Al's Opinions

Years ago in the campaign for proposition 13 the sainted Howard Jarvis told us that his goal was to reduce the revenue available to politicians.  Having less money, they would do less.  There'd be less annoying and costly regulation of business.  Besides, people should pay directly for the services they receive and not depend on government to provide them.  People should pay to use libraries, just like they pay to visit museums.  Parents should pay for their children's educations.  All of these services should be provided by private enterprrise.  Private businesses are more efficient than government.  Etc., etc., etc.

This philosophy of government did not originate with Mr. Jarvis.  It's an old idea, one cherished by Republicans for ages.  One of President Gerald Ford's favorite sayings was "government spends too much money."  An early advocate of "small" government was a business man who, about 1929, wrote an article complaining about how government regulations was costing his business too much money.  He didn't care about the size of government.  He simply wanted it to leave him alone.

The behavior of recently elected Republican governors and legislators indicates that their primary concern is not the size or strength of government but rather a government that will support the aspirations of their wealthy backers.  Governor Walker did not reduce the revenue of the government of Wisconsin to bring about "small" government.  His intent all along was to make Wisconsin a State hospitable to manufacturers by reducing the wages of workers.  To do that requires destroying labor unions.  He is starting with  the public employee unions.

We liberal progressives seem to have been caught off guard.  We are astonished and unbelieving that a governor could be so calculating as to produce a budget problem, then use that problem to attack the civil servants of the State.  But think back a few years.  When Bill Clinton left office, the federal revenue exceeded federal expenditures.  The national debt was being paid down.  One of George Bush's first accomplishments was to engineer a sustantial tax reduction.  Most of the benefits went to the wealthiest taxpayers.  The government has been running a deficit ever since.  Republicans are now using this deficit to justify their attacks on Social Security, Medicare, support for National Public Radio, and expansion of health care.  They're not talking about reining in the Defense budget or about letting Bush's tax cuts expire and going back to Clinton's tax rates.

We thought that the elections of 2006 and 2008 had put away these aspirations of some Republicans.  We shifted our attention to other matters, such as ending the wars in Iraq and Afghanistan, extending the rights of marriage to gays and lesbians, providing true universal health care in California, and providing public funding for election campaigns.  Now we face the task of fighting for workers' rights.  It's as though we were living in the year 1911, not 2011.

We haven't been paying enough attention to our political enemies.  We've ignored the evidence of a wise man who believed in keeping his friends close and his enemies closer.

Labels: Bush tax cuts, Gerald Ford, going back 100 years, Howard Jarvis, Proposition 13, Scott Walmer

A Los Angeles talk show host (Larry Mantel of KPCC) is promoting the idea of a constitutional convention for California to solve the problems that make the State ungovernable and lead to yearly deadlocks on the budget. I oppose the idea. I don't think it's possible to solve the problems in California with a single convention to draft a new constitution for the State.

Why is the State ungovernable? One important reason is the requirement for a 2/3 vote in each house of the legislature to pass a budget or to amend the tax code. We don't need a constitutional convention to change the 2/3 requirement to a simple majority. A simple majority is the rule in most of the other States. We can change it by initiative. Don't expect the legislature itself to draft a proposition to do away with the 2/3 vote. A constitutional amendment also requires a 2/3 vote in the legislature. The minority party very much wants to keep the 2/3 requirement in place.

There is the question of whether the voters would approve a change from 2/3 to majority voting in the legislature. I think a majority favors such a change. However, the minority in favor of keeping the 2/3 vote is very passionate and is willing to spend a lot of money to scare the public into keeping the requirement. You can expect to see ads with arguments like these:

• If you let a simple majority in the legislature raise taxes, they will. You'll pay more taxes if this change is made.
• This requirement forces legislators to think in terms of how to reduce the cost of government to fit within the available tax revenue, rather than think of how to spend more of your money.
• This requirement also prevents the majority from shutting out the minority in planning the budget. The Republicans are the minority party now, but the Democrats could be the minority party a few years from now.

These are plausible arguments. Those of us who favor a simple majority vote in the legislature for budgets and taxes will have to prepare good arguments against them. In any event, we should study how other States enact budgets and taxes and see whether in practice any of the warnings of the "status quo" faction have any merit in actual experience.

Another necessary but more difficult change is to modify the property tax rules of Proposition 13. Many home owners are naturally nervous at the possibility of a big increase in the property tax on their homes. In my case, Proposition 13 limits the tax on my home to about $1700 a year. If it were taxed at the rate of 2 percent of its market value, the tax would increase to at least $10,000 a year. This extra revenue would be a boon to the City of Los Angeles, struggling now with a structural deficit of over a billion dollars a year. I have enough income to pay the extra tax, so I have no fear of being dispossessed by the marshal. There are many retired persons in less fortunate financial situations than mine who would have to go in debt, probably by taking out reverse mortgages on their homes, to pay the tax. They would stay in their homes and survive, but their heirs would not inherit the houses. The banks would repossess them and sell them to collect the amounts owed on the mortgages.

