John Moorlach: Sacramento has no clue how to solve housing crisis

Sacramento just doesn’t get it. A housing crisis is not solved with new fees, bonds and local government process overrides.

Let’s talk about housing. KQED provides some of the gory details in a recent piece. But, allow me to elaborate. A quick tip, KQED provides the last act first.

For Senate Bill 3 (and 5), I provided the following abbreviated concerns on the Senate Floor:

  1. Let’s review the housing market over the last 11 years. In Orange County, the median price for a home in 1996 was $221,800. Ten years later, after the subprime mortgage boom (for fun, watch “The Big Short”), the median rose to $739,000. With the Great Recession, the median went down to $498,200 in 2011. And, as of June 2017, it is back to $734,200.
  2. Why the recent resurgence?
    • A slow, but steady rise in job growth.
    • Foreign investors. They came in at the market low as a safe haven.
    • Explaining an increase of all-cash transactions; more than 50% in 2013.
    • This has caused a decrease in home ownership and more renters.
    • Difficulty for developers to obtain entitlements and to build.
    • The other usual suspects, like NIMBYism, CEQA and open space demands.
    • For those lucky enough, try working with the California Coastal Commission.

It makes you wonder, what has Sacramento done to address foreign buyers and entitlement restrictions? And, I can see now why SB 714 (Newman) was removed from the calendar this last week, as it doubles down on taking entitled property for building new homes in the city of Brea and requiring total open space. Boy, this bill was so out of touch, the Democrats had to save the author from himself.  But, I digress.

  1. What is the current dilemma?
    • Americans find the home buying process too overwhelming.
    • They find it too difficult to come up with the down payment.
    • More than other generations, millennials value experiences over ownership.
    • Americans change jobs more often than in previous generations.

With SB 2, Sacramento will be adding to the burdens. Within minutes, the Democrats also voted for AB 166 (Salas), which provides exemptions from the new SB 2 fees. You can’t make this stuff up. And those who qualify are not those going through a foreclosure!

Then I warned them about issuing more debt by sharing the following disturbing data from Moody’s Investors Service. Among the 10 largest states in the nation, California joins Illinois and New York as the three worst in all of the following categories:

  1. Debt to personal income – 4.70%, when the median for all states is 2.50%.
  2. Debt per capita – $2,323, when the median is $1,025.
  3. Debt as a percentage of state GDP – 3.94%, when the median is 2.21%

And the state’s own bond credit rating is a measly AA-, just above Illinois, at BBB+. This means that California will be paying higher interest rates than issuing states with top credit ratings.

If this wasn’t enough of a reason to vote against the bond measures, I also gave a lecture on future budget and balance sheet concerns – a “what’s up?” listing:

  1. A $4 billion bond translates into $225 million per year in payments! Where will this come from?  The Senate approved two such bond bills on Friday.
  2. The annual contributions for CalPERS and CalSTRS are also rising.
  3. The Proposition 98 school funding threshold into the General Fund is also rising.
  4. The minimum wage is rising and will impact the budget by $4 billion per year.
  5. The recent voter approved $9 billion bond for school improvements will impact the General Fund by $500 million per year (no wonder the Governor hasn’t released any tranches).

What does all this mean? In a few short years, the General Fund is screwed. But I put it more politely on the Senate floor, stating that “it will be dramatically impacted. Good luck with that.”

Sacramento so much wants California to be like other blue states that are heading for the fiscal precipice, such as Connecticut, Illinois and New York. And quickly. But, this is the wrong race to be in.

You can bet the governor will sign these bills and the monopoly party will pat themselves on the back for once again dealing with a problem with inappropriate solutions. Tragic.

Who Runs Our Government?

Many years ago, it became clear to many of us that Sacramento had two parties, the Republican Party and the Union Party. It is amazing how many bills are approved that incrementally give unions, both public and private, more and more territory over management or nonunion private sector businesses.  It’s a testimony to their effectiveness, that such a small portion of the work force can control so much influence. Now that they have so much influence, that the changes they seek are no longer incremental.  In fact, they are swinging for the fences and seem to be closing in on wholesale ownership of the state.  They will use their power to the fullest, following the dictum of “more.” They are proving that they are “the Daddy” around the Capitol.

The most egregious example this year is AB1250. Almost every newspaper in California has opined against this bill. Consequently, it was reported that it has become a two-year bill. Yet, we have been told that AB1250 may come back to the Senate floor today or tomorrow for a vote (also see MOORLACH UPDATE — AB 1250 OC Opposition — September 5, 2017 MOORLACH UPDATE — AB 1250 Labor Dominance — July 13, 2017 MOORLACH UPDATE — AB 1250 Labor Dominance — July 13, 2017 ).

With this shadow hanging over the Legislature, I submitted one last editorial in opposition and it was published by Fox & Hounds.

Moorlach Update – Whistleblower Reaction

The Senate voted on nearly 200 bills and then adjourned for the week a few hours ago. The only bill a reporter asked my opinion on was SB51. “Why did I vote against it?”

SB51 addresses a certain category of whistleblowers. Having held this title for my efforts back in 1994, you should know that I like whistleblowers very much. Earlier this year, I wrote a bill to protect whistleblowers in college who were being persecuted, vilified and punished for their political beliefs by college professors and administrators. This was a very real problem in my district. See Senate Bill 677, the Student Whistleblower Protection Act.

Incidentally, my bill died at the hands of the legislator who authored SB51, and she was the only opposing vote on SB677 (it received 2 votes, but the other Senate Judiciary Committee members abstained). You’ve got to love the ironies up here in Sacramento.

While the reporter accurately reflects my comments, focusing on my concerns that there were negative fiscal impacts of the state of California absorbing work undertaken by the federal government, it must also be said that my legislative colleagues need to be a little more circumspect and less reactionary in the work we’re doing in the state capitol. SB51 is another bill in a long list of anti-Trump measures that has no real bearing on fixing our poorly run state.

Yes, we need courageous people to stand up when government messes up, which is often enough. However, a new federal administration has the ability to run its websites as it sees fit as long as it obeys all relevant public information and transparency laws.

