Brown's Address: Egypt on the Pacific?

JAN. 31, 2O11

By JOHN SEILER

In his State-of-the-State address today, Gov. Jerry Brown compared Republican legislators’ refusal (so far) to put taxes  on a special election ballot in June to the longstanding thwarting of democracy in Egypt. Apparently he didn’t read my Sunday blog that made a more apt comparison to Egypt:

the Brown Family Dynasty has been running California for decades. Current Gov. Jerry Brown’s father, Pat, was governor five decades ago. And Brown pere became California’s attorney general way back in 1950, when King Farouk still was monarch of Egypt. Farouk’s dynasty dissolved long ago, but the Brown Dynasty lives on.

Egypt’s problem, as California’s, is that each is run by remote elites that have bankrupted their people through excessive spending and high taxation.

Brown said:

When democratic ideals and calls for the right to vote are stirring the imagination of young people in Egypt and Tunisia and other parts of the world, we in California can’t say now is the time to block a vote of the people.

But we just had a “vote of the people” against taxes last November, less than three months ago. And the year before, voters turned down tax increases similar to those Brown now is proposing.

The message of the people, through democratic elections, is crystal clear in California: No new taxes.

Moreover, as I blogged yesterday, there is a way Brown and his Democratic Party could put a measure on the ballot in a couple of months.

Against redevelopment

On the positive side, Brown continued pushing for the elimination of funding for redevelopment agencies. As he said:

In recent days, a lot has been made of the proposed elimination of redevelopment agencies. Mayors from cities both large and small have come to the capitol and pressed their case that redevelopment is different from child care, university funding or grants to the aged, disabled and blind.

They base their case on the claim that redevelopment funds leverage other funds and create jobs. I certainly understand this because I saw redevelopment first hand as mayor of Oakland. But I also understand that redevelopment funds come directly from local property taxes that would otherwise pay for schools and core city and county services such as police and fire protection and care for the most vulnerable people in our society.

So it is a matter of hard choices and I come down on the side of those who believe that core functions of government must be funded first.

That’s true. But there’s a bigger reason why redevelopment funds should be eliminated: Redevelopment is a gross violation of property rights. Redevelopment means wealthy developers manipulate the government — commonly through contributions to politicians’ campaigns — to seize the property of the poor and middle-class to advance private ends.

Redevelopment is different from using eminent domain to condemn a property to build a school or police station, something that at least has some relation to the public good (although that often is abused, too). A still relevant book on this is “Abuse of Power: How Government Misuses Eminent Domain,” by Steven Greenhut.

The higher point here that Brown did not emphasize, which itself is revealing, that prosperity depends on rock-solid property rights. Tearing down Jose’s Muffler Shop — and offering him a fraction of what his business is worth in compensation — to put up a big-box store might seem to be a way to increase sales tax revenues. In fact, by violating Jose’s Fifth Amendment right to not to “be deprived of life, liberty, or property, without due process of law,” the property rights of all Californians are diminished.

Such a severe reduction in our property rights leads to a reduction in economic production, as owners cannot be sure that their property always will be theirs until they decide to sell it. This makes it more difficult for property owners to make reasonable plans for the future of their businesses.

With California’s unemployment at 12.5 percent, now second highest in the nation, the last thing the state should do is to continue redevelopment’s assault on property rights and jobs creation. The claim of redevelopment’s beneficiaries that such property seizures create jobs is just special pleading.

Lack of Policy Innovation

Brown spoke glowingly of the state’s world-class innovators in Silicon Valley:

We have the inventors, the dreamers, the entrepreneurs, the venture capitalists and a vast array of physical, intellectual and political assets. We have been called the great exception because for generations Californians have defied the odds and the conventional wisdom and prospered in totally unexpected ways. People keep coming here because of the dream that is still California, and once here, their determination and boundless energy feeds that dream and makes it grow.

But what the state lacks is policy innovators. Brown himself once was known for policy innovations, such as the flat tax he advanced in his 1992 presidential run. Now, his policy suggestions, especially his call for a tax increase, are as tired and out-of-date as the policies of Egyptian strongman Hosni Mubarak.

Here are some policies Brown could have advanced today:

1. Suspend AB 32. The Global Warming Solutions Act of 2006 allows the governor to suspend for a year the bill’s draconian imposition of a 25 percent reduction in greenhouse gases by 2020. It’s not clear yet whether AB 32, as some critics suggested, will kill a million jobs. But with one in eight Californians out of work, AB 32 sure isn’t helping.

2. If Brown insists on a democratic election to decide things, how about putting on the ballot a repeal of the recent spate of initiatives that increased spending? Voters were misled into thinking that these initiatives wouldn’t break the bank — but that’s what happened anyway.

When I researched the issue last April, here’s what I discovered:

Ballot measures that dedicate tax revenues:

1. Proposition 99 (1988), $300 million for anti-tobacco education.

2. Proposition 172 (1993), $3 billion for local police and fire spending.

3. Proposition 10 (1998), $600 million for programs for children (this is Rob Reiner’s initiative).

4. Proposition 63 (2004), $1 billion for mental health programs.

Ballot measure that locks in state spending:

5. Proposition 49 (2002), $550 million for after-school programs. This initiative was sponsored by Arnold Schwarzenegger and catapulted him into statewide politics.

Total: $5.45 billion.

Ending such spending would not be the complete solution to the deficit, but it would cut in half the $12 billion in new taxes Gov. Brown is promoting.

Schwarzenegger’s Prop. 49 was the one that prefigured what a spendthrift governor he would become, as some of us warned at the time. It was a warning, heeded by not enough voters, that he would leave the state a $25 billion budget deficit that his successor now is trying to reduce.

This is what’s called “ballot-box” budgeting, and is the major problem with California’s initiative system. It allows multi-millionaires like Reiner and Schwarzenegger to put on the ballots seemingly well-meaning initiatives “for the children” that really advance their political careers.

Well, in a time of budget crises, such luxuries should be the first to be done away with.

3. Third, and finally, why hasn’t Gov. Brown used this as a chance to advance a flat-tax system? Dr. Arthur Laffer, who designed Brown’s 1992 proposal, has come up with something similar for California, as I reported here a year ago.

He can do better

Brown concluded his address:

But let’s not forget that Job Number 1 – make no mistake about it – is fixing our state budget and getting our spending in line with our revenue.

Right. Then why is a governor once known for innovation now about as imaginative as a teachers’ union representative demanding a pension spike? California deserves better. Jerry Brown can do better.

John Seiler is a reporter and analyst for CalWatchDog.com. His email: [email protected].