Crumbling Infrastructure? Rebuilding Roads the Right Way in California

Californians are not known for stoicism. Citizens of a state that exemplifies the excesses of the therapeutic culture are known for emoting—usually loudly, often publicly, and frequently well beyond their listener’s point of exhaustion. When it comes to the state’s congested freeway system, however, Golden State residents have developed a high threshold for pain. Sure, the phenomenon of “road rage”—bursts of violence unleashed by clogged thoroughfares—originated in Los Angeles. But it’s the exception that proves the rule. For every motorist driven to mania, thousands more quietly accommodate themselves to the fact they won’t get where they’re going anytime soon. Think of it as the soft tyranny of low expectations.

It takes a true disaster to inflame the passions of California drivers grown accustomed to inconvenience. Over the holidays, they experienced precisely that: on the afternoon of Wednesday, December 14, a tanker trunk filled with 8,800 gallons of gasoline exploded on Highway 60 in Montebello, a community in eastern Los Angeles County’s San Gabriel Valley. The resulting flames were so intense that they caused the concrete in a section of freeway overpass to explode, forcing the California Department of Transportation to close that part of the freeway for the better part of a week in order to demolish the bridge. With Highway 60 acting as a prime conduit for commerce flowing from the ports of Los Angeles and Long Beach—the nation’s busiest as measured by number of containers—to the massive distribution centers of the Inland Empire to the east, the ramifications for trade were brutal.

In responding to the incident, Governor Jerry Brown took a page from the playbook of one of his predecessors, Pete Wilson, the state’s Republican governor from 1991 to 1999. In the aftermath of 1994’s devastating Northridge Earthquake (a 6.7 on the Richter Scale), which destroyed sections of another vital Southern California artery, Interstate 10, Wilson waived the traditional regulations (including exhaustive environmental studies) that most California construction projects must satisfy before going forward. Wilson’s emergency approach—combined with performance incentives that indexed bonuses for contractors to how quickly the freeway was rebuilt—led to I-10’s reopening in 66 days. The initial projection estimated 26 months. Now Governor Brown has used his official declaration of a state of emergency to waive several statutes and regulations that would impede the rebuilding process.

The instinct favoring swift action is sound, particularly given the economic consequences for Montebello and the surrounding communities. But it invites a question: why does it take an emergency to get roads built quickly and efficiently in California? A 2008 Milken Institute study estimated that, without serious changes to California’s approach to infrastructure, the statewide costs of congestion would skyrocket to $42 billion a year by 2030. As it stands, Bay Area commuters lose an average of 50 hours per year to road congestion. It’s worse still in Los Angeles, where drivers average 64 hours per year idling in traffic.

As is often the case in California, however, near-universal accord in diagnosing a problem doesn’t translate to effective action. The obvious solution—expanding the state’s freeway capacity—is expensive, and most green and NIMBY groups oppose it. Environmentalists fret that expanding access would only strengthen the state’s car culture, putting more vehicles on the road and increasing carbon emissions—though vehicles idling in traffic tend to generate substantially higher greenhouse-gas emissions than those in free-flowing commutes.

Lately, a curious partner has joined the environmental lobby against proposals to upgrade California’s freeways: construction trade unions. In November, Bob Balgenorth, president of the State Building and Construction Trades Council of California (an AFL-CIO affiliate), wrote in an op-ed in the Bakersfield Californian: “Continuing to build more and more freeways . . . would be much more expensive, more environmentally damaging, and less efficient for moving millions more Californians up and down our state.” If you think it’s odd that the head of a building union would oppose more building, you’re right: Balgenorth and his colleagues, it turns out, are seeking a favorable contract from the California High Speed Rail Authority, which administers the voter-approved plan for a statewide bullet train. Rail is the environmentalists’ proposed panacea for California’s traffic woes. Balgenorth was appointed to the California High Speed Rail Authority’s board of directors last year.

Projections for the rail project have always been naive. Advocates for the project’s 2008 ballot initiative claimed that it could replace up to 92 million car trips annually, the sort of wild prediction one usually finds in a five-year plan released by a politburo. Since voters approved the project, however, its difficulties have only compounded. More than three years later, not a single inch of track has been laid. Cost projections have ballooned from $40 billion to nearly $100 billion. And California voters now oppose the program by a margin of 59 percent to 31 percent, according to a Field Poll.

For now, then, it looks as if the automobile will remain the centerpiece of California transportation—and it’s past time for the state’s elected officials to recognize this reality. They need to get serious about expanding freeway supply and setting up market mechanisms, such as congestion pricing, to manage demand. Otherwise, they risk a continued drag on the state’s productivity—and sooner or later, public resentment, too. Even California drivers have a limit to their patience.

(Troy Senik is a senior fellow at the Center for Individual Freedom and an editor at Ricochet.com. This story was first posted in City Journal.)

