“Remember when tech startups like Lyft, Sidecar and Uber fought California regulators and won, getting designated as a new class of transportation that was deemed legal?

“Turns out Uber didn’t like that. It filed today a petition for rehearing with the California Public Utilities Commission, saying the transportation regulator shouldn’t have jurisdiction over technology companies.

“What’s going on here is that Uber is trying to play the long game. The previous decision may have been harmless enough, but Uber being Uber, it doesn’t want the CPUC to get the idea that it can tell Uber what to do.

“More specifically, in September the CPUC established a new category called “transportation network companies,” where drivers use their personal vehicles to provide rides for pay.

“That applied to the peer-to-peer businesses of Lyft, Sidecar and Tickengo, and to Uber’s own competitor in that space, UberX. It was a highly important decision that helps legitimize the larger idea of a sharing economy, where non-professionals share their resources and time for a fee. And it was hailed as such by the peer-to-peer companies. 'We made history today!' tweeted Sidecar CEO Sunil Paul. …

“What Uber is clearly concerned about is the CPUC extending its regulatory interest deeper into the Uber business — for instance, saying Uber needs to register as a 'transportation charter party,' or TCP, which covers the commercial license for black cars and limos. That hasn’t happened yet, but it’s possible that it’s on the table.

Here's hoping Uber gets its way. As the Reason folks have pointed out for decades — here's a recent iteration — licensing and regulation have long been used not for safety reasons but to protect entrenched business interests from competition.

If Uber and similar firms wipe out taxis, so be it. Survival of the fittest, and no more ripoff $33 fares for four-mile drives to and from the airport.

For an article I was editing, I checked out L.A. City Councilman Gil Cedillo’s bio on his Website. It explains, “Gil Cedillo has found a balance with his underlying message that progressive politics is good for business. This circular logic of ‘what is good for the people is good for business’ is what allows this legislator to have his cake and eat it too—a working class tilt without antagonizing the business class.”

It’s curious that he thinks “circular logic,” also called “circular reasoning,” is a good thing. Circular logic uses the fallacy “begging the question.”

For example, suppose someone said, as many did last fall, including Gov. Jerry Brown, “We need to raise taxes with Proposition 30 because the schools need more money.”

That begs the question: Do schools really need more money? And other questions: Could the schools be run better with less money? Do we even need public schools?

In Cedillo’s case, the “circular logic” cited on the Website begs the question: Is what’s good for the people really good for business”? And another question: Is what he’s doing really good for business, and for the people?

By Chris Reed

The conventional wisdom about the 400,000 members of the California Teachers Association and the 120,000 members of the California Federation of Teachers is difficult to dispute:  Their unions dominate Sacramento in a way no other special interest remotely rivals.

Aside from charter schools way back in 1992, the only fundamental school reform to get through the Legislature the past 20 years is the one that swelled the CTA’s and the CFT’s ranks: classroom-size reduction. No other special interest gets promised future multibillion-dollar payoffs to go along with tough budgets, as the teacher unions secured in 2009.

But in early 2013, we could see that conventional wisdom tested in a way without modern precedent. The issue is how to shore up the struggling California State Teachers’ Retirement System, which as of Oct. 31 had $154.8 billion in investments and an unfunded liability of $64.5 billion, meaning it is only 71 percent funded.

The state Legislature sets the contribution rates for teachers that each school district must pay. The status quo has long been that employers contribute 8.25 percent of pay, teachers 8 percent of pay and the state 2 percent of pay.

But Gov. Jerry Brown signed a pension reform plan in September, AB 340 by Assemblyman Warren Furutani, D-Gardena. Under the reform, government agencies in California must adopt contracts going forward that have employers and employees equally share the normal cost of pension liabilities by 2018.

Bank accounts would shrink

If that happens, it means a sharp cut in take-home pay for every CTA and CFT member. As Ed Mendel laid out in calpensions.com, actuaries say teachers hired going forward under the less generous terms of the new state pension will need to pay 15.9 percent of pay — nearly double the current 8 percent contribution. Meanwhile, veteran teachers would need to pay 18.3 percent of pay — 10.3 percentage points more than they now pay and more than the total that is now set aside by all three contributors combined (teachers, districts and the state treasury).

This 50-50 required split of pension costs is jaw-dropping given what the CalSTRS board recommended when the topic of shoring up the teachers’ pension fund came up in 2007. It wanted teachers to go from contributing 8 percent to 8.5 percent; for districts to gradually go from 8.25 percent to a maximum of 13 percent; and for the state to gradually go from 2 percent to a maximum of 3.25 percent.

Or, to put the plan in a context that more readily shows its outrageousness, CalSTRS wanted teachers to increase their contributions by 6.25 percent — and for taxpayers to increase their contributions by 59 percent, nearly 10 times as much! The result would have been a pension system in which taxpayers had roughly twice the obligation (66 percent) as teachers (34 percent).

