Successful Voter-Approved Program Steps In To Bail Out Failed State

On May 19, voters were asked to divert money from First Five programs to pay for General Fund expenditures. The argument was that First Five had a reserve that was just "sitting around" and they should give up some of that money, earmarked for children's programs, to pay for the budget. At Calitics, we called this the "if it ain't broke, break it" proposition. First Five, financed by a tax on cigarette sales, was well-funded and able to make multi-year program projections, so that the programs started up were not in perpetual fear of being dropped.

One of the values of First Five is that they can seek out other programs affecting children and contribute to them, in keeping with their mandate. And that is what they have voluntarily agreed to do with respect to the Healthy Families program, California's version of S-CHIP.

Meeting in Sacramento this afternoon, the First 5 California Children and Families Commission agreed to help the Healthy Families Program, which faces a $90 million General Fund shortfall in 2009-10. But the Commission declined to commit to a specific level of financial assistance. As a result, it appears all but certain that the enrollment freeze approved last month by the Managed Risk Medical Insurance Board, which oversees Healthy Families, will take effect on Friday, July 17.

In a resolution, the First 5 Commission committed “to join with like-minded public and private partners, including but not limited to health plans and philanthropic organizations, to provide financial assistance in Fiscal Year 2009-10 to the extent practicable and feasible…to ensure young children have access to affordable health insurance coverage.” This commitment, however, “is contingent upon the availability of funds in the applicable First 5 California accounts.”

I wish that First Five would have chosen a specific funding level, which could have rolled back the enrollment freeze. Still, they are making a commitment to help provide health insurance to needy children, one they couldn't have made if the state clawed back some of their money in the May 19 election. This way, First Five can target the money and keep in line with what the voters asked from them - to use their revenue to provide needed services for children. The state could have used that money for anything if they skimmed it off the top.

People often wail about ballot-box budgeting and the broken initiative process in the state, and to an extent I agree with them. But First Five is an example of GOOD ballot-box budgeting. It has a dedicated funding source, it's well-managed and well-capitalized, and it has the ability to make contingencies. If the structure of state government fails to allow increased revenue to pay for needed services, it's perfectly logical to go outside that process and produce dedicated sources of funding. It shows the virtue of a balanced approach. I don't necessarily want the ballot to do all of Sacramento's work for it, but the broken system of government sometimes leaves no choice.

What The Democratic Budget Didn't Do

I mentioned in passing that I didn't particularly like the Democrats' budget counter-proposal. Let me go into some detail on that.

The Democratic budget provides a $3.8 billion dollar reserve. I recognize that, with state personal income tax revenues falling off the cliff (though by more in several states - man, Arizona's getting crushed - than here), that $3.8 billion will probably need to be used down the road, when this budget projection fails to match reality. But we're on fire right now, and using more of that reserve in this package would eliminate cuts that will probably contribute to more of an economic slowdown and bigger deficits down the road.

Of course, the reserve is so big because that's clearly the back-up plan for the legislature in case the $2 billion in taxes on oil severance and cigarette companies, so they can pay for their externalities, fail. I guess the problem is that those tax increases are only $2 billion dollars, and only around the margins instead of actually moving to a more progressive tax structure. However, there are of course short-term exigencies here - e.g. the 2/3 rule. But I'm assuming that putting the oil and cigarette taxes up is designed to provide fodder for future campaign ads - "X voted against kids and for Big Oil and Big Tobacco." Well, why wouldn't you HEIGHTEN those contradictions, then? There are plenty of other options - a nickel a drink alcohol tax, adding tax brackets between $47,500 and $1 million, etc. - that could be put into a model budget. Why not create the budget you WANT instead of the one you have to have, at least at first?

Finally, the budget sets aside the $2.5 billion dollar annual tax breaks for the largest corporations in America, secured in the last two budget agreements in the middle of the worst economic downturn since the Great Depression. That doesn't come close to sharing sacrifice, and it's really disappointing to see the Democrats shield big business on this. Their tax hikes are so small that all of them could have been covered by repealing the tax breaks. And a point of information - while normally repealing such tax breaks would require a 2/3 vote, because this is a modification of an existing budget and not a new budget, I'm not so sure that remains the case:

A couple of other points worth noting. First, the package of proposals is a modification of the state budget; the new fiscal year spending plan was actually enacted in February. As such, all proposals that are not a tax increase -- most notably, the spending reductions -- can be passed with a majority vote in each house. Trouble is, that would mean they wouldn't take effect for 90 days... thus delaying aid to the cash-strapped state. For the cuts to kick in immediately, it will take a supermajority vote -- which shifts some of the pressure over to the GOP about matching votes to their rhetoric about cuts, even if the rest of the package isn't to their liking.

Looking for some information on whether that applies to repealing tax cuts as well, I'll get back to you.

(As a side note, we will see what it's like if you lowered the 2/3 threshold for the budget and not for taxes - and that is, EXACTLY THE SAME. Taxes are part of the budget process. Walling them off makes it just as hard to pass a budget, especially if you're in the kind of hole that California is in.)