Think Long and California Forward merge to form Pseudo-Reformer Billionaire Group

“Think Forward and Long” or “Think Long and Forward California.” I suggest one of those as the new name for the merging government reform groups California Forward and Think Long.  Because the ridiculousness of the name should be as ridiculous as the hailed move.

This is what former politicians do who can’t go back to the private sector once they leave public office. Couple the attention-starved politicians with bored billionaires and you get groups like the Think Long Committee and California Forward.

The Think Long Committee boasted reforms to deal with the estimated $13 billion state budget shortfall and looming $2 billion automatic trigger cuts to education.

Under The Cover Of Taxes

But many of the pseudo-reformers, who already had a shot at fixing the state’s chronic budget problems, never quite got around to sincerely addressing the actual problems in state government. Instead, the two groups came up with rhetoric-laced, lofty sounding big-budget plans, to be run by lots of paid consultants, benefitting people like the “reformers.”

It has been business-as-usual in the Capitol, with lawmakers continuing to overspend, create more regulations, scheme on ways to weasel more taxes out of the middle-class “rich” and foster incestuous relationships with labor unions. Meanwhile, the Think Long Committee released its ”Blueprint to Renew California” in November. Short on substance and devoid of any big reforms, the “Blueprint” was primarily cover for a new sales tax on every service in California not already taxed — excluding education and health care.

Haircuts would be taxed. Lawyers, accountants, landscapers, contractors, veterinarians, day care and many other everyday services would be taxed.

Who’s Who

The lineup of the two groups is a who’s-who of Capitol politicians who apparently just didn’t get enough of the place while in power: Former Assembly Speaker Willie Brown; recalled Gov. Gray Davis and his replacement, Arnold Schwarzenegger; Sunne Wright McPeak, former Contra Costa supervisor and former secretary of the California Business, Transportation, and Housing Agency; another former Assembly Speaker, Fred Keeley;  former California Secretary of State Bruce McPherson; and another former assembly speaker, Bob Hertzberg.

These politicians joined forces with billionaire financier Nicolas Berggruen; union boss Bob Balgenorth, president of the State Building & Construction Trades Council of California, AFL-CIO; and ueber-wealthy foundations such as the Evelyn and Walter Haas, Jr. Fund, the William and Flora Hewlett Foundation, the James Irvine Foundation and the David and Lucile Packard Foundation.

According to the Nicolas Berggruen Institute website, “the Think Long Committee for California aims to offer a comprehensive approach for repairing and renovating California’s broken system of governance while proposing policies and institutions vital for the state’s long term future.”

Beware the word “comprehensive” when used in the same sentence with “governance.”

California Forward proposed the Government Performance and Accountability Act, ”a constitutional amendment that would change the culture of governance in California,” ultimately taking it out of the hands of the governor and legislators. “The state is simply too big and too diverse to let a handful of lawmakers in Sacramento make decisions about local programs and resources that are much better understood at the community level,” the California Forward’s website said.

The long and forward thinkers talked incessantly of taking reforms to the voters through the initiative process. But, remember, it is important it is to watch what people do instead of just believing what they say.

Fourth Branch of Government

California Forward tried to “change the culture of governance in California.” The Think Long Committee really wanted to create an elitist “Citizen’s Council for Government Accountability,” which some have described as a “fourth branch of government for California.”

Acting more like a Super-Committee, the Council would be made up of 13 members appointed to six-year terms by the governor and the leaders of both parties in the legislature. They would have the power to place constitutional amendments (constitutional measures) as well as proposed laws (statutory measures) on the ballot, with no legislative vetting or signature gathering required.

Wow. Welcome to an attempt at a California oligarchy, in which political power would be held by the wealthy elite and political class, who would use this power to serve their own class interests.

Voters will need to think long and hard about what’s ahead for the state. While the Think Long Committee scrapped its own tax initiative planned for the November ballot, the group has joined the initiative sponsored by California Forward to change how the state is governed, and how the budget is written.

There are problems in paradise. Almost everyone can agree that California is showing signs of sun damage and aging. The thin, beautiful veneer is cracking.

The best thing to do is to use the system we have to defeat these types of measures.  Unions and billionaires don’t have to dominate politics. There are still many more of us than them.

(Katy Grimes is CalWatchdog’s news reporter. Grimes is a longtime political analyst, writer and journalist. This article was first posted on CalWatchdog.)

Gov. Brown Pitches Tax Measure to Business Leaders in LA

Governor Jerry Brown returned to the Los Angeles Chamber of Commerce to give a similar speech to the one he gave last year– seeking support for his tax plan. Last year, his proposal was in the legislature, this time he had an initiative to sell. However, the business people I talked to in the audience were non-committal on the taxes, especially if the taxes were not accompanied by other reforms such as spending limits and pension reform.

In fact, the first applause line for the governor came when he called for pension reform. He received no major applause when discussing the taxes.  He did not mention spending limits but acknowledged at the beginning of his talk that California spends more money than it collects.

