Yes, Cutting Jobs And Services Does Affect The Economy

Dan Walters had a funny column a few days back, excoriating anyone who use "numbers" and "projections" to theorize about the impacts of budget cuts. As if it's some kind of novel idea that an economy dominated by government spending would rise or fall based on the amount of that spending. Mr. Walters, 1937 called and wants a word with you.

Anyway, let's look at the heart of Walters' complaint. First he says that we must have a hefty budget reserve because the economy is likely to go south, and because it will signal to bankers that "we're solvent so they'll buy our short-term notes." As I noted earlier, this is nonsense given the clear Constitutional duty to repay debt before practically everything else. Then he says this:

Democrats and Republicans are equally guilty, meanwhile, of emitting self-important nonsense about the impacts of their actions on the state's recession-wracked economy. While Democrats claim that cutting "safety net" programs and/or public payrolls will worsen the recession by taking money out of circulation, Republicans claim that raising taxes will retard recovery by discouraging investment and/or consumer spending.

Both practice voodoo economics. The entire deficit on which they are working, $24.3 billion including Schwarzenegger's desired reserve, is well under 2 percent of the state's economy. The lesser cuts and taxes they are debating would merely shift relatively small amounts of money from one form of spending to another, all within the state's economy, so the macro economic impact would probably be nil, no matter what they do.

That's a strange opinion, especially because in the next sentence, he argued that a budget filled with gimmicks would threaten our economic future, even though such gimmickry would effect the same small amount of cash, from a macroeconomic perspective. But to his main point - cutting spending for state services, cutting jobs, cutting salaries for public employees and their related vendors, has a multiplier effect that in fact does weaken the prospects for economic recovery. You don't have to take my word for it. John Myers ran a story on this just today.

"It's hard to see how the country recovers if California does not," says U.S. Rep. Zoe Lofgren (D-San Jose). Lofgren says she thinks congressional authorization of loan guarantees for any state will happen. But no one thinks it'll happen in time for California, which needs to go to market -- assuming a budget deficit deal is agreed to in the state Capitol -- early next month.

Lofgren says she's particularly troubled that the national stimulus and recovery programs... which are expected to benefit California by as much as $80 billion... could be drained of their help by the cuts needed to balance the state budget. "It is contrary to the efforts that we're making," she says.

This is a fact neglected by Walters, the very real possibility that certain spending cuts would result in the forfeiture of stimulus funds as well as regular funding, multiplying the effect of the cuts. Many of the programs that Schwarzenegger wants to eliminate, like Healthy Families, CalWorks and Medi-Cal, have their funding matched by the federal government. Clearly any dollar cut there would mean $2 in practical cuts to Californians. And losing out on stimulus dollars could number in the tens of billions.

This UCLA Anderson Report also speaks to the impact of state spending on California and the nation at large.

According to UCLA Anderson Forecast senior economist Jerry Nickelsburg, there is nothing happening in California that will help pull the state out of recession in advance of the nation.

"California," Nickelsburg writes, "is in for a continued rough ride for the balance of 2009 and is not going to see economic growth return until the end of the year, shortly after the U.S. economy begins to grow."

The dire conditions surrounding the state budget will contribute to prolonging tough conditions in California, according to the report.

In his essay, Nickelsburg notes that Gov. Arnold Schwarzenegger is attempting to close the state's $24 billion budget gap with a combination of fee increases, forced borrowing from local government, the sale of state assets and, primarily, budget cuts.

Yet that the real risk for California, Nickelsburg writes, is the possibility that there will be no budget agreement at all and that the chaotic and inefficient spending cuts that would likely follow would have an even more severe impact on the ability of California to stem the downturn in economic activity this year.

The rhetoric has risen to the extent where a prolonged stalemate, like every year given our broken governmental structure, is possible. But clearly, Nickelsburg is demonstrating that state spending does have an impact on the economic picture at large, especially at a time when there's 11.5% unemployment and a growing dependence on state services.

That one of the top political reporters in the state would deny this economic reality is just baffling.

Day 2 Wrapup: This One Was For The Gasbags

So I was in the hall last night, albeit barely. We spent about 15 minutes and all of Lily Ledbetter's speech trying to find a seat, and the only ones forthcoming were behind the stage in the nosebleed section with a view through the rafters of a JumboTron.

