By Chris Reed

In September 2008, in his last major speech to the California Legislature, soon-to-be congressman Tom McClintock said the state government had turned the corner, and not in a good way.

“I believe we have now also passed the point where conventional budget reductions can restore our state’s finances. I believe we have now reached the terminal stage of a bureaucratic state where our bureaucracies have become so large and so tangled that they can no longer perform basic functions.”

Has the state’s economy also reached the “terminal stage” because of excessive taxes and regulations? Writing at NewGeography.com, Robert J. Cristiano, a California businessman and academic who has moved to Texas for tax reasons, believes that it has:

“The number 1 topic of conversation amongst the despised 1% in California today is when you are leaving California or whether you can leave. Property owners who cannot move their apartment building or office complexes can move their homes and change their residency. On a flight from Austin, Texas to Orange County last week, I sat next to the owner of a substantial manufacturing business whose plant is in the inland southern California community of Ontario. He lives in Austin, flies in on Monday and home on Thursday. He spends less than 180 days a year in California. His savings in state income taxes more than pays for his airfare, hotel and rental car expenses. His home and gas and energy all cost less in Texas. More significantly, he will not expand his plant in California and intends to move his plant and people to Texas over the next five years. …

“So many of the 1% are quietly leaving. The exodus has already begun. Spectrum Location Solutions reported that 254 companies left California in 2011. Despite claims of an upturn, a press release by the State Controller’s office last week revealed tax revenues from both personal income taxes and corporate taxes fell during the month of this November. Revenue from personal income dropped 19 percent below projections while corporate tax revenue was down a whopping 213.4 percent. Such declines will continue unabated for years to come as the California brain drain proceeds.

“When a government becomes a one-party state, nothing can stop the utopians and zealots of either party. In California, there’s no brake on progressives imposing its vision of Blue Utopia on its people. California may have clean water, clean air and green energy but at the expense of its people, prosperity and fiscal health.”

Read Cristiano’s entire lament about what California has become here.

By Joseph Perkins

A civil war has broken out within California’s dairy industry, pitting milk producers against cheesemakers.

The two sides are at odds over the state Department of Food and Agriculture’s valuation of whey, the liquid left after curds are separated from milk to make cheese.

But the real issue is the Ag Department’s anachronistic milk marketing program, which has regulated dairy prices here in California for more than three-quarters of a century.

The state’s milk producers have petitioned the Ag Department’s to revisit the decision it made this past September in which it revalued whey from a fixed 25 cents/cwt. to an adjustable 25 cents to 65 cents/cwt.

The valuation is factored into the state-regulated pricing formula for Class 4B milk, which is used in cheese (other than cottage cheese) and whey products.

Even with the Ag Department’s markedly increased valuation of whey, milk producers complain that it’s still not high enough. They say demand has driven up whey’s value above the state’s 65 cents/cwt. cap.

The state Milk Producers Council asserts that, since the Ag Department’s whey price controls took effect eight months ago, the price for Class 4B milk has been $2.54/cwt. less than the price for comparable milk produced in states operating under the federal milk marketing order.

The disparity between milk prices in California and other dairy states is “disturbing and outrageous,” said MRC spokesman Rob Vandenheuval, in a recent newsletter the group published.

Since last September, according to MRC, the state’s milk producers have sold more than 1.4 billion pounds of milk per month to the state’s cheesemakers. That means cheesemakers have received “a state-sponsored discount of $260 million,” said Vandenheuval, at the expense of the state’s milk producers.

The state’s cheesemakers see things differently. With the valuation of whey more than doubling over the past eight months, the petition by milk producers to further increase the valuation of whey is an “onerous and obscene demand,” wrote Norman Shotts II and Scott Hofferber of Farmdale Creamery, a smaller cheesemaker, in a letter to the state Ag Department.

The sentiment expressed by Shotts and Hoffberger represents that of most of the state’s cheese processors. According to the Dairy Institute of California, which has sided with cheesemakers in their civil war with milk producers, since the Ag Department ratcheted up its valuation of whey, most smaller and midsize cheese manufacturing have seen their profit margins erode, because they have been forced to pay sharply higher prices for milk.

The state Ag Department will try to broker peace between the state’s milk producers and cheesemakers when it holds three days of hearings next week, after which it will decide whether it should revalue whey yet again.

But that won’t address the real issue, which is the state continuing to regulate milk prices from the dairy farm to the dairy case.