Brown argued that his tax increase proposal was half of what Governor Arnold Schwarzenegger steered through the legislature. Brown said his tax plan was half as big and half as long as Schwarzenegger’s tax increase.

The tax increase may actually be less than half the $12 billion in taxes Schwarzenegger supported. It depends on whose analysis one believes– the Department of Finances $6.9 billion projection or the Legislative Analyst’s more conservative $4-plus billion speculation.  But, Schwarzenegger’s temporary taxes lasted two years. Brown is proposing a five-year run for his temporary taxes.

Brown urged the business community to join with labor to “build for the future, not steal from it.” He said the complaints he hears now about the inability to compromise are the same ones he heard when he was first governor 35 years ago.

During a press conference following his speech, the governor said the business community was responding “heroically” in helping to finance his campaign. His campaign kitty has received contributions from some businesses.

He also acknowledged the validity of concerns about doing business in California but claimed the California business environment was also listed 49th in the country when he was first governor and said other states have problems being business friendly.

Brown promised the chamber that he would fix California’s problems in a couple of years and the streets would be “paved in gold.”

Skeptics might think he was referring to taxpayers’ gold.

(Joel Fox is the Editor of Fox & Hounds and President of the Small Business Action Committee. This story was first posted on Fox & Hounds.)

Fiddling with High-Speed Rail While Sacramento Burns

Several recent events have thrown some cold water on the dreamers who seem to view the California high-speed rail project as the solution to all of the state’s problems. Unfortunately, this has not dissuaded them from pushing for the project to go full speed ahead.

The cracks in the high-speed rail project continue to grow into deep chasms. California High-Speed Rail Authority (CHSRA) CEO Roelof van Ark announced he is going to resign, although he said he may then stay on the project and profit as a consultant, of course. A Field poll revealed that, by a two-to-one margin, voters oppose the California high-speed rail project and would like to re-vote on it. Then there was a pair of recent state and federal legislative hearings that were highly critical of the project. And there is the matter of the revised business plan, which now projects costs of $98.5 billion to $117.6 billion—versus the $40 billion to $45 billion estimate issued less than two years ago—and a 13-year delay in building the rail system. To supporters of high-speed rail, all this may be a rude awakening but California must acknowledge reality if it is to tackle its monstrous budget problems and return to any semblance of fiscal responsibility.

The state is running a $9.2 billion budget deficit (not to mention a $10 billion unemployment fund deficit and a projected unfunded pension liability in the range of $400 billion to $500 billion), Governor Jerry Brown has proposed a $35 billion tax increase ($7 billion a year for five years) to plug the gap and stave off deeper cuts to education and welfare, among other things, and yet the governor persists in pushing a high-speed rail plan that numerous agencies, government officials, and groups—from the Legislative Analyst’s Office (see here, here, and here), to the Bureau of State Audits, to the California High-Speed Rail Peer Review Group, to the UC Berkeley Institute of Transportation Studies, to Treasurer Bill Lockyer, to influential Democratic state Senators Alan Lowenthal, Joe Simitian, and Mark DeSaulnier, to organizations such as Reason Foundation, Howard Jarvis Taxpayers Association, Citizens Against Government Waste, Community Coalition on High-Speed Rail, Californians Advocating Responsible Rail Design, and California Rail Foundation—have criticized for its lack of a realistic financing or business plan; overoptimistic assumptions regarding costs, benefits, and ridership (to name but a few); poor planning and management; and route and engineering/design decisions.

Even under optimistic scenarios, the Authority has identified only about 15 percent of the funding necessary to build the project. The other $85 billion or so is supposed to somehow come like manna from heaven, primarily from the federal government, which is engulfed in an even greater fiscal crisis than California (not to mention the fact that Congress has repeatedly indicated it is not going to support any additional high-speed rail funding any time soon—see here, here, and here), as well as some from the private sector, which has surprisingly shown no interest in investing in a project with poor prospects and an unrealistic business plan.

Earlier this month, the California High-Speed Rail Authority’s own Peer Review Group even recommended that the legislature not approve bond sales for the project, concluding, “We cannot overemphasize the fact that moving ahead on the HSR project without credible sources of adequate funding, without a definitive business model, without a strategy to maximize the independent utility and value to the State, and without the appropriate management resources, represents an immense financial risk on the part of the State of California.”

Nevertheless, “We’re pushing forward,” Gov. Brown said recently of the administration’s plans for the high-speed rail system. Added Brown, “We’re going to build, we’re going to invest, and California is going to stay among the great states and the great political jurisdictions of the world.” Not if we keep spending money we don’t have on boondoggle projects, we won’t, Governor. Brown then reiterated his support for the project in his 2012 State of the State address and called on the Legislature to approve the appropriation of bond proceeds for the first segment of the project.