With the state economy rapidly slowing and the Schwarzenegger administration strongly opposed, the Legislature never passed the CalSTRS proposal.  That the CalSTRS board put the plan forward as a serious policy alternative showed that the CTA and CFT were calling the shots — just as Senate Democrats wanted.

In a 2006 Senate committee vote, State Sens. Don Perata, Debra Bowen and Gil Cedillo rejected Gov. Arnold Schwarzenegger’s nomination of David Crane to the California State Teachers Retirement System board. A Democrat himself, Crane is a sharp San Francisco financier and government reformer. Crane’s disqualification? “The three Democrats on the five-member Senate (Rules Committee) agreed that Crane seemed too concerned about the burden of pension shortfalls on taxpayers,” The Los Angeles Times reported.

Teachers’ unions unaccustomed to treatment

The CTA and the CFT must daydream about the good old days. The unions can’t even be very confident that the Legislature will do rope-a-dope with Brown’s pension reform by just never changing the present contribution rules for CalSTRS. That’s because state lawmakers also passed a bill that directs CalSTRS to prepare three alternatives that address the pension underfunding and to formally present it to the Legislature by Feb. 15, 2013.

So, in a rational world, the teachers’ unions would appear to be trapped, likely to face a permanent cut in take-home pay of about 10 percent. They are sure to sue and claim that existing funding formulas amount to a vested pension benefit, as a CalSTRS legal opinion concludes. Yet that legal view seems shakier than ever given the readiness of so many collective bargaining units to accept increases in their contributions and to make concessions in recent years. There’s also no question that judges are influenced by the headlines of the era.

But that’s forecasting what would happen in a rational world, not Sacramento — and especially not in the Assembly, where union power is so intense that 21 Democrats actually voted against a bill to overturn school regulations that allowed only union nurses to give medical help to students suffering life-threatening epileptic seizures. The 21 included Speaker John Perez, D-Los Angeles.

So expect an epic, years-long battle over AB 340. It may be law, but laws can be changed, ignored or sabotaged — and the CTA and the CFT can’t live with the new status quo that the governor’s pension reform portends.

By John Seiler

People naturally move from depressed countries to thriving countries. That’s especially true when travel between the two countries is easy, as it is between the United States and Mexico.

Because so many Mexicans have come to the United States, pressures have risen to give even illegal immigrants access to tax-funded student loans. A writer I’ve read a lot over the years, Gustavo Arellano of the OC Weekly, writes the paper’s ¡Ask a Mexican! column. I like how he flavors his articles with a few Spanish words, much as H.L. Mencken did with German words a century ago.

In his current column, Arellano writes about the advance of the California Dream Act scholarships last year, whose actual official title is: the Development, Relief, and Education for Alien Minors Act. And about the federal Dream Act. He quotes the California law’s author, Assemblyman Gil Cedillo, D-Los Angeles, who “ceaselessly supports DREAMers.”

Cedillo explained: “[S]tudents will have the opportunity to receive Cal Grants, Board of Governors Fee Waivers (for community-college students) and other state-funded scholarships.”

But the legislation comes too late. The California and American dreams have turned into economic nightmares, even as Mexico’s economy has turned into the real dream, leading immigrants to return home.

The Pew Hispanic Center’s recent report found:

“After four decades that brought 12 million current immigrants—most of whom came illegally—the net migration flow from Mexico to the United States has stopped and may have reversed, according to a new analysis of government data from both countries….”

Here’s Pew’s graph:

You’ll notice the previous time the numbers dropped: the 1930s. That was during the Great Depression, when many immigrants returned home because U.S. unemployment soared above 25 percent. It was a global depression, so people might not have gotten jobs back in Italy, France, Sweden or Mexico. More people were farmers back then, and a family farm could make us of extra hands.

Curiously, that’s a reason mentioned in this short RT video about current immigrants returning home:

This shows that what America is going through now may not really be the time after the Great Recession, but the middle part of the Greater Depression. Although the official California unemployment rate is 10.9 percent, the real level — including those working part time who want to work more and those who have given up looking for work — is 25 percent, just as during the 1930s, as I have reported.

A difference this time from the 1930s is that Mexico’s economy is not also in a slump, but is a hot tamale:

“First-quarter growth was 4.6 per cent compared with a year earlier, the fastest pace since the third quarter of 2010, prompting several analysts to upgrade 2012 growth forecasts.”

U.S. decline

The Pew study noted,

“It is possible that the Mexican immigration wave will resume as the U.S. economy recovers.”

However, this seems unlikely because U.S. economic growth will remain sluggish for many more years. In particular, residential and business construction, which employed hundreds of thousands of immigrants until the real-estate bust of 2006-07, remains overbuilt. Compared to a year before, home prices in April 2012 declined 3.1 percent in Los Angeles County and 2.3 percent in Orange County; although prices did rise 2.4 percent in San Diego county, and rose in the long-depressed counties of Riverside, 5.3 percent, and San Bernardino, 5.9 percent.

