Page 2 of 2 California's sweet dream sours
By Julian Delasantellis
In the modern era, this pattern was established in 1978 with the California
voters' approval of Proposition 13, the Howard Jarvis property-tax cutting
initiative that became the first shot in the tax revolt war that swept Ronald
Reagan to the presidency in 1980. (Jarvis is the taxicab passenger in 1980s
movie Airplane who gets left in the cab while Ted Striker (Robert Hays)
goes off to save his fiancee and a planeload of other passengers from the most
hilarious case of food poisoning ever seen.) Besides capping locally originated
property taxes, it mandated when applied to the state level a two-thirds
majority in the state legislature to either pass a budget or raise statewide
taxes.
Which is why the advocates of the five tax packages shot down last week knew
they had to try their luck with the people rather
than the legislature, where they knew that they could not get two-thirds
support.
After 1978, governance by popular initiative became quite the rage. As Jules
Tygel, professor of history at San Francisco State University put it in a 2005
article in the Los Angeles Times:
The success of Proposition 13 marked
the beginning of a new trend. The initiative was no longer viewed as a means to
correct the Legislature. Rather, it became an instrument to govern. Between
1982 and 1988, voters passed 22 measures. In the 1990s, they passed 24 more. In
the 20 years since Proposition 13, Californians passed more initiatives than in
the preceding six-and-a-half decades. Many of these measures further limited
the Legislature's ability to govern. Proposition 4, approved in 1979, imposed
limits on the growth of state spending. Proposition 98, passed in 1988,
mandated that 40% of the state's general fund be spent on public schools and
community colleges.
These and similar measures restrict state legislators' flexibility and curb
their ability to reach budget compromises. As a result, direct democracy has
turned the annual budget process into an annual budget crisis.
Just
in this decade, the voters of California have had to pass judgment on over 100
referendum initiatives and proposed amendments to the state constitution. A
close look at just some of them explains a lot of why the state is where it's
at today.
In March 2000, California ballot initiatives 12, 13 and 14 authorized about $15
billion in bonds for general improvements to libraries, parks, and state water
quality systems. Later that year, they passed Proposition 36, which for five
years mandated $120 million in treatment services for drug addicts. They also
turned thumbs down on Initiative 26, which would have replaced the two-thirds
ballot "supermajority" needed to raise school-directed taxes with a simple
majority.
Just in 2002, the people passed Initiative 40, another $2.5 billion bond issue
for clean parks and water, along with Initiative 42, which took gas tax
revenues out of the hands of the Legislature to dedicate it solely to
transportation. They also passed Initiative 46, funding battered women's
shelters, along with Initiative 47, a $13 billion kindergarten funding bond.
Proposition 49, passed by over 900,000 votes, provides for up to $75,000 in
fresh funding to each public school in the state for new before and after
school programs. Finally, 2002's Initiative 50 provided for another $3.5
billion in bonding for more clean water and coastal protection projects.
In 2003, as the budget deficits inherent in this process started to really
mount up, Californians fell back on a particularly familiar security blanket -
they put the whole thing in the hands of an action movie star. Then Democratic
governor Gray Davis was recalled in favor of on-screen superman Arnold
Schwarzenegger, who campaigned in character by deriding his opponents in the
legislature as "girly men" whom he would wish "hasta la vista".
The party continued, as evidenced by 2004's Initiative 61, providing $750
million in bonds for children's hospitals. Proposition 63 called for $750
million in new mental health spending to be raised through a 1% rise in the
marginal tax rates paid by people reporting over $1 million in income.
In the past few years, the coming due of all the bonding initiatives passed
early in this and the previous decades meant that the state was spending up to
40% of ready cash just on debt service, expenditures that could not be cut back
without a government default on its obligations. The state has been in a
virtually unending budget crisis since the middle part of this decade, and that
was even before the global economic crisis hit.
Many people look at the huge budget deficits being racked up in Obama's first
months in office and come to a quick conclusion that the US government, much
like the California legislature, must be spending too much. In both cases, that
is not true.
In Washington, the projected $1.8 trillion deficit is being driven primarily by
the almost 10% of the population now unemployed and subsequently paying much
less in income taxes, along with some increased "countercyclical" spending on
programs such as unemployment and food stamps. Very little, as of yet, of the
current deficit is Obama's spending.
In California, it's not the legislature driving the deficits; it's the
ballot-mandated programs that the legislators are proscribed from coming even
near trimming - just like legislators in Washington can't touch the
"entitlement" programs of Social Security and Medicare. That, and the
subsequent prohibition of tax hikes, mean that California would be having
trouble even with the economic crisis only giving the state just the absolutely
lightest of friendly busses, which it certainly is not.