This is like your neighbor, who is an average Joe struggling to get by during the ongoing economic malaise, announcing that he is going to buy an expensive Tesla Roadster (gotta support “green jobs” and all that), even though he already has a car and is having trouble paying the rent and utility bills as it is. Complicating matters are the facts that he does not know just how high the price of the car will be (it has already more than doubled since last year) and he probably won’t be using it very much anyway. Oh, and you and a whole bunch of other people who haven’t agreed to it yet will be paying for almost all of it. This is the insanity of the California high-speed rail project.

The California high-speed rail project has laid bare, in a way more obvious than usual, just how stark are the lies and how empty the promises that politicians and special interests make in order to separate taxpayers from their hard-earned money.

Agency after agency, expert after expert, has criticized everything about the project, from its lack of a feasible financing/business plan to its cost and ridership estimates, which even the CHSRA has begrudgingly admitted are off by orders of magnitude. Undaunted by reality, the HSR advocates obstinately cling to their claims, whether out of unquestioning faith in the utopian ideal of high-speed rail or out of selfish interest in partaking in the gravy train, so to speak, that the project will bestow upon them. Through sheer incompetence or outright lies, the CHSRA and its supporters have been wrong about everything about the project, yet they continue to make false promises about the boon that, they claim, high-speed rail will surely bring to the state. Why should we listen to these people anymore?

California’s budget situation is dire enough as it is. It cannot afford for Sacramento to fiddle with this fiscal black hole of a rail project while California burns in a conflagration of debt. The high-speed rail project plug should be pulled as soon as possible before the state wastes even more money it does not have.

(Adam B. Summers is Senior Policy Analyst at the Reason Foundation, a libertarian think tank advocating “free minds and free markets.”)

Obama’s Unfair Tax Code

One of President Obama’s central themes in this week’s State of the union address was fairness. In particular he mentioned – three times – that the rich must pay their fair share of taxes. Partly in response to the fairness issue, Mitt Romney released his tax forms just prior to the speech. But if we are to “change our tax code so that people like me. . . pay or fair share of taxes” – as the president requested – then we might want to define our “fair share.”

I suspect that fairness, like beauty, is in the eyes of the beholder.

I was driving with my teenage son when we heard a NPR story about Romney’s tax returns. The story mentioned that Romney’s tax rate (one has to assume average rather than marginal, since his marginal rate on speaking engagements is well above his average) is 15 percent. It also mentioned that Mr. Romney paid more than $3 million in taxes in the last year alone.

My son was astonished that our tax system is structured such that about half of US households pay no income tax – and one person could pay as much as $3 million in taxes. This didn’t seem fair to him. He thought that there ought to me a limit as to how much the government could take from any one person – perhaps $1 million.

Our system doesn’t seem fair. If I told you that we were forming an organization of 100 people, and the dues schedule would such that 50 of us would pay no dues, one of us would pay $3 million in dues, and the rest would pay something between $1 and $1 million – would you think it fair? Yet President Obama thinks people like Romney should pay even more.

This is not a question of fairness, for surely if half of us pay nothing and one person can pay $3 million by himself, we wouldn’t make it more fair by making that person pay $6 million. This is only a question of income redistribution—plain and simple. If I am paying nothing and you are paying $3 million, I might be happy – but can’t call it fair.

The President keeps reminding us that Warren Buffet pays less in taxes than his own secretary. He acts as if tax rates are the same as taxes and average tax rates are the same as marginal tax rates – neither of which is correct. Mr. Buffet surely pays millions of dollars more in taxes than his secretary. He may well pay at a lower average tax rate though. Whether it is fair that Mr. Buffet’s average tax rate is lower than that of his secretary is not an interesting question.

A better question is whether it is fair that Mr. Buffet, who has contributed as much to the US and world economy as anyone of his generation, should pay millions of dollars more in taxes every year than his secretary.

Questions of fairness aside, we should ask what is the most economically efficient way to structure an income tax? I have been teaching the subset of economics called public finance for decades, (I got my Ph.D. at an early age). Every public finance textbook has an explanation of why the taxation of the returns to saving – that is, dividends and capital gains – results in a double taxation of income and less investment and, thus, less economic growth. The optimal tax rate for capital gains and dividends is probably zero.

This is because we have a corporate income tax, which taxes – at the margin – income earned by corporations at about 34 percent. This income is then taxed again when it is distributed to individuals as dividends or capital gains.

Because the average Joe won’t know how our complicated tax system works, it’s easy to mask a call for the redistribution of income in a call for higher taxes on dividends and capital gains. If we eliminated the corporate income tax, then it would make sense to tax dividends and capital gains adjusted for inflation at the same rate as wage and salary income. But until we do, we can reduce some of the inefficiencies in the tax structure by keeping a lower rate on dividends and capital gains, resulting in a lower average tax rate for those who generate a large portion of their income from successful investments.