That the failed enterprise zone program is still funded at $500 million dollars annually is a sin.

Finally, there are very few solutions here - outside of the vehicle license fee for state parks - that incorporate the majority-vote fee increase items passed in January and vetoed by the Governor. They have veto bait in this deal, so I don't see why you wouldn't add the fee increases as well, which would have savings in the billions.

Some of the solutions that the Democrats came up with are fine, some gimmicky (delaying paychecks for state workers one day from June 30 to July 1, 2010 "saves" the state $1.2 billion dollars in this budget), but some still unconscionable - basically all of the education cuts sought by the Governor remain. There are $1 billion in Medi-Cal cuts that would need a federal waiver. And there were options to cancel those cuts.

The Democratic leadership thinks Schwarzenegger will cave and accept this budget. Keep in mind that, other than the $2 billion in tax increases, Republicans are somewhat irrelevant in a modification, and the fight will focus on whether that $2 billion will come from the budget reserve or additional cuts. Republican votes are needed to put the modifications in immediately, which maximizes their savings. So all these fiscally conservative Republicans can say now and waste the state lots of money. Their choice.

UPDATE: John Myers writes in to tell me that his understanding is it would take 2/3 to repeal those corporate tax credits. I pretty much figured this, but it seems weird that you cannot cancel what was enacted in the same budget cycle with a simple majority. In addition, treating repealing a tax cut like a tax increase and covered by Prop. 13 sounds just very wrong to me - an extension of conservative dogma that ought to be challenged in court. But yes, that's the most perverse part of our budget dysfunction. Hat tip to John for the info.

Arnold Plays The Gingrich Role, Threatens Government Shutdown

(UPDATE: I got a copy of the Budget Conference Committee report, will give more info later)

The plot thickens. The Governor today threatened to veto the work of the bipartisan Budget Conference Committee and reject any bill that, essentially, doesn't hew to his desire to destroy the social safety net of the state. The Democratic leadership countered that they'll pass the bill anyway.

Democratic legislative leaders vowed today that the Legislature will pass a "share the pain" budget-balancing plan early next week - with or without tax increases -- that will close the state's spending deficit without completely shredding California's social services safety net.

The vows by Senate President Darrell Steinberg, D-Sacramento, and Assembly Speaker Karen Bass, D-Los Angeles, came about an hour after Gov. Arnold Schwarzenegger said he wouldn't sign a plan that was balanced with tax increases.

The rhetorical staking out of ground by the key figures in the current version of the state's ongoing fiscal melodrama came a day after the Legislature's joint budget conference committee, on a party-line vote, adopted a plan that included about $2 billion in new oil production and cigarette taxes to help bridge a $24 billion budget gap.

Let's take a brief look at what else the conference committee has done. They resisted some of the worst health care cuts, including the total elimination of Healthy Families (the SCHIP program). They reduced education spending significantly in both K-12 and higher ed. They reduced corrections spending by a fairly large amount. Despite the fact that state parks pay for themselves, Democrats agreed to cut state participation in park funding, replacing it with additional fees on park admissions. They agreed to increasing withholding by 10%, which amounts to an interest-free loans from citizens to the state. According to Karen Bass, they agreed to 45% of the Governor's proposals in full, and 93% in part.

So the idea that Democrats are not cutting spending is simply unreasonable and wrong. At the same time, they rejected additional cuts to state worker salaries. They rejected the end of Cal Works or Cal Grants or In-Home Support Services. And some of the Governor's proposals, like borrowing from local governments, were rejected unanimously.

I don't even much like what the Democrats came up with. But they did not agree to completely wipe out the social safety net, calling for moderate increases in revenue on constituencies who have been getting away with murder, pretty much literally, for decades, to pay for the externalities in health care costs that they impose on the public. As Noreen Evans explains:

Californians expect their schools to be good, a safety net to be available to the needy, a college education to be affordable for working families, their air and water to be clean, and their parks to be open and kept up. In order to meet their expectations, we must to pursue new revenues. Today, for the greater good, we approved two new tax proposals that won’t impact most Californians.

Establishing a 9.9 percent tax on oil extracted from California would generate $830 million in FY 2009-2010 and $1.1 billion in future years. This precise proposal was part of the governor’s budget proposals last year. Increasing the excise tax on cigarettes by $1.50 per pack generates $1 billion in FY 2009-2010.

Tax increases require a 2/3 vote. Absent the pursuit of new revenues, wider and deeper cuts will be required. Getting new revenues requires a mere 6 Republican votes: 2 in the Senate and 4 in the Assembly. It is undemocratic that the votes of 6 Republicans can veto the votes of 75 Democrats.

But Arnold wants to destroy the state of California like a good little neo-Hooverist, so he said no.

The Dem leadership appears to want to have this fight for the moment, so they ought to realize one thing: Arnold will ultimately be responsible - and reviled - in a government shutdown situation. No question about it. Not 1 in 10 Californians can even NAME a Democrat in the legislature. If the ship sinks, Arnold will be perceived as the skipper. And so, if and when Arnold vetoes the bill, the Democrats should send it back - with MORE tax fairness solutions, daring Arnold to prolong the agony. That resets the battle and draws clear lines between those who want the richest companies in America to sacrifice along with ordinary Californians, and those who want to protect the rich completely. Unfortunately, the Dems are tipping their hand that this will not be the case.