It’s time the state abandoned such price controls. The free market — rather than Ag Department bureaucrats — should determine the value of whey as well as the price milk producers fetch for their commodity.

By Steven Greenhut

SACRAMENTO — Occupy Wall Street protesters are reminiscent of writer R. Emmett Tyrrell’s criticism of radical feminists: They don’t know what they want, but they want it very badly.

On May Day, the protesters tied up the streets of Oakland, San Francisco and elsewhere. They are mad as hell and they are not going to take it any more, although it remains unclear what, specifically, they are angry about.

I am not particularly annoyed by the overall protests. It’s an American tradition to take to the streets. These folks need an economic lesson, at the very least, and none of us should tolerate violence or destruction. But many of the Occupiers appear more open to ideas than our state legislators, who continually express similar ill-defined anti-corporate sentiments.

To those who run California’s grotesquely large and bumbling state government, the problem always is the same: the private sector, a good bit of which is fleeing to other states.

A new ad on a major Bay Area radio station is recruiting high-tech employees for positions in Detroit. Talk about insults. San Francisco is one of the most beautiful cities in the world, and wretched, cold Detroit is going to seed, literally.

Michiganders talk about rural sprawl rather than urban sprawl — so many neighborhoods have been abandoned and bulldozed that farms are sprouting within the city limits. But despite the fantasies of Gov. Jerry Brown and his fellow Democrats, people will indeed leave this magnificent place for less-desirable locales to pursue better economic opportunities.

Not everyone lives on a trust fund or works for, or is retired from, the government, which these days is more lucrative than having such a fund.

Government elite

A recent San Francisco Chronicle column explained, “When it comes to city worker payouts, forget the old $100,000 club or even the $250,000 club — the new elite among San Francisco’s civic workforce are those who got more than $500,000 in pay last year.”

Apparently, it’s impossible to exaggerate how wasteful California governments have become.

I heard that radio ad after returning from Austin, Texas, where the locals talk about the sea of Californians moving to their pro-growth (but attractive, friendly and hip) locale. California officials remain in denial. They promote bills that shift more money from the private economy to the state, which promptly squanders it as quickly as possible. They mock Texas, which lures our most energetic workers and laughs all the way to the state treasury.

As an example of misplaced priorities, California’s Democratic legislators say they have no time to deal with the pension crisis, busy as they are creating new rules, regulations and programs.

Their big idea was to create a new mini-Social Security system. In their view, the problem isn’t an unaffordable and unsustainable public system that lavishes huge payouts on union members, but a too-stingy private one. That’s almost too goofy to mock, given that the private system isn’t destroying public budgets. That proposal epitomizes the thinking in Sacramento.

There is nothing perfect in this world, so the private sector will always be afflicted with imperfections borne of the human condition. In the private world, we have to pay our own way —- there is no mechanism to live off of the fruits of others, which upsets those who are frustrated that they cannot have everything they want as quickly as they want it.

All great advancements in affluence have come from the private realm, although some government is necessary to provide the backdrop to all of this through the administration of a legal system and construction of infrastructure.

We know the wretchedness found in government-dominated societies. Most of what American governments do these days strays far outside those boundaries, but I’ve sensed no area of our economic life that our state’s leaders would not subject to government control.

Entrepreneurs take risks. They often fail, but they sometimes make great strides forward.

Government employees go to jobs where they cannot be fired except in the most extreme circumstances. They regulate us and provide “services” few of us want. They retire at young ages with pensions that make them the envy of their neighbors. They consume an ever-larger share of the money earned by those who take risks and create growth. Then their unions lobby for more government. And our fellow citizens willingly vote for the politicians who perpetuate this system.

Forgotten lessons

These lessons should be obvious in the world following the collapse of the Soviet Union. But they seem forgotten, and not just in California.

The unions protesting Wisconsin Gov. Scott Walker’s reforms have been shockingly bold in their hard-left rhetoric and clenched-fist symbolism. Whereas the Occupy protesters are a straggly group of powerless young people and vagrants, the radicalization of the union movement is something that should cause worry.

Every day, we read the stories of malfunctioning government agencies, of government waste, fraud and abuse. Journalist H.L. Mencken quipped that all government is evil and efforts to improve it therefore are a waste of time. Maybe he exaggerated, but there is little hope in reforming government — the only solution is cutting it back. Yet legislators believe in this magical thing called government. They provide new funds and create new agencies to solve problems.