(Dr. Gary L. Wolfram is the William E. Simon Professor in Economics and Public Policy at Hillsdale College. This story was first published in The Michigan View.)

Is Communist China More Pro-Business Than California?

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

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

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

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

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

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

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

‘Arsenal of Democracy’

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

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

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

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

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

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

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

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

‘Everything Else’

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

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

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

“ ‘Wages?’ I ask.

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

“I’m startled. ‘So what is it?’

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

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

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

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

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

Detroit on the Pacific?

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

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

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

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

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

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

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

Where’s Our Deng?

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

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

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

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

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

(John Seiler, an editorial writer with The Orange County Register for 19 years, is a reporter and analyst for CalWatchDog, where this piece first appeared.)

Liberty is at Risk: Wise, Brave and Virtuous Men are always Friends to Liberty

Most Americans say that understanding our founding is very important.  However, we actually pay almost no attention to it, seldom going beyond boilerplate praise for our most famous founders, leaving us woefully unaware of many critical aspects of our heritage.

One of the most important but overlooked Revolutionary era influences were New England ministers.  Franklin Cole, editor of They Preached Liberty, described them as “watchmen on…the wall of liberty,” making them “the ‘forgotten men’ among the heroes of the American Revolution.” The most influential was Boston Congregationalist minister, Jonathan Mayhew (1720-1766), who Declaration of Independence signer Robert Treat Paine called “The Father of Civil and Religions Liberty in Massachusetts and America.”

Especially important was his January 30, 1750, sermon, A Discourse Concerning Unlimited Submission and Non-Resistance to the Higher Powers, which has been termed “The Morning Gun of the American Revolution.” He argued that God sanctioned revolution against tyranny.  The sermon was printed and, in John Adams’ words, “read by everybody,” throughout the colonies and in London.

Mayhew’s Discourse took place on the centennial of the execution of Charles I in England.  He insisted that Charles’ execution was a Biblically justifiable response to his tyranny.  “Common tyrants, and public oppressors, are not entitled to obedience from their subjects, by virtue of any thing here laid down by the inspired apostle,” because tyranny violates the divinely instituted purpose of government.  But if rebellion against Charles for eviscerating British liberty was morally and scripturally justifiable, the same arguments applied to George III.

As we again pass the date on which, over a quarter of a millennium ago, Jonathan Mayhew started what John Adams called “the spark that ignited the American Revolution,” consider his argument for our liberty, which is only safe from assault when we recognize its fundamental importance.

“[T]he powers that be, are ordained of God…[But] how does this prove, that those who resist a lawless, unreasonable power, which is contrary to the will of God, do therein resist the will and ordinance of God?”

“[S]uch as really performed the duty of magistrates, would be enemies only to the evil actions of men…But how is this an argument, that we must honor, and submit to…such as are not a common blessing, but a common curse, to society!”

“[I]f magistrates are unrighteous…the main end of civil government will be frustrated. And what reason is there for submitting to that government, which does by no means answer the design of government?”

“[T]he apostle argues the duty of a cheerful and conscientious submission to civil government, from the nature and end of magistracy…to punish evildoers…But does this argument conclude for the duty…to such persons as use all their power to hurt and injure the public?…to such as have no natural and just claim…?”

“For what can be more absurd than an argument thus framed? ‘Rulers are, by their office, bound to consult the public welfare and the good of society: therefore you are bound to pay them tribute, to honor, and to submit to them, even when they destroy the public welfare, and are a common pest to society, by acting in direct contradiction to the nature and end of their office’…arguments to enforce submission…conclude only in favor of submission to such rulers…as rule for the good of society, which is the only end of their institution. Common tyrants, and public oppressors, are not entitled to obedience…”

“[T]he apostle’s argument is so far from proving it to be the duty of people to obey, and submit to, such rulers as act in contradiction to the public good, and so to the design of their office, that it proves the direct contrary. For…if the end of all civil government be the good of society…and if the motive and argument for submission to government be taken from the apparent usefulness of civil authority; it follows, that when no such good end can be answered by submission, there remains no argument or motive to enforce it; if…by submission, a contrary end is brought about…here is a plain and positive reason against submission…And therefore, in such cases, a regard to the public welfare ought to make us withhold from our rulers that obedience and subjection which it would, otherwise, be our duty to render to them…when he turns tyrant…we are bound to throw off our allegiance to him, and to resist…Not to discontinue our allegiance, in this case, would be to join with the sovereign in promoting the slavery and misery of that society, the welfare of which, we ourselves, as well as our sovereign, are indispensably obliged to secure and promote…”

“[T]he apostle…grounding his argument for submission wholly upon the good of civil society…authorizes, and even requires us to make resistance, whenever this shall be necessary to the public safety and happiness…”

“[N]othing can well be imagined more directly contrary to common sense, than to suppose that millions of people should be subjected to the arbitrary, precarious pleasure of one single man; so that their estates, and every thing that is valuable in life, and even their lives also, shall be absolutely at his disposal…What unprejudiced man can think, that God made ALL to be thus subservient to the lawless pleasure and frenzy of ONE, so that it shall always be a sin to resist him!”