But Bass and Steinberg seemed to be reconciled to the likelihood that the tax hike proposals would fail next week. Steinberg said that if they did, the package they sent the governor would have a reserve $2 billion smaller than he had sought.

We have a couple days to change this dynamic. The progressive movement around the budget has stiffened spines a bit so far. Time to make the calls and emails.

This is funny:

Schwarzenegger added that he wants a budget plan that will bridge the entire projected deficit of $24 billion, not a stopgap measure to "kick the can down the alley."

The plan must consist of permanent solutions to the state's fiscal problems, not one-time revenue that sparks ongoing spending commitments, Schwarzenegger said.

When Schwarzenegger was reminded that his own budget plan contains some one-time revenue proposals, such as acceleration of income tax payments, he smiled.

"Very good point," he said. "We don't want to add to the problem."

The cyborg is not running on all cylinders. He has a single-minded purpose to kill the California dream and even these extremely moderate revenue enhancements.

...Document here:


June 16 2009 Conference Report -

The Dangerous Politics Of Cap And Trade

I mentioned earlier that I am less hopeful on getting meaningful carbon pricing legislation through Congress this year than getting health care reform. The main reason is that too many Americans experience the broken health care system directly for politicians to evade public anger over it. Climate change is simply more abstract, making it a tougher sell. And you can very easily turn the idea of capping emissions and selling carbon credits at auction to polluters into "an energy tax." This is from a letter from GOPers on the Senate Environment and Public Works Committee to their colleagues, and the rhetorical gambit is clear.

The President's 2010 Budget proposal contains a risky, ill defined new energy tax that has the potential to continue the economic recession for many years to come. We are writing this letter to alert you to this situation and ask that you join us in a budget resolution amendment to strike and such provision.

Specifically, the President's 2010 Budget proposal asks to collect $646 billion dollars in new "Climate Revenues" from the American people. The government will collect these new revenues through a cap and trade scheme in which " allowances" are sold to the highest bidder. The government won't tax consumers directly, but it will impose new costs on energy producers and users who will in turn pass those higher costs on to consumers, which will result in higher electricity bills, gasoline prices, grocery bills, and anything else made from conventional energy sources. In short, consumers will feel as if they are paying a new tax on energy.

The stated price tag for this new energy tax is $646 billion, yet recent news reports indicate that administration officials are privately admitting their program will actually generate between "two and three times" this amount of revenue, or between $1.3 trillion and $1.9 trillion. However, these numbers represent only the cost from 2012 through 2019. The budget summary describes the energy tax extending at least through 2050. At the 2012 through 2019 average annual rate, families and workers would face through 2050 between $6.3 trillion and $9.3 trillion in higher energy taxes.

Left unsaid is that the government would funnel most if not all of that tax to those same consumers in the form of the "Making Work Pay" tax credit. Really this is an effort to keep the oil industry in business - and the industry obviously believes it can work, as they divest from renewable energy and into biofuels, the production of which emits just as much carbon.

There are good signs as well - Lindsay Graham and John McCain have signed on to climate change legislation, but of course they would like nothing more than to eliminate the auction for carbon credits and give away polluting rights for free. That was the structure of the McCain-Lieberman (later Lieberman-Warner) cap and trade bill from last session. The hint toward using budget reconciliation clearly got McCain and Graham out of their chairs on this one. But a bad climate bill that ditches auctioning off pollution rights wouldn't be anything to cheer about. It would reward big business, plain and simple.



As Brad Plumer notes:

You see what happens if the permits are auctioned off and the revenue is divided among Americans equally. The overall impact is actually progressive, and lower-income households come out ahead—the extra amount they pay for dirty energy is more than offset by the rebate. But if the permits are given out to companies for free, it's only wealthier Americans who benefit—they're the ones running the companies making windfall profits, after all—while everyone else gets squeezed.

Given the option of another tax break for the wealthy or movement on other issues like investing in renewables and a hard standard for electricity generation... let's say it's a toss-up.

Senate's Reverse-Midas Touch Turns Economic Recovery To Dung

When the initial Obama recovery plan came to the Congress, it had about a 40%-60% ratio between spending and tax cuts. That got reduced to around 33%-67% in the House bill. Based on the amendments that have passed and the inclusion of the AMT patch in the Senate, if the axis of Nelson-Collins are successful in scooping out $100 billion in spending that percentage could be closer to 50%-50%. This is especially true because the ridiculous home-buyer credit, passed last night, is now twice as costly as once imagined.

The measure, which had been championed by GOP Senator Johnny Isakson, would give $15,000 (or 10 percent of the purchase price, whichever is lower) to every person who buys a home in 2009.

As late as this afternoon, the overall price tag allotted for this measure was around $18.5 billion.

But the ultimate real world cost of this measure has been disputed, with some critics predicting that it would cost much more, given the expected levels of housing sales this year.