I don't think a simple repeal of Proposition 13 is politically possible. It may be possible to amend the proposition such that commercial property - property that produces income for the owner - is taxed at a higher rate than residential property. This change would not, or should not, alarm the retired homeowner with a modest retirement income. There would be powerful resistance to such a change, mostly from landlords. The Howard Jarvis Taxpayers Association would go full bore in putting out ads and sound bites to scare the retirees. The purpose of the change would be misrepresented. Persons who live in rented houses and apartments would be told how much their rents would have to be increased to cover the change in the tax rate. Perhaps rental property would have to be left out of the proposed change, so that only property supporting a manufacturing or service business (e.g., Macy's, Boeing Aircraft) would pay the increased tax.

Another problem that promotes the ungovernability of California is the extreme partisan divide in the legislature. Members have to face voters at a primary election before they can campaign in the general election. Primary election voters tend to be ideological purists. They want their candidates to be as pure as they are. Mr. Schwarzenegger thinks this partisan divide can be diminished by changing the way legislative boundaries are drawn, so that districts contain a more even mix of Republicans and Democrats. In that way, the winner of the primary in a "safe" district would not be guaranteed election in the general election. The voters approved this change and it will go into effect after the 2010 Census, when State Assembly and Senate Districts are redrawn. My own view is that it won't have much effect on the extreme partisanship.

I have an idea for an election system that would reduce the effect of the extreme partisan ship. I will have to think about it for a while and present it in another post.

Labels: 2/3 vote requirement for budget, California budget, Governor Schwarzenegger, Proposition 13, ungovernable California

I've just received by e-mail exhibit 37b as to why California is ungovernable. We have problems in this State that our magnificent Governor and our fearless legislators seem unable to solve. Our public schools are suffering from insufficient funding. Teachers have to use money from their own salaries to buy supplies for the children. Hospitals are having to close emergency rooms because of the flood of uninsured residents who must use the ER for any health care they receive. Our prisons are overcrowded. Our highways need repair. There's a shortage of money everywhere - except in the campaign funds of some prominent politicians.

Anyway, here is a copy of the exhibit:

Albert, the package we sent your petition inlooks like this.

Name:
Mr. Albert Saur
Property address:
5416 Manton Ave, Woodland Hills, CA 91367
County of:
Los Angeles
Delivery date:
Week of 03/12

This e-mail is to confirm that your Official Petition to the California Legislature was delivered to your verified address on the date indicated above.Please sign and return your petition immediately so that we can forward it to your California State Legislators.Also, please say "yes" to our invitation to join the Howard Jarvis Taxpayers Association. Return the membership form along with your petition, or click on the red button to join online. Making your voice heard is important, but the only way to stop higher taxes is to get involved! Please join us today.

If you did not receive your package, or have misplaced it, please click on the red button to access our website for further instructions.

I did in fact receive the petition in the mail a few days ago. This exhibit shows that the anti-tax movement here in California is still strong and resourceful. I don't know yet what the constitutional amendment underconsideration is that has the Howard Jarvis Taxpayers Association so worried. I know that it is about time that someone tried to do something to restore some degree of equity and fairness to the property tax mess we Californians created when we adopted Proposition 13.

I think I am in position to talk. My wife and I bought our present house in 1968. It is a large tract house. We paid $39,000 for it. When Proposition 13 went into effect, the house was appraised at about $60,000 and was taxed at two percent per year on that amount. Since that time similar houses in the tract have increased in value. Not long ago some houses like ours were selling for $750,000. I am now paying in property taxes $1500 a year for a house that may be worth three-quarters of a million dollars. The people who bought houses in the tract recently may be paying a property tax as high as $15,000 a year, or ten times what I pay.

There is a nice Mexican restaurant near my house that has been in existence for longer than I have been living in my present house. I don't know what property tax the restaurant pays, but I suspect it isn't much more than what I pay. You may argue, even though I don't, that because of my advanced age and because I am retired, I am entitled to a reduced rate of taxation on my house. But, is the restaurant similarly entitled? A restaurant earns a lot of money. I don't earn any money; I live on my savings, my investments, on social security, and on some company pensions.

I think it's high time that California changed the Proposition 13 property tax law. The Howard Jarvis Taxpayer Association is determined that the law will not be changed. In a contest between the reformers and the Howard Jarvis people, I will bet on the latter.