“[N]o government is to be submitted to, at the expense of that which is the sole end of all government–the common good and safety of society…The only reason of the institution of civil government; and the only rational ground of submission to it, is the common safety and utility. If therefore, in any case, the common safety and utility would not be promoted by submission to government, but the contrary, there is no ground or motive for obedience and submission, but, for the contrary.”

“[A]uthority [is] a trust, committed by the people…all besides, is mere lawless force and usurpation; neither God nor nature, having given any man a right of dominion over any society, independently of that society’s approbation, and consent…those in authority may abuse their trust and power to such a degree, that neither the law of reason, nor of religion, requires, that any obedience or submission should be paid to them: but, on the contrary, that they should be totally discarded…”

“A people, really oppressed…to arise unanimously, and to resist their prince, even to the dethroning him, is not criminal; but a reasonable way of indicating their liberties and just rights; it is making use of the means, and the only means, which God has put into their power, for mutual and self-defense. And it would be highly criminal in them, not to make use of this means. It would be stupid tameness, and unaccountable folly…”

“For what reason, then, was the resistance to king Charles made?…during a reign, or rather a tyranny of many years, he governed in a perfectly wild and arbitrary manner, paying no regard to the constitution and the laws of the kingdom, by which the power of the crown was limited…He levied many taxes upon the people without consent of parliament; and then imprisoned great numbers of the principal merchants and gentry for not paying them. He erected, or at least revived, several new and arbitrary courts, in which the most unheard-of barbarities were committed…He not only by a long series of actions, but also in plain terms, asserted an absolute uncontrollable power…”

“[O]n account of king Charles’ thus assuming a power above the laws, in direct contradiction to his coronation oath, and governing…in the most arbitrary oppressive manner…resistance was made to him.”

“[T]his resistance which was made…[was] a most righteous and glorious stand, made in defense of the natural and legal rights of the people, against the unnatural and illegal encroachments of arbitrary power. Nor was this a rash and too sudden opposition. The nation had been patient under the oppressions of the crown…and there was no rational hope of redress in any other way–Resistance was absolutely necessary…against one which was impiously attempting to overturn law and equity and the constitution; and to exercise a wanton licentious sovereignty over the properties, consciences and lives of all the people…And now, is it not perfectly ridiculous to call resistance to such a tyrant, by the name of rebellion?”

“[T]he prerogative and rights of the crown are stated, defined and limited by law…he cannot, while he confines himself within those just limits which the law prescribes to him as the measure of his authority, injure and oppress the subject.  The king…swears to exercise only such a power as the constitution gives him. And the subject…swears only to obey him in the exercise of such a power…From whence it follows, that as soon as the prince sets himself up above law…he has no more right to be obeyed…The subjects’ obligation to allegiance then ceases…”

“There is an essential difference…between resisting a tyrant and rebellion…to resist [Charles], was no more rebellion, than to oppose any foreign invader, or any other domestic oppressor.”

“[King Charles] died an enemy to liberty and the rights of conscience…”

“It is to be hoped that it will prove a standing memento, that Britons will not be slaves; and a warning to all corrupt counselors and ministers, not to go too far in advising to arbitrary, despotic measures…”

Jonathan Mayhew’s role in America’s Revolution extends beyond his Discourse Concerning Unlimited Submission and Non-Resistance to the Higher Powers.  He preached a sermon against the Stamp Act, arguing that the essence of slavery is subjection to others, “whether many, few, or but one, it matters not,” that led to the stamp riots.  He coined the phrase “no taxation without representation.”  He proposed the idea of Committees of Correspondence.

Despite his many contributions, however, the main reason that Franklin Cole concluded that “to Jonathan Mayhew belongs the distinction of being the first of the Revolutionary preacher-patriots,” was the influence of his Discourse.  He even demonstrates substantial parallels between it and the Declaration of Independence.

Mayhew said “having learned from the Holy Scriptures that wise, brave and virtuous men were always friends to liberty…made me conclude that freedom was a great blessing.” Today, we need to remember how great is the blessing of freedom that has been passed down to us from his generation, and rekindle the same level of commitment to it, for freedom is always under fire.

(Gary M. Galles is a Professor of Economics at Pepperdine University.)

Fixing Fundamental Problems in California

In governance, mastery of the fundamentals is critical.

In his annual State of the State address, Governor Brown had every opportunity to discuss the fundamental problems facing California. These include a $15 billion budget deficit, $500 billion in unfunded pension liabilities, a tax and regulatory climate that drives businesses away, wasteful and ineffective use of our tax dollars and a political system unduly influenced by special interests – most notably the public employee labor organizations.