In all seriousness, while this may be a problem for some, pulling politically controversial links claiming “scientific consensus” on climate change off of a federal government website does not rise to a level of concern for me. As far as I can tell, the information hasn’t disappeared and is available to those that need it. Indeed, all of the scientific data prepared by scientists, often with government grants in government institutions or institutions of higher learning, is redundantly saved and shared in numerous places and any concerns of it being lost are absurd and rise to the level of hyperbole. I tried to address this issue during the very predictable debate over cap and trade on my website, as I prefer providing more information to you, rather than less.

The Mercury News provides my response. Next week we’re anticipating going through more than 300 more bills. The fun life continues.

John Moorlach, R-Costa Mesa, is a state senator representing the 37th District.

Freedom flourishes in San Francisco — if you can afford the rent.

San Francisco, CA, USASan Francisco, that most forward-looking of cities, has looked backward this summer. Half a century after an estimated 100,000 young Americans descended on the 20 blocks surrounding the intersection of Haight and Ashbury Streets to “tune in, turn on, and drop out,” the city has commemorated the birth of America’s counterculture. A frenzy of nostalgia—exhibitions, concerts, conferences, lectures, installations, street fairs, walking and “magical mystery” bus tours—has celebrated all things “hippie.” More than 50 of San Francisco’s best-known institutions — the California Historical Society, de Young Fine Arts Museum, University of California at Berkeley, San Francisco State University, San Francisco’s ballet and opera companies, dozens of art galleries, and private merchants — paid tribute to 1967’s Summer of Love, iconic shorthand for a decade that not only shattered the city’s and the nation’s cultural and political norms but also gave birth to a countermovement that elected Ronald Reagan as California’s governor—and, in 1981, the nation’s president. In 1966, Reagan ran explicitly against student activism in Berkeley, which was then merging with the growing youth movement across the bay in the Haight-Ashbury neighborhood to create the hippie counterculture.

California’s political schizophrenia, an enduring hallmark of the state’s politics, may have predated that fateful summer, argues Adam Hirschfelder, director of strategic initiatives for the California Historical Society, but it was “deeply exacerbated by the 1960s counterculture.” It is an irony not lost on some sponsors of these myriad anniversary “happenings” that, while San Francisco has been celebrating the youth culture that evolved into “San Francisco values” — left-wing or rigidly liberal politics, social tolerance, gender and sexual freedom, a shared sense of community, concern about the planet’s inherent fragility, and an embrace of change — President Donald Trump was marking a half-year in the White House by proclaiming in tweets and speeches the triumph of his own unorthodox, nostalgic political upheaval, one aimed at making America “great” again.

Today, San Francisco is better known as the home of another kind of revolution — that of high tech and Silicon Valley, which, by some accounts, owes much to the ideas and institutions that emerged during that fateful summer 50 years ago. It’s no accident, many argue, that the Bay Area became high tech’s geographic and spiritual global headquarters. Information, too, wants to be “free.”

By now, the information revolution has long since overrun the countercultural revolution, at least economically. Well-heeled techies have displaced latter-day hippies, says Stannous Fluoride, a wry, well-informed guide for Flower Power Walking Tours in the Haight. He spoke with me while guiding tourists along the Haight’s tree-lined streets and elegant late-Victorian houses, the so-called Painted Ladies, where Janis Joplin, Jimi Hendrix, Jefferson Airplane—and, yes, the mass murderer Charles Manson and Jonestown’s infamous Reverend Jim Jones—once lived or hung out. “What helped make the counterculture possible was cheap rent,” he says. But since 1987, San Francisco’s median home price has exceeded New York’s, and for years, the city has had the dubious distinction of being the nation’s most expensive; it appeared last year on the Guardiannewspaper’s list of the world’s ten costliest places to live. The older, avant-garde Beats and, later, the teenage hippies who flocked here could not have afforded to live in the city today. The musicians who combined elements of jazz, blues, folk, and rock and roll at the Fillmore West and the Avalon Ballroom to produce a quintessentially American sound would not be able to pay the rates at even a decrepit recording studio today, much less the run-down house at 710 Ashbury Street once shared by San Francisco–born Jerry Garcia and other members of the Grateful Dead, the band that embodied the counterculture spirit.

Heroin, opioids, and crime are on the rise again in Fog City. Homelessness has again become a plague, and not only in the Haight. Billionaires step over sleeping bags and dodge dog feces on sidewalks to enter some of the nation’s most expensive restaurants. A city with more dogs than children, San Francisco has become, like New York, a city of extremes of wealth and poverty, with too few of the middle-class adults upon whom urban cultural and economic vibrancy ultimately depend.

According to Salon founder David Talbot, a San Francisco Chronicle columnist and author of Season of the Witch, a sweeping chronicle of the counterculture, “San Francisco values” did not “come into the world with flowers in their hair,” he wrote. “They were born howling in blood and strife.” As his book and the most forthright of the commemorations make clear, San Francisco endured years of “frantic and often violent conflict” after that much celebrated summer of ’67—the political assassinations of a mayor and the first openly gay member of the city’s Board of Supervisors, bombings, riots, kidnappings, serial race murders, antigay street mayhem, the biggest mass suicide in history in Jonestown, and a panic-inducing AIDS epidemic—before the city finally “made peace with itself and its new identity.”

Still, as Talbot argues, the counterculture could have been born only in this city of outcasts. Despite its modern-day obsession with astrology and all things spiritual, San Francisco, or Yerba Buena, as it was initially known, has always been unapologetically ribald, eccentric, and moneygrubbing. While most of America’s eastern cities were founded by God-fearing Puritans seeking freedom to practice their faith and form communities of decorum, the men who came to the Bay Area were schemers and dreamers, attracted by the lure of gold, copper, and silver, or by the opportunity to sell life’s essentials to those hoping to acquire them. (See “California Emerges,” Winter 2015.) By 1866, Talbot reports, the city had 31 saloons for every place of worship. Even the great earthquake of 1906, which some evangelical preachers considered God’s verdict on “Sodom Francisco,” failed to dampen the raucous, bar- and burlesque-filled energy and profits generated by the Barbary Coast. William A. Kelley, a visitor in the early 1990s, described San Francisco as a city of “precocious depravity.”