Still and all, it was good to be in the room. In ascending order, I thought Mark Warner's speech was mostly wooden with brief flickers of passion; Ted Strickland's offered some OK red meat but he's not the best messenger; Deval Patrick completely lost the room, it was embarrassing; Brian Schweitzer was a knockout, credible on energy (though he has his own idiosyncratic beliefs on it like clean coal and CCS) and great taking on McCain:



And Hillary Clinton was, in a word, spectacular. Not one person in that room had a bad word to say about her performance. She delivered like a pro, calling for unity and asking her supporters to get off the sidelines and put away personality in favor of country. Digby was right, this was the best line:

"I want you to ask yourselves: Were you in this campaign just for me? Or were you in it for that young Marine and others like him? Were you in it for that mom struggling with cancer while raising her kids? Were you in it for that boy and his mom surviving on the minimum wage? Were you in it for all the people in this country who feel invisible?"

I think the supporters selfish enough to react to that with indignation are infinitesimally small (they also happen to be skilled PR mavens and Republican ratfucks. A lot of this is not real). And what's more, the pundits, the morons who have been trying to drive this wedge for months upon months, can really just shut up now. I don't know what more Sen. Clinton can do to prove to everyone that she supports Barack Obama. Though the gasbags wrote the story a week ago and then tried their best to find people to fit into it, the disunity story is a dead letter. I talked to Zoe Lofgren (D-CA) yesterday and she said all these media types are coming up to her asking about the divisions in the party, and she said "I don't know what they're talking about!" Hopefully this speech puts it to rest for a little while.

Democrats love nothing more than to criticize other Democrats, so you're going to keep seeing that (and Bill still seems to be holding a little grudge, but he's a pro and will give a great speech tonight). But overall, there's a lot of unity in the party, particularly ideologically, where the left and right flanks have actually come together on a number of issues. One PUMA delegate (in an ad that played nowhere) isn't going to change that.

House Judiciary Warns DoJ on Perata Leaks

I've been mulling this around in my head for a few days. Three powerful members of the House Judiciary committee have have sent a letter to the Justice Department calling for an investigation into leaks surrounding the inquiry into State Senate President Pro Tem Don Perata.

No article since November 2004 has explicitly said that any information came from a federal government source. But in a letter to U.S. Atty. Gen. Michael B. Mukasey obtained by The Times on Monday, U.S. Reps. John Conyers Jr., Linda Sanchez and Zoe Lofgren wrote, "We are disturbed and concerned that news story after news story . . . has cited federal law enforcement sources as the basis of information."

The only article specifically mentioned in the July 31 letter was a story in the San Francisco Chronicle. The article cited "sources familiar with the probe," a broad term that could encompass federal agents, defense attorneys and people who have been questioned [...]

On Friday, the day after the congressional letter was sent, a Wall Street Journal article said the investigation into Perata "gained momentum over the past year." The article's details were attributed to anonymous people "close to the defense," who said Perata's longtime political consultant, Sandi Polka, was granted immunity to compel her to answer questions.

(Here's that SF Chron article mentioned in the letter.)

The Perata investigation certainly has dragged on for years, leading to him needing more and more funds to raise in his defense. In particular, the dumping of $250,000 from the California Democratic Party into his legal defense fund raised a lot of eyebrows around these parts. After the initial explanation of "We're the CDP and we can do what we want," a secondary explanation was that the investigation had been politicized and that this was part of the DoJ's efforts to prosecute and delegitimize Democrats. A couple weeks later, out comes this letter, signed by two members of the California delegation. But it's Conyers' participation that makes me believe that this is a real concern. I trust Conyers enough to think that he wouldn't simply badger the DoJ to help out a political problem in California.

Of course, let's look at what the letter is actually alleging. It's not suggesting that the investigation itself is unnecessarily political, but that someone inside the investigation is using the media to disparage Perata. That may well be true, but it doesn't necessarily follow that the whole investigation is a farce.

Let's now look at what this does NOT suggest:

• It in no way excuses the CDP for paying off Perata with $250,000 in the middle of an election year, whether that money was simply laundered through them and earmarked for Perata or not. Based on this SacBee report, it appears Perata is perfectly capable of raising money for himself:

Senate President Pro Tem Don Perata has solicited at least $200,000 this year from political interest groups for a nonprofit foundation that promotes and rallies support for one of his bills.

The arrangement, apparently legal, allows the Senate leader to solicit unlimited funds for his own political agenda without having to detail how the money is spent.

"He may have found a loophole in the Political Reform Act that needs to be closed," said attorney Bob Stern, a co-author of the state's Political Reform Act who now runs the Center for Governmental Studies in Los Angeles.

Which leads me to point 2:

• There is no way that Perata should still be Senate President Pro Tem at this point. While he has done a good job of hammering Republicans for their intransigence on the budget, this image hit, as well as the constant distraction of having to find new ways to raise money for his legal bills, are not what we need at this sensitive time, ESPECIALLY when Darrell Steinberg is waiting in the wings and perfectly capable of performing the same duties without the black cloud of indictment hanging over the head of the Democratic leadership. They haven't even taken a caucus vote on this yet, to my knowledge - it's currently scheduled for August 21, but during these budget negotiations that's doubtful to come off.

It is perfectly consistent to be skeptical of the Justice Department's case against Perata and to ALSO demand that he step down from his leadership position, and to excoriate the CDP for their conduct in either shoveling Perata money or acting as a conduit for that fund transfer.

On DREAMs, Intimidation, and Nativist Jerks

The federal version of the DREAM Act comes up for vote today in the US Senate. The bill would set on a path to legal status those children of immigrants who enlist in the military or enroll in college. Yesterday, college students who would benefit from this program were on Capitol Hill, lobbying Congress for passage. Tom Tancredo, noted jerk, called for the arrest of the students.

Democrats were planning to hold a press conference today featuring three college students whose parents came to the United States illegally in order to promote the DREAM Act. But the event was postponed after anti-immigrant Rep. Tom Tancredo (R-CO) called on the Immigration and Customs Enforcement Agency to arrest the three students:

“I call on the Immigration and Customs Enforcement Agency to detain any illegal aliens at this press conference,” said Tancredo, who claims to have alerted federal authorities about the well publicized press confrence. “Just because these illegal aliens are being used for political gain doesn’t mean they get immunity from the law. If we can’t enforce our laws inside the building where American laws are made, where can we enforce them?”

They eventually held the press conference anyway and nobody was arrested. Tancredo is not only being callous here, he's being ignorant. One of the students has permanent residency status, and another cannot be deported because she exists in a kind of legal limbo. Her name is Tam Tran.

Tam Tran, whose Vietnamese parents came illegally to the US from Germany, has lived in the US since she was ten, is a UCLA graduate who wants to pursue a PhD at USC, but can't because she can't afford further schooling without federal student loans. The government can't deport her family back to Vietnam because her father was persecuted by the communist government there, but the German government won't take them back either. Tran said today she is in "permanent legal limbo."

The last time Tran spoke out in support of the DREAM Act, in an article in USA Today on October 8, her family was detained by the ICE.

Just three days after the article appeared, federal officers entered her home in the middle of the night and forcibly arrested her family. Tran’s family was detained on a “years-old deportation order,” even though they have been in regular communication with immigration officials for almost 20 years since arriving in the United States.

Rep. Zoe Lofgren (D-CA), chair of the immigration subcommitee, equated the family’s arrest to “witness intimidation” and accused Immigration and Customs Enforcement (ICE) officials of targeting the Tran family because Tam “testified before Lofgren’s panel earlier this spring.” Earlier this week, USA Today spoke with Lofgren about the Tran family’s arrest:

“Would she and her family have been arrested if she hadn’t spoken out?” Lofgren said of Tran, who was not at home for the raid but has been asked to report to Immigration and Customs officials next week. “I don’t think so.“

This is shocking behavior for the ICE to undertake, and not only does it show the price for dissent in Bush's America, but it shows how convoluted our immigration system is in the absence of a comprehensive solution. You can punish immigrants, who have no political power, or you can punish companies who hire the undocumented, who have loads of political power. In this case, the solution is clear; allow students who have known no other home to contribute to the country in which they were raised. Brian has the numbers; light 'em up.