate there will be times when that slice isn't doing well and times when it's doing much better than average. A responsible government should not, therefore, spend everything collected during the good times and leave nothing to deal with the inevitable bad times.

    So IMO, it's not rich people that have broken the social contract in American in general and California in particular - it's the irresponsible and venal politicians along with ourselves. We don't hold them accountable. Despite the crisis in California I be most of the incumbents in the legislature will get reelected!

    I'm also not against raising tax rates, but one needs to consider how to raise them and what the consequences will be. If you only raise the rates for the upper income earners you will be making the government even more dependent on their income.

  25. Wow, sorry for the numerous typos.

  26. Much like the Description of the Portuguese, Greeks suspect (and often rightfully) their government officials of corruption.

    Tax evasion is a sport, but since only income taxes (personal and business) are "easy" to cheat on, it's not a major threat to government effectiveness. VAT and other taxes, of course, are difficult to avoid. Road tax (what folks call the cost of license plates in the US) are based upon the size of the vehicle as a proxy of the wear and tear that vehicle would cause on our roads. This year begins the equivalent of property tax, which will be about 80 - 100 Euro/year on the average size home. It's based on the total square meters of the home.

    Greeks appear to try to hold the pols feet to the fire for essential services. And, there does seem to be attempts and successes in several sectors. Here on Paros, the police force is significantly reinforced during tourist season with TDY personnel from the mainland, one organizational benefit of a national police force. Our garbage collection frequency increases dramatically as the population increases in the summer months. Our roads are in reasonably good shape, especially when one considers that the island's roads are the equivalent of tertiary roads or less in the US. There is a public-private program to increase municipal bus service dramatically in the summer season.

    As in all Europe, fuel is highly taxed, EXCEPT residential heating diesel, which is virtually tax free from 15 Oct to 1 May and dyed red. The program is carefully monitored for abuse. If a 100 sq meter home starts using 500 liters/month, expect a visit from the tax office.

    Public schools on the island are very interesting. Each village with a large enough child population will have a kindergarten/1st grade school. Then elementary schools (grades 2-6) are spread a bit further out, but still just a few miles from home. Junior highs are a bit more consolidated, and there are two towns where the high schools are located. The municipal buses transport the kids to and from school for free.

    The debate is rarely about cutting essential services (education, health, police, fire, etc) to reduce deficits. Rather, revenue must be sought, either by higher taxes or stopping evasion. There isn't the kind of craziness seen in the US over public sector budgets and services - and yet we have national health care to pay for.

    Family and friends are the main unit in most of Greece. National health care hospitals, for example, do not provide the "nurses aide" type of service so common in the US. Nurses do serious medical stuff,and family provide most of the non-medical assistance, not because the nurses aren't provided, but because families take care of those things. Thus, additional nurses/nurses aides would be superfluous.

    I would suggest that Greece, Italy, Spain and Portugal, for example, cannot be compared directly to the US, as they are relationship centered cultures, not object or ego centered. Government, therefore, exists for the benefit of all, not just me. I doubt you would find a significant number of Greeks that would say they opposed a slight increase in school taxes because they had no children in school. A full 1/4 of my neighbors in WA openly expressed this sentiment.

    The difficulty in the US is that the bill for the supposedly free lunches has arrived, complete with interest, and no one wants to pay it.


  27. I recall a commonly heard sentence over the past couple of decades.

    "You as an individual know better how to use YOUR money than the government does."

    You know, "kumbaya" is often denigrated, and Hillary was criticized for the title of her book, "It Takes a Village".

    But when each person of a society gets to be an individual government unto himself, society will not last.

    And Homo Sapiens is a very social animal.

    If you wanna know, a decent and small middle class house in the Middle of Nowhere USA, for us, 60K and 1800/year in property taxes.

    Eat your hearts out, East and West Coast Elitests!



  28. ooops

    about 1100/year in PT


  29. "So IMO, it's not rich people that have broken the social contract in American in general and California in particular - it's the irresponsible and venal politicians along with ourselves."