Then out of nowhere a newspaper will expose how that agency really works, and everyone pretends to be shocked.

For instance, the Sacramento Bee recently reported how the federal Department of Agriculture’s Wildlife Services really operates, which “has accidentally killed more than 50,000 animals since 2000 that were not problems, including federally protected golden and bald eagles; more than 1,100 dogs, including family pets.”

The problem is not with one agency, but with the vast expansion of federal and state government, which takes our money and freedoms and leaves a path of destruction wherever it goes.

Sure the Occupy protesters are annoying. But the real surprise is why the rest of us aren’t at least as angry as they are.

By JOHN SEILER

New reports show how both the U.S. and California governments have imposed severe anti-manufacturing regulations impeding economic recovery and growth. President Obama and Gov. Jerry Brown pay lip service to creating good middle-class jobs. But their anti-manufacturing bias belies their statements.

Ever since the Industrial Revolution began more than two centuries ago, manufacturing has been the key to middle-class prosperity. China, Vietnam, India and other countries have realized this and are promoting manufacturing. They sloughed off decades of socialist penury to embrace industrial capitalism, catapulting themselves into prosperity.

America once understood that. And the U.S. and California manufacturing sectors remain large, although declining.

The New York Times described how a decade ago Apple shifted its manufacturing from California and other states to China: “Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

“A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“’The speed and flexibility is breathtaking’,” the executive said. ‘There’s no American plant that can match that’.”

These formerly were high-paying, middle-class jobs right here in the Golden State.

‘Arsenal of Democracy’

And it was America that showed the world how to build industries that can retool so quickly. The greatest example was the retooling during World War II. A manufacturing base that was almost entirely geared toward civilian production almost overnight became the Arsenal of Democracy.

Even in the 1970s, the auto industry quickly adapted to new environmental mandates from the federal government.

Today, that fast-change capability has been hampered by literally tens of thousands of pages of preposterous regulations, absurd tax policies and policy uncertainty.

In California, this anti-manufacturing attitude is at its worst. The belief of Brown and others among the Democratic Establishment that runs the state is that desirable private-sector jobs are those performed on a laptop. That makes California a utopia for computer nerds with 180 IQs. The rest of us — the folks who once supported families on middle-class manufacturing incomes — don’t have a place here.

This was shown dramatically during the November 2010 election. Proposition 23 would have overturned the anti-jobs AB 32, the Global Warming Solutions Act of 2006. Opponents branded it the “Dirty Energy Proposition.” The opposition included then-Gov. Arnold Schwarzenegger, who signed AB32 into law. His  personal worth was $700 million, which kept him insulated from the damage his policies did to ordinary people.

“Dirty Energy” means “dirty jobs” in manufacturing. The anti-23 campaign conned voters it believing that unless the “dirty jobs” were killed, it would “Jeopardize 500,000 jobs and $10 billion in private investment in California clean energy businesses.”

Well, where are those 500,000 jobs? Instead, of course, the state suffered the Solyndra scandal. Solyndra ripped off $535 million from federal taxpayers and $25 million in tax credits from California taxpayers.

The message misled voters sent to industry was: “We don’t need your stinkin’ dirty jobs! Send them all to China! We can live on welfare.”

‘Everything Else’

Bloomberg also ran a report on why America is anti-manufacturing. The author interview a Silicon Valley businessman:

“ ‘I’d love to make this product in America. But I’m afraid I won’t be able to.’

“My host, a NASA engineer turned Silicon Valley entrepreneur, has just conducted a fascinating tour of his new clean-energy bench-scale test facility. It’s one of the Valley’s hottest clean-technology startups. And he’s already thinking of going abroad.

“ ‘Wages?’ I ask.

“His dark eyebrows arch as if I were clueless, then he explains the reality of running a fab — an electronics fabrication factory. ‘Wages have nothing to do with it. The total wage burden in a fab is 10 percent. When I move a fab to Asia, I might lose 10 percent of my product just in theft.’

“I’m startled. ‘So what is it?’

“’Everything else. Taxes, infrastructure, workforce training, permits, health care. The last company that proposed a fab on Long Island went to Taiwan because they were told that in a drought their water supply would be in the queue after the golf courses’.”

Get that: The problem isn’t high American wages. We can compete there. I remember management guru Peter Drucker pointing out in the late 1980s that, when manufacturing drops below 15 percent of cost, it doesn’t matter where you locate a manufacturing facility. That’s because shipping costs are about 15 percent.