Turns out the critics may have been right. The nonpartisan Joint Committee on Taxation has just sent a letter to Chuck Schumer, who’s on the Finance Committee, responding to Schumer’s request that the Committee score an estimate of the measure’s cost.

The total price estimated by the Committee? $35.5 billion — double the original cost, says the letter, which was sent our way by Schumer’s staff.

So now we have a $35 billion dollar bailout for the mortgage industry in this bill, and the offsets are coming from state and local government relief, so county hospital workers and cops and firefighters can be thrown out of work?

This is lunacy. Robert Reich has an on-point explanation of how this debate SHOULD have gone, if we lived in a marginally sane country.

Regardless of your ideological stripe, you've got to see that when consumers and businesses stop spending and investing, there's only entity left to step into the breach. It's government. Major increases in government spending are necessary, and the spending must be on a very large scale. In the last several weeks the President has put forward the outlines of a stimulus plan, and has left it to the House and Senate to fill in the details. A tiny portion of the details that made it into the House version should be stripped away because they seem like old-fashioned pork. But most spending in the bill is absolutely appropriate. My worry is there's not nearly enough of spending to fill the shortfall in overall demand.

Yet at this very moment, Senate Republicans are seeking to strip the President's stimulus package of many of its spending provisions and substitute tax cuts. Part of this is pure pander: They know tax cuts are more popular with the public than government spending, even though spending is a far more effective way to stimulate the economy (more on this in a moment). Another part is pure partisan politics: Republicans are emboldened by Obama's willingness to court Republicans (taking three Republicans into his cabinet, bringing Republican leaders into the White House for consultations, putting all those business tax cuts into the stimulus bill in order to gain Republican favor) without getting anything at all back from the GOP. House Republicans snubbed the bill entirely. So, Senate Republicans say to themselves, what's to lose?

Plenty. Millions more jobs and a full-fledged Depression, for example.

We're adding in tax cuts that people will either give to bankers to pay down debt or keep in savings accounts in case they're the next to get fired. Maybe they'll buy some cheap crap from China. And we're taking out spending that can give people jobs and circulate multiple times through the economy to increase demand. This is so stupid.

Here's the deal. Obama pre-compromised with 40% tax cuts. That's too high, and I'd prefer having only the targeted, progressive tax cuts (like the child tax credit, tuition tax credit, and reduction in withholding) in there, but let's take the midpoint between Obama's initial offer and the House bill. That's 37.5% tax cuts. That ratio should be FIXED. If you add tax cuts in, you have to take tax cuts out so the ratio stays the same. If you want to give $35.5 billion to home buyers, you can eliminate those worthless business tax cuts in the exchange. Obama should announce that the ratio must be preserved or he cannot accept the bill. Veto threats work. These people cave.

...Maybe he'll do that this Monday. Greg Sargent reports that Obama will hold a nationally televised news conference. Maybe he can explain what a stimulus is and why it's needed, as well.

Mint SCHIP

The House just passed an expansion of the State Children's Health Insurance Program (SCHIP) by a vote of 289-139, which is a very solid majority. I was wondering how it was funded, and I guess it's through that same sin tax.

SCHIP currently covers over six million children whose parents earn too much to qualify for Medicaid — the federal health insurance program for the poor — but who can't afford private insurance. The bill's supporters say the legislation would extend the program to an estimated four million additional children, paying for it with a 61-cent-per-pack increase in the federal tax on cigarettes.

Passing an expansion of SCHIP early in Obama's presidency, House Majority Leader Steny Hoyer said, would be "a very dramatic and important statement that change has come to America."

"Children are our treasure," said Rep. John Dingell, D-Michigan. "The (SCHIP) bill is only the beginning… We must not stop until all Americans qualify for quality, affordable health care."

I'd rather you taxed millionaires or financial transactions, but there's a certain logic to expanding health care by discouraging bad health outcomes. If less people abuse cigarettes in the process, you are saving health care money on the way in as well as raising revenue. Still, this is an incremental reform and only a gateway to the needed overhaul of the system.

Here's Obama's statement:

"In this moment of crisis, ensuring that every child in America has access to affordable health care is not just good economic policy, but a moral obligation we hold as parents and citizens. That is why I'm so pleased that Democrats and Republicans in the House of Representatives came together to provide health insurance to over ten million children whose families have been hurt most by this downturn. This coverage is critical, it is fully paid for, and I hope that the Senate acts with the same sense of urgency so that it can be one of the first measures I sign into law when I am President," said President-elect Obama.

The problem with this is that it didn't pass in 2007, when President Bush vetoed it twice. Because having that in place before the downturn would have meant that the programs would not have been cut to ribbons in the states:

Even as President-elect Barack Obama plans an ambitious push to expand health coverage nationwide, states are slashing health services to their poorest residents amid the economic downturn.

The unprecedented cuts in public assistance come as millions of Americans are losing their jobs and health insurance.

In many cases, the cuts are so deep that even the massive federal rescue package being assembled on Capitol Hill may not be enough to restore services being eliminated in the burgeoning crisis, health officials warn.