    Andy, politicians don't spring from the forehead of a ballot box, like Athena. They are just people who are backed by wealth (since without wealth it is nearly impossible to be elected in this country) who are voted into office by greedy and shortsighted citizens who believe them when they say stuff like "deficits don't matter".

    The U.S. pols over the past thirty years have been carrying water for their constituents. Which ones? Well, let me see. I don't know anyone in my little neighborhood who likes the idea of reducing the marginal tax rates on incomes over 400K from, say, 90% to 35%. Or anyone who thinks that FICA shouldn't apply to your ENTIRE income, not just the first 100,000. Or who believes that it's a good idea for corporations like Nike to pay the state of Oregon $10.00 in corporate income taxes. Or who think that Americans should be able to hide income in the Caymans, or Switzerland, to avoid paying taxes on it.

    Or that a split-roll property tax isn't a good idea (once you explain it to them in little words while talking...very...slowly...

    Or think that the idea of NOT having to rely on greedy, venal, self-interested insurance company bureaucrats whose concern for your health stops at their profit...

    Or consider that the BEST way to balance the state budget is not to seek additional revenue but to find cuts that will hurt those lucky duckies paying negative income taxes.

    So, Hmmm. Who do you think is convincing all those irresponsible and venal politicians to be irresponsible and venal. Hmmm.

    You don't couldn' CAN'T be the same powerful and wealthy individuals and groups that help get these people elected, form their cabinets and blue-ribbon commissions, provide them with junkets and treats and otherwise dominate the political landscape in a way we haven't seen since the fucking Grant Administration?


    Look, if you don't believe that our social contract is breaking or broken, I'm not going to be able to convince you. America has always been the Land of ME, as Al points out. It's just sad to see the country that managed to pull together to surmount Depression and world war (even if many of the elite had to be dragged along screaming - I know, I know, sorry, I'll stop now) falling back into our pre-New Deal divisions of capital and labor. And, in particular, seeing My people, the working sods, get the shaft.

  30. FDChief,

    I think the social contract might be breaking, but the jury is still out. Even if it is, I don't think the rich and monied hold all the blame. From your comments, you seem to believe that there was some golden age when the monied were nicer and intentionally allowed more of their wealth to trickle down to the rest of us - at least that's the perception I get from your comments.

    I see things a bit differently. I don't think there was any golden age. Furthermore, I don't much use for a system where the success of the little guy is dependent upon the rich and powerful guy being a progressive. I would rather ensure the little guy had more power. That's the idea behind democracy where, theoreticially, everyone is equal because everyone gets one vote. As we both know, it's not that simple.

    Over at the old intel-dump and elsewhere, I've talked about my disgust at the entrenched two-party system. If you're searching for a cancer afflicing America or the source of malaise in the "social contract" I suggest you look there. The American people, as a whole, so far don't seem interested in changing the status quo. It may take another great depression to spur the people out of their apathy. I can only hope the fiscal crisis will do the same in California.

  31. Andy,

    I agree that FICA taxes should include all income; that would change it from an unbelievably regressive tax to a mere horribly regressive tax. Means testing should also be implemented. This would generate revenue, but I don't see where it would affect the solvency of SSI, since this revenue goes into the general fund anyway. But I'm sure some of Bernie Madoff's clients wish they had paid FICA on all their income (and had their SSI benefits calculated on that basis). As it is now, some of them may find themselves subsisting on Purina Senior Chow.

    Medicare is much closer to insolvency than SSI. Note that Dems have been trying for years to allow Medicare to negotiate with pharaceutical companies for lower drug prices -- as the VA and Medicaid do. Senate Republicans blocked that ever time it came up. Maybe Medicare means testing would be a good idea, too.

    While I'm on the subject, pharma companies should also be prevented from extending drug patents by repackaging or combining about-to-go-generic drugs.

    The point of my post was to show the incontrovertible fact that there has been an enormous transfer of wealth from the middle class to the rich. If you think that this was accidental or unintended by policymakers, well, we'll just have to disagree on that.

    I can't speak for FDChief, but I don't believe that anyone, anywhere, anytime ever thought that people with money relinquished it out of the goodness of their hearts. Those people tried to kill the New Deal and have continued trying ever since.

