Commentary

April 20, 2012

By Wayne Lusvardi

California Gov. Jerry “Moonbeam” Brown recently issued a phony challenge to the state legislature to “man up” and cut services out of the state budget to resolve a lingering $9 billion deficit.

Brown was telling the legislature to remove the proverbial wooden beam out of their eyes rather than take the moonbeam out of his own eye.

Brown knows that the services he wants the legislature to cut – welfare and Medi-Cal – are federally mandated.  Medi-Cal is California’s version of Medicaid, not Medi-Care. Thus, proposing to cut back such services would galvanize public pressure to save such services from the chopping block.  Brown dare not shine a moonbeam on his own pet programs and policies.

Los Angeles Times columnist George Skelton creates more phony drama about Brown’s challenge to the legislature to reduce the state budget on the purported backs of the poor.  Skelton scolds the governor for telling the legislature to “man up” by cutting back some health and welfare services from the state budget.  This just focuses more public attention on mostly pretend cuts to mandated services. The poor and the medically needy are always put on the visible chopping block instead of non-essential middle class welfare programs and policies.

Untouchable Luxury Public Goods

The remaining budget deficit could be solved by cutting or suspending the provision of luxury public goods, such as redundant:

* Affordable housing;
* Stem cell research;
* High-speed rail;
* Green power;
* Cap and trade pollution credits;
* Useless energy research funded as a surcharge on utility bills;
* “Waterless” water bonds;
* “Categorical” public school ancillary jobs earmarks;
* Perchlorate regulation that has no health benefits;
* Mandated elimination of ocean water cooling for coastal power plants at an enormous cost to protect a few sea mammals and fish larvae while thousands of birds are killed by wind turbines.

Former University of California, Berkeley political scientist Aaron Wildavsky once wrote that such bureaucratic programs don’t just exist by hoodwinking the population with green ideology. Tax expenditures keep going up because more people benefit from the public distribution of jobs and wealth enhancements to private properties from such programs than benefit from private production.

What green power, cap and trade, affordable housing, eliminating coastal power plants, bullet trains and “waterless” water bonds all have in common is enriching the values of private properties and sometimes creating real estate speculation. These programs:

* Replace old, obsolescent housing with new luxury low income housing;
* Reduce air pollution by shifting it elsewhere;
* Eliminate nuisance power plants by shifting them to remote areas;
* Reduce the number of nuisance jet airplane flights and noise by shifting passengers to trains; and
* Create open space buffers around upscale residential enclaves with so-called water bond funding.

The above luxury programs don’t really reduce pollution, create more water resources, reduce educational deficits in children from perchlorate, protect endangered species, create magical medical cures for cancer or paralysis or make housing more affordable. What they mainly do is shift those problems elsewhere or to where nobody lives.  Or such programs promise to eliminate some perceived threat to public health and property values — such as perchlorate in drinking water  — at a huge cost that could be done so cheaply by iodized salt in the human diet.

Why California is Dysfunctional

By enhancing private property values, bureaucracies bind middle class homeowners to their programs.  In the language or psychotherapy, private property owners become co-dependent on bureaucrats and labor unions for middle-class welfare.

This is why California is often described in terms of a dysfunctional family. What California needs is a Twelve-Step Program to recover from its addiction to overspending on non-essential middle-class welfare programs, not cutting programs for the poor or medically needy. One of the reasons California’s economy has been declining is that it over-invests in real estate compared to states like Texas.

The bureaucratic agencies that run the above-listed programs all preserve and protect the California Dream of home ownership.  If strong cultural values and economic interests did not desire these popular programs, they would not be so resilient to elimination or expenditure reductions.

This is what economist William Fischel describes in his book, “The Homevoter Hypothesis: How Home Values Influence Local Government Taxation, School Finance, and Land Use Policies.”

Voters are rational economic actors who perceive the benefits of luxury government programs and policies to their property and wealth interests.  It isn’t the super rich or the poor immigrant who are the only causes of the state budget deficit.