By the 1930s, however, the city’s more staid, God-fearing Irish—and later, Italian-Catholic families—had solidified their political control and imposed a new, unaccustomed order. San Francisco’s upper class had long been at least half-Catholic, a distinction among American cities shared only by Baltimore and New Orleans, notes Michael Anton, a native San Franciscan and critic of the city and its culture. The Catholic Church’s influence permeated key institutions, particularly city hall and the San Francisco police department. Cops routinely rounded up gays and lesbians in midnight raids. At the same time, the radical longshoremen’s union and the Democratic Party became embedded in the city’s political DNA.

But San Francisco’s inherent rowdiness could not be suppressed forever. It erupted once again in the mid-1950s, says historian Dennis McNally, when poet Lawrence Ferlinghetti’s City Lights Press (founder of the eponymous bookstore) published Allen Ginsberg’s poem “Howl,” warning that America was becoming a soulless monster of consumerism and conformity. “Howl” “lit a fuse and defined a mass of disaffected proto-artists who didn’t buy into mainstream values,” McNally wrote in an essay for the de Young museum’s catalog of its April-August exhibition Summer of Love, Art, Fashion, and Rock and Roll, a display of some 300 rare and familiar concert posters, photos, films, interactive music-and-light shows, and the embroidered denim jeans and loose-fitting shirts and dresses that forever changed how young Americans, especially young women, dressed. Arrested and charged with obscenity for selling Ginsberg’s poem, Ferlinghetti and the clerk who had sold the book to an undercover cop stood trial. Their acquittal in October 1957 was a pivotal free-speech victory that helped fuel the 1964 Free Speech Movement at Berkeley. Another precursor of the coming upheaval came in 1960, when protesters ran the House Un-American Activities Committee out of San Francisco after it tried holding hearings in the city. In 1965, psychedelic proselytizers Ken Kesey and Timothy Leary, along with members of the Grateful Dead, began hosting “acid parties,” at which LSD and other mind-bending drugs spiked communal punch bowls and were distributed to runaways for free.

Many historians date the unofficial birth of the Summer of Love to the winter of 1967—specifically, to January 14, 1967, when tens of thousands of “freaks,” as hippies then called themselves, gathered in Golden Gate Park for a “Gathering of the Tribes for a Human Be-In.” For a full day, they ate, chanted, sang, and listened to rock bands, poems by Ginsberg, Gary Snyder, and Michael McClure, and speeches by Timothy Leary, Shunryu Suzuki Roshi (the “primary apostle for Zen Buddhism in America,” as McNally calls him), and Berkeley radicals like Jerry Rubin. At day’s end, audience members picked up the trash, leaving the park spotless, to the amazement of police. The media took note, finding in the gatherings in and near the Haight a sharp counterpoint to the bloodshed of the Vietnam War. Hippie culture made the cover of Time. John Phillips of the Mamas and the Papas wrote a song encouraging people to attend the Monterey International Pop Festival in June wearing “flowers in your hair.” To ensure that they did, the festival flew in 10,000 flowers from Hawaii.

As legions of teenagers eagerly anticipating summer break made plans to travel to San Francisco, city government looked at the impending human flood with indifference. Meetings between Haight merchants seeking help from the mayor and city officials came to naught. The Haight would have to fend for itself. The “Diggers,” political provocateurs and members of a former mime troupe, provided volunteer services for the youth pouring in to the city—free food and clothing, “feed-ins” near City Hall, and a parade to celebrate “the death of money.” The Diggers sought to “liberate San Francisco’s consciousness” by arguing that food, shelter, health care, and even entertainment were not commodities but fundamental human rights. Their posters and street manifestos were the most “passionate expressions of what would later be called San Francisco values,” McNally wrote.

To rescue teenage runaways from being swept up in police dragnets, activist lawyers formed the Haight-Ashbury Legal Organization, or HALO, funded by the Grateful Dead and other bands’ benefit concerts. In 1967, Huckleberry House, the nation’s first alternative shelter for runaways, opened its doors. That same year, Robert Conrich, a physician and LSD enthusiast, launched the Haight Ashbury Free Clinic, which proclaimed: “Health care is a right, not a privilege,” according to Talbot. Kids freaking out during bad acid trips or bouts of suicidal depression filled the clinic’s “calm center,” where they received care from volunteer staff.

But these efforts were soon overwhelmed by the tens of thousands who flocked to the city that summer. Hard-drug merchants began replacing the dispensers of marijuana and LSD-spiked punch. The neighborhood’s fragile infrastructure crumbled under the weight of too many homeless people and too few city services, rendering the Summer of Love a “slightly cruel joke,” McNally observed. “By Labor Day, the Haight was a tourist carnival nightmare. By 1968, Haight Street would be inhabited by children shooting methedrine and heroin. The magic died hard.” Crime had doubled in the neighborhood by 1976.

Keepers of the counterculture flame note that some of what emerged from the Haight—especially what McNally calls a “Thoreauvian respect for the environment”—would eventually become mainstream beliefs. Many of the radical or fun-seeking counterculture pioneers may have left the Haight after the Diggers staged a “death of the Hippie” procession in October 1967, but they took their alternative ideas and lifestyles back home with them. Others went on to found communes and alternative communities elsewhere. Some activists would launch successful ventures—Stewart Brand, for instance, the army veteran who spent time on Ken Kesey’s bus, started the Whole Earth Catalog, which linked the counterculture to the digital future. “Counterculture values would be a significant part of the subsequent growth of Silicon Valley as the nation’s new technological center,” McNally wrote. “If you meditate in some fashion, or eat organic food, or do yoga, or support gay marriage, or are concerned about the environment and the survival of the planet, you are still swimming in the currents that picked up such a froth here in the 1960s.”

Others scoff at these ostensible achievements. San Francisco’s hedonist narcissism distracts from the huge challenges that the city now confronts—among them, scarce, overpriced housing and staggering income inequality. The top 1 percent of households in San Francisco’s metropolitan area earned $3.6 million on average in 2013, according to one report—44 times the average income of the bottom 99 percent. And San Francisco’s 1 percent, the Bay Area’s new gilded class, demands ever more from a city to which it gives relatively little philanthropically. Fund-raisers for impoverished children in South Sudan and to protect the Amazon are oversubscribed, while the city’s excellent opera company and ballet struggle financially.

