Opinion

The Great Debate

To see future electorate, look at California voters now

The changing face of the American electorate is etched all over the map of California. The Golden State may no longer be a partisan battleground, but it continues to be a reliable bellwether for the evolving national political landscape.

Even as President Barack Obama won a second term with an electorate that mirrored the demographic trends that have made California deep blue, Golden State voters chose to raise taxes to fund education and gave Democrats a two-thirds “supermajority” in both houses of the state legislature—meaning Democratic lawmakers will have the ability to raise taxes without a single Republican vote.

This willingness to increase taxes to pay for schools and other long-underfunded public services, coupled with California voters’ rejection of the GOP’s “no new taxes” mantra—up and down the ballot—could well echo across the nation, just as the passage of the state’s Proposition 13 ignited the anti-tax movement more than three decades ago.

Once upon a time, the Golden State was a Republican bastion. From 1952 through 1988, only one Democratic presidential candidate — Lyndon B. Johnson — carried California. It may have helped that a Californian — either Richard Nixon or Ronald Reagan — was on the GOP ticket for seven of those 10 elections. Until former Governor Jerry Brown’s “Back to the Future” victory in 2010, Republicans had won 10 of the previous 15 gubernatorial elections.

How times have changed. In 2010 – a great year for Republicans nationally — Democrats scored overwhelming victories in California. Brown swamped billionaire business executive Meg Whitman and her prodigious spending, and Senator Barbara Boxer easily fended off a challenge from another wealthy GOP standard-bearer, Carly Fiorina. Democratic candidates took every statewide office, maintained their legislative majorities and held all their congressional seats.

Can one-party rule fix California?

California is on the verge of becoming a one-party state — but policy gridlock isn’t going anywhere soon.

Democrats now hold all the statewide offices and have a shot Tuesday at achieving two-thirds majorities in the Legislature. Yet they are far from being able to unilaterally resolve California’s fiscal logjam.

For the past decade, California’s fiscal picture has been awash in red ink, legislative stalemates, borrowing and a lot of budgetary gimmickry.  Three governors in a row, Gray Davis, Arnold Schwarzenegger and Jerry Brown, hit a stone wall in trying to resolve the state’s structural deficit—the  imbalance between ongoing spending and available tax revenues — that has persisted in the $10-billion plus range.

Postscript to California’s marijuana vote

From America’s mid-term elections, two noteworthy comparative results. A modestly funded ballot initiative to legalize marijuana in California drew 300,000 more votes than a billionaire businesswoman who spent well over $140 million of her own money to try to become the state’s governor. Both lost.

The hotly debated marijuana ballot measure attracted 3.4 million yes votes. Meg Whitman drew 3.1 million voters. It’s not clear whether she will run again but proponents of the marijuana measure, Proposition 19, are already planning to make another attempt in 2012. They think the California vote shows legalization is a matter of when, not if, never mind that this time they fell more than half a million votes short of success.

Proposition 19 would have allowed Californians over 21 to grow up to 25 square feet (2.3 sq metres) of marijuana and possess up to an ounce for personal consumption. It would have turned California, America’s most populous state, into the world’s first jurisdiction to formally legalize marijuana. (Not even the Netherlands, which has a system best described as schizophrenic pragmatism, has gone that far).

California voters back weakened climate law

-The opinions are the author’s own-

California voters on Tuesday rejected a measure to suspend the state’s innovative climate change law. But the state’s emission trading scheme has been substantially diluted to buy off opposition from energy-intensive industries and allay fears about job losses.

If it is true that “as California goes, so goes the nation”, the past 10 days have confirmed the lack of political support for tough emissions curbs.

The survival of California’s cap-and-trade scheme has kept alive hopes for enacting a patchwork of state and regional schemes in the absence of a federal program. Supporters hope establishing even a diluted system will lay the groundwork for a program that can be toughened as the economy improves.

California vote and Mexican drug cartels

What would legalizing marijuana in California, America’s most populous state, mean to the drug cartels whose fight for access to American markets have turned parts of Mexico into war zones? Shrinking profits? Certainly. Less violence? Maybe.

