A New Deal for California – What Now? (Finance and Green Economy)

In Budget Politics, California, Climate Change, Economic Planning, Economics, Environment, Liberalism, Mass Transit, Political Ideology, Politics, Politics of Policy, Progressivism, Public Policy, Public Sector, Regulation, Social Democracy, Social Policy, Taxes, Welfare State on December 2, 2010 at 9:10 pm

Introduction:

With the belated victory of Kamala Harris as Attorney General, the full results of the 2010 election are in for California. There many things that progressives can be proud of – a sweep of statewide offices, picking up another Assembly seat, defeating prop 23 and passing prop 25. On the other hand, there are also some major disappointments – the defeat of prop 19 (marijuana legalization), the defeat of prop 21 (a VLF to fund the state parks), the defeat of prop 24 (rolling back corporate tax breaks), and the passage of prop 26 (2/3rds requirement for fees). Prop 26 especially complicates what this victory means for California.

Indeed, our situation is a lot like the national picture after the 2008 elections – we have an executive who straddles the line between the left and right wings of the Democratic Party, a big legislative majority, but not the ability to break the fiscal deadlock and really be able to govern our state.

So where do we go from here?

Finance:

The rather comfortable million-vote margin by which prop 25 passes would make me rather optimistic about the possibility for the passage of a majority-vote revenue proposal. However the failure of every revenue increase – prop 19, 21, and 23 – are daunting evidence to the contrary. Granted that the outcome might be different in a presidential electorate (younger, more minority and working class voters, higher turnout generally), but I think this shows how difficult it will be to thread the needle of the “Program/Government Blindspot” and the prevalence of austerity thinking, even if we link taxation to spending.

In the mean time, California Democrats have a daunting task ahead of them – to balance the budget without doing any more harm to already brutalized public services, and to create the economic growth necessary to ensure that the budget stays balanced. In the short-term, there are four things we can do:

  1. Going back to the Steinberg Maneuver - According to the California Budget Project, Prop 26 doesn’t establish a blanket 2/3rd requirement for all fees. A number of fees, including “charges where the feepayer receives a service, product, benefit, or privilege…charges imposed for entrance, use, purchase, or lease of state or local government property, penalties, fines, or other monetary charges resulting from a
    violation of the law, charges imposed for “reasonable regulatory costs” and assessments and property-related fees,” are not covered by the 2/3rds requirement. Thus, it’s still possible to raise revenue through a two-step process in which said fees are raised by a certain amount by majority vote, then taxes are raised and the fees are lowered by the same amount by a majority vote. The issue here is whether we can get Governor-elect Jerry Brown to sign such measures, given previous statements of his.
  2. We can try again with Ballot Box Budgeting – there’s some indication that Brown’s approach will be instead to put the budget to a vote as a proposition in a special election. The tricky thing here is how to persuade the public to vote for said budget; Schwarzenegger tried this in 2009 and it was dramatically unsuccessful. Perhaps the 2010 election signals a more realist (and realistic) electorate, but it’s a roll of the dice.
  3. Banks – I’vewritten before about the potential that a state reserve bank offers. That was true before the 2010 election, but it’s even more true now. Given the newly-created restrictions on raising revenue, a state reserve bank offers an entirely new possibility, both for resolving the current budget crisis, and for creating the economic growth necessary for California’s future development.
    1. I believe that this bank would be even more likely to gain support if, within the state bank, there was created a series of Development Funds – a Green Development Fund, an Education and Innovation Development Fund, a Health Care and Medical Science Development Fund, and so on – that could make targeted investments into key sectors of California’s economy, both public and private.
  4. Jobs – with or without financing from a state reserve bank, a Job Insurance fund would fit under the exemption in prop 26 – since the “feepayer receives a service, product, benefit, or privilege,” namely eligibility for a job when unemployed. Ultimately, as I have said before, California cannot balance its budget with 12% unemployment because revenues will continue to decline, no matter how much spending is cut. What is needed is a sudden shock to California’s labor market, and unemployment being cut in half is that shock – it will pump huge amounts of money into local retailers and other businesses, it will make employers see the ranks of the unemployed in their communities shrinking, and hopefully shift the “animal spirits” of both employers and lenders.

None of these steps is a total solution for the fundamental problem of revenues – given the problems we had with the budget even before the recession. But they will fill the gap so that we can debate the question of majority-vote revenues in an economic climate of balanced budgets, normal levels of unemployment, and higher economic growth.

Green Economy:

Now that AB32 and CEQA (California Environmental Quality Act) are safe from Prop 23, we need to do more to show the real possibilities of a green economy. This means making it fast and seamless to develop sustainability, through the creation of expedited approval and categorical permits for model projects. It also means establishing special zoning rules in transit corridors to allow for sustainable, energy-efficient, high-density development.

This doesn’t mean dismantling regulations in the name of the environment, but rather shifting the direction of regulation away from NIMBY no-growth, which only encourages sprawl and wasteful development, towards in-fill building of affordable housing in already-developed areas while protecting undeveloped land. It also means – and here is where environmentalists need to reckon with the realities of class and race – getting rid of the tools of modern class (and racial) discrimination: zoning rules that limit building heights to two-stories or less, that ban unrelated individuals from living in the same house (to prevent renters and subdivision), that establish minimum lot sizes to mandate , or that mandate the construction of garages. In other words, ending exclusionary zoning and encouraging inclusionary zoning.

Finally, it means supercharging public investments into green energy, mass transit, and other sustainable ventures. A statewide version of LA’s 30/10 plan, aimed at speeding up and extending High-Speed Rail and local mass transit would be a huge transformation, both in terms of creating jobs and spurring growth, but also in lowering CO2 emissions and pushing land-use away into energy-efficient high-density development. Large-scale alternative energy projects, like the Beacon Solar Energy Project, San Fransisco’s tidal energy project, should be built under public auspices, making use of the newest forms of technology. The advantage to this approach is that it allows the public sector to act as a yardstick competitor to California energy companies, spurring innovation and providing a guaranteed market for green manufacturing firms under democratic auspices.

All of this links together. Without financing, there’s not going to be a green revolution in California any time soon. Without new sources of economic growth that don’t depend on housing bubbles, California won’t get the revenue it needs. In the end, the fight over our budget is really about the future direction of this state – whether we will have a government that can help build a broad economy or a night watchman state that is powerless to prevent corporate greed from running wild.

So let’s get to work.

  1. [...] housing is valued according to low density (big suburban houses with big yards and few people), and a system of regulation that supports sprawl and penalizes high density. As it turns out, “laissez faire” actually requires a lot of behind the scenes [...]

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