This is why California state government is dysfunctional. It is why we have a state water system with only a half-year of water storage.  By comparison, the Colorado River system has 4 to 10 years of water storage. Meanwhile, we have spent more than $18 billion on five water bonds that produced no new water storage reservoirs and have mainly funded open space acquisitions.

This is why the state unemployment fund is in hock to the federal government for more than $10 billion, but luxury “affordable housing” programs continue to be flush with cash.

This is why Medi-Cal is being threatened with budget cuts, but the voters have approved funding redundant stem cell research.

This is why self-serving bureaucrats are mandating costly cleanups of perchlorate from drinking water with no health benefits, but family welfare is to be cut back.  Voters should not worry, however. Residential property owners will not feel “toxic” substances threaten their home values.

California has a structural budget deficit because voters are “homevoters” who vote for mostly visual benefits that enhance their property wealth. California is running a permanent budget deficit because it is promising the middle class it will eliminate the side effects of modern technological society: pollution, cancer, noisy airports, dirty power plants, toxic substances, and all kinds of nuisances from their backyards. But mostly these are purely symbolic benefits. This is mostly why California government is broke and health and welfare services must go begging.

Pogo Principle: We Have Met the Enemy and They are Us!

Political scientist Aaron Wildavsky called this The Pogo Principle: “we have seen the enemy and they are us.”  Pogo is a character in a comic strip created by William Kelly.

It is hypocritical to threaten cutbacks to health and welfare programs for the poor and leave middle class welfare programs untouched.  It is likewise hypocritical for tax advocates to continue to want tax increases shifted to the despised “1 percent” of high-income earners — the millionaires’ tax — while leaving luxury government programs for the bulk of the middle class uncut.

It is hypocritical for an environmental governor such as Jerry Brown to dramatize the cutback of health and welfare programs while leaving middle class welfare programs untouched. Gov. Brown should take the “moonbeam” out of his own eye first before staging a media event about cutting programs for the poor.

We have met the enemy of health and welfare programs. It is not the “1 percent.”  It is not the Republicans. It is not the corporations or banks. It is not only the immigrants.  As the comic strip character Pogo accurately stated: “it is us.”

By Wayne Lusvardi

Dan Walters, call your office!  Or call a reputable economist for therapy.

Walters writes that a marginal tax rate increase amounting to $9 to $10 billion in new revenue would reflect only 0.5 percent of the total state Gross Domestic Product.  And it would increase state revenues by only 6 percent from $160 billion to $170 billion.  A marginal tax rate is the rate you pay on the taxable income that falls into the highest tax bracket you reach: 8, 9, or 10 percent, etc.

Why a tax increase?

But during Jerry Brown’s recent trip to New York. he blurted out that the state GDP had increased by $90 billion, or 4.75 percent, increase in 2011.  That should have increased tax revenues by $9 to $10 billion without having to raise the existing income tax rates on millionaires — Brown’s tax proposal; or income tax rates on everyone but the very poor — Molly Munger’s tax proposal.

The top tax income tax rate in California currently is 10.3 percent. This is the second highest rate in the nation, after Hawaii at 11 percent.

California recently let its temporary sales tax increase expire in July 2011. Thus, the state sales tax has been reduced from 8.25 percent to 7.25 percent — still the highest state sales tax rate in the United States. Local governments can add 1.5 percentate points to the base sales tax rate.

And California has the highest corporate tax rate of 8.84 percent of all Western states (excepting Alaska).

Subtract the $4.5 billion lost tax revenues from the expiration of the 1 percent temporary income tax rate increase and California would still have about $5.5 billion in new net taxes remaining.

The state legislature recently diverted $1.4 billion of excess redevelopmentagency monies from the state general fund back to local redevelopment agenciesfor “affordable housing.” This doesn’t even count the $2 billion in “excesscash” leftover from redevelopment agencies before they were phased out ofoperation.  This signaled that thelegislature is not serious about plugging the state budget deficit.

New tax revenues and excess redevelopment funds would add up to about $7.5 billion in new tax revenues without need of an income tax rate increase.