But what matters is government attitudes toward manufacturing: pro or con.

As was noted at the beginning of this article, the Chinese are obsessed with greasing the skids of manufacturing. You need it? They’ll do it. They’re gung-ho.

In America, manufacturing is “dirty.” You need it? Forget it! You’ll just pollute the environment. Besides, giving a decent wage to middle-class families just means they’ll procreate more polluters.

Detroit on the Pacific?

Except for Silicon Valley, California’s economy still is limping along. Will it become Detroit on the Pacific, a rusted-out hulk of a formerly great industrial state?

It probably won’t get that bad. The weather here is just too good. It’s like saying Cuba will become North Korea. Both have extreme socialist systems. But North Korea has harsh winters and tree bark to eat during a famine, while Cuba has beautiful tourist beaches year-round and the world’s best cigars.

Still, elements of Detroit obviously are washing across California. Our unemployment rate, although improving to 11.1 percent in December 2011, remains worse than Michigan’s at 9.3 percent. And the “hollowing out” of the manufacturing sector continues apace in both places.

A new documentary coming out in a couple of weeks is “Detropia,” about the industrial decline of the once great Motor City. Here’s a five-minute preview:

Think it can’t happen here? The preview shows scavengers grabbing steel and copper in abandoned buildings in Detroit. In a time of soaring gold prices leading to inflation, commodities are a hot item. The scavengers explain that raw materials used to make things in Detroit factories. Now, the wreckage of the previous prosperous civilization is salvaged, shipped to China, then returned to America and stocked on Wal-Mart shelves.

That’s also happening in California. According to CreativeSecurity.com, “Over the past several years, copper theft has reached epidemic proportions both in California, and nationwide. According to the U.S. Department of Energy, copper theft is a $1 billion problem that’s only getting worse.

“Increasing worldwide demand for copper and short supply has caused copper prices to skyrocket, reaching all-time highs within the past five years. At specific locations, such as commercial buildings and construction sites, copper metal can be found in abundance and is relatively easy to steal. Once stolen, it’s virtually impossible for authorities to track or recover from recyclers, making copper theft a low-risk, high-profit crime that many thieves can’t resist.”

Where’s Our Deng?

While researching this article, I came upon a report by the government’s National Public Radio about how China transformed itself from starving Maoist socialist paradise to global capitalist economic powerhouse. In 1978, a group of farmers in the village of Xiaogang agreed to defy the socialist authorities and regulations and re-establish competition. Soon, the farmers went from starving under socialism to prospering under a nascent capitalism.

They feared reprisals, even death, from the socialist government of China. But new Chinese leader Deng Xiaoping was eager to switch to capitalism. Reported NPR, “So instead of executing the Xiaogang farmers, the Chinese leaders ultimately decided to hold them up as a model…. The government launched other economic reforms, and China’s economy started to grow like crazy. Since 1978, something like 500 million people have risen out of poverty in China.”

Something similar will have to happen in America to revive manufacturing. Small bands of producers will have to band together and defy the regulations and taxes of Brown, Schwarzenegger, Obama and others — Republicans as well as Democrats.

So far, in California there’s no Deng to grasp the importance of capitalism and lead reforms that ditch the bureaucratic model. Instead, we have Brown, first elected to state office as Secretary of State in 1970, when Mao’s Cultural Revolution still was ripping up China. His obsession is to raise taxes to pay for the pensions of government workers.

But as China’s example shows, people can put up with a lot until they finally decide they’ve had enough and insist on a return to prosperity and freedom.

By DAVE ROBERTS

Former Gov. Arnold Schwarzenegger infamously promised to “blow up the boxes” of state government when he took office — only to leave them mostly intact and bigger and badder than ever when he exited. But under Gov. Jerry Brown’s reorganization plan, it looks like a few of those boxes will finally explode.

On Thursday a state oversight agency, the Little Hoover Commission, looked favorably on a proposal to eliminate one of the more byzantine bureaucracies in state government: the State Personnel Board and its overlapping counterpart, the Department of Personnel Administration. Together they oversee the state’s more than 500,000 full- and part-time employees.

The State Personnel Board (SPB) came first, having been formed in 1934. It establishes job classifications, determines qualifications and probationary periods, ensures selection by competitive examination, reviews complaints, discipline and other issues, provides consultation on merit issues, administers programs related to federal funding and language services, screens new hires and provides support on equal employment opportunity, among other things.