And the faltering economy has all but killed trailblazing state campaigns to expand coverage for the working poor -- once seen as hopeful signs for national healthcare reform.

This injection of money is going to help, but in many ways the damage has been done.

One additional point. The most controversial portion of the SCHIP debate is whether or not the children of immigrants should be covered. The xenophobic right thinks that "illegals" shouldn't reap the benefits of citizenship, even though we're talking in most cases about kids who were born here and are legal residents. In addition, having untreated kids running around could be a public health issue, and there's value (and even savings) in treating everyone with vaccinations for communicative diseases, for example. Simon Rosenberg says that this is a good reason to pass comprehensive immigration reform so we don't keep returning to these narrow debates:

"That the debate over SCHIP has immediately become a debate about immigration should be a clear warning to the Administration and Congress that progress on many important domestic priorities this year may get caught up in the debate on how to best fix our broken immigration system. It is our belief that rather than having a series of tough and contentious proxy fights on immigration, our leaders should recognize that passing comprehensive immigration reform this year will not only help fix our badly broken immigration system - a priority of many Americans - but may also be the key to unlocking bipartisan progress on a whole range of other domestic and security related issues."

I have to agree.

...roll call here. 40 Republicans joined every Democrat but 2.

(hint: if they can't vote for SCHIP, Bobby Bright and Jim Marshall aren't really Democrats.)

Strategic Drift

Whether it was a kabuki dance or just the Democratic majority in the Senate finding its power or, amazingly, the essence of deliberative democracy, the Obama recovery plan looks to have gotten a facelift:

President-elect Barack Obama tried Sunday to shore up support in Congress for his ambitious economic policies, with his top advisers offering concessions on his economic-stimulus proposal and preparing to detail conditions for how the incoming administration will spend the second half of the $700 billion financial rescue package.

Emerging from a two-hour meeting in the Capitol with Obama advisers Lawrence Summers and Jason Furman, Senate Democrats praised the President-elect's team for agreeing to make changes to its stimulus proposal based off of concerns senators raised last week at a meeting with the president-elect’s senior aides.

The Obama team told about 35 Senate Democrats gathered at Sunday’s meeting that it would grow the size of an energy-tax incentive package and modify proposed tax credits for individuals and for businesses that hire new employees, according to meeting attendees. Also, with lawmakers raising concerns that the first half of the $700 billion of the financial rescue law was badly mismanaged, Obama’s team signaled it would lay out precisely how it would spend the second half of that package, which Congress is expected to consider as soon as this week.

“It’s very clear they’ve listened, they’ve heard and that they’re moving to respond,” said Sen. Kent Conrad, chairman of the Budget Committee, who questioned previously whether the tax credits in the stimulus package were enough to encourage new jobs. “It was very, very healthy. They’re not defensive, not arguing back, they’re listening, they’re attempting to hear and they’re responding.”

It's good to have a negotiation drift to the left. The right is focused on deficit reduction, which is interesting, considering that eight years of Republican policies brought record budget deficits and a booming national debt. They've all converted into fiscal hawks at just the right time!

The hope is that they will remain irrelevant. It is not worth getting 80 votes in the Senate if the cost is a million jobs because too much money goes to tax cuts.

By the way, watch that new TARP program. If done right, that could have a positive effect on the economy as well.

...A few weeks ago, John Boehner asked for economists - on his website, publicly - who opposed the recovery plan to sign onto a document. He hasn't found one former member of the President's Council of Economic Advisers - not one Democrat, and not one Republican.

Good luck with that, John.

McCain Has Issues Beyond Iseman

You know, before the whole Iseman and Maverick business, I was ready to note that John McCain's credentials on his signature issues, particularly national security and honesty, were beginning to come into question.

He put out a "no new taxes" pledge, and yet his health care plan seeks to "end the bias" toward employer-based health care by giving individuals a tax credit and treating employer-based benefits as taxable income. That would actually be a trillion-dollar tax increase, higher than any candidate has proposed this year. Empty words, useless platitudes.

He claims to be above reproach on the issue of torture, but after voting against banning torture in our intelligence agencies, he now has called on President Bush to veto the same intelligence authorization bill. Empty words, useless platitudes.

The supposedly reticent Obama campaign took McCain on directly on the issue of national security in a conference call.

Just got off a conference call with Susan Rice talking about the contrasts between her boy Barack Obama and John McCain on national security policy. One key point of emphasis was the strange notion coming from the McCain campaign that talking about focused counterterrorism operations in Afghanistan and Pakistan is irresponsible, whereas randomly threatening to start new wars is the height of good sense. As she put it "it's a strange contrast -- he says that somehow it's naive for a presidential candidate to outline how he would deal with that crucial national security challenge, but it's appropriate for him to joke about starting another war." A reporter from the Washington Times challenged her on the "bomb, bomb, bomb, bomb Iran" business saying McCain was joking. Rice responds that "if he wants to say that he was joking and that's the kind of joke he thinks is funny, that's his perogative."

Even Joke Line is getting this message, that McCain looked soft on Al Qaeda by attacking Obama on targeted strikes in Pakistan, which is current US policy and has even yielded results. When Klein calls McCain a "loose cannon" on national security matters, that's not good for their camp.

