George Will Wrong on California Pension Plans

Editor’s Note: Dean Baker takes George Will to task for misapprehending the cause of California’s budget woes:

George Will Never Heard of the Housing Bubble (or Labor Economics)

Sunday, 22 May 2011

By Dean Baker

Fortunately, his job as a columnist for the Post doesn’t require that he have any knowledge of such things. His articletoday touts California’s fiscal hardships. It includes no mention whatsoever of the housing bubble.

California was at the epicenter of the housing bubble with prices in some areas more than tripling in the decade from 1996 to 2006. This led to a massive construction boom as well as a consumption boom based on bubble-generated home equity.

Now that prices have returned to pre-bubble levels in many of the former bubble markets, construction has fallen through the floor and consumption has plunged as underwater homeowners struggle to keep current on their mortgages. This collapse is the main cause of the state’s economic downturn as well as its fiscal crisis.

While Mr. Will looks forward to the prospect of the state’s public employees being forced to take large pay cuts, in most sectors public sector wages are not substantially higher than for their private sector counterparts with similar education and experience. Basic economics dictates that if wages are lowered by much below their private sector level then the state will be unable to attract qualified people to work as teachers, nurses and other positions in the public sector.


Reprinted from the Center for Economic and Policy Research (CEPR) under a Creative Commons License.

We Dropped By to Rapture You, But You Were Out

Editor’s Note: We found this note on our door Sunday morning. If you can read this, you weren’t raptured. Glad to have you here with us. Judging by the general absence of empty clothes on the streets of Grass Valley and Nevada City, I’m guessing that being left behind in our community is widespread and non-partisan.

Tax Cuts, Wars Account For Nearly Half of Public Debt By 2019

Back to the Drawing Board: GV finds numerous errors in IMM proposal

By CLAIM-GV

“Yesterday, Grass Valley Planning Director Tom Last stated that the CD that was released to the public and the copies that were posted online contain a number of errors and will have to be revised by IMM and re-submitted. It is not clear whether the errors that are in the CD version also appear in the printed versions.

“The full scope of the problems with the electronic versions and the printed versions of the plans that IMM submitted is yet to be determined.

“It is recommended that persons reviewing the current version of the Revised Project Description wait until a corrected version has been submitted by IMM and validated by Planning Department staff.”

A Country Without Libraries

Charles Simic

Outside of a dog, a book is a man’s best friend. Inside of a dog, it’s too dark to read.
—Groucho Marx

“All across the United States, large and small cities are closing public libraries or curtailing their hours of operations. Detroit, I read a few days ago, may close all of its branches and Denver half of its own: decisions that will undoubtedly put hundreds of its employees out of work. When you count the families all over this country who don’t have computers or can’t afford Internet connections and rely on the ones in libraries to look for jobs, the consequences will be even more dire. People everywhere are unhappy about these closings, and so are mayors making the hard decisions. But with roads and streets left in disrepair, teachers, policemen and firemen being laid off, and politicians in both parties pledging never to raise taxes, no matter what happens to our quality of life, the outlook is bleak.“The greatest nation on earth,” as we still call ourselves, no longer has the political will to arrest its visible and precipitous decline and save the institutions on which the workings of our democracy depend.

“I don’t know of anything more disheartening than the sight of a shut down library. No matter how modest its building or its holdings, in many parts of this country a municipal library is often the only place where books in large number on every imaginable subject can be found, where both grownups and children are welcome to sit and read in peace, free of whatever distractions and aggravations await them outside. Like many other Americans of my generation, I owe much of my knowledge to thousands of books I withdrew from public libraries over a lifetime. I remember the sense of awe I felt as a teenager when I realized I could roam among the shelves, take down any book I wanted, examine it at my leisure at one of the library tables, and if it struck my fancy, bring it home. Not just some thriller or serious novel, but also big art books and recordings of everything from jazz to operas and symphonies.”

Read full article here.


Charles Simic is a poet, essayist, and translator. He has published twenty collections of his own poetry, five books of essays, a memoir, and numerous books of translations. He has received many literary awards for his poems and his translations, including the Pulitzer Prize, the Griffin Prize, and the MacArthur Fellowship. Voice at 3 A.M., his selected later and new poems, was published in 2003 and a new book of poems, My Noiseless Entourage, came out in the spring of 2005. His new e-book is titled Confessions of a Poet Laureate.” (From The New York Review of Books)

What a Public Bank Could Mean for California

Reprinted under Creative Common License from Yes! Magazine.