The reason the United States is so underperforming compared to Mexico is because of the nations’ debt loads. Everybody is seeing how high government debt is imploding the economies of Portugal, Italy, Ireland, Greece and Spain (the PIIGS). But consider these numbers of public indebtedness by country. This is a U.S.-Mexico comparision I don’t think anyone else has made.

Debt by percent of GDP (CIA and Eurostat data), least to most:

8.7 Russia
10.1 Hong Kong
30.3 Australia
37.5 Mexico
38.7 Switzerland
54.4 Brazil
43.5 China
69.3 Spain
82.0 Germany
83.5 Canada
86.5 France
103 United States
108.4 Ireland
108.5 Portugal
120.9 Italy
165.3 Greece
208.2 Japan
230.8 Zimbabwe.

Mexican and U.S. debt

Some comments: Japan is an anomaly because it has borrowed heavily to rebuild after the March 2011 Tohoku earthquake and Tsunami. Although its high debt before that had helped retard economic growth during the past two “lost decades” there.

Zimbabwe, of course, is an economic basket case from dictator Mugabe’s socialist confiscation policies. Spain’s relatively low debt, 69.3 percent, means it might fare rather well in the ongoing European crisis.

The big thing to notice is that Mexico’s debt is just 37.5 percent of GDP, a bit lower than Switzerland’s 38.7 percent. ¡Excelente!

By contrast, the U.S. debt is 103 percent. Terrible. That’s more than two-and-a-half times as large as Mexico’s ratio.

A big reason for the U.S. debt is the huge military commitment overseas. By contrast, Mexico has no imperial ambitions. Its war on drug dealers — foisted on it by by Tio Samuel — at least wastes the money at home.

Mexico also has a young population, whereas America’s is shifting into its Baby Boomer retirement phase, in which well-educated Boomers drop out of the work force — and, as they head for the links, start soaking up Social Security and Medicare, not to mention Metamucil.

Government debt is like family credit cards. Suppose your family income is $60,000, which it is for many Californians. A 38.7 percent debt means you own $23,220 on the plastic. Not great, but manageable if you’re frugal.

But a 103 percent debt is $61,800, which is difficult even to sustain, let alone pay off.

It’s true that the U.S. government currently pays really low interest rates. That’s because the Federal Reserve Board is keeping rates low. As my colleague Wayne Lusvardi has shown, artificially low interest rates are devastating the private economy because families, in their private savings, actually are losing money from inflation. So the low interest rates that help the government debt are undermining the private economy that is the foundation of the whole government structure. That’s why I expect the Fed, after the election, will jack up interest rates, just as Fed Chairman Paul Volcker did in the late 1970s to kill the 1970s inflation.

But that will meain higher interest paid on the federal government’s current national debt of $15.7 trillion — and rising.

It’s a Catch 22 that cannot have a good ending.

Recent economic history

Mexico also has had more pro-market presidents in recent decades. President Reagan obviously was pro-market. But his successor, President George H.W. Bush, increased taxes in 1991, crashing the economy. In 1993-94, President Bill Clinton raised taxes and tried to push Hillarycare into law.

But after his actions led to the Republicans taking over Congress in 1995, Clinton switched. He dropped Hillarycare; cut taxes — twice; and enacted welfare reform. The dot-com boom ensued. A mild recession began in 2000. But Clinton left office enjoying the first budget surpluses in 30 years.

In 2001, President George W. Bush panicked after 9/11, and went on a wild spending spree, turning the Clinton surpluses into record deficits. At the same time Federal Reserve Chairman Alan Greenspan, also panicked over unbased economic worries after 9/11 and debased the dollar, causing the inflation we’ve suffered since then; and kept interest rates artificially low, sparking the boom-bust in housing. (There were other reasons for the housing boom-bust, including shady bank loans and government easy loans to homeowners.)

Bush’s tax cuts would have helped — but they expired in 2010. Since about 2008, this has caused great uncertainty, because no one knows if the extensions since then will continue, so no one can plan for future tax policy.

After the September 2008 financial crisis, Bush also panicked and signed the infamous TARP bailout of Wall Street, paid for by Main Street. He also imposed the Sarbanes-Oxley absurd regulations on business.

President Obama has continued the Bush policies of wild spending, record deficits and hyper-regulation, especially Obamacare and the absurd Dodd-Frank financial reform disaster. Current Fed Chairman Ben Bernanke has continued the Greenspan policies of easy money and too-low interest rates.

Although America needs financial and business reform, Sarbanes-Oxley and Dodd-Frank were bureaucratic monstronsities that have destroyed businesses and jobs.