Juan Cole also eviscerated McCain's tough talk on national security.

And I think there is good reason to ask whether McCain helped create al-Qaeda and the mess in Pakistan to begin with. It is time for someone to start holding the Cold Warriors who deployed a militant Muslim covert army against their leftist enemies accountable for the blow-back they created [...]

McCain appears never to have met a rightwing dictator he didn't like. McCain defends the dictator. Here is what McCain said about Musharraf late last December:

"Prior to Musharraf, Pakistan was a failed state," McCain said. "They had corrupt governments and they would rotate back and forth and there was corruption, and Musharraf basically restored order. So you're going to hear a lot of criticism about Musharraf that he hasn't done everything we wanted him to do, but he did agree to step down as head of the military and he did get the elections."

So in the building confrontation between democratic parties and the military dictator who trashed the rule of law, which would McCain support? What kind of relations will a president McCain have with the new prime minister of Pakistan if McCain is on record supporting the dictatorship that preceded?

The potted history McCain offers is wrong, and it points to the deep problems of authoritarianism and admiration for dictatorship in McCain's political philosophy. Pakistan was not a failed state before 1999, and in fact most of its political problems derived from repeated military coups such as the one spearheaded by Musharraf, as well as from the US government giving the Pakistani military gobs of money and enormous stockpiles of weapons, and winking at its nuclear program. In fact by "US government" above, we really could just substitute "Senator John McCain."

He goes on with some very damaging stories about McCain and the Taliban, as well as former Pakistani dictator General Mohammad Zia ul-Haq and the nuclear arsenal commenced on his watch. Our government is STILL making mistakes of this stripe, pressuring the new Pakistani government to retain Pervez Musharraf despite his thundering defeat in national elections, premised on the false belief that only a strongman can keep that country together (proven wrong by the election results).

Of course, this is all being swamped by the Iseman revelations, which the right and the broadcast media are pushing back against with all their might. Their myth of McCain as a straight-talking straight shooter is being threatened, and they must not let that happen. Of course, a few reality-based folks in the media see this for what it is:

"The press loves McCain. We're his base," MSNBC loudmouth Chris Matthews declared during the 2006 elections.

A new book, "Free Ride: John McCain and the Media" by David Brock and Paul Waldman, identifies Matthews as "the head of the McCain fan club among the establishment press" but says he has plenty of company [...]

Unending use of the phrase "maverick," and unceasing praise of McCain's "straight talk," have shaped a highly favorable public image ... at a time when ratings for his fellow members of Congress are in the drink [...]

Still, the national press corps' "big feet" owe it to the country to put aside their pack mentality and subject McCain to the same critical scrutiny as other presidential hopefuls.

A year ago, on "Hardball," Matthews asked about Hillary Clinton's presidential aspirations: "What have you done to deserve this job?"

The program's guest allowed that this was a "tough question" facing the full field of candidates.

"Not so much for McCain," Matthews interrupted. "He has deserved the presidency. Whether he should be president or not, it's up to the voters."

It's a different standard.

Now this is a major challenge for that media trying to coat McCain with teflon. Since he may have to stay in the public financing system for the primary, and subsequently may have only $13 million to use between now and the Republican National Convention, McCain may have to rely on free media. They've been very reliable so far. But if this scandal goes drip-drip-drip, and particularly the corruption angle plays out, with news of favors for lobbyists, he's going to have an impossible time righting the ship.

UPDATE: By the way Matt Browner Hamlin has the most complete coverage of the Iseman story I've seen. I guess the media is pulling an "OH NOES NOT OUR MAVERICKZ!" on it.

The Unmentionable Part Of California Health Care Reform

I thought this was the key moment in the Appropriations Committee debate over ABx1 1, which passed the Assembly yesterday.

Republican Assemblywoman Mimi Walters asked Nunez and the Department of Finance whether they were certain financial projections would come through. AB x1 1 relies on $4.5 billion in federal dollars in addition to other revenue sources. Department of Finance staffer Tom Sheehy said one provision in ABx1 1 would not be implemented unless the Director of Finance declared that money to pay for the program was in hand and in state coffers.

Assemblyman Mark Leno, Democrat chairman of the Appropriations committee, followed up with questions about whether the program could be turned off if money did not come in as expected. Nunez’ staff responded that ballot initiative would contain provisions to assure that insufficient funds would trigger a series of events to pull back the program, including the individual mandate and the market reforms. It would first allow the governor and legislature to fix any fiscal imbalances. If lawmakers and the governor did not act, then the pieces of the legislation would be repealed, including the public program expansions and tax credits, returning the state to the status quo.

This is the key because this is what has happened to every single state that has tried to implement universal health care. They pass the bills with a lot of fanfare but are either unable to control costs or keep up with population or their numbers on revenue fall short (nobody EXPECTED the $14 billion dollar budget deficit this year, to use a parallel example), and the program has to be scaled back and eventually scrapped. And there's no massive celebration or gathering on that day, where everyone gets in a room and congratulates each other. But that's what's happened very single time.