It is San Francisco’s smug self-satisfaction that so enrages critics like Michael Anton, the San Francisco native who now works for the Trump White House in national-security communications. In a blistering 2015 critique in the Claremont Review of Books, Anton asserted that “San Francisco values” had come to reflect little more than a “confluence of hippie leftism and filthy lucre,” a marriage of convenience between “old-time materialism and hippie ‘morality.’ ” What kept the Summer of Love veneer going for so long, he asserted, is the implicit deal between the high-tech oligarchs and the hippie rank-and-file. “The latter not only decline to use their considerable propaganda skills to vilify the former, but cheerfully glorify and whitewash them,” he wrote. “The oligarchs in turn subsidize the lefties through nonprofits and make-work jobs” and, more important, “take their cues from them on matters of politics not directly contrary to their economic interests.” Both groups benefit from what he called this “socio-intellectual money laundering.” The resulting policies have done little to create opportunities for an aspiring middle class that is neither elite nor bohemian.

Anton is not wrong about the less savory aspects of the counterculture. A notable omission in the city’s much touted tradition of “tolerance,” for instance, is that it rarely extends to politics. There is no welcome mat out for Republicans, especially conservatives. Student mobs at Berkeley boast about preventing conservative scholars from speaking on campus. Socially liberal but fiscally conservative activists like David Crane, who worked as Governor Arnold Schwarzenegger’s finance director, struggle to raise funds for candidates willing to question the pension burdens being imposed on future generations by San Francisco liberals in the name of “workers’ rights.” Several Republican city residents confided that they would never display a Trump/Pence sticker on their car or home window for fear of vandalism.

Nor have many counterculture enthusiasts noted the irony of the use of the Summer of Love as yet another marketing tool for tourism, now a key industry for San Francisco. The San Francisco Travel Association predicts that some 25.6 million tourists will visit the city in 2017 and spend roughly $9.22 billion. Museums and other commemoration sponsors say that attendance is strong. “People throughout the world still care about what happened here when the counterculture was vibrant and organic,” said Hirschfelder of the California Historical Society, whose superb exhibition was curated by McNally.

McNally concedes that some of the commemorations have been “silly and trivializing.” The Summer of Love “wasn’t about love-ins and long hair,” he said. “It was about a movement and a generation that changed this city, the nation, and the world. It was about a serious challenge to the status quo. And that,” he said, “is always to be honored.” Or, at least, remembered.

Rent Control Makes for Good Politics and Bad Economics

affordable housingOne needn’t read very much about public policy before coming across some statement to the effect that “bad economics makes good politics.” This statement is clearly untrue when good politics is defined as furthering mutually beneficial arrangements, as good economics is central to that task. But the statement is often true when good politics is defined as attracting 50%-plus-one votes on some issue or candidate, which is a much different standard, leaving plenty of room for government-imposed harms to be imposed on citizens.

Few issues reflect this divergence between “good” politics and bad economics more clearly than rent control. One of the most universally accepted propositions among economists is that rent control produces a host of adverse social consequences with its large involuntary redistribution of wealth and suppression of market prices as communicators of information and incentives. Despite that, it has been adopted as policy in many places and times — and now is a good time to revisit these issues, as efforts are currently underway in several states (including California, Oregon, Washington, and Illinois) to repeal existing statewide restrictions on rent control.

How Rent Control Destroys Value

Rent control takes a large portion of the value of residential properties from landlords. It does so by removing owners’ rights to accept offers willingly made by potential renters. And the value of the rights involved are large. For example, after Toronto imposed rent control in 1975, affected building values fell by 40% over five years, and a decade ago, such losses were estimated at $120 million annually in Santa Monica. A law like rent control, which can take half or more of each apartment’s value from the landlord, harms them just as much taking away half of their apart­ments, even though the latter is recognized as theft. Those stripped property values are given to current tenants, whose resulting bonanzas are shown by the fact that those under strict rent control almost never leave.

Rent-Controlled United Decline in Quality and Quantity

By taking away so much of the effective ownership of rental housing from owners, rent control creates several other additional adverse effects. Without owners’ ability to capture the value of their buildings, the rental housing stock deteriorates in both quantity and quality. Reduced incentives for maintenance and repair erodes existing rental housing. Further, owners retain little incentive to construct new rental units, bringing new apartment construction to a virtual halt, taking with it local construction jobs and tax revenues. Rental units are also converted to condos and non-housing uses to escape the burdens rent control imposes. All of this reduces rental housing availability, which worsens the problem of inadequate housing rather than alleviating it.

Rent control also increases discrimination and landlord-tenant hostility. Owners who can no longer be compen­sated for increased costs created through crowding, water usage, potential damage, or reduced probabili­ty of actually paying the rent — or any other unattractive tenant charac­teristic — have sharply reduced incentives to accommodate those who might impose them. This is why rent controlled areas, rather than helping those of low and moderate means, become increas­ingly popu­lated by higher income tenants with few children. Further, tenants bla­me “greedy” land­lords for not providing the services they desire, and landlords view tenants as the enemy engaged in an ongoing rip-off, even though rent control is the real culprit.

Rent Control Creates Black and Gray Markets

Rent control’s artificial restrictions on mutually agreed upon exchanges also lead to evasion attempts, such as under-the-table payments, agreements to renovate apartments or upgrade appliances at private expen­se, personal connections, etc. Not only do these alterna­tive forms of competition favor higher income renters, rather than “the poor” (who populate rent control rhetoric but far less of the housing available under it), they lead to rent control boards to stymie such at­tempts. That enforcement, as well as the costs land­lords must bear both to defend them­selves and comply with its edicts, consumes a great deal of resour­ces that could have been put to productive uses.

Despite such an overwhelming case for rent control being bad economics, why has it not been equally politically unattractive? The essential reason is that in cities where rent control is imposed, existing local renters, who are the recipients of the value taken from landlords, form a political majority who approve of that theft, vote for it, and go to great lengths to rationalize and defend it as part of “the wonders of democracy.”