Untouchable Luxury Public Goods

The remaining budget deficit could be solved by cutting or suspending the provision of luxury public goods — such as redundant:

* Affordable housing;
* Stem cell research;
* High-speed rail;
* Green power;
* Cap and trade pollution credits;
* Useless energy research funded as a surcharge on utility bills;
* “Waterless” water bonds;
* “Categorical” public school ancillary jobs programs;
* Perchlorate regulation;
* Mandated elimination of ocean water cooling for coastal power plants at enormous cost to protect a few sea mammals and fish larvae while thousand of birds are killed by wind turbines; and
* Unneeded state commissions for termed-out state legislators.

Former University of California, Berkeley political scientist Aaron Wildavsky once wrote that such bureaucratic programs don’t just exist by hoodwinking the population. There is an ideology that grows around such programs. But tax expenditures keep going up because more people benefit from public distribution of jobs and property enhancements than from private production.

What green power, cap and trade, affordable housing, eliminating coastal power plants, bullet trains and “waterless” water bonds all have in common is enhancing the values of private properties and real estate speculation. These programs:

* Reduce old, obsolescent housing with new luxury low income housing;
* Reduce air pollution by shifting it elsewhere;
* Eliminate nuisance power plants by shifting them to remote areas;
* Reduce the number of nuisance jet airplane flights and noise by shifting passengers to trains; and
* Create open space buffers around upscale residential enclaves with so-called water bonds.

The above luxury programs don’t really reduce pollution, create more water resources, reduce water pollution risks of mental retardation, protect endangered species, create magical medical cures or make housing more affordable. What they mainly do is shift those problems elsewhere or to where nobody lives. By enhancing private property values, bureaucracies bind private residents to their programs.  In the language or psychotherapy, private property owners are co-dependent on union bureaucrats and labor unions for political perks. This is why California is often described as a dysfunctional family.

The bureaucratic agencies that run the above-listed programs all preserve and protect the California Dream of home ownership.  If strong cultural values and economic interests did not desire these popular programs, they would not be so resilient to elimination or expenditure reductions.  This is what economist William Fischel describes in his book, “The Homevoter Hypothesis: How Home Values Influence Local Government Taxation, School Finance, and Land Use Policies.”

Pogo Principle: We Have Met the Enemy and They are Us!

Aaron Wildavsky called this The Pogo Principle: “we have seen the enemy and they are us.”

It is hypocritical for tax advocates to continue to want tax increases shifted to the despised “1 percent” of high-income earners — the millionaires’ tax — while leaving luxury government programs for the bulk of the middle class untouched.

Voters are rational economic actors who perceive the benefits of luxury government programs and policies to their property and wealth interests.  It isn’t the super rich or the poor immigrant who is the sole cause of the state budget deficit.

This is why California state government is dysfunctional. It is why we have a state water system with only a half year of water storage.  Even though the Colorado River system has 4 to 10 years of storage.

Meanwhile, we have spent over $18 billion in five water bonds that produced no new water storage reservoirs and have mainly funded open space acquisitions.  This is why the state unemployment fund is in hock to the federal government for more than $10 billion, but luxury “affordable housing” programs continue to be flush with cash. It’s not solely because the “1 percent” are stingy, or big banks are “greedy,” or immigrants are overburdening government services.

You get what you vote for.

By WAYNE LUSVARDI

No one expects the California Green Chemistry Inquisition.

In post-industrial California, the California Department of Toxic Substances Control has launched an inquisition called the Green Chemistry Initiative to determine if there are safer alternatives to the use of some 3,000 chemicals used in commercial products.  California’s chemical inquisition was authorized by the state legislature under AB 1879 and its counterpart SB 509, both signed into law in 2008 by then-Gov. Arnold Schwarzenegger.

The European Union suspects that the Green Chemistry vetting process could be used to erect a trade barrier to commercial products made outside California. Entire industries could he hauled into hearings, tortured with endless proofs that their product or byproducts have no safer alternatives and possibly put out of business in California.

