By Mark Cabaniss

Democracy, it has been said, is two wolves and a sheep voting on what to have for dinner.

Yes, the sheep gets to vote.  And yes, in theory he could appeal to one of the wolves to break rank and vote with him instead of the other wolf.  But in reality, the sheep loses.  Every time.

The only way that the sheep could win, in a closed system, or zero-sum game, would be for him to convince one of the wolves that the other wolf would make a tastier meal than would the sheep himself.  Alternatively, he could try to convince one or both of the wolves that they are not, in fact, in a zero-sum game.  Historically, the sheep has had a difficult time doing this.

We can construct a simple model with only three voting blocs, each of which considers only its own economic interests when voting, each represented by one of the animals:

1. People who don’t pay taxes (Transfer Wolf);

2. Public employees (Public Wolf);

3. Private sector employees (Sheep).

At dinner time — oh, excuse me — voting time, there are two propositions on the ballot:

A. Shall we raise (or decrease) taxes and use the money to raise (or decrease) spending on Public Wolf?

B. Shall we raise (or decrease) taxes and use the money to raise (or decrease) spending on Transfer Wolf?

Voting

The voting goes like this:  On Proposition A, Public Wolf votes to raise taxes and raise his own pay.  Sheep votes to lower taxes and to lower Public Wolf’s pay.  Public Wolf and Sheep are at a stalemate.

Transfer Wolf sits this vote out.  Since he doesn’t pay taxes, he doesn’t care what tax rates are.  Nor does he care how much Public Wolf is paid, unless — unless he is paid to care.

On Proposition B, Transfer Wolf votes to raise his own benefits and to raise taxes to pay for them.  Both Public Wolf and Sheep vote against him.

Transfer Wolf has a problem. He has been outvoted.  But luckily for him, Public Wolf also has a problem: He is in a stalemate with Sheep.  The two wolves realize that they need each others’ votes, so they agree to work together, against Sheep.  Each will support the other’s position, and Sheep will be outvoted on both propositions.

In actual practice, the evidence suggests this is exactly what is happening — transfer payment recipients and government workers have formed a successful political coalition.  According to a recent article by demographer Nicholas Eberstadt, since 1960 total United States transfer payments have grown from $24 billion to just short of $2.2 trillion in 2010, nearly a 100-fold increase in the last half century.

Simultaneously, total government spending, federal and state and local, has gone from about 24 percent of GDP in 1960 to about 36 percent in 2010, growth of 50 percent.

Nash equilibrium

A Nash equilibrium, as popularized in the book and movie “A Beautiful Mind” about mathematician John Nash, posits a game stalemate dependent on two conditions: first, each player knows every other player’s strategy; second, despite knowing everything, each player is nonetheless unable to adjust his own strategy to make it more advantageous.

In politics, there are no secret strategies, since elections involve trying to gain adherents to your strategy over the other side’s.  But in our simple Fairy Tale, even though the first condition for Nash equilibrium is there — everyone knows everyone else’s position — there is nonetheless no equilibrium.

Public Wolf and Transfer Wolf will continue to vote in tandem, and thereby grow; Sheep will continue to be outvoted, and shrink.  If we graphed Sheep’s life expectancy, it would be a curve breaking straight down, inversely proportional to the growth of his two compatriots.

But when we consider the second condition necessary for a Nash Equilibrium, we see how Sheep can get out of his predicament: He simply has to change strategy and start competing with Public Wolf by directly bidding for Transfer Wolf’s vote.

Why hasn’t Sheep already thought of that?  He could, after all, promise to cut Public Wolf’s pay and then split the savings with Transfer Wolf, much as Public Wolf promises to raise taxes and split it with Transfer Wolf.

The reason for this is history, and the simple inability to think past it.

Sheep has always been opposed to raising taxes, whether it is to increase the size and pay of Public Wolf or whether it is to increase the size and pay of Transfer Wolf.