The state’s facing big debt, but also big opportunity.

by Ellen Brown

California is the eighth largest economy in the world, and it has a debt burden to match. The state has outstanding general obligation bonds and revenue bonds of $158 billion, largely incurred for building infrastructure. Over $7 billion of California’s annual budget goes to pay interest on the state’s debt.

As large as California’s liabilities are, they are exceeded by its assets, which are sufficient to capitalize a bank rivaling any in the world. That’s the idea behind Assembly Bill 750, introduced by Assemblyman Ben Hueso of San Diego, which would establish a blue ribbon task force to consider the viability of creating the California Investment Trust, a state-owned bank receiving deposits of state funds. Instead of relying on Wall Street banks for credit—or allowing a Wall Street bank to enjoy the benefits of lending its capital—California may decide to create its own, publicly owned bank.

On May 2, AB 750 moved out of the Banking and Finance Committee with only one nay vote, and is now on its way to the Appropriations Committee. Three unions—the California Nurses Association, the California Firefighters, and the California Labor Council—submitted their support for the bill. The state bank idea also got a nod from former Secretary of Labor Robert Reich in hisspeech at the California Democratic Convention in Sacramento the previous day.

Why a State Bank?

California joins eleven other states that have introduced bills to form state-owned banks or to study their feasibility. Eight of these bills were introduced just since January, including in Oregon, Washington State, Massachusetts, Arizona, Maryland, New Mexico, Maine and California. Illinois, Virginia, Hawaii and Louisiana introduced similar bills in 2010. [For more information about these proposals, see here.]

All of these bills were inspired by the Bank of North Dakota(BND), currently the nation’s only state-owned bank. While other states are teetering on the edge of bankruptcy, the state of North Dakota continues to report surpluses. On April 20, the BND reported profits for 2010 of $62 million, setting a record for the seventh straight year. The BND’s profits belong to the citizens and are produced without taxation.

The BND partners with local banks in providing much-needed credit for local businesses and homeowners. It also helps with state and local government funding. When North Dakota went over-budget a few years ago, according to the bank’s president Eric Hardmeyer, the BND acted as a rainy day fund for the state. And when a North Dakota town suffered a massive flood, the BND provided emergency credit lines to the city. Having a cheap and readily available credit line with the state’s own bank reduces the need for massive rainy-day funds (which are largely invested in out-of-state banks at very modest interest).

The Center for State Innovation, based in Madison, Wisconsin, was commissioned to do detailed analyses of the Washington and Oregon bills. Their conclusion was that a state-owned bank on the model of the Bank of North Dakota would have a substantial positive impact in those states, increasing employment, new lending, and government revenue.

What California Could Do with Its Own Bank

Banks create “bank credit” from capital and deposits, as explained here. Under existing regulations, $8 in capital reserves can be leveraged into $100 in loans, drawing on the liquidity provided by the deposits to clear the outgoing checks. Assuming a 10 percent reserve requirement (the amount in deposits normally held in reserve), $8 in capital and $100 in deposits are sufficient to create $90 in loans ($100 less $10 held back for reserves).

In North Dakota (population 647,000), the Bank of North Dakota has $2.7 billion in deposits, or about $4,000 per capita. The majority of these deposits are drawn from the state’s own revenues. The bank has nearly the same sum ($2.6 billion) in outstanding loans.

California has 37 million people. If the California Investment Trust (CIT) performed like the BND, it might amass $148 billion in deposits. With $12 billion in capital, this $148 billion could generate $133 billion in credit for the state (subtracting 10%, or 14.8 billion, to satisfy reserve requirements).

There are various ways the state could come up with the capital, but one possibility that would not require new taxes or debt would be to simply draw on the treasurer’s existingpooled money investment account, which currently contains $65 billion in accumulated revenues dispersed to a variety of funds. This money is already invested; a portion could be shifted to the CIT. Since it would be an investment in equity rather than an expenditure, it would not cost the state money. Rather, it would make money for the state. In recent years, the Bank of North Dakota has had a return on equity of 25-26 percent. Compare the 25-30 percent lost in the two years following the 2008 banking crisis by CalPERS, the California Public Employees’ Retirement System, which invested its money on Wall Street.

