The Swarm

The headlines on the Field Poll story today were alll about "voters" opposing the May 19 ballot measures, but the real story is in the partisan split.

Democrats and independents favor the most of the package, especially its most importance piece, Proposition 1A. But Republicans are opposed and their position is dragging it down in the overall poll.

On Prop 1A, 52 percent of Democrats said they woudl vote yes, and 37 percent were opposed. Among indpendent and minor party voters, the measure led 47 percen tto 40 percent. But Republicans hate it. Only 24 percent said they would vote yes, while 65 percent are opposed.

Part of this is probably due to the fact that Republicans, out of power in Washington and in the California Legislature, are generally down on anything the government is doing. But a big part of it is also no doubt due to the fact that Prop 1A has been pummelled by partisans for extending the temporary taxes in the budget package for two years.

The irony is that the linkage between the spending limit in 1A and the tax hikes was a Republican strategy. They wanted to tie the two so that Democrats and their allies would not go after the spending limit. Now it appears that it is the Republicans, not the Democrats, who are most likely to bring it down.

The campaign from here on out will be a contest between Republican leaders trying to woo back some of their party faithful to vote in favor of 1A as Democratic-leaning unions try to peel back some of their party's support for the measure. Should be fun.

See the full poll here.

 

 

 

 

 

The Democratic Party's refusal to endorse (by the required supermajority) the budget package on the May 19 ballot, following the Republican Party's decision to oppose the measures, means more of the same from the state's grass-roots political activists. The Democrats balked mostly because of the spending cap in Prop. 1A, although they also were not wild about shifting money from special funds for mental health and children's programs to other priorities, as proposed in Props 1D and 1E. Earlier, the Republicans opposed the measures because they didn't like the idea of extending the temporary taxes in the package from two years to four years, as proposed in Prop. 1A.

Although the combination of the two parties' positions might help tank the package, both sides cannot ultimately prevail. They are playing a game of fiscal chicken. Eventually, there will be either more cuts, as the Republicans desire, more revenue, as the Democrats want, or a combination of both, as this package proposes.

The Democrats seem to think that a bigger crisis will lead voters to repeal the two-thirds requirement for raising taxes, and with a new Democratic governor in 2010, they will get their revenue without a spending limit. The Republicans think just the opposite will happen: a crisis will prompt the voters to slap a strict spending limit on the Legislature, forcing a solution that relies only on spending cuts.

While that might be the thinking of the parties' hard-core activists, it doesn't appear to reflect the beliefs of the broader electorate. Polls continue to show that most folks accept that any real solution is going to have to include more revenue and more cuts. But that's not necessarily who will be voting on May 19. So the props could very well fail.

And then we will get to see which side wins this all-or-nothing fight to the death.

 

 

 

 

 

 

It probably doesn't mean a damn thing, but the state's personal income tax collections are finally showing some signs of a pulse. After an abysmal start to the month, the past three days have each been stronger than the same three days one year ago. Keep an eye on it next week when the real trend for the month should emerge....

 

Here is economist Steve Levy's take on today's California jobs report:

California's unemployment rate reached 11.2% in March, the highest rate on record, topping the 11.0% rate of February 1983. The state lost an additional 62,100 jobs in March. For the past 12 months California has seen 637,400 jobs vanish and the state has lost 727,700 jobs since the peak in July 2007. The Jobs Story California lost jobs in March at the same rate as the nation. For the past year California suffered a 4.2% decline in job levels compared to the nation's 3.5% loss. California's higher rate of job loss is primarily the result of greater exposure to the housing downturn and related job losses in construction and finance. 

 

The nation's job losses are widespread. Thirteen states had greater percentage job losses than California including the three neighboring states of Arizona, Nevada and Oregon. Five southern states, usually thought to have stronger job growth, posted higher job losses than California including Florida, Georgia, North and South Carolina and Tennessee. 

Job losses were widespread with continuing losses in construction, manufacturing, finance, trade and temporary help services. 

 

The Unemployment Story 

The state's unemployment rate at 11.2% is the fourth highest in the nation behind Michigan, Oregon and South Carolina. There are now eight states with unemployment rates of 10% and above and that number will grow in the coming months. 

 

Why is California's unemployment rate so much higher than the national average when our job losses are only slightly above the nation's rate of decline?

 
 
 

 
 

California's unemployment rate is higher because, despite job losses throughout 2008, more than 300,000 workers joined the California labor force and , in effect, became instantly unemployed. For some reason California's labor force growth was three times the national average despite during this recession. 

 

Bottom Line Going Forward 

The job losses are not over and the unemployment rate has not peaked yet in California or in the nation. 

This news is not surprising and the March employment report is not surprising given the bad news in the national jobs report released two weeks ago. 

If the administration's anti-recession efforts succeed the rate of job loss should slow by July. We are seeing some positive economic news mixed in with the disappointing employment numbers and we should see more good news in the coming months. 

 

If the situation is not clearly getting better by July, I think we will see Plan B including additional stimulus efforts and efforts to help homeowners and state and local governments.

 
 

It's still not clear that the unions will spend money against Prop. 1A, despite Kevin Yamamura's report here that the SEIU, the California Federation of Teachers and the California Faculty Assn. have formed an opposition committee. But it would indeed be a perfect California marriage if the state's biggest public employee union and its anti-tax groups got together to kill this measure. The unions want to increase spending. The anti-tax groups want to reduce taxes. You can't do both, so one of them has to be wrong about the likely outcome of the political and fiscal crisis that defeating 1A would bring about. My hunch is that the union folks are gambling that they can win two-thirds majorities in the Legislature and seat a Democratic governor in 2010, then make the tax hikes permanent without having to worry about a spending limit. The anti-tax folks? The best they can hope for in the Legislature is continued stalemate, which probably means more borrowing and gimmicks. Or, on the ballot, a tougher spending limit not linked to taxes. The voters love that idea at first glance. But will they support it after the unions get down trashing it?

 

One odd thing about the anti-tax groups' opposition to Prop. 1A is that if they win, they will produce a result that the Democrats in the Legislature would have been happy to accomplish this year.

The Democrats were pushing for a tax increase. They wanted a permanent tax hike, but would have settled for one year, two years, three years, anything that Republicans were willing to vote for. In the end, a few Republicans agreed to a tax increase of up to four years, but only if the Democrats agreed to a spending limit that would have to go on the ballot because it is a constitutional amendment.. The deal was structured to allow the taxes to stay in effect for two years if the spending limit failed at the polls and for up to four years if the reform passes. But it's pretty clear that no Republican would have voted for even a single year of higher taxes without the spending limit.

Enter the anti-tax crowd. By dfeating Prop. 1A, they would block the one big thing the Republicans got in exchange for their tax vote. Opponents are focused on the final two years of the tax increases, but if they win, the end result is this: two years worth of tax hikes, and no spending limit.

And that is a deal that every Democrat, and probably not a single Republican, would have supported in the Legislature.

 

 

 

The No on 1E people say they caught a CTA official stating in error that the money IE would shift from the Prop 63 fund would be "borrowed" and paid back "with interest." The 1E opponents point out that this is not the case, that the money being shifted will not be "repaid." To which I say good. I probably wouldn't support 1E if it were proposing another budget "loan."

We don't need to borrow from ourselves. The mental health fund is money that comes from Californians, or at least the handful who earn more than $1 million a year. It was a mistake to set that money aside for a special purpose in the first place, and there is absolutely nothing wrong with saying to voters, "Hey, do you want to loosen the strings on that money for a year or two so we can use it to avoid cuts in other programs that might be more important at the moment."

That's called setting priorities. It's something the Legislature should do more of, not less. And in this case the people should support them.

The text of the No on 1E statement is below the jump.

Our friends at the Howard Jarvis Taxpayers Assn. brought this editorial from the Daily Breeze to our attention, noting that today, with the 1-cent sales tax hike taking effect, Californians begin to pay for the "failures" of our leaders. That's the same language often employed by Gov. Schwarzenegger, or at least it was before the economy tanked so badly that even he concluded that California had to raise taxes.

I've never been a fan of that way of looking at the problem. Not because I don't think our leaders have failed. They have, in many ways and at many times. My problem with it is that it distracts the reader from what is really going on.

California has been spending more than it is taking in. The state is spending that money on stuff for us: schools, roads, prisons, mental health care, doctors and hospitals for poor kids, etc. Yes, the state and its leaders should have been more prudent, and should have done more to keep that spending under control. But the higher taxes we are paying now are not some sort of abstract penalty we are all stuck with because our leaders are so feckless. The taxes are paying for services we and our fellow Californians are receiving, or have received in the recent past.

If you think those services are too expensive, or too generous, then say so. It would also be helpful if you noted exactly which services you would like to cut back or eliminate.

That's really what is at issue here.

So when you start paying that higher tax today, and if it bothers you, think about which state services you'd rather do without, and let your legislator know what they are.

 We're not so much paying for anyone's "failure" as we are paying for more services than we could afford with the taxes we were paying last year.