Labels: Education, hospital emergency rooms, Howard Jarvis Taxpayers Association, prisons, Proposition 13

# posted by Albert Saur @ 10:51 PM 0 comments

Some time ago I had a conversation with a member of the city council of a small city here in California. She said that the city had a problem raising enough revenue to pay for the services provided to the residents. In particular she said that the tax on residential property was not sufficient to pay for the services that residential property requires.

Today, on the front page of the Los Angeles Times I saw an example of what she was talking about. The center story today is about a fire in the Anaheim Hills area of Orange County. The fire has burned about 2000 acres and has damaged some buildings. According to the Times story,

The fire, coming during an especially dry winter, was fanned by Santa Ana winds blowing through the air dangerously heated by record-setting temperatures. Red flag conditions, oppressive heat and single-digit humidity also complicated the efforts by the more than 800 firefighters at the scene.The Anaheim Hills neighborhood features hotel-sized homes, some 7,000 to 10,000 square feet and still under construction.

I don't know what the property tax rates are in the area of the fire. The expensive homes may be new. If so, they would be taxed according to the price the owners paid for them and not according to the assessed value in 1975. Another excerpt from the Times article suggests that most of these homes are fairly new.

Orange County Fire Authority Capt. Glenn Sekius, from Fire Station 10 in Yorba Linda, fought a blaze in this corridor the last time it burned, about three decades ago."The only difference between now and 30 years ago is that people put houses in the way," he said.

The story of the fire gives me an appreciation of what my friend on the city council meant when she said that the property tax doesn't pay for the services that property requires. A city has to maintain a fire department to fight brush fires that may spread and destroy expensive homes. The city has to maintain a police department that, among other duties, has to help evacuate residents from homes threatened by a spreading wildfire. These services cost money and money must be found to maintain the service departments, even though serious fires may occur only once in thirty years.

Labels: Anaheim Hills fire, fire damage to homes, Orange County, Proposition 13

Milton Friedman, who died recently, was an influential economist and advisor to three Presidents. He established the following dicta in the thinking of conservatives:

1. Free markets are better at making economic decisions than governments.
2. Individuals make better economic decisions than government.
3. Government is unable to create jobs. Any new jobs resulting from government action only take money away from other jobs. Government can only redistribute jobs, not create new ones.

Although many Conservatives accept these statements as axioms, our history as a nation contains counterexamples. Friedman’s dicta are true part of the time, but not all the time.

The first and second dicta (or axioms) assert that individual decisions about spending money and the supply and demand forces that set prices give “better” results than prices and spending priorities of governments. My question is, better for whom? If you consider a sum of money that, in one situation is taken by a government in taxes, and in another situation is spent by the individual, it may be true that letting the individual spend the money is better for him or her than letting the government spend it. However, the result may not be better for society as a whole.

It is easy to cite examples that contradict the third dictum. The Internet was a government invention. The result has been a profound change in the way information is transmitted and the creation of a whole new industry with many jobs. Other examples of government creating infrastructure that created new industries and new jobs are the Erie Canal, the interstate highway system, and the U. S. Postal Service. There are many others.

At present we Americans have serious problems that will not be solved simply by government inaction and letting free markets work on them. Two important ones are the breakdown of our system of health care and the lack of good public transit systems in our cities.

Our health care system has always depended on medical doctors acting as private entrepreneurs, like grocers and barbers, providing medical treatments in return for fees. This model seemed to work fairly well when I was a child in a small town in Michigan. I would go to the village doctor for immunization shots, eye examinations, health check-ups, and treatment for various diseases. The doctor would extend credit to those patients who were temporarily short of money. Some patients never were able to pay. Care in hospitals worked the same way. No one was denied medical attention or treatment for lack of money.

This small-town model may actually still prevail in some parts of the country. I don’t know; I have not lived in a small town since I left home in 1944. Since that time I have lived in Washington, DC, in Champagne and Urbana, Illinois, in Fayetteville, Arkansas, in New York City, and in Los Angeles. I recall that my wife spent time in a hospital in Fayetteville; the bill for the stay was nine dollars a day. Today a stay in a hospital costs more than a thousand dollars a day. At the time that my wife and I were living in Arkansas, I was a professor at the University earning a salary of $4800 a year. Today a starting salary for a professor is at least fifteen times that much. If the cost of hospital stays were still in the same ratio to professors’ salaries, the cost would be $135 per day. This is an example of how medical costs in the United States have risen much faster than the inflation index.

Of course, Fayetteville may not be a good example. While we were living in New York, my wife was in a hospital there to give birth to our first child. The total bill, including the services of the doctor, was about two hundred fifty dollars. The year was 1952. I was earning $5600 a year as an employee of Columbia University, working on a Navy project to study the transmission of sound under water over long distances.