The bill has some advances on the health reform front, and is not an ignoble effort. But nobody seems to want to deal with these historical facts. "This is better than nothing" doesn't mean anything when 5-7 years down the road, you're ACTUALLY left with nothing. And I think walling off the funding and claiming that it's revenue neutral makes it more likely that road will be travelled again. The state budget should reflect priorities. We all want every Californian to have access to health care. Paying for it with part gimmick taxes, part wishes and hopes of federal support, et cetera, shows that you really don't value it all that much. And admitting that the program will fall apart unless people continue smoking a lot of cigarettes... well, you see where I'm headed.

UPDATE: Here's another concern. Overhauling health care in a time of a national trend toward major budget deficits at the state level is a problem that shouldn't be dismissed. And we know that the Governor is going to cut all other health care programs to the bone because there's this separate system to provide coverage, which is actually not true. It's a set-up.

How About A "Year Of Doing Your Job"?

The Schwarzenegger era will be remembered as the era of "blockbuster politics," where the Governor took the same marketing techniques that made his movies popular and transferred them to the political stage. He wouldn't just make an issue a priority, he would structure the entire year around it. "The Year of Reform!" "The Year of Education!" "The Year of Healthcare!" "The Year of The Environment!" As an actor he only put out one movie a year, so one legislative initiative a year sounded about right for the average attention span. The details of governance would be pushed backstage; the thrust would be to go big on one issue and hope the goodwill gained from success would mask whatever failures occurred. This has not been a slam dunk; the year of reform crashed badly, other signature issues have yielded fruit. Now, with this year's blockbuster on the rocks due to Republican resistance, legal challenges, initiative politics and structural roadblocks, the inattention to the small problems that weren't on the big agenda are starting to consume the state. In an excellent editorial, Assemblyman John Laird, Chairman of the Budget Committee, explains how our current mess of a $10 billion dollar shortfall could have been easily avoided if the Governor would have paid attention to something other than staging the next blockbuster.

... [T]he chronic boom-and-bust budget cycle is rooted in a simple problem: Californians generally believe in government and want it adequately funded -- so much so that they repeatedly have voted for laws or constitutional amendments that lock in guaranteed spending for, say, education or transportation. At the same time, the state's revenue system is antiquated and volatile. It is heavily reliant on income taxes, for instance, and so the pains of an economic downturn have a magnified effect on state revenue.

The short-term solutions that get us through on a year-to-year basis all have been tried -- and tried. It's time for bipartisan hard work to bring California's long-term spending demands into balance with long-term revenues. It won't be easy, but the easy paths have been taken, and they've left the state awash in red ink.

Wingnut conservatives are calling on the Governor to declare a fiscal crisis. It's one of their own doing. When California could have eliminated the constant catastrophes of the budget process by restructuring the revenue offsets to services the population desires, instead the Governor floated a $15 billion dollar bond in 2004. The result is $3 billion a year extra in debt, every year, to repay the costs of a senseless short-term fix. If sound Republican budgeting means "put the problem off to children and grandchildren," then we've got a lot of sound budgeters in Sacramento:

On paper, it may look like spending has increased in recent years, but that is largely driven by the expiration of earlier budget-balancing tricks -- such as temporarily shifting school funding to local governments, shifting costs to special funds and the multibillion-dollar temporary cut to education.

There really haven't been significant program spending increases, with three exceptions: public safety, the result of various court cases regarding our prison system and implementation of "Jessica's Law" to track sex offenders; debt service, primarily the annual $3-billion payment on the $15-billion deficit bond; and local government funding, a result of the vehicle license fee cut because billions from that fee used to go to cities and counties.

Sacramento does not have a spending problem. It has a denial-of-reality problem. The cuts are always accommodated in the state budget, like this year's delay of COLA (cost of living adjustments) for elderly public assistance, and the $1.3 billion in transportation funding. The revenue increases are always blocked. Stopgaps that run out and increases in population wipe out the cuts. We're left on an unsustainable track.

The state is rapidly headed toward bankruptcy if it continues down this stupid, temper-tantrum approach to the budget. if Arnold Schwarzenegger wants to leave a lasting legacy, and let's face it, that's all he wants to do, he can work hard to fix the structural problems that will always put the state's financial picture in peril. That would require sitting in his office and doing his job, not holding big speeches behind backdrops that say "The Year of the Tiger!" or whatever he's trying to peddle to the electorate.

Parallel Lines On A Slow Decline

(Apologies to the Thers at Whiskey Fire for stealing his gimmick of using a Guided By Voices lyric as a blog title)

I feel like there are two completely different conversations happening on the major issues of the day in California. In one, there is an historic opportunity to provide quality health care to everyone in the state, which will be affordable and comprehensive and go a long way toward solving our numerous health care problems. In the other, the state is completely in the fucking toilet and nobody in a position of power has the political will to do anything about it.

Now the governor finds himself in a predicament similar to that of his predecessor, Democrat Gray Davis: staring at a crippling budget shortfall that threatens to overshadow all other business in the Capitol and tarnish his political legacy.