There are many inviting possibilities for applying the CIT’s $133 billion in credit power, but here is one easy alternative that illustrates the cost-effectiveness of the approach. Assume the bank invested $133 billion in municipal bonds at 5 percent interest. This would give the state close to $7 billion annually in interest income—nearly enough to pay the interest tab on the state’s debt.

Choosing Prosperity

What California can do with its own bank, other states can do as well, on a scale proportionate to their populations and economies. North Dakota has a population that is less than 1/10th the size of Los Angeles; last year, the BND produced $62 million in revenue and $2.2 billion in loans. Larger states could generate much more.

We have been trapped in an austere neo-liberal economic model in which the only alternatives are to slash services, raise taxes, and sell off public assets, all in a futile attempt to “balance the budget” in a shrinking economy. We need to start thinking outside the box. We can choose prosperity, and public banks are a key tool for achieving that end.


Ellen Brown wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Ellen is an attorney and president of the Public Banking Institute. In Web of Debt, her latest of eleven books, she shows how people can reclaim the power to create money. Her websites are webofdebt.com and ellenbrown.com.

Interested?


YES! Magazine encourages you to make free use of this article by taking these easy steps. This work is licensed under a Creative Commons License

Who Increased the Debt?

How to Have a Rational Discussion

Editor’s Note: Brandon Scott Gorrell, who created this graph, admits that “perhaps it is mere wishful thinking, this diagram; perhaps reasonable discussion is altogether impossible (esp. on the internet), and we only hope in vain to one day live in a world where people are ready and willing to, you know, talk it out reasonably.”

Appealing To The “Center” Drives Away Voters

Reprinted under Creative Commons License from Speak Out California.

By Dave Johnson

Is there a “block” of “centrist” voters who “move” one way or the other, to Democrats or Republicans, depending on whether a candidate takes positions that are “between” the positions of those on the “left” and “right?” This is the standard model followed by many Democratic pollsters, who advise their clients to take wishy-washy positions and avoid clear progressive positions. There is reason to believe this view is fundamentally wrong, and that the metaphor of the existence of a “centrist” is affecting and constraining our ability to understand what actually happens in the voting population.

Washington Post’s The Fix looks at a Pew poll of independent voters in The misunderstood independent,

In politics, it’s often tempting to put independents somewhere in the middle of Republicans and Democrats, politically. They identify somewhere in between the two, so they must be moderates, right?A new study from the Pew Research Center suggests that’s not so true anymore. Independents, in fact, are a fast-growing and increasingly diverse group that both parties are going to need to study and understand in the years ahead.

. . . Pew identifies three different kinds of independents. Libertarians and Disaffecteds are 21 percent of registered voters and lean towards Republicans; Post-Moderns are 14 percent and lean towards Democrats.

A look at their views on issues shows those three groups can often be among the most extreme on a given topic.

Disaffecteds, for example, believe in helping the needy more than most Democrats. Libertarians side with business more than even the solidly Republican Staunch Conservatives. And Post-Moderns accept homosexuality more than most Democrats. The three independents groups are also less religious, on the whole, than either Republicans or most Democrats.

In the post I wrote here lsat year, The Elusive “Swing” Vote, I wrote about this idea of a “swing” voter, (note I should have written “few” voters switch instead of flatly saying none),

Have you heard of the “Moveable Middle?” This is the idea that there are voters on the left who will always vote on the left, and voters on the right, who will always vote on the right, and then there are voters between them who switch back and forth. They are called “swing voters.”So the idea in politics is that in order to win elections you have to take positions that appeal to these voters, and they will “switch” and vote for you instead of for the other side. This is a fundamental mistake.

Here is what is very important to understand about the “swing” vote: No voters “switch.”That is the wrong lesson. There are not voters who “swing” there are left voters and right voters in this middle segment who either show up and vote or do not show up and vote, and this causes this “swing” segment to swing.

The lesson to learn: You have to deliver for YOUR part of that swing segment or they don’t show up and vote for you. That is what makes the segment “swing.”

That post looked at polling by the Progressive Change Campaign Committee that reached conclusions similar to this more recent Pew polling.

So I’ve been saying that Dem pollsters are using the wrong model of what an independent voter is, telling the politicians that there is a “block” of independents who will vote one way or the other depending on what they hear. With this model they have to “move to the center” always staying in “between” the position of liberals and the far right, hoping to “attract” these voters away from the other side. They describe a single “center” or “independent voter” who will vote one way or another depending on whether they thing a candidate is “in between” the two poles, even when those poles have been moved very far to the right.

The PCCC and now the Pew poll show us that these “independent” voters are NOT some group that sits between the positions of the parties. They are not a block and they are not between. Democrats and especially their pollsters think of them as a block that is between, and this is why the do what they do.

Karl Rove believed that there were independents who were not registered Republican because the party was not far enough to the right for them, who would only turn out if the party gave them something to vote for. I think Karl Rove’s model is more accurate, that the independent voters are a number of groups, and very large numbers of them are MORE to the left or right than the parties,and don’t vote unless the parties appeal enough to them.

Rove decided this means the Republicans need to move ever more to the right, and this will cause those “independent” voters who had changed their affiliation out of disgust with the centrism of their party to now turn out and vote.

I think Rove nailed it. the PCCC had a poll a while back that showed this, and now see below. Dems have it exactly wrong, what they are doing turns off those independents who might have turned out to vote for them.

The problem here is the effect the metaphor of a “center” has on our thinking. Thinking about independent voters as being a “block” that is “between” the parties is the problem. It forces the brain into a constraint because of the visual image that it evokes. What I mean is that the actual language of “centrist” changes how we think. The metaphor makes us think they are “between” something called left and right. And as a result it forces certain conclusions.

The way to grow your voting base is NOT to try to “appeal” to some group that is not left or right, but is “between” something called left and right. To get more voters — especially the “independent” ones who won’t identify with a party — is to take stands, be more committed to progressive positions, and to articulate them more clearly.

California’s Renters’ Right to Redemption Bill Moves Forward

From the California Progress Report.

By Dean Preston

Imagine that you pay your rent faithfully for years and then one month something extraordinary happens and you need to pay late.  That’s exactly what recently happened to a Los Angeles tenant named Jorge, a former Marine and automotive tech who lived in his rent-controlled apartment for thirteen years with his wife and three children paying rent timely each month. In February, the family was not able to pay the rent until the 10th of the month, and conscientiously advised the landlord of the situation.

The landlord responded with a three-day notice to pay or quit and immediately filed an eviction action, refusing to accept this one-time late payment of rent. The tenants now have an eviction on their record and will likely become homeless. When the judge at trial noted that the landlord’s actions were extremely harsh, the landlord’s lawyer replied, “that is what the law permits.”

Unfortunately, the landlord’s lawyer is right.  Under California law, tenants have no right to pay after the expiration of a three-day pay or quit notice to maintain their tenancy. Tenants who are just four days late on rent can be thrown out of their homes notwithstanding their willingness to pay rent, even if they have lived there for years.

Assemblymember Tom Ammiano (D- San Francisco) has authored AB 265 to address such unfair evictions.  His bill cleared a major hurdle last week when it passed the Assembly Judiciary Committee despite an intensive lobbying effort by landlord groups.  The bill would provide tenants being evicted for nonpayment the right to pay the rent due and specified costs during eviction proceedings in order to “redeem” the tenancy and prevent eviction.  Similar rights exist in over a dozen states, but not in California.

“With the second highest rents in the nation, California tenants are suffering in the current economy,” noted Ammiano.  “Despite their best efforts, some tenants cannot pay the rent on time, but with the help of family, friends or nonprofit rental assistance programs are able to come up with the money soon after it is due. These tenants should be protected from eviction.”

A right to redemption already exists under California law for property owners (including landlords) who default on mortgage payments. A landlord who fails to make mortgage payments that are due has months in which to pay up and retain their rights to the property, but a tenant has a mere three-day period in which to pay any and all rent due or face eviction.

The Judiciary Committee voted 6-3 to move the bill to the full Assembly for a vote. Assemblymember Toni Atkins (D-San Diego) broke with her fellow Democrats on the Committee to oppose the bill.

AB 265 will prevent unnecessary and unfair evictions without creating any hardship for landlords.  The bill deserves broad support.


Dean Preston is the Executive Director of Tenants Together, California’s statewide organization for renters’ rights.  Tenants Together is the sponsor of AB 265.  For more information about Tenants Together, visit www.TenantsTogether.org.

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