But like an eight-year-old Pop Warner quarterback who wants to try a “flea flicker” or a Statue of Liberty play before he knows basic passing and running techniques, Governor Brown seems uninterested in – and even bothered by – the fundamentals of governance.

Take high speed rail. Beset with problems ever since voters approved a $10 billion bond in 2008, Brown pleaded with legislators in his speech to approve a business plan for the project so construction could begin – a plan so bad that the non-partisan Legislative Analyst’s Office and a peer review group hired by the High Speed Rail Authority itself have derided it as illegal and not feasible.

Another fundamental of governance is to insure that expenditures do not exceed revenue. Although California is showing signs of a nascent recovery (which was helped by a reduction in taxes due to voter rejection of Proposition 1A in 2009) Governor Brown wants to increase taxes to close the budget gap. This, despite the fact that California already has one of the highest tax burdens in America.

Raising taxes in a high tax state is even less defensible given that Governor Brown actually envisions an increase in spending by seven percent.

The fundamentals of governance also dictate that state leaders keep their expectations realistic. Governor Brown’s tax hike plan requires voter approval. However, given that California voters have rejected the last seven statewide tax increase proposals, it is likely Brown’s expectation will remain unrealized.

To his credit, Governor Brown did spend some time in his State of the State Address on pension reform. But talk is cheap. While his plan contains many of the substantive reforms Republicans have sought for years, the real question is whether he is willing to expend political capital to achieve those reforms. Few Sacramento insiders believe that the labor controlled legislature will give Brown real pension reform. So rather than focus on raising campaign funds for his tax increase initiative, would it not be a return to fundamentals by taking the issue of pension reform directly to the People?

Another fundamental of governance is to ensure that businesses, which comprise a major component of your tax base, are treated fairly so they are not lured to other states offering a less hostile tax and regulatory climate. Given that CEO magazine has ranked California as the 49th worst place in the country to do business, this is not an academic concern.

Brown’s solution is a restructuring of the Office of Business Development saying that businesses large and small now had an “effective champion to navigate the state’s plethora of complex laws and regulations which can discourage investment and job creation.” This sounds good, but would it not be a more fundamental fix to actually address the “plethora of complex laws and regulations” that are the problem in the first place?

California’s fundamental problems are legion. But instead of confronting them head on, Governor Brown chooses to call his critics “declinists” who “fantasize that California is a failed state.” But it is not the “declinists” who rank California as having the worst credit rating – it is credit rating agencies who have no political ax to grind. It is not the “declinists” who are relocating capital outside of California – it is major business interests who would actually like a reason to stay in California. It is not the “declinists” who rate California’s system of governance poorly – it is the non-partisan Pew Center on the States.

Rather than waste time calling his critics names, it is clear that Governor Brown should begin to take seriously the fundamental problems facing California. If he doesn’t, it will surely become the “failed state” that he thinks some of us fantasize about.

(Jon Coupal is president of the Howard Jarvis Taxpayers Association -– California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights. This story was first posted on HJTA.)

Trouble for Brown’s Tax Strategy in Poll Numbers

Governor Jerry Brown’s hope of clearing the field of all other tax increase measures except his own ran into trouble with the release of the newest Public Policy Institute (PPIC) poll. The poll indicates that proposals that simply tax the rich may fair better than Brown’s plan of income and sales tax increases giving proponents of the tax the rich proposals incentive to carry on.

While the PPIC poll did show Brown’s overall plan scored a 68%-31% edge amongst likely voters, breaking down the proposal showed a glaring weakness. Voters do not like the idea of raising the sales tax. Brown proposes raising the income tax on those earning more than $250,000 and raising the sales tax a half-cent. The idea of raising the sales tax was opposed by 64%.

Other proposals Brown wanted to move from the ballot only raise the income tax.

The idea of taxing the rich has strong support right now. Likely voters backed taxing the rich by 68%.

The California Federation of Teachers/Courage Campaign tax increase proposal raises income taxes on millionaires.  Civil Rights attorney Molly Munger’s initiative raises only income taxes, although it hits a wider range of income earners than the CFT plan.

The poll also revealed that sending money to schools enjoys strong support, something that all the major tax measures do.

The CFT/Courage Campaign leaders have argued all along that their plan has a better chance of passing. This poll will only solidify their stand and make it less likely that they will move aside.

Another hurdle for Brown and all the tax increase proponents: Likely voters seem skeptical that taxes are the best way to balance the budget. A combination of taxes and spending cuts to balance the budget was supported by 40% of the respondents while 41% said spending cuts alone should do the job.

That attitude could present problems once campaigns for and against tax measures are in full swing. In fact, these poll numbers may have little merit once campaigns are engaged providing more information to the voters.

A prime example of this is the question PPIC asked on the split roll property tax, an effort to raise property taxes on commercial property by reassessing business property annually removing it from Proposition 13 protections.

