Archive for 2011



Why PPIC’s New Wealth Gap Report Matters

Friday, December 9th, 2011

Data dump: This week’s Little Pulitzer Award for Actual Facts Reporting goes hands-down to Sarah Bohn and Eric Schiff of the (all rise) Public Policy Institute of California, for their terrific synthanalysis of income (mal)distribution in the state, and how it’s been affected by the recession.

The fundamental conclusion to be drawn from the data ain’t exactly a stop-the-presses shocker (spoiler alert: rich and poor each getting more so). At a time when income inequality has emerged as a crucial issue in the 2012 elections, however, the report’s comprehensive collection, sharp dissection and clear presentation of reams of up-to-date economic data provides policy makers and political hacks of every persuasion a sturdy bulwark of shared, high-quality and hard evidence.

“The gap between upper and lower-income families is now wider than ever,” the dynamic duo report. “As these findings suggest, the Great Recession has brought us to new extremes. These include record high measures of inequality, near-record lows in the proportion of middle-income families, and record high unemployment and unemployment duration.”

Not to put too fine a point on it.

But what does this mean to me?  While noting that “changes in the distribution of income are generally greater in California than in the rest of the U.S.,”  the radically non-partisan PPIC characteristically steered wayyy clear of getting too close to the messy business of politics by, oh, you know, pointing to any of the real-life political implications of the data.

Fortunately Calbuzz — Issue-oriented, solution driven! –  is here to sweep up after the elephant, whereby we glean at least three basic issues:

Economic activity.  The obscene, Third World-levels of income inequality in the state and nation are most often discussed as an issue of morality and social justice. But the most pernicious, long-term affliction of wealth-by-class distortion is its dampening impact on the overall economy.

As economic conditions for tens of millions at the lower level of the spectrum press them to spend proportionately more and save proportionately less than the wealthy, the plain fact is that the great mass of citizens with ever-declining levels of disposable income will increasingly shirk their solemn patriotic duty to act as energetic, highly-motivated consumers:

By 2010, families at the (lowest) 10th percentile had incomes roughly 24 percent lower than the 10th percentile did in 1980 (emphasis ours), and families at the 25th percentile had incomes 12 percent lower . . . At the other end of the spectrum, the 90th percentile saw a decline from its 2006 peaks. However, the gains at the 90th percentile over the past three decades mean that despite the Great Recession, the 90th percentile of income was still 34 percent higher in 2010 than in 1980.

Economic survival. At a time when state and local governments have responded to depressed economic conditions with year-after-year cuts in benefits for those at the bottom of the economic pile (and conservative blowhards ideologues endlessly chant their mindless mantra of tax cuts and trickle-down economics as the keys to growth; but we digress) such policies exert a multiplier effect on those most damaged by the severe downturn, who lack savings or investment portfolios as a safety net:

Family income derives from multiple sources. Earnings from work clearly are related to family economic well-being. However, other sources of income matter as well. In times of constricted labor market opportunities, income from sources other than wages – such as unemployment compensation, welfare, or earnings on investments – can compensate for declines in family income…

For low-income families, the third most important source of income is the government; this includes unemployment, Social Security, public assistance, and Supplemental Security Income.

Economy and education. The PPIC study confirms with updated hard numbers the widespread assumption that the single most important, long-term factor shaping income disparity is educational attainment, neatly summing it up this way:

The more education, the higher the median income and the lower the unemployment rate among families in California.

While “everybody knows” this is true, however, Jerry Brown and the Legislature are set to double down yet again on the state’s decades-long policy of steadily reducing public support for higher education.

As high school enrollments substantially increase, creating record demand for admission to California’s public universities, the mid-year trigger cuts about to be enacted by lawmakers and the governor will extend this all-wrong policy by piling another $200 million in reductions on the UC and CSU systems.

Consider: Twenty years ago, state funds accounted for nearly 80 percent of the cost of educating a UC student — $16,720 of $21,370; today, not only has the average expenditure per student shrunk about 20% — from $21,370 to $17,390 – but the state’s share of the cost has declined 60%, and now amounts to just $6,770 per student.

This at a time when a shortage of 1 million college educated workers in California is projected by 2025. Says PPIC:

The most important factor driving the gap between high- and low-income workers is education…

Economic opportunity in the new economy is inextricably linked to education. Policy has a role to play in creating economic opportunity across the income distribution, particularly through education. Looking ahead, California may need to find innovative ways to promote opportunity through education, especially so that middle- and lower-income families are not left behind.

Talk about your masters of understatement.