    Finally, I've ranted in I-D on the topic of "corporate personhood" and why it's great for corporations and bad for the rest of us. Here's an overview of how that happened:



  32. JP,

    I don't think there has been an enormous transfer of wealth from the middle class to the rich. Instead, I think two things that have happened:

    1. The increase in wealth in this country has gone mostly to to the rich. IOW, the rich have gotten richer while the middle class has stayed roughly the same.

    2. The middle class upward mobility has been hurt by systemic problems like the skyrocketing costs of health insurance and things like the regressive FICA tax. Wages have stagnated for many people even while the total compensation they receive has steadily risen. That's why I'm so concerned about controlling health care and other costs since it is eating up the middle classes' ability to increase its wealth. Healthcare is almost 20% of GDP currently and that increases every year. It is also about 20% of an average workers total compensation and that figure also rises every year. Decades ago the same benefit was much cheaper and a much smaller portion of compensation. When it costs an additional 6-9% every year to provide the same benefit as the previous year, that is 6-9% less capital available to grow a business, increase wages or, for those who have to pay for their own insurance, it means they have to make 6-9% more each year just to tread water.

    IMO, that is the biggest factor that's kept the middle class stagnant. The skyrocketing costs of benefits don't affect the rich all that much, but they greatly affect the majority of Americans and those costs directly reduce the money available to people to improve their quality of life or purchase other goods and services.

    I remain unconvinced that raising marginal tax rates of the top brackets will do much of anything. Even assuming it raises significant revenue for the government (a pretty big assumption), I'm not sure how that helps the middle class.

  33. Al-

    Southern Europeans? Perhaps not so much compared as contrasted . . . the distinctions show a lot.

    I do envy them their level of family cohesion. All too often it seems I'm forced to compare. My wife's family is a source of inspiration, whereas mine . . . ? Kids are well off though, which is probably due to the wife . . . ;-)>

    Weird summer on our end. Much cooler and rainier than usual.

  34. Hmmm. Let's take this point by point:

    "From your comments, you seem to believe that there was some golden age when the monied were nicer and intentionally allowed more of their wealth to trickle down to the rest of us..."

    I'm not sure how you get that out of this:

    "the creation of the modern U.S. was...a long, hard-fought war between those people who owned the sources of wealth and those who labored to create it. The proles took a pretty good beating up until the 20th Century, when the combination of War and Depression knocked some of the stuffing out of the oligarchs. But I don't think the wealthy EVER liked the idea that social peace was being bought with their riches."

    My point was exactly the reverse: the wealthy have ALWAYS been predatory, always wanted more than they were allotted, even by the elitist system the Founders and Framers provided them. It took relentless and often violent action to change things like the appointment of Senators, the smashing of unions, and the regulation of predatory monopolies. Those of us who grew up in the Fifties and Sixties were spoiled in having lived in the brief interregenum provided by the post-Depression/post-WW2 egalitarian system that the Democrats set up after Hoover and the R's steered the economy onto the rocks in 1929. But the norm has ALWAYS been the wealthy and powerful on top doing their best to keep the rest of us down. The "norm" is returning, and the wealthy have no intention of letting that go...

    "I would rather ensure the little guy had more power. If you're searching for a cancer afflicting America or the source of malaise in the "social contract" I suggest you look there."

    I'd argue that the problem is more and less simple than that. It's not so much the entrenchment of the parties. It has a lot more to do with the notion that political contributions are protected "speech" and the insane influence of lobbyists and interest groups. The bottom line is that Monsanto - as JD points out - is a "person" who will always have more influence than Joe or Molly.

    The other, ugly reality is that the system that the Framers designed depended on a sturdy, independent artisan/farmer/businessman class that has shrunk to insignificance in the tide of wage-slaves.

  35. Interesting comment about wage slaves. The irony is that it was the industrial revolution that created wage slaves along with the unions that protect their interests.

    Thanks for the additional clarifications. So, given the problems as you see them, what solutions or changes do you think are necessary?

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