But, just because Sheep has always been opposed to these ideas in the past does not mean that he has to stay opposed to them in the future.  If Sheep could let go of his historical antipathy to Public Wolf and Transfer Wolf, he could seek to make a deal with one against the other.

Of course, there is yet one more way out for Sheep. He could potentially try to convince one or both of the wolves that their dinner choice is not a zero-sum game; that they could, in fact, join forces and go foraging in the woods together for something that all three animal friends could eat.

Historically, this approach has been a loser for Sheep.  At dinner time, both of the wolves are usually too hungry to listen to reasoned pleas about thinking outside the zero-sum model.

So the only bet for Sheep may be to undergo a paradigm shift, overcome his qualms, and make a deal with one of the wolves to dismember and eat the other.

Sponges come in all shapes and sizes. And some sponges are much more absorbent. Unfortunately for Californians, the freeloading sponges in the state are soaking up more than ever as California sinks deeper into a sinkhole of deficit.

While California’s legislators remain focused on such important issues as cell phones in prisons, training the underprivileged how to use the Internet, high-speed rail and multi-billion dollar computer systems — and while they continue to ban sodas, sugar, fat, cigarettes, perfume, and anything that offends very few — California’s relevance is waning and the sponges are the only entity thriving.

A recent poll showed that Gov. Jerry Brown remains fairly popular, but the California Legislature’s approval ratings continue slipping. Some ratings will soon be hovering as low as Rep. Nancy Pelosi’s dismal approval rating … but rarely is the reason why discussed.

Elsewhere in America, citizens and their representatives appear concerned about historic budget deficits, looming socialized healthcare and an increasing loss of liberties through government infringement on our purses and personal lives.

In response to these concerns, the rest of the country overwhelmingly voted out Democratic politicians in the November election. California Republicans, ironically, instead lost another Assembly seat and helped elect a liberal governor, Jerry Brown, who already had a significant hand in harming the state — and did it as governor during his first two terms in the 1970s and early 1980s.

The majority party has been leading the kooky causes of extreme environmentalism, union growth and unchecked public pensions, while simultaneously forcing a multi-billion-dollar high-speed rail system onto Californians, massive subsidies for solar and wind power, and cap and trade restrictions through California’s global warming law. Most Democrats in the state are a walking, talking contradiction.

But that does not matter to a sponge … just keep feeding the entitlements to the sponges and don’t bother them with the details.

Republican Sponges

The problem in California is not necessarily the Democrats. The problem is that too many Republicans just go along with the government expansion and absurdity. They rarely thrown up roadblocks that anyone takes seriously.

The justification is elections. Many Republican lawmakers insist that their constituents want them to vote for Democratic issues. But that’s just hogwash designed to conceal a missing spine, and a love for holding elected office.

Californians expect Democrats to lie. And Californians used to expect Republicans to do the right thing, even if it meant losing elected office. Acting and voting on principle seems to have gone the way of the typewriter and the rotary phone.

Today, the sponges are winning and thriving while the rest of the shrinking middle class of Californians are suffering under some of the worst conditions in the history of the state:

• * Our roads are in deplorable shape. The huge potholes, cracks and uneven pavement cost the average driver an additional $400 a year beyond the normal cost of owning a car;
• * Our public schools look like prisons, and too many California students are uneducated and undereducated;
• * Our prisons look like state office buildings and receive the homage churches used to get;
• * In every city, bicycle lanes are multiplying as automobile traffic lanes disappear, leaving drivers moving at a crawl or idling more frequently in traffic, while the occasional bicyclist weaves in and out of traffic;
• * Public transit is bankrupt and losing riders, but more public money than ever is being spent on it;
• * City downtowns penalize visitors with costly and increasingly punitive parking, crash taxes, unchecked crime and increasing homeless populations;
• * Businesses are closing or leaving the state as regulatory agencies create new regulations, fines and penalties;
• * Entitlements and welfare are increasing — and so are our taxes;
• * College students demand more and more entitlements, wanting to pay less and less for them;
• * State agencies have become fiefdoms, run for the sake of union jobs, and not about the service that the agency was created for. With prison guards, Caltrans employees and firefighters receiving six-figure salaries and commensurate benefits, the tail is wagging the dog;
• * Middle-class, private sector businesses are targeted for additional taxing, penalties, and environmental regulations by resentful liberals and the sponges they have spawned.