Press Clips: Belated mega-kudos to erstwhile Calbuzz Washington correspondent Mackenzie Weinger, whose journalistic talent, indefatigable work ethic and endless capacity for alcoholic beverages have helped her land a real job. Her latest Politico offering reports on a new Organization for Economic Cooperation and Development study about wealth inequality around the globe:

The U.S. — where the Occupy Wall Street movement exploded to protest the disparity between the richest 1 percent and the remaining 99 percent — ranks in with the fourth-highest inequality level, coming after Chile, Mexico and Turkey. Overall, the report stated, inequality among U.S. workers has risen by 25 percent since 1980…

 “The social contract is starting to unravel in many countries,” OECD Secretary-General Angel Gurría said, according to a press release. “This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, inequality will continue to rise.”

Lock up the kids Maude: All Right-Thinking People will be spending Saturday night in front of the big screen, checking out the All-Time Most Importantly Crucial Republican Presidential Debate This Week (6 p.m. PST on ABC).

Drinking game: Throw one down every time Newt says the words “fundamentally,” “profoundly,” or “deeply” and we’ll see you Monday morning when you finally pull your face out of the guacamole. H/T Ruth Marcus.

Let’s get Don King to arrange it: Mike Kazin (son of Alfred) was one of those triple-smart guys at college whose massive brain matter thoroughly intimidated a working class kid from Cleveland on the first day of school, although he later turned out to be one of the more friendly and level-headed SDS honchos working tirelessly to smash the state.

His new history of the American Left stands ready on the book pile next to the bed, but in the meantime we strongly recommend his excellent essay on why an Obama-Gingrich race would be a valuable and clarifying experience for America.

And this could set up the kind of campaign Americans have never witnessed before: a serious debate between articulate exponents of liberalism and conservatism—the ideological conflict that has shaped American politics since the emergence of a mass movement on the right in the 1950s.

In other words, we would have a fair chance of having a true contest of ideas and ideals between two smart men. Newt would force Obama to talk about his principles and not just his programs—or rather how the latter flows from the former. The debates would sharpen the terms of political discourse in a healthy rather than demagogic fashion: Standing just feet away from the president, Newt would probably refrain from ranting about the Democrat’s “secular socialist agenda,” and Obama would not be able to get away with empty talk about “winning the future.”

Must read of the week: Jacob Weisberg’s examination of the most important question in politics today: Is Newt clinically insane?

ICYMI: Here’s Burton’s instantly iconic star turn on “The Daily Show.”

Calbuzz Panel: Brown Must Scuttle Other Tax Plans

Wednesday, December 7th, 2011

The only way Gov. Jerry Brown can win approval of his November initiative to raise $7 billion a year over the next five years is if he can convince other forces who are planning to qualify tax measures to drop their proposals and unite behind his. And even then, the odds are about 50-50.

That’s the consensus of the California Consultanate – a collection of the smartest and most experienced political strategists in the state who are members of the Calbuzz Advisory Board of Leading Experts on Practically Everything.

Under Brown’s plan, income tax rates would grow by one percentage point for individuals making $250,000,one-and-a-half points for those making more than $300,000 and two points for persons making $500,000 a year or more. Also, the state sales tax would be raised by a half cent. Revenues would be dedicated to schools and public safety.

But at least three other individuals or groups are planning tax measures:

– The California Federation of Teachers and Courage Campaign would raise $6 billion by raising income taxes on millionaires.

–Civil rights attorney Molly Munger, who happens to be the daughter of Warren Buffett’s partner, would raise $10 billion by increasing income taxes, especially on the highest-income individuals.

– The Think Long Committee, a business and civic coalition, would raise $10 billion, largely by extending sales taxes to services.

“To have a chance, the governor needs to step up and convince others to withdraw their initiatives or hold them for a later ballot,” said one GOP member of the Calbuzz panel.

“Brown has to clear the field of the many potential other ballot measures that raise taxes,” agreed a Democratic panelist. “If he can do that he has a chance. But if there are several rival ballot measures on taxes, he will likely lose.”

Brown’s top strategist, Steve Glazer, wouldn’t discuss what negotiations the governor’s brain trust is having with backers of other potential initiatives other than to say he believes Brown’s proposal will enjoy a “good environment” next November.

But everyone knows the electoral calculus: In the history of ballot measures in California, “no” has beaten “yes” two-thirds of the time. And the default position for voters, when the ballot is filled with competing initiatives, is to reject them all by simply voting “no, no, no.”