Republicans are saying that Mitt Romney, if he becomes president, will improve things. That’s unlikely. His Romneycare in Massachusetts when he was governor there was the model for Obamacare. Romney only would tinker with Obamacare, not get rid of it entirely. And he’s not serious about spending cuts. Any reduction in the trillion-dollar deficits must include major cuts to defense spending. But Romney, on his Web site, even attacks Obama’s proposed “cuts,” which really are just a slowing of massive increases that Obama would continue. Romney admits, “This will not be a cost-free process.”

There is little indication that America will veer away from barreling toward a Greek-style crisis.

Mexican history

Now consider Mexico’s recent presidents. The 1994 devaulation crisis crashed the Mexican economy. But the New York Times later reported of new Presidente Ernesto Zedillo, elected that year, “[T]he tight-money policies and fiscal discipline that he imposed after [the crisis] brought the broad economic indicators back to healthy growth in two years.”

Further free-market reforms have been enacted by Presidente Vicente Fox, elected in 2000, and current Presidente Felipe Calderon, elected in 2006.

Let’s compare them: Since 1994, Mexico has had 17 years of economic policies, 1995-2012, promoting free markets. The United States has had only six years promoting markets, 1995-2000, all under Clinton. The Bush-Obama years, 2001-2012, have been 11 years of assaults on the private economy.

Of course, Mexico has its own problems, especially the horrible drug-gang violence. But that was caused because the drug “war” was pushed on Calderon by Bush. In 2007, Bush gave Calderon $500 million in U.S. taxpayers’ money to heighten the war. Calderon should have told the Yanqui caudillo to keep his money. But it’s hard to say no to a bully with 10,000 nuclear weapons. The Bush-Calderon “war” on drugs meant drug-gang retaliation across Mexico. Of course, almost all the dope ends up in the United States. And the drug “war” is pointless, because the dope still is readily available at low prices. Mexico pays the price in blood for Yanquis getting high.

Perhaps Mexico’s next presidente, elected this year, will reverse this process, and even legalize drugs, as has been urged by ex-Presidente Fox.

After Portugal legalized drugs a decade ago, drug use actually declined. Drug addiction has been treated as a medical, not a criminal, problem. With no profit motive, the pushers don’t push drugs on kids, or fight turf wars.

A combination of continued economic growth and ending the drug violence through legalization would turbocharge the attractiveness of Mexico’s economy. Likely millions more immigrants to the United States would return home.

Goin’ South

Not only that. Millions of gringos would head South, seeking jobs and freedom. Among the many ways Mexico is freer than El Norte, South of the border you can smoke and drink most anywhere. And you can buy Cuban cigars legally.

The United States government still imposes an embargo on most Cuban goods, especially cigars, because of fears that the Soviet Union will use Cuba as a base for a Red Army invasion, as in the 1984 movie “Red Dawn.” Except that the Soviet Union dissolved 21 years ago. Now we know who’s been using all the drugs the U.S. government confiscated from Mexican drug gangs.

As millions of gringos move South to pursue the bright Mexican Dream, we’ll soon hear complaints about the Yanquis “taking Mexican jobs.” Yanqui defenders will say they’re only “doing jobs Mexicans won’t do.”

And for their children attending university, gringo parents will insist on the Mexican government passing a “Mexican Dream Act.”

Ali Meyer:

This afternoon Gov. Jerry Brown signed the “Dream Act” bill AB 130. By Assemblyman Gil Cedillo, D-Los Angeles, the bill will “allow undocumented immigrants who live in California to apply for scholarships funded with private donations,” according to the Sacramento Bee.

This bill is one part of the Dream Act initiative.  Part two, AB 131, would allow these students to be available for public financial aid, paid for by state taxpayers. Brown also is expected to sign it.

This isn’t the first time the Dream Act was introduced.  Cedillo has been attempting to pass the bill since 2006.  Introduced as SB 1460 in 2010, the bill passed both houses of the state Legislature but was vetoed by then-Gov. Arnold Schwarzenegger on September 30, 2010.  Now that Schwarzenegger is gone, Cedillo has found luck with Gov. Jerry Brown.

The Dream Act, Cedillo said, is a “bill that recognizes that in the year 2025, this economy of the eighth largest economy of the world is going to be missing one million people with bachelor of arts and bachelor of science degrees. And the question is, where will these people come from?”

Where will they come from? Isn’t there already a surplus of college students with degrees attempting to find jobs? Not to mention adding undocumented immigrants to the list?

“I suggest to you part of where they come from is from this group, this community of students, that are called dream students,” he continued.

The opposition mentioned the state’s endemic budget problems.  “The problem we have right now with the state of California’s budget is that we don’t even have enough money to provide financial aid for students that are here legally, let alone ones that are here illegally,” said state Senator Bob Dutton, R-Riverside.

July 25, 2011