Taxes never decrease in California, and agencies are never dissolved — well, almost never.

The sunset review legislation Democratic Assemblywoman Allison Huber (El Dorado Hills) pushed for a couple of years seeking to end unnecessary boards, commissions and agencies, was met again last year with less-than-enthusiastic support among colleagues. Eventually it passed, but was scaled down.

Prior to former Gov. Arnold Schwarzenegger signing Huber’s bill, only three agencies were ever eliminated by the Legislature: the Board of Fabric Care (licensing dry cleaners), the Auctioneer Commission and the Board of Polygraph Examiners.

Small Business

Most private businesses are very small, and have equally small operating budgets. According to the Small Business Administration, there were 3.4 million small businesses in California in 2008 (the last year for statistics). Of these, 711,313 were employers (as opposed to non-employer business owners), and they accounted for 51.6 percent of private-sector jobs in the state. Small firms made up 99.2 percent of the state’s employers because many of them are owner-operated without employees.

Every time a new tax, fee or regulation is increased or added, it comes right out of the business owners’ pockets. And, while not many businesses can pass along additional costs, it’s the employees who end up feeling the pinch with no raises and even salary and benefit cuts.

Most business owners know that the cost of doing business in California is quickly tilting into the red, which is why so many businesses leave the state if they can afford the move. Others just close down, rather than continuing to operate until bankruptcy is the only option left.

Which leaves the sponges, public employees and big labor in California.

We know who the public employees and big labor are. But many don’t know who makes up the “sponge” class of California residents.

Sponging off of the working people in the state are the folks who send their kids to school without breakfast or lunch. They get free bus and rail passes from the county along with food stamps and welfare payments. And they get financial aid for their kids to attend college. Their utilities are subsidized, as are their homes, mortgages and cars. They received free or subsidized day care, elderly care, medical care, pharmaceuticals, vision and dental care and even “family planning.” The sponging never stops.

They don’t pay anything into the system, except sales tax on their purchases.

The top 10 percent of Americans now pay more than 71 percent of the total federal income tax burden. And it’s the top 50 percent of working Americans who pay 97.11 percent of the total income tax burden.

The sponging bottom half of Americans pays less than even 3 percent of federal income taxes. But they get to vote on tax increases, according to California’s Gov. Jerry Brown proposal for a $12 billion tax increase.

And Democratic legislators just keep upping the ante for the sponges. Only sponges aren’t just receiving traditional government assistance and welfare.

Subsidies Galore

Subsidies come in all shapes and sizes in California, beginning with big subsidies to wind and solar “innovators.” Anything that involves green technology qualifies for a subsidy today.

Green technology is an industry that can’t stand up on its own two feet, but is funneled so much money through subsidy channels that it’s a house of cards with only a few making money off of it — the “innovators.” In my world, we call these people hedge fund managers.

President Obama authorized $2.3 billion in federal tax credits last year for creating 17,000 subsidized temporary jobs in the green energy industry, equating to a nearly a 30 percent taxpayer subsidy. Unfortunately, the only winners were money managers and corporate interests in the wind and solar industry.

Sponges come in many forms. It’s not just the people who send their kids to school without breakfast.

Don’t expect sponges to go away quietly. if Gov. Brown succeeds in passing his tax increases, we  — the middle class — are doomed. We are at the tipping point. Too much government money has been passing hands for the last 45-50 years for these subsidies to really be eliminated.

And Gov. Brown knows it.

– Katy Grimes