On Monday, Schwarzenegger ordered all state agencies to prepare plans to cut spending across the board by 10% next year. Education, transportation and healthcare will all be affected. Some programs face elimination. Layoffs may loom. The state's budget shortfall, thanks largely to the troubled housing market, has ballooned from a few billion dollars projected at the beginning of the year to $10 billion.

Experts are not surprised.

"There has been lots of talk and lots of gimmicks, but none of the state's underlying budget problems have been dealt with," said Ryan Ratcliff, an economist at the UCLA Anderson Forecast. "Even in the middle of a revenue boom, we kept spending more than we take in."

Spending has increased, but the issue is structural. There's no way California can meet the needs of its burgeoning population under the draconian revenue and spending structure we have in place, and the Governor has made no moves to fundamentally change that, just to pass the horror show on to whoever replaces him in the most hacktastic manner possible. Here's Kevin Drum.

Four years ago Arnold Schwarzenegger took office in the midst of a massive budget crisis after promising voters that he would end our "crazy deficit spending." In true Republican fashion, he did this by immediately reducing the state auto licensing fee by $4 billion a year and then insisting that we all approve $15 billion in bonds to paper over a shortfall that was now even more desperate than the one he inherited. The hope, apparently, was that nothing bad would ever happen to the economy and eventually we'd squeeze out from under the rock we were under.

I opposed the bonds at the time, and I've never regretted that vote since. Defeating the bonds would have caused immense fiscal pain, but it would also have forced Schwarzenegger and the legislature to actually fix our underlying problem by increasing taxes and reducing spending. Our nonpartisan legislative analyst made it clear from the beginning that Arnold's plan had no long-term chance of success, but he just flashed that million-dollar smile and went ahead with it anyway.

And now we'll be paying for years and years to come, with ENORMOUS pain just down the road when the bonds come due. And we're talking about providing universal health care?

The plan itself has significant things to feel good about, even if it is only a first step. It includes an individual mandate, but with all of the affordability exemptions, it's not a mandate at all. It expands public health services as much as any reform since the creation of Medicare and Medicaid. And there are excellent reforms like guaranteed issue and a modified community rating for cost control. Obviously there are questions about what minimum coverage provides but the affordability requirements, capping out of pocket costs at 6.5% of income, should be a mitigating factor.

But the entire discussion is happening in some kind of alternate universe of fiscal health. The 10% across the board cuts will impact health care, particularly any public care options; is AB X1 going to account for that? The convoluted funding mechanism, which will need voter approval because the 2/3 system for tax increases is still in effect, includes 8 core parts, including "federal matching funds" and "reinvested state savings." Why don't you just add a pony, too? We're heading into a time where the state could be as much as $10 billion in the hole. The new entitlements will be the first ones crowded out by a governor wedded to anti-tax ideology. And he hasn't signed on to a new cigarette tax, by the way, still preferring PRIVATIZING THE LOTTERY, and the net income increase from which will be approximately zero dollars in the long term, at best.

And let's not gloss over the ballot-box hurdle such a plan would have to scale. Maviglio soft-sells the defeat of a tobacco tax to pay for health care in Oregon yesterday, saying that California's different, conveniently forgetting that Prop. 86, which was, um, A TOBACCO TAX TO PAY FOR HEALTH CARE, failed miserably here just last year. In fact, the Oregon ballot measure wasn't the only one that a tax-averse, skittish electorate rejected yesterday.

Cost-conscious voters rejected school vouchers for Utah students, state-sponsored stem cell research in New Jersey and increased cigarette taxes in Oregon to fund health care for uninsured children.

New Jersey voters had not killed a statewide ballot measure since 1988. The rejection was a defeat for Democratic Gov. Jon S. Corzine, who campaigned heavily for the plan to borrow $450 million over 10 years to finance stem cell research.

"The public understands the state has serious financial issues that must be addressed first," Corzine spokeswoman Lili Stainton said.

No state has more serious financial issues than California right now. And voters are listing the economy as a greater concern than Iraq at this point in time. Ballot-box budgeting ends up producing results that are popular but not necessarily effective. Painful solutions regarding revenue and spending are the only way to dig us out of the mess the so-called leaders in Sacramento have created, and voters aren't entirely likely to be informed and sanguine enough to pull the trigger on that.

This is why I continue to maintain that universal health care ideas on the state level are doomed almost by definition, and particularly in a state with the looming budget troubles like we have here.

The history of state health reform initiatives (and there’s quite a history) is a tale of false hopes and great disappointments. The deck is stacked from the start, and the house—in this case the insurers, the providers, and other agents of the status quo—always wins. The new raft of reforms may prove different, but they probably won’t. Universal care advocates must be realistic about that, and think hard about how to convert the energy in the states into a national solution before the current crop of novel experiments fail—because fail they almost certainly will [...]

One of the great things about state governments is that they have more freedom than the federal government does to test new policy ideas. But it pays to look honestly at what the results of those tests actually say. And in this case, the results are pretty clear: states are no good at delivering universal health care.

No one can doubt the role Massachusetts and California have played in reinvigorating