The governor’s approval rating, right now, is 47%, according to the Field Poll – not great, but not too bad for a chief exec in a state where the Legislature is in budget gridlock and the economy is still lagging. At the same time, two-thirds of voters don’t want the automatic cuts to schools, public safety and other state services that have been negotiated as part of the current budget. So there’s an opportunity to argue, as Brown has and will, that the only way to break the GOP stranglehold on progress is for the voters to elect to temporarily increase their own taxes.

Here are some of the other responses from our panelists when we asked if Brown will be able to pass a tax measure next November.

Democrats:

– No, no and no. The reality of the governor’s proposal is that it raises taxes by $2.5 billion on working families through a sales tax increase – public opinion research has consistently shown that voters do not like raising the statewide sales tax. It isn’t $500,000 – that’s the governor’s spin on it. It is $250,000 for individuals, then $300,000 (1.5% increase) and then $500,000 (2%) increase. Polling has shown these numbers are too low and many voters will view this as hurting “small business owners” (and voters and the press tend to focus on the lower dollar amount – just ask Rob Reiner and his pre-school initiative). It says it will fund “education and local public safety” but in reading the measure, it is about as clear as mud as how it will do that, so much will depend on the title and summary that the Attorney General puts forward. To make it stronger, he should have focused on raising taxes on incomes over $1 million – that would give him a much better chance of winning.

– Yes, if he can get everyone else lusting after those tax revenues from millionaires to stand down. Focusing it on education and public safety connects with the top priorities of voters.  Making it temporary undercuts the critics.  Limiting it to the wealthiest Californians allows most voters to say yes because it’s their favorite kind of tax – a tax on some other guy.

– Voters in recent focus groups show surprising trust in Brown’s motives and give him benefit of doubt. If that holds up his plan could gain enough traction to pass. So yes it passes.

– 45-to-55 if there are other tax increase measures on the  ballot. 55-to-45 if his is the only one. Take that Grover Norquist

– Not unless he gets off his ass and puts forward a more aggressive, strategic public campaign than he did in a) the governor’s race, and b) when he supposedly took his case to the public after his months-long negotiation with Republican legislators failed to produce a single vote for tax extensions.  The latter involved a couple of random, hit-and-miss appearances, then he went MIA for several weeks because he had a band-aid on his nose. It’s not at all clear to me that Brown really understands how to wage a sustained public fight on such a difficult issue in the 21st century . . . Does this guy really have what it takes to pass a tax increase? Don’t bet on it. His approval rating is in the 40s and he has the attention span of a 5-year-old.

– The answer is no. He won’t get a pension reform plan in time, and the governor’s habit of starting late will mean anti-tax advocates will get a chance to define the tax measure as taking from job creators to support public employee pensions before the “yes” campaign even gets out of the starting blocks.

Republicans:

– Depends on the overall trade-offs he asks voters to make, depends on whether his natural allies will be there to support it financially.

– If the measure were the only tax increase on the ballot, I think he would have a better than even chance, given Obama’s likely margin in this state.  (In 2008, L.A. County passed a 1/2 cent sales tax for transportation, by a 2/3 vote, because of the Obama effect.)  But several other tax increase measures have been floated, and I think passage becomes doubly difficult with two tax measures, four times as difficult with three, etc.   Anger over so many “asks,” and the spending against a number of them, will activate that tried and true initiative voters rule of thumb:  when in doubt, or ticked off, vote “no.”

– Jerry’s odds are still pretty long, especially given how many tax measures will be on the ballot. If the ballot has as many measures on it as I think it will, I see confused, frustrated voters voting “no” on every single one of them.

– No. Voters have already said no to higher taxes without corresponding reforms or assurances that the new taxes would be used efficiently.  The Legislature is incapable of enacting any reforms that would achieve this prerequisite and the anti-tax lobby will have the resources to defeat the tax. Moreover, the effort to raise taxes could backfire and become a reason for voters to pass the Paycheck Protection initiative, which would ban corporations and unions from using shareholder dollars/union dues for politics.

– No. There likely will be several tax initiatives on the November ballot, which may doom them all . . . Specifically, the Think Long (aka Think Again or Think Wrong) ideas need to be scuttled. As well as the effort of Ms. Munger, whose motives are a mystery other than sibling rivalry. Still Brown has an uphill battle and will come up short.

– No. He hasn’t offered a reform oriented trade off for voters to believe it’s worth raising taxes.  He needs to pair it with a spending cap or something else that voters see goring public sector oxes a bit to have a chance.  That’s the political reality.

Newt: Nomination Maybe, White House Never

Monday, December 5th, 2011

Whether or not Newton Leroy Gingrich wins the Republican nomination for the presidency is up for grabs: Willard Mitt Romney has been unable to attract more than about a quarter of GOP voters, Newt’s serial adultery may be marginally less a drag than Mitt’s serial flip-floppery and, of course, Iowa Republican caucus-goers are more or less insane (remember presidents Huckabee and Dole).