The Department of Personnel Administration (DPA), which was created in 1981, administers terms and conditions of employment, represents the state in collective bargaining with the employee unions, formulates human resources policy, advises the governor, and administers salaries, benefits, some retirement and leave programs, training, performance and development, among other responsibilities.

A chart on the DPA website attempts to clarify matters by providing a voluminous list of duties for each agency that also shows the muddiness of the regulatory waters.

For example, issues related to the Americans with Disabilities Act and disabled employment programs are handled by SPB. But long-term disability insurance is under the purview of DPA. The agencies also share responsibilities when dealing with audits, quality assurance, civil service reform, legislation, litigation, minimum qualifications, regulations, involuntary separations and consultants.

As a result, many state department heads with a personnel matter are unsure whether to take it to SPB or DPA. They can find themselves confused and caught between both agencies, which may weigh in with differing information and edicts.

The Little Hoover Commission has been complaining about state agency waste and duplication for decades. In a 1989 report, the commission warned “that the state’s boards, commissions and similar bodies are proliferating without adequate evaluation of need, effectiveness and efficiency. This lack of control may cost the state not only dollars, but also wasted resources, duplicated efforts and the adoption of policies that may run counter to the general public’s interest.”

Further complicating matters, state employees with grievances can take their complaints and appeals to both the SPB and DPBA, as well as to the Department of Fair Employment and Housing, the Department of Industrial Resources, Division of Labor Standards Enforcement, and the federal Equal Employment Opportunity Commission, possibly resulting in conflicting rulings.

To help bring a semblance of order to the personnel situation — as well as potentially save nearly $6 million due to layoffs and greater efficiency — the heads of SPB and DPA are planning to merge into a new agency called the Department of Human Resources, referred to as Cal HR by the speakers at the Little Hoover Commission hearing.

“At a time when our budget situation is taking food out of children’s mouths, we can’t afford to have two entities working on human resources in the state,” said Debbie Endsley, former DPA director, who is helping coordinate the merger. “I have a passion for good government. It’s distracting that there are two agencies. By combining staff into one department, a lot of things we do now that are difficult to coordinate will become much easier.”

There is little doubt that the Little Hoover Commission will recommend the consolidation, which would then go to the legislature for approval.

“I think this is long overdue,” said Commission Vice Chairman Eugene Mitchell. “It’s amazing that we have lasted this way this long and shocking. It’s not as if no one has focused on this. This is the fifth time in 20-plus years that the Little Hoover Commission has looked at this. This isn’t news. There are obvious and persistent problems. The California Performance Review identified all of these issues. It was discussed in ’81 when the department was created.”

Commissioner David Schwarz agreed, asking, “What took so long? These issues go back to the ’70s. We haven’t learned anything new in the last few decades and years. Why has it been so difficult to get to a place where such obvious, albeit incremental, consolidation is taking place?”

Commissioner Michael Rubio, who is also a Democratic state senator representing East Bakersfield, responded that the California legislature has an inability to monitor and manage the legislation that it passes.

“What we do not do is look at how well we perform,” said Rubio. “With no one overseeing or determining how well we are performing, you don’t get these types of improvements. We are not getting to where we are consolidating, innovating and improving what we are doing.”

Commissioner Victoria Bradshaw noted that there also has been strong opposition to blowing up the boxes in Sacramento.

“Any time you create something you have people who are vested in the outcome of what happens,” said Bradshaw. “In the case of DPA and SPB, something needed to be done. (But) we have some consolidation proposals go through the budget process and get killed. Twenty committees were proposed for elimination in 2009, and only one got eliminated. One hadn’t done anything in 10 years, but they had stakeholders come out of the woodwork for them.”

SPB Board President Maeley Tom is confident the new agency will streamline personnel issues while preserving agency functions. “We see this merger providing potential cost and staff savings while providing more efficient services to administrators, employees and applicants,” she said. Tom also acknowledged that in the past “there hasn’t been enough openness and effort to look at new approaches and ways so we could operate more efficiently cost wise.”

While the commissioners welcomed the merger, at least one of them, Mitchell, is not so sure it will result in cost savings. “The reason we might sound skeptical is because we have heard these before,” he said. “Often times the savings don’t materialize but the costs go up a lot.”

The details of the consolidation, including where the merged department will be located and how many employees will lose their jobs due to redundancy, will be worked out in the next two years.