These topics are being raised as the U.S. heads towards Nov. 2 mid-term elections which in California include a ballot initiative, Proposition 19, providing for marijuana to be treated like alcohol and tobacco for Californians over 21. A vote in favour would end 73 years of prohibition and have enormous political impact not only on the rest of America but also on the long-running global war on drugs.

Experts on the issue have been working overtime and the latest of a string of academic studies, out this week, came from the RAND Corporation, a California-based think tank. The voluminous paper is entitled: Reducing Drug Trafficking and Violence in Mexico – Would Legalizing Marijuana in California Help? The study’s four authors, all prominent authorities on the illegal drug business, hedged their answer.

Get ready for the IOU market

agnes1– Agnes T. Crane is a Reuters columnist. The views expressed are her own –

Let the trading begin.

California will be mailing out its first batch of IOUs today after the state’s stalemate over how to close the more than $24 billion hole in the budget leaves it with insufficient funds.

The IOU market could swell to $3.36 billion by the end of the month if lawmakers and the governor still can’t find a middle ground.

Big banks, which stepped into the breach 17 years ago when the state last issued IOUs, appear to be reluctant to do the same this time around. Wells Fargo & Co, Chase and Bank of America have so far said they will accept the IOUs from their customers as they would any other check, but only for a very limited period of time. All three banks say they’ll stop accepting them after a week.

from Commentaries:

California faces its moment of truth

agnes1The California budget impasse comes to a head one way or the other this week, with state lawmakers needing to make nice by June 30 to close a $24 billion budget gap. If they don't, rating agencies have threatened to downgrade the state's credit ratings.

California's Comptroller said he would begin handing out IOUs on July 2 and the Treasurer said the state will draw on reserves to service the debt of all economic recovery bonds on July 1. (These bonds were created in 2004, when voters gave the state government the authority to raise $15 billion through bond issuance to plug another budget deficit.)

While a slump in real estate and tax revenue are very real factors behind California's disastrous finances, the San Francisco Chronicle also bullet-points more entrenched problems that have made it difficult if not impossible for the state to surmount extreme dysfunction.

Develop domestic oil reserves for energy independence

 Diana Furchtgott-Roth– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. —

President Obama is in favor of moving towards “energy independence,” but his new 2010 Budget specifically seeks to raise taxes on domestic oil exploration by $31 billion over 10 years, a larger tax increase than on any other industry. In addition, oil and gas producers would bear a disproportionately heavy share of other tax increases on business, more than $320 billion.

Surely a president who desires energy independence would leave oil companies alone so that America could develop greater domestic reserves.  But this is not the case.

Fishing for the housing bottom in San Diego

– James Saft is a Reuters columnist. The opinions expressed are his own –
jimsaftcolumn6
When prophetic long time bears turn a bit cuddly, it is usually best to take notice.  A real estate maven who rejoices in the “nom-de-blog” of Professor Piggington has now, after five years of correctly shouting bubble, labelled San Diego housing prices “reasonable” based on the latest available housing data.

Remember, San Diego has been, along with Phoenix, Las Vegas and parts of Florida, among the most bubbleicious markets in the U.S., and the massive busts there still represent a huge problem for bank balance sheets, for employment and for the U.S. economy generally.

So a bottoming, if that is what we are seeing, would be very significant. Housing is usually among the first sectors to recover in the aftermath of a recession and many economists argue that it actually drives the economic cycle.

First the stock market, now water

Jonas Minton– Jonas Minton is Water Policy Advisor for the Planning and Conservation League, an environmental advocacy organization.  Previously he was deputy director of the California Department of Water Resources. The views expressed are his own. –

In many ways, water policy in the Western United States mirrors the economic policies which created our financial catastrophe. Here in the West we’ve seen a massive development boom fueled by unrealistic expectations of ever-increasing supply.

Water contracts have been issued for many times the amount of water that nature can reliably provide. Wildly optimistic appraisals of water availability are being used to justify long-term, otherwise infeasible projects. Long held cautionary principles are being overlooked or eliminated in the rush to fulfill promises and support dreams that are unsustainable. And the public is being actively encouraged to invest billions more in bonds to subsidize the very system that is driving us to the crisis point.

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