It is clear to most Americans that our system of health care needs repair. Relying on Friedman’s dicta isn’t going to bring about any improvement. Depending on market forces won’t provide health care to persons who can’t pay for it. The existing institutions – doctors, hospitals, insurance companies – will continue to make profits under the present system as long as they are not obliged to provide any care for those who can’t pay. A corollary of Friedman’s dicta is that government should not interfere and enact laws that require hospitals to care for the indigent. As long as the existing system is restricted to providing medical services to those who can afford them, that part of society will continue to be well-served. One of the big problems is that hospital emergency rooms are obliged to care for anyone. Our compassionate laws do not allow a seriously injured person to die just outside the entrance to a hospital for lack of money.

Perhaps I am unfair to the late Professor Friedman. I have not taken into account the existence of compassionate benevolent organizations, such as churches. These organizations take care of the poor. In Professor Friedman’s society, they would care for those poor wretches who can’t afford the medical care provided to the more affluent members of society. Unfortunately, there are too many poor wretches and too few benevolent organizations.

As a long-time resident of Los Angeles, I am aware of the limitations and inadequacies of the public transit system of this city. In all of my working experience here I have never held a job where it would have been convenient to take public transportation from my home to my job site. I had to use an automobile to commute to work. During the last twenty years of my working life the commute was either twenty or thirty-six miles one way. Like millions of others, I drove on our excellent freeway system. During part of my working life I commuted with other workers, either car-pooling or riding in a van pool. Even then I had to use my car to drive from my home to the meeting place for the van, a distance of about four miles. If I had ridden the bus, the bus routes were laid out so that I would have had to make one transfer. During rush hour the buses I would have taken ran at intervals of half an hour.

Car pooling and van pooling are results of following Friedman’s dicta and letting free markets solve the problem of getting me to and from work. Although I was able to ride a pool van to get to work, millions of other commuters drove in their cars with one person per car. That is easily the most expensive way to transport workers back and forth from their homes to their jobs. A fraction of the cost of operating and maintaining and insuring all those autos would have provided an excellent and extensive rapid transit system. However, such a reordering of priorities and resources was beyond the ability of our political leaders and contrary to the prejudices of the voting and tax-paying public. People would rather pay the cost of owning and operating a car than the increase in taxes necessary to maintain an effective and convenient public transit system. Many conservative or libertarian politicians advocate building additional freeways, perhaps with double decks, to accommodate the ever increasing number of private automobiles used to transport workers between home and work.

Friedman’s dicta allow private entrepreneurs to offer commuting services. A number of private bus companies have come into existence, principally to provide transportation between communities outside of Los Angeles and various job sites that employ large numbers of workers. I have not examined the operation of any of these bus lines with respect to just where they pick up and discharge passengers. I assume that the discharge locations are at several aerospace firms in the city that employ thousands of workers. One bus carrying fifty workers is certainly more economical than fifty cars carrying the same workers. In addition, the one bus is less demanding of highway facilities than fifty cars. These private bus lines represent a limited validation of Friedman’s dicta, but they also show the limits of what can be achieved by relying on free markets and government inaction.

I am convinced that relying on private entrepreneurs and free markets will never provide a system of public transportation in a large city that is fair to all residents. Private enterprise will develop profitable routes that serve the more affluent part of the population; that is, people who can pay the price will enjoy convenient and comfortable transportation between their homes and jobs. The poorer part of the population have just as great a need for good public transit, but their needs will be met by methods that are less comfortable, less convenient, and less reliable. A good, comprehensive, and convenient transit system for a large city is not a profit-making proposition. Where such systems exist in the world they are subsidized by local governments. Everyone in the city pays to keep the transit system in operation. Receipts at the fare box are never sufficient to pay the cost of operating and maintaining a good system.

The same argument can be applied to public health care facilities. Years ago the County of Los Angeles maintained many free clinics where one could go to receive certain simple but useful medical procedures, such as immunizations against smallpox, measles, and influenza. These and other services were provided free of charge to any resident of the county. Because of cutbacks in revenue, largely due to the passage of the property tax limitation (known as Proposition 13 in California), these free clinics have been closed. People desiring or needing medical care who can’t pay are now forced to go and wait in hospital emergency rooms. The crowding in these rooms is a serious problem not merely for the indigent waiting for medical care but for the affluent who are stricken with heart attacks or strokes and need immediate attention. They also have to wait.

Just as a good public transit system requires a subsidy from local government, so also does a good system of basic medical care. If the people are willing to provide less than satisfactory public transit and less than satisfactory public health facilities they are not living up to traditional American values of fairness to all. We have a conflict of values between fairness and efficiency. Friedman’s dicta provide a means of utilizing resources in the most productive and profitable way possible. They do not provide fairness in social policy.

Labels: fair society, Milton Friedman, Proposition 13, public health, Public Transportation