The poll asked if the respondents favored or opposed taxing commercial property at market value. The response was 60% favorable, 34% opposed. But there was no context to the question. In a campaign, consequences of raising taxes on business, like the potential of lost jobs, would be presented to the voters. Surely, voters hearing both sides of an argument would result in some change in the current poll numbers.

Educating voters is what campaigns are all about. As we have seen recently in the presidential primary states, polls numbers can turn around quickly.

(Joel Fox is the Editor of Fox & Hounds and President of the Small Business Action Committee. This story was first posted on Fox & Hounds.)

Obama’s Ironic use of “Limited Government” in SOTU

Toward the end of his State of the Union speech, President Obama said “I believe what Republican Abraham Lincoln believed:  That government should do for people only what they cannot do better by themselves, and no more.”  Apparently, he didn’t note the immense irony of those words on the lips of one of American history’s most aggressive expanders of the scope and reach of the federal government, or the cognitive dissonance between that claim and the preceding substantial laundry list of things he wanted to do for (and to) Americans.

But the huge gap between the Presidents limited government words and his expansive government actions shows how limited is the power of such words to constrain centralized power and control.  Ritual obeisance to the rhetoric can simply be combined with inconsistent behavior, and his inflation of  government even further past any defensible claim of advancing the general welfare is defined out of existence.

Fortunately, this issue has already been considered.  In his 1969 Let Freedom Reign, Leonard Read wrote about a loophole in the limited government formulation that now allows President Obama to eviscerate any such limitation.  His depressingly current chapter on “Governmental Discipline” merits careful consideration.

During the last century, several of the best American academicians and statesmen—in an effort to prescribe a theory of governmental limitation—have agreed: The government should do only those things which private citizens cannot do for themselves, or which they cannot do so well for themselves.

[T]his is meant to be a precise theory of limitation…

The government should, indeed, do some of the things which private citizens cannot do for themselves…Codifying and enforcing an observation of the taboos gives the citizenry a common body of rules which permits the game to go on; this is what a formal agency of society can do for the citizens that they cannot, one by one, do for themselves… And no more!

This proposal…does not go far enough.  It has a loophole, a “leak,” through which an authoritarian can wiggle

What they [citizens] will not do and, therefore, “cannot” do for themselves is to implement all the utopian schemes that enter the minds of men, things that such schemers think the citizens ought to do but which the citizens do not want to do…”only” is utterly meaningless!

Reflect on the veritable flood of taboos—against other than destructive actions—now imposed on the citizenry by federal, state, and local governments.  And all in the name of doing for the people what they “cannot” do for themselves.  In reality, this means doing for them what they do not wish to do for themselves.

How might we state this idea, then, in a way that…if followed, would restore government to its principled, limited role—keep it within bounds?  Consider this:  The government should do only those things, in defense of life and property, which things private citizens cannot properly do each man for himself.

The only things private citizens cannot properly do for themselves is to codify all destructive actions and prohibit them…Neither the individual citizen nor any number of them in private combination…can property write and enforce the law.  This is a job for government; and it means that the sole function of a government is to maintain law and order, that is, to keep the peace…a task much neglected when government stops out of bounds.

All else—an infinity of unimaginable activities—is properly within the realm of personal choice: individuals acting cooperatively, competitively, voluntarily, privately, as they freely choose.  In a nutshell , this amended proposal charges government with the responsibility to inhibit destructive actions—its sole competency—with private citizens acting creatively in any way they please.

The government is engaged in countless out of bounds activities…what private citizens will not do rather than something they cannot do…

[W]e allow government to commandeer resources that private citizens will not voluntarily commit to such purposes.  In other words, private citizens are forced to do things they do not wish to do.

Why are private citizens forced to do what they do not wish to do?  After all, the formal coercive agency of society—is their agency!

We have one test, and one only, for what private citizens really wish to do: those things they will do voluntarily!

But here’s the rub:  There are those who believe we do not know all the things we want or, at least, are unaware of what is good for us.  These “needs” invented for us…have no manner of implementation except by coercion.  In a word, these people who would be our gods can achieve the ends they have in mind for us only as they gain control of our agency of force: government.

And the primary reason why they can force upon us those things we do not want is our lack of attention to what are the proper bounds of government.

By asserting his devotion to limited government in his State of the Union address, President Obama seems to be trying to blunt criticism of how untrue that statement is.  He mouths the same words as those who are truly concerned about limiting over-reach of government, but he clearly means something else than they do.  It reminds me of some other words of Abraham Lincoln:

We all declare for liberty, but in using the same word we do not all mean the same thing. With some the word liberty may mean for each man to do as he pleases with himself, and the product of his labor; while with others the same word may mean for some men to do as they please with other men, and the product of other men’s labor. Here are two, not only different but incompatible things.

(Gary M. Galles is a Professor of Economics at Pepperdine University.)

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