At 11%, California's has the fifth-highest unemployment rate in the United
States. That alone would be driving up the state deficit, but the fact that
income taxes hit upper-income California taxpayers so hard makes the current
circumstance even more problematic.
For the most part, rich people in America do not get that way through their
weekly pay packets. They either inherit their money, or find themselves rolling
in dough through capital gains on their real estate and stock investments.
California, with a 10% marginal tax rate, the highest in the nation, for
incomes over a $1 million, was getting a highly disproportionate share of its
state income through its richest taxpayers; 1% of its taxpayers filled up 50%
of the state's coffers.
These are the guys who sure aren't filling those state coffers with capital
gains taxes from their San Diego real estate flips or stock option plays
anymore. As more and more time passes in which they are not, California will
still be borrowing money to pay its debts, and the fiscal situation will only
get worse and worse and worse, as it will when Governor Schwarzenegger returns
to the legislature with the budget cuts necessitated by the failure of his five
tax-raising initiatives last week.
Still, that's not the worse part of the problem.
Of the five defeated tax raising initiatives, it was Proposition 1B, mandating
$9.3 billion in new community college funding, that did the best, garnering
37.4% of the vote. It only needed another 12.6% +1 to pass and become law.
But if Proposition 1B was being debated in the legislature, it would have had
to pass a far higher bar; it would have needed a "supermajority" of two-thirds
of the legislature voting affirmatively.
What is the stated justification for the supermajority? Its supporters claim it
as a sort of ultimate check on the tyranny of the majority, of the mob. The
mob, being the mob, may have the numbers and they may be destitute, but at
least, with the supermajority requirement, they won't be able to drain the
upper-classes' riches through legislative legerdemain anytime soon.
Where does that leave the non-supermajority majority? It leaves them, much like
in old South Africa, as essentially without full rights in the land in which
they are the majority. They can't move initiatives on measures that might be
important to their communities, such as education and pollution, without
getting the approval of the minority, a minority frequently obviously
disinterested in addressing these very issues of concern to the majority.
This is particularly true as regards to the massive 100-car freeway smash-up
that is modern California demographics. Hispanic-Americans outnumber whites in
the state in every age cohort up to 45-54; add in Asian-Americans, and whites
are outnumbered until you get way out to the senior citizens.
Political identification in California has become very easy. If you're any type
of person of color you vote liberal Democrat as you do if you're white and live
in the crunchy granola northern part of the state and West Hollywood. If you're
white, and you live in the Caucasian redoubts of Orange County south of Los
Angeles down to San Diego, you vote conservative Republican.
In terms of social comity and peaceful co-existence, probably the only existing
system that does this worse is the tradition in chauvinistic cultures that
allows brothers to murder the family members of one who had insulted their
sister. The ethnic minorities, now the collective majority, know full well that
the newly installed minority does not care sufficiently about them to tax
themselves for their benefit. The now minority thinks that all society's
troubles are just a result of the excess utilization of government services by
"those people". Right-wing California talk-radio hosts regularly make six- and
seven-figure incomes talking from sunup to sundown about how "those people" are
the only ones currently to be found in schoolrooms, welfare offices, and
hospital emergency rooms.
In much the same way that last-stand Boers resisted majority rule by the Africa
National Congress by thinking they were the final bulwark of Christian
civilization in Africa, in the gated communities of Orange County, conservative
white Republicans defend the two-thirds supermajority by claiming that only
they are the true guardians of the "real" America.
Ethnic groups disenfranchised by the political and power system sparked
California's civil rights riots of the 1960s, as well as the Rodney King riots
in 1992. Will it take more riots before Californians realize that a system set
up with the best of populist intentions has now deteriorated to something that
only serves the worst of the people's narrow-minded prejudices? If it does, the
rioters will find their opponents very well supplied, as the election of Obama
has led white America to stock up on ammunition as if there's no tomorrow, or
at least as if there's no tomorrow that does not see them being tenderized
through being boiled in oil in an African chef's stew pot.
At its heart, the political dysfunction that has led to its current economic
dysfunction is quintessentially Californian; it's the belief that one can have
everything good in the world forever and at no cost. If you're a woman, your
plastic surgeon can load you up with so much botox and staples that you'll soon
be double-dating at the drive-in with your great-granddaughter; if you're a
man, you can ask your urologist to pump you with so much Viagra that you'll be
breaking off the plaster at the nursing home on your every visit to the tub
room.
There's the American dream, the California dream - everything all the time one
wants it. In 1965, the Mamas and the Papas wrote of California dreaming;
perhaps it would be better now if the state finally woke up and faced the
morning.
Julian Delasantellis is a management consultant, private investor and
educator in international business in the US state of Washington. He can be
reached at juliandelasantellis@yahoo.com.
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