Rent control offers current tenants perhaps the greatest economic returns of any policy they could use their majority power to enact. Not only do they save what can far exceed $1,000 a month compared to what market prices would be, they are also awarded what amounts to life tenure. If you saved $1,000 a month and stayed 10 years, that would be $120,000, while staying 21 years would generate over a quarter million dollars in benefits. And many long-term tenants have saved themselves far more. What other political act offers local renters so great an economic benefit in exchange for their votes?

Rent control’s “pro renter” rhetoric also allows a powerful form of misrepresentation. Rent control benefits current renters, but it does not benefit renters overall. It harms all renters and potential renters who aren’t already in rent-controlled units. It harms all those who seek to rent apartments after rent control is imposed, mainly finding “no vacancy” signs instead. But they don’t get a vote in the communities to which they’d like to move. Even though those who are eventually successful in finding a controlled unit have been harmed, once there, they don’t want their finally-achieved good deal halted. Rent control also harms renters in surrounding communities, as the restricted supply of available units raises rents there, as well. But they don’t get a vote, either. Rent controls also harm those who rent houses, which are usually exempt, because rent control’s reduction in housing availability leads those rents to be bid up as well.

Rent control also involves unusual characteristics that weakens and divides opposition.

The Long-term Effects of Rent Control

Because housing is durable, there is an unusually sharp dichotomy between short-run and long-run effects. The short-term effect of imposing rent controls on the available supply of rental units is quite small. Proponents can focus only on the immediate effects to argue that objections are unsubstantiated. However, the cumulative effect of ongoing rent control is very large, leading many economists over the years to recognize its ability to decimate the supply of urban housing.

Property owners, who might be expected to be unified in opposition to the threat to property rights rent control poses, are also subject to divide and conquer techniques.

Not only are rental housing owners far outnumbered by current tenants, many of them live outside the jurisdiction considering rent control, undermining their voice. And if they raise money for an opposition campaign, their efforts against the harm that would be imposed on them can be easily demonized as proof of how much they rip off tenants whenever they are given a chance.

Some Property Owners Benefit

Property owners are also split in other ways. Owners in neighboring areas, who would otherwise tend to side with those in the jurisdiction considering rent control, due to the similar threat posed against them, can be bribed away because the reduction of housing supply “next door” increases their demand and raises their rents. Owners of commercial property, who are usually exempt from rent control, can benefit from higher rents for their properties due to the influx of higher income residents rent control brings. The restriction in supply of rental units in an area also raises the price of owner-occupied homes, undermining their support against rent control.

Rent control can give current tenants massive windfalls taken from owners by their dominant majority vote. That also means politicians who cater to that politically dominant majority can more easily acquire and maintain power. The fact that current tenants benefit at the expense of those in nearby areas and all other future prospective tenants can be masked by pretending current tenants interests are the same as all actual and prospective tenants. Rent control also splits owner opposition to the threat of expropriation by exempting commercial uses and houses in the jurisdiction by increasing the value of their properties, as does the spillover gains they capture from the reduced supply of rental housing nearby. That combination goes a long way to explain why, in majority renter areas, the truly bad economics of rent control frequently translates into “good” 50%-plus-one piracy politics.

Gary M. Galles is a professor of economics at Pepperdine University. He is the author of “The Apostle of Peace: The Radical Mind of Leonard Read.”

JFK or Patrick Henry?

U.S. President John F. Kennedy reports to the nation on the status of the Cuban crisis from Washington, D.C. on Nov. 2, 1962. He told radio and television listeners that Soviet missile bases "are being destroyed" and that U.S. air surveillance would continue until effective international inspection is arranged. U.S. government conclusions about the missile bases, he said, are based on aerial photographs made Nov. 1. (AP Photo)

May 29 marked the 100th anniversary of John F. Kenney’s birth, which has triggered multiple Camelot retrospectives. Seldom do they omit JFK’s power to inspire, often illustrated with his most famous quote: “Ask not what your country can do for you – ask what you can do for your country.” However, while many find it inspirational, it has been put to more ominous use. And comparing those words with those of Patrick Henry, who shares the same birthday, illustrates why.

Kennedy’s speech was inspired by a Kahlil Gibran article whose Arabic title translates as “The New Frontier.” It said, “Are you a politician asking what your country can do for you, or a zealous one asking what you can do for your country? If you are the first, then you are a parasite; if the second, then you are an oasis in the desert.” But Kennedy dramatically altered its meaning.

Clearly, politicians who benefit by abusing their positions are parasites. In America, with Washington supposedly limited by the Constitution to few, enumerated powers solely to advance the general welfare, such abuses are even more blatant. The same holds for everyone seeking special government treatment.

However, extending “ask what you can do for your country” from politicians and special treatment seekers to citizens turns America’s foundation on its head. Asking citizens to sacrifice for the country, with the government a misleading proxy for society, implies we were made for government’s benefit, rather than it for ours.

That is how “ask what you can do for your country” has been employed to create innumerable government policies helping some by imposing involuntary burdens on others, sacrificing America’s broad interests to political causes and favorites.

Kennedy was also addressing “what together we can do for the freedom of man.” But financing the unjustifiable policies that dominate politics sacrifices others’ life, liberty and pursuit of happiness rather than advancing freedom. And America’s federal government was explicitly limited to the few goals we actually share, such as defense against aggression and invasions of our common, inalienable rights, which describes liberty, not goals where some with shared interests force the costs of advancing them onto others, which is diametrically opposed to liberty. As Milton Friedman once put it, the latter is “at odds with the free man’s belief in his own responsibility for his own destiny … .[It] implies the government is the master … the citizen, the servant.”

The words of Patrick Henry, America’s “Orator of Liberty,” reinforces the large gap between JFK’s “ask not” and the liberty which inspired both the Declaration of Independence and the Constitution. Consider some of them:

Liberty ought to be the direct end of your government.

We wish to be free … we mean to preserve inviolate those inestimable privileges for which we have been so long contending.

Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death!

Liberty is the greatest of all earthly blessings.

In the language of freemen, stipulate that there are rights which no man under heaven can take from you.

Guard with jealous attention the public liberty. Suspect everyone who approaches that jewel.

When the American spirit was in its youth … liberty, sir, was then the primary object … the foundation of everything.