Imagine every supermarket in California having to morph into a pricey Whole Foods Market just to stay in business.  Or imagine clothing stores having to guarantee that they sell “organic” hemp clothing.

What will happen with drinking water treated with chemicals such as fluoride is anyone’s guess.  Some chemicals are not easily removed from water, raising the question about the future use of recycled water to alleviate drought.  Or what about chemotherapy, which is designed to be toxic? Would the safer alternative be no treatment? The Green Chemistry Initiative raises more questions than if offers to provide potential answers thus far.

The Federal Food and Drug Administration and other regulatory agencies already review many of the 3,000 chemicals that California’s Department of Toxic Substances Control considers in the category “chemical of concern” — COC’s. Many private industries offered comments to the new green laws.  One of the repeated questions by private industry is: Why doesn’t California prioritize the “chemicals of concern” to those chemicals that have not been already reviewed by the FDA or regulated by the EPA? Why add yet another bureaucratic layer of duplicate regulatory oversight if it is not for erecting trade barriers, as the European Union suspects?

The Green Chemistry Initiative is a bureaucratic process requiring every maker of chemical products to submit data to the California Department of Toxic Substances Control. Green chemistry is the “design of chemical products and processes that reduce or eliminate the use and generation of hazardous substances.”  But nearly all substances are potentially hazardous, depending on their dosage and exposure.

‘Chemicals of Concern’

A major stimulus for California’s Green Chemistry Initiative is the concern by several California sanitation and water districts about man-made chemicals found in drinking water and wastewater.

For example, the Los Angeles County Sanitation District is concerned about the following chemicals:

17b-estradiol: a natural sex hormone needed to prevent bone deformities. It is also sold in ointments including vaginal ointments and contraception products approved by the FDA in Sept. 1999.

Triclosan: an antibacterial and antifungal agent used since 1972 in trash bags.  Triclosan can react with chlorinated tap water to produce dioxin as a byproduct. Dioxins can block the thyroid, pituitary and other glands. Plain soap is thought to be just as effective as antibacterial soap with Triclosan. The FDA and European Union already regulate Triclosan.

Caffeine: a natural stimulant found in coffee, tea and chocolate. It is also a common ingredient in cola and energy drinks. Coffee and other products can be sold “decaffeinated,” where the caffeine is reduced to small levels. It is also a natural pesticide that paralyzes and kills insects that feed upon plants. If regulatory agencies are seeking safer substances to replace synthetic pesticides, perhaps caffeine would be a natural alternative.  The FDA already regulates caffeine.

NDMA — N-nitroso-DiMethlyAmine: a highly toxic organic chemical that, like all substances at high dosages, can cause cancer. It is an industrial by-product and waste product. It can also be a by-product of water treatment and sanitization by chlorination. It breaks down in minutes when exposed to sunlight. In deep soil, it should break down in a few months. It can be found in tobacco, cured meats, beer, fish, cheese, toiletry and cosmetic products such as shampoos. NDMA can form in the body from naturally occurring compounds called alkylamines. Alkylamines are produced from natural fatty acids, which are plant oils that are essential for human growth and health. The FDA and EPA already regulate NDMA.

1,2,3-Trichloropropane or TCP: a solvent only regulated in California. Not much is known about TCP. It is a synthetic agent used as a building block to make pesticides and elastic products. DOW Chemical does not produce TCP but puts out the best information on it.

Hydraine: no information could be found online on this chemical.

Quinoline: an aromatic compound mainly used as a building block to other chemicals. There are no studies of whether quinolone is a cancer-causing agent.  It is used in processing oil shale or coal. Why the Los Angeles County Sanitation District is concerned about fracking agents in its water is a question to be answered. There has been no known intrusion of the substance into any of the eight ground water basins in Southern California.