But Gingrich will not be elected president. For starters, you’re in big trouble when – all rise – George Will Himself, the High Priest of Anglican Republican Theology, proclaims that Gingrich “embodies the vanity and rapacity that make modern Washington repulsive.” This from a vain D.C. pundit who knows from repulsive.

Then there’s the revelation (only the latest in a long chain of abuses) that Gingrich has raked in millions in recent years “helping companies promote their services and gain access to state and federal officials,” as the New York Times put it, so as to allow Gingrich to assert hypocritically that he is not a “lobbyist.”

Of course this is just semantics. And legalese. Gingrich can’t admit he was a lobbyist because he was never registered to lobby on behalf of his clients. Even the dim-witted Michele Bachmann could see through this one, telling Chris Wallace at Fox News:

“It’s implausible, Chris, because he’s been a part of Washington, D.C. for over 30 years. He’s as Establishment as you get. His address is located on the Rodeo Drive of Washington, which is K Street. His organizations have taken in over a hundred million dollars just this year alone to peddle influence. You don’t have to be a lobbyist within the letter of the law in order to influence the outcome of legislation.”

But if he wasn’t a “lobbyist” per se, surely Newt – that’s Citizen Newt, to you, buster — wouldn’t mind if we refer to him as a backscratcher, skid greaser, door opener and influence peddler. Why else would people pay him? What, after all, did he do to earn all that cash? Hold senior seminars on the history of how a bill becomes law?

Whether he’s advocating for an end to child labor laws, calling President Obama a socialist or delivering divorce papers to his wife when she’s in the hospital recovering from cancer surgery, Gingrich personifies a level of condescension, contempt and arrogance that could choke a horse. He is one of the most distasteful figures in modern American politics, not just because he’s fat and nasty, but because he wears his smug hubris like Hester Prynne’s scarlet letter.

Even as he has picked up some of Herman Cain’s supporters – and you have to wonder why having committed your serial adultery in the past is better than it having just being exposed, but that’s another story – Gingrich remains a dislikeable figure.

Take, for example the Quinnipiac poll in which Gingrich has a favorable-to-unfavorable rating of 30-42% nationwide. But that’s a vast understatement, because in this survey, at least, he has a 64-10% positive favorability among Republicans, but a massive 9-67% unfavorable among Democrats and – most important – a 27-42% unfavorable rating among independents.

Compare that to Romney, whose overall favorability is 36-31% favorable, including 58-15% positive among Republicans, 19-47% negative among Democrats and –importantly — 37-27% positive among independents. (This, by the way, is why Obama’s people would be delighted if the Republicans select Gingrich instead of Romney.)

While Romney has racked up more support from the GOP Establishment, Gingrich is beating him in the polls among potential Republican primary voters. This may turn out to be a blessing for the Newtster if, as poll watcher Nate Silver postulates, GOP voters are becoming increasingly anti-establishmentarians. But all that gets Gingrich is the nomination – not the White House.

Newt is convinced he will be the nominee. This we know because he says so. “I’m going to be the nominee,” he told ABC News. “It’s very hard not to look at the recent polls and think that the odds are very high I’m going to be the nominee.”

Maybe. Maybe not. A lot of conservatives are rallying against the idea – worried that their best chance to take out a Democratic president (with Romney) would be turned to dust if their party picks Gingrich.

Some, like Ramesh Ponnuru of the National Review, have been quite emphatic:

His recent proposals on immigration are classic Gingrich: innovative-sounding, accompanied by high-tech gadgetry, and wholly absurd. Local community boards will decide which illegal immigrants to expel! We will be “humane,” while denying temporary workers the vote and stripping their children of citizenship! . . . . Memories have faded, and his current fans say he is a changed man. But he still has the rhetorical style — by turns incendiary, grandiose, and abrasive — that turned off middle-of-the-road Americans then. (November 16: “Because I am much like Reagan and Margaret Thatcher . . . ”) . . . . Recall the events that led to his campaign’s meltdown this summer, in which he first praised Paul Ryan’s plan for entitlements, then condemned it as “right-wing social engineering,” and finally apologized to Ryan for the comment. . . .

But that’s elite opinion. Out there among the Republican base, Gingrich is generating a lot more upside intensity than Romney is, according to Gallup.

Which is what Obama and the Democrats are hoping for. Because no matter how smart the former Speaker of the House believes he is, no matter how clever – he will never be elected president because he’s so thoroughly unlikeable.