The Constitution is not an instrument for the government to restrain the people, it is an instrument for the people to restrain the government – lest it come to dominate our lives and interests.

No free government, or the blessings of liberty, can be preserved to any people but by … frequent recurrence to fundamental principles.

If our descendants be worthy of the name of Americans they will preserve and hand down to their latest posterity the transactions of the present times … to preserve their liberty.

Many have found JFK’s “ask not” inspirational. But it has been utilized for many purposes that are directly opposed to American liberty. That is why we need to also remember the unmatched potential and inspiration liberty offers us, which Patrick Henry’s words make clear. We must recognize that rhetoric, however inspirational, does not advance American’s interest when it leads us away from liberty

Gary M. Galles is a professor of economics at Pepperdine University, an adjunct scholar at the Ludwig von Mises Institute, a research associate of the Independent Institute, a member of the FEE faculty network and the Heartland Institute’s Board of Policy Advisors. His books include “Apostle of Peace” (2013) “Faulty Premises, Faulty Policies” (2014) and “Lines of Liberty” (2016).

A Supreme Court Litmus Test from Our Founders

Photo courtesy Envios, flickr

Photo courtesy Envios, flickr

As the March 20 start of confirmation hearings for Neil Gorsuch approaches, Americans have been hearing about litmus tests. For instance, Sen. Charles Schumer, D-N.Y., and Rep. Nancy Pelosi, D-Calif., have set up a standard of “being mainstream” in their eyes and respecting precedents they like, ignoring whether they violate the Constitution.

However, there is a far more relevant litmus test – our founders’ views of American government under the Constitution justices pledge to defend. They are worth reviewing as a primer for where attention should focus on any nominee for the Supreme Court.

Samuel Adams: The liberties of our country, the freedom of our civil constitution … it is our duty to defend them against all attacks … to maintain the rights bequeathed to us.

Patrick Henry: Liberty ought to be the direct end of your government.

Thomas Paine: A constitution is not the act of a government but of a people constituting a government … . All delegated power is a trust, and all assumed power is usurpation.

James Wilson: Government … should be formed to secure and enlarge the exercise of the natural rights of its members; and every government which has not this in view as its principal object is not a government of the legitimate kind.

Benjamin Franklin: An equal dispensation of protection, rights, privileges and advantages, is what every part is entitled to.

Thomas Jefferson: A sound spirit of legislation … banishing all arbitrary and unnecessary restraint on individual action, shall leave us free to do whatever does not violate the equal rights of another.

John Dickinson: We cannot be free, without being secure in our property … we cannot be secure in our property, if, without our consent, others may, as by right, take it away.

George Washington: [Government] has no more right to put their hands into my pockets, without my consent, than I have to put my hands into yours.

John Adams: The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. …“Thou shalt not covet” and “Thou shalt not steal” … must be made inviolable precepts in every society before it can be … made free.

Richard Henry Lee: It must never be forgotten … that the liberties of the people are not so safe under the gracious manner of government as by the limitation of power.

James Madison: The powers of the federal government are enumerated … it has legislative powers on defined and limited objects, beyond which it cannot extend its jurisdiction.

John Taylor of Caroline: Every innovation which weakens the limitations and divisions of power … makes [government] strong for the object of oppression.

Alexander Hamilton: A limited Constitution … can be preserved in practice no other way than through the medium of courts of justice, whose duty it must be to declare all acts contrary to the manifest tenor of the Constitution void. Without this, all the reservations of particular rights or privileges would amount to nothing. … To deny this would be to affirm … that men acting by virtue of powers may do not only what their powers do not authorize, but what they forbid.

Joseph Story: The Constitution of the United States is to receive a reasonable interpretation of its language and its powers, keeping in view the objects and purposes for which those powers were conferred.

James Otis: An act against the Constitution is void.

George Mason: Flagrant violations of the Constitution must disgust the best and wisest part of the community.

Mercy Otis Warren: Any attempt [to] subvert the Constitution … cannot be too severely censured.

Our founders clearly revealed their central purpose was defending Americans’ rights and liberties against encroachment, particularly from overbearing government. That is the Supreme Court’s primary function. Therefore that should the central litmus test focus in evaluating Judge Gorsuch, as well as any other nominee, to the court tasked with preserving and protecting the highest law of the land.

Gary M. Galles is a Professor of Economics at Pepperdine University, a Research Fellow at the Independent Institute, an Adjunct Scholar at the Ludwig von Mises Institute and a member of the Foundation for Economic Education Faculty Network. His books include “Lines of Liberty” (2016), “Faulty Premises, Faulty Policies” (2014) and “Apostle of Peace” (2013).

Neither liberty nor justice for all

Recently, Harvard political theorist Danielle Allen wrote in the Washington Post of “The most important phrase in the Pledge of Allegiance” — “with liberty and justice for all.”

Liberty

Allen recognized that justice required “equality before the law” and that freedom exists “only when it is for everyone.” But she confused democracy, as in progressives “build[ing] a distributed majority across the country, as is needed for electoral college victory,” with liberty, which is very different. Similarly, she replaced the traditional meaning of justice (“Giving each his own,” according to Cicero) with a version of “social justice” inconsistent with it. And her two primary examples — rights to education and health care — were inconsistent with both liberty for all and justice for all.

Americans cannot have both liberty and such social justice, under whose aegis one can assert rights to be provided education and health care, not to mention food, housing, etc. Positive rights to receive such things, absent an obligation to earn them, must violate others’ liberty, because a government must take citizens’ resources without their consent to fund them. Providing such government benefits for some forcibly violates others’ rights to themselves and their property.

The only justice that can be “for all” involves defending negative rights — prohibitions laid out against others, especially the government, to prevent unwanted intrusions — not rights to be given things. Further, only such justice can be reconciled with liberty “for all.” That is why negative rights are what the Declaration of Independence and the Constitution, especially the Bill of Rights, were intended to protect. But those foundational freedoms continue to be eroded by the ongoing search to invent ever-more positive rights.

Echoing John Locke, The Declaration of Independence asserts that all have unalienable rights, including liberty, and that our government’s central purpose is to defend those negative rights. Each citizen can enjoy them without infringing on anyone else’s rights, because they impose on others only the obligation not to invade or interfere. But when the government creates new positive rights, extracting the resources to pay for them necessarily takes away others’ unalienable rights, which people recognize as theft except when the government does it.