Existing Regulations

What the above snapshot of seven “chemicals of concern” to the L.A. County Sanitation District indicates is:

1. The FDA and EPA already regulate most of the substances.
2. There is no priority placed on those chemicals that are not already regulated by the FDA and EPA or for which there have been no studies about their potential health effects.
3. Many substances are beneficial as well as toxic.
4. Most of the chemicals are not dumped into local water basins by industries but are excreted into sewer systems through human waste. Some of these are prescribed medicines, plausibly including chemotherapy agents that are designed to be toxic.
5. Finding safer alternatives to the chemicals’ use may result in undesirable unintended consequences. An example is when MTBE was substituted for ethanol in gasoline in California to prevent ethanol producers in other states from capturing the market, with disastrous consequences on local groundwater supplies.  MTBE and ethanol are used as gasoline additives to reduce smog in the summer season.
6. One of the substances, caffeine, is not a synthetic chemical but a natural substance.
7. Some of the “chemicals of concern” could be potentially safer substitutes for more toxic substances, such as caffeine as a safer alternative for synthetic pesticides.

Green Chemistry Omits the ‘Environment’

Paradoxically, California’s new Green Chemistry Initiative omits any consideration of the environment. Environmentalists are searching for the proverbial tree while they miss seeing the forest.

If what makes any substance toxic is the dosage (“the dose makes the poison”), then it follows that concentrating any substance can make it toxic. But California’s Green Chemistry Initiative omits any consideration of the environmental context that may concentrate any chemical or even any natural substance.

The Trap Makes the Poison

One of the most well known environments that traps substances and makes them potentially toxic is the inversion layer.  In a normal atmospheric environment, the air temperature decreases with altitude. The higher you go, the colder it gets.  However, when an inversion layer occurs, the temperatures reverse and air high above the ground is warmer than the air below it.  The result of an inversion layer is the trapping of particles in the air, resulting in smog and unhealthy air.  It isn’t the substance alone, but the trap that causes the exposure to any substance to become a potential health risk.

The same trapping process can occur in “energy-tight” buildings, resulting in “sick building syndrome.”  Asbestos, formaldehyde, radon, toxic mold, secondhand smoke, carbon monoxide and even anthrax are potentially harmful if they become airborne in newer buildings made tight for energy efficiency.

Perchlorate is a natural and man-made molecule that can be relatively harmless on the ground surface even at high levels.  But if it becomes trapped in an underground water basin, it can be potentially harmful.  If diluted with other water, however, it can be rendered harmless.  “The solution to pollution is dilution.”

Cal Chamber: Green Chemistry Law is ‘Unworkable’

The California Chamber of Commerce has commented of the Green Chemistry laws:

1. The laws are nearly limitless and thus make the private investment process uncertain and risky;

2. There is no prioritization of chemicals;

3. The minimum level of exemption from the Green Chemistry list is “unworkable”;

4. Curiously, there is no process in the law to remove a chemical from the list;

5. Small companies do not have the resources to comply with a safer alternative chemical assessment;

6. The Safer Consumer Product Alternatives goes beyond the scope of the law;

7. The law could result in banning a product when there is no safety issue

8. The 180-day and 12-month deadlines to submit product assessments are unrealistic as it may take years to conduct such assessments;

9. The law nullifies its own guarantee of non-duplication of regulation; and

10. The law avoids any economic impact criteria.

The California Chamber of Commerce summarizes its comments to the Green Chemistry law as follows:

“The issue is not whether there is a data gap; but rather, how can the state manage its finite resources to best identify and prioritize the uses of the chemicals of greatest concern in consumer products. We urge the Department to proceed with caution, and recognize the value of harmonizing the program with works previously done in the European Union and other states and countries on chemical use regulation.”

Green Chemistry or Counter-Industrialization?

As any toxicologist can tell you, everything is potentially hazardous, depending on its dosage and time exposure. Even drinking too much pure distilled water can be lethal.

What is considered “pure” or a “risk” in a technological society depends on social culture.  As former U.C. Berkeley professor Aaron Wildavsky once observed in his book, “Risk and Culture: An Essay on the Selection of Technological and Environmental Dangers,” one must look deeper into what form of social organization is being attacked and what form is being defended.

Thus far, California’s Green Chemistry Initiative looks more like an inquisition than legal due process.  Industrialization is being attacked and a post-industrial risk-free society and potential trade protectionism are being defended.