10 Nov The Irreversible Decline of California
The election results of 2012, despite a few victories around the country (Heller over Berkeley in the Nevada Senate race; Jeff Flake in the Arizona Senate race; the GOP House keeping a few key seats and certainly the overall majority), were mostly an utter disaster for those who believe in principles of limited government and free-market liberty. The bad news ranged from the disastrous (Obama’s defeat of Romney), to the comical (people in Massachusetts elected Elizabeth Warren to office, who right now today would lose a spelling bee to my seven-year old son), to the irritating (Akin not dropping out against McCaskill, George Allen being the only guy we could run against Tim Kaine, and Republicans nominating that big dope, Tommy Thompson, in Wisconsin, where the other nominees would have surely won the seat). It was a bad, bad night around the country. However, lest we forget, things were not so in 2010. How quickly we forget that just two short years ago, we were celebrating the elections of such stalwart leaders as Marco Rubio and Pat Toomey to the Senate, Allen West and countless other freshmen to the House, and a slew of Republican Governors that have already made extraordinary improvements in their states (Scott Walker, John Kasich, and Chris Christie, amongst others).
2010 was the anti-2012 for Republicans, unless you live in California, where 2010 and 2012 were basically the same thing: The reinforcement that California is a goner. In 2010, Jerry Brown handily defeated well-capitalized Meg Whitman in an ugly gubernatorial race, and the she-devil Barbara Boxer defeated Carly Fiorina, essentially telling any qualified GOP candidate from not until kingdom come that if you want to take on the mighty intellectual giants of Dianne Feinstein or Barbara Boxer, you will lose. The election of Jerry Brown, who was able to run with a resume of experience, having overseen the highest crime city in America, Oakland, and also having been Governor back in the 1970’s, where he almost ruined the state once before and appointed Rose Bird to the Supreme court, was to me the wake-up call that California was gone. This has not been one or two frustrating elections – it has now been practically a generation of bad elections – and they all stem from ONE thing: The money, influence, and power of the public employee unions in California. People can blame the demographics, the immigrants, the big city voting blocs, Sodom & Gomorrah, or whatever they want to come up with, but any theory that ignores the basic and obvious explanation for California’s state of affairs – the public employee unions running of the state – is implausible and false. And frankly, the “public employee unions” is practically too generic a phrase, as really we are now practically dealing with a single public interest union, the “teacher’s union”, which may be the most poorly phrased title in the history of collectivism. One has to wonder what is being “taught” as California has slipped in to 48th or 49th place in nearly all quantifiable categories in public education rankings, but even beyond that, one has to wonder what advocacy for teachers the unions have exactly been providing. I digress. As teachers were being laid off in droves over the last several years, California’s spending on their public schools increased to over 50% of the entire state budget, not even counting the massive federal subsidies given from Washington D.C. for this debacle of a school system. California spends over $50 billion per year on her statist school system, the results are among the worst in the country, and the recommended remedy? Spend more money. Always and forever. “More money for the schools”. The unstoppable masses of people fleeing the state schools for private schools, parochial schools, charter schools, and even home-schooling would suggest that the consumer is voting with their feet. However, citizens still have to vote at the ballot box too, and the teacher’s unions are well aware of that. Consider these numbers, and then the meat will fall off the bone in my making of the case the California is unsalvageable: All told, California public employee unions spend $250 million per year on politics, with the benevolent teacher’s unions representing over $200 million of that. The unions exist to sustain their own existence, and Californians are paying the tab. My feeling in late 2010 after the election was that the country was improving, but California was in a bad place. But then, hope arrived …
Proposition 32 was the combined effort of a handful of concerned and thoughtful people and organizations here in California, most notably the Lincoln Club of Orange County where I serve in leadership. We provided key seed financing and strategic direction, our individual members provided significant financing, and we led a great deal of the statewide funraising. Proposition 32’s major move was to simply say that unions (and corporations) could not take dues from their member’s paychecks without their “opt in” consent. Horror of horrors! The belief was that the influence of these insidious unions in state politics could only be controlled when their access to funding was limited, especially the kind of dishonest and compulsory funding they were receiving. We had precedents for this working to much success – notably in Utah, Idaho, and Washington. Prop 32 was bipartisan, it was sensible, and it represented the last chance to see if the state could begin the process of embarking in a new direction.
Then, Jerry Brown made things really interesting. In addition to the need for people who care about the Golden State to pass Proposition 32, he gave us something to oppose in Proposition 30, the largest state tax increase in the history of the union. Creating as much as a 29% increase in state income tax rates for top wage-earners, and increasing our already astronomical state sales tax for all people, Proposition 30 said it would “save our schools” and make the rich pay for it. The 2012 election had no candidate races of note to worry about – but these two ballot measures became the bellwether for whether or not this state would be able to send a message to Sacramento or not.
And the state sent a message, alright. The state said, by over 1 million votes and 13% margin, that unions could continue to extract money from their member’s paychecks without their consent, and continue to spend $250 million per year on politics instead of education. The state said, by over 700,000 votes and an 8% margin of victory, that business owners and high income wage earners could now pay 12.3% of their income in state taxes, bringing their combined rate with the federal tax code to fifty percent of their income. The state said that a SUPER-majority for Democrats in the legislature was a good idea, paving the way for the complete obsoletion of divided power in government. The voters of California said that they absolutely care nothing for good governance, for fiscal responsibility, or for a state that has a chance of staying fiscally solvent into the future.
I will get personal with all of this. I don’t care all that much about the state of the public school system here, at least to the degree that my kids are not in it and are not going to be in it. But I do care that those who are in it deserve something better than seeing their classroom size explode while unions spend a combined $100 million just two propositions in one election cycle. Yes, that’s right – the teacher’s unions alone spent $100 million to pass Proposition 30 and defeat Proposition 32. In doing so, they guaranteed their ability to continue this power, maintaining their right to take dues money without consent, and having elected a super-majority of union stooges to the state legislature. Californians began a path down this slipper slope over 15 years ago, having passed one retarted measure after another making the state school unions the de facto leaders of this state. Like GM prior to their bankruptcy, the state now exists to fund the medical and retirement benefits of their employees, and in the year 2012, where Stockton and San Bernardino declared bankruptcy over it, the voters of California doubled down. And now California is going to see just how well Laffer’s Curve works.
Proposition 30 is not going to assist the financial well-being of California because it is not going to increase revenue. The retroactive nature of it, which is utterly incomprehensible to me, will bring in additional revenue for fiscal year 2012 and 2013. But rich people are not stupid, and they are not going to pay the highest state income tax in America by a wide margin when they can easily avoid it. Some will, because some are too old, and too rich, and too complacent to care. One day I will be too old and too rich to care. Right now, I am not old. Would people suffer through an unfair tax code for the purpose of living in such a gorgeous and delightful state? You bet. I have been doing it my entire adult life. Millions have. But will people pay for it when the result is a state that is going to hell in a handbasket? Of course not. There are very few people left who believe California can be saved. A plethora of theories exists has to how its demise will take place, and when, but the details are not of importance to me. What is important to me is Mitchell, Sadie, and Graham. The entrepreneurial drive that made California what it is has been leaving for Nevada, Texas, Arizona, Colorado, and you-name-it for years. Silicon Valley keeps its high funding centers and executive locations there (for now), and outsources nearly everything else to friendly states like Texas where cost of business does not become moronic. Tremendous intellectual capital still exists in industries like bio-technology, but across the board, incentives are being decimated, and cost of business (regulatory and taxation) are forcing a total re-calibration of our market system. The game is over – the only question is who wants to just “wait out the clock”, and who wants to leave.
I do not know the exact answer, and I can respect a plethora of responses to the question based on individual circumstances and preferences. California is the greatest state in the country in terms of weather and natural resources. However, to the extent that the cultural and economic climate of our once great state matters to you, I suggest abandoning all hope. I know I have.