Almost all of Americans’ rights laid out in the Constitution are protections against government abuse. The preamble makes that clear, as does the enumeration of the limited powers granted to the federal government. That is reinforced by explicit descriptions of some powers not given, particularly in the Bill of Rights, whose negative rights Justice Hugo Black called the “Thou Shalt Nots.” Even the Bill of Rights’ central positive right–to a jury trial–is largely to defend innocent citizens’ negative rights against being railroaded by government. And the 9th and 10th Amendments leave no doubt that all rights not expressly delegated to the federal government (including health care and education) are retained by the states or the people.

Liberty means I rule myself, protected by my negative rights, and voluntary agreements are the means of resolving conflict. In contrast, assigning positive rights to others means someone else rules over the choices and resources taken from me. But since no one has the right to rob me, they cannot delegate such a right to the government to force me to provide resources it wishes to give to others, even if by majority vote. For our government to remain within its delegated authority, reflecting the consent of the governed expressed in “the highest law of the land,” it can only enforce negative rights.

Our country was founded on unalienable rights, not rights granted by Washington. That means government has no legitimate power to take them away. However, as people have discovered ever-more things they want others to pay for, and manipulated the language of rights to create popular support, our government has increasingly turned to violating the rights it was instituted to defend. And there is no way to square such coercive “social justice” with “liberty and justice for all.”

Gary M. Galles is a Professor of Economics at Pepperdine University, a Research Fellow at the Independent Institute, an Adjunct Scholar at the Ludwig von Mises Institute and a member of the Foundation for Economic Education Faculty Network. His books include “Lines of Liberty” (2016), “Faulty Premises, Faulty Policies” (2014) and “Apostle of Peace” (2013).

Understanding California Legislative History and Intent

CA-legislatureAttorneys, lobbyists, legislative staff and others examining California statutes should understand the basics of legislative history and intent research. Unfortunately for attorneys, the subject of legislative intent is not a particularly well covered aspect of the typical law school curriculum where heavy emphasis on the case method of studying law tends to restrict the discussion of legislative purpose to what the courts say on the subject.

However, because California courts have a long tradition of relying upon bill analyses and other evidence of legislative history in the same manner as they do case law – to clarify the meaning of a statute and properly apply the Legislature’s intent – practitioners would do well to know how to discover and apply the Legislature’s intent with respect to the statutes that at are issue in their cases.

For others, such as lobbyists, staff or the media, the focus is typically upon the proposed solution contained in a particular piece of legislation, and not upon the accompanying expressions of legislative intent. However, both are important. At minimum, it is a good idea to confirm one’s understanding of a proposed legislative solution with the statements of legislative intent from the bill’s legislative history. Here are at least three reasons why:

(1)  Our codes are rife with ambiguities that the courts will look to the legislative history to clarify.

(2) The courts will overlook a statute’s plain reading if it collides with evidence of the Legislature’s actual intent or to avoid an absurd application.

(3) Courts will also look to legislative history to confirm their own plain reading of a statute.

Both attorneys and Sacramento Capitol watchers would do well to understand that evidence of California legislative history and intent serves as an important aid for interpreting statutes and understanding what was intended by the Legislature in enacting a particular new law or amending an existing law.

Sir Francis Bacon is attributed with the statement “knowledge is power.” Applying that wisdom here, lobbyists and others should be well versed in the legislative history and intent of the code sections that their clients have hired them to “watch” and or/amend. Attorneys should utilize a well-established area of legal research that can shed light on the meaning of statutory terms at issue. And solid news reporting should include relevant aspects of the story surrounding how and why the bill of interest was passed.

In California, the primacy of legislative intent has long been established by both statute and case law. For example, Code of Civil Procedure Section 1859 (enacted in 1872) provides this mandate to the courts: “In the construction of a statute, the intention of the Legislature … is to be pursued, if possible.” Also, the judicial notice statutes identify admissible legislative history materials in Evidence Code Section 452(c). The cases cited under those sections identify various records with which the courts have a high comfort level.

In general, evidence of legislative intent can be derived from two primary sources: An intrinsic analysis of the statute and its surrounding statutory context according to standard principles of statutory construction, and the use of extrinsic aids to reconstruct the legislative history of a statute.

The wider historical circumstances surrounding the adoption of a statute can yield extrinsic evidence of legislative intent that is outside the statute itself, such as relevant historical background, the chronology of events and the presumption that the Legislature is aware of prior law. Again, such evidence may even contradict any so-called “plain reading” of the statute which contradicts persuasive, extrinsic evidence of legislative intent.

In properly researching legislative history and intent, interested persons should ask the following questions to guide their efforts:

  • What is the plain meaning” of the language in the statute? To what extent is the meaning self-evident?
  • Why was the statute adopted? What needs prompted it? What problem or evil was the Legislature trying to correct?
  • What happened in the Legislature during the process of adoption? What is the statute’s legislative history?
  • What was the law prior to the adoption of the statute?
  • What has happened since the statute was created? What has been the response of the courts, the agency charged with administering the statute, the legislature, the public, scholars, etc.?

The California State Archives has a vast collection of original legislative papers that can be accessed by source and session year (e.g., authors’ files, committee and study files, Governor’s Chaptered Bill Files, party caucus files, Senate Floor analyses files, agency files, Law Revision Commission Study Files). Interested persons can phone in research requests to the State Archives at (916) 653-2246, but be prepared to wait as they often have backlogs. “Walk-ins” receive priority treatment and the $.25 per page cost must be paid in advance.

In addition, a wide variety of state legislative offices have insightful materials (i.e., legislator offices, committee offices, partisan offices, floor analysis offices), especially when it comes to more recent legislation, as well as agency analyses and bill files. Access to records held by these offices varies widely depending on the personalities involved and their willingness to make their files available to members of the public. The Legislative Open Records Act, Gov’t Code Sections 9070, et seq. assures public access as specified.

Finally, there are numerous sources to help determine the legislative history and intent of a bill’s provisions such as:

  • The Legislature’s own online databases. They provide committee and floor analyses, bill versions, the final calendars, votes and governor’s vetoes, past session laws, journals, etc. It is not recommended that you rely upon the minimal collection of legislative history materials that Westlaw provides. In the main, it merely provides materials that you can obtain for free from the Legislature’s websites.
  • Previous related, failed legislation. The history of predecessor failed bills can be considered relevant when the legislative effort spans multiple sessions.
  • Interim hearing study and/or transcript and related files. Excerpts from testimony at public legislative hearings which preceded the enactment of a statute may be of some relevance in ascertaining legislative intent.
  • Other formal studies and/or recommendations, such as those published by the California Law Revision Commission or a state agency.
  • All versions of the bill, as introduced, amended, enrolled and chaptered along with Legislative Counsel’s Digest on the face of the bills. Always note when your language of interest came in and relevant amendments.
  • Legislative Journal entries addressing substantive matters. Letters of intent by the author, committee reports, and similar information contained in the Journals.
  • Bill Background Worksheets, which are requested by the committee and filled out by the author’s office, sometimes with attachments.
  • Policy and fiscal committee analyses (both partisan and nonpartisan versions).
  • Department of Finance fiscal reports.
  • Floor analyses for third reading (both partisan and nonpartisan versions).
  • Statements by the author for committee and floor purposes.
  • The legislative author’s letter to the governor. Note that the courts can be more friendly toward such letter if they cast light on the history of a measure and are a reiteration of legislative discussion and events, and not merely as an expression of personal opinion.
  • Statements by proponents and opponents, such as letters, testimony, position papers, etc.
  • Analyses by state agencies.
  • Opinions by the Legislative Counsel and the Attorney General.
  • Enrolled Bill Reports to the governor from various state entities, such as the Legislative Counsel, agencies and departments and the governor’s staff.
  • Contemporaneous, unpassed legislation may be a significant indicator of the intent underlying legislation passed during the same session.
  • Online research manuals can be helpful. For example, Legislative Research & Intent LLC, which is a commercial provider of legislative history research, supplies numerous complimentary research assistance and resources at www.lrihistory.com.

It is important for attorneys and others to possess a basic understanding of what legislative history research consists of and where to look for insights into what the Legislature intended when it enacted a new law or amended an existing statute. An insistence upon going beyond simply reading the statute allows one to consider valuable extrinsic evidence of what was intended by the Legislature in the adoption of the particular legislation of interest.

Carolina Rose is the President and Founder of Legislative Research & Intent, LLC which has provided legislative history research since 1983, and provides related expert witness services. Chris Micheli is an attorney and lobbyist with the firm of Aprea & Micheli, Inc. For more information contact carolina.rose@lrihistory.com or cmicheli@apreamicheli.com

The perfect security of person and property

Regulation and taxation impose constant government assaults on Americans’ property rights, eroding their ability to make choices for themselves. James Fenimore Cooper put it, “There is getting to be so much public right, that private right is overshadowed and lost … danger exists that the ends of liberty will be forgotten.”

jean-baptiste-sayGiven how much private property rights now overshadowed, we should return to first principles about those essential underpinnings of voluntary relationships. One person worth reconsidering is Jean Baptiste Say, particularly on the 250th anniversary of his January 5 birth.

J.B. Say was the foremost French political economist in the early 1800s. An elaborator on Adam Smith’s Wealth of Nations and a vigorous defender of economic freedom, which arises from the defense of private property rights, his Treatise on Political Economy was used as a textbook in the United States.

Say’s chapter, “Of the right of property,” remains among the wisest, though widely violated, insights into property rights available today.

The right of property … [is] the most powerful of all encouragements to the multiplication of wealth.

The legal inviolability of property is obviously a mere mockery … where possession is rendered perpetually insecure, by the intricacy of legislative enactments, and the subtleties of technical nicety. Nor can property be said to exist, where it is not matter of reality as well as of right. Then, and then only, can the sources of production … attain their utmost degree of fecundity.

Who will … deny, that the certainty of enjoying the fruits of one’s land, capital and labor, is the most powerful inducement to render them productive? Or who is dull enough to doubt, that no one knows so well as the proprietor how to make the best use of his property? Yet how often in practice is that inviolability of property disregarded … upon the most flimsy pretexts?

The property a man has in his own industry is violated, whenever he is forbidden the free exercise of his faculties and talents, except insomuch as they would interfere with the rights of third parties.

Sacred as the property in the faculties of industry is, it is constantly infringed upon. …What robber or despoiler could commit a more atrocious act of invasion upon the public security?

Nothing short of the necessity of defending [social] order from manifest danger can authorize these or similar violations of individual right.

Taxation … must be proved indispensable to the existence of social order; every step it takes beyond these limits is an actual spoliation; for taxation, even where levied by national consent, is a violation of property.

The right of property implies the free disposition of one’s own.

When public authority is not itself a spoliator, it procures to the nation the greatest of all blessings, protection from spoliation by others. Without this protection of each individual by the united force of the whole community, it is impossible to conceive any considerable development of the productive powers of man, of land, and of capital.

The poor man … is equally interested with the rich in upholding the inviolability of property. His personal services would not be available, without the aid of accumulations previously made and protected. Every obstruction to, or dissipation of these accumulations, is a material injury to his means of gaining a livelihood.

Civilized communities pursue and punish every invasion of property as a crime … the happy effects, resulting from the right of property, are more striking in proportion as that right is well guarded by political institutions.

As Larry Sechrest noted, J.B. Say was “precise and yet as simple as possible, so that any literate, reasonably intelligent person can comprehend his meaning.” However, Americans have been governed by violators of those principles, because “agents of public authority … can enforce error and absurdity at the point of the bayonet.” And the results have been far worse than if we had followed his understanding. In Say’s words:

Of all the means by which a government can stimulate production, there is none so powerful as the perfect security of person and property, especially from the aggressions of arbitrary power. This security is itself a source of public prosperity.

Gary M. Galles is a Professor of Economics at Pepperdine University, a Research Fellow at the Independent Institute, an Adjunct Scholar at the Ludwig von Mises Institute and a member of the Foundation for Economic Education Faculty Network. His books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014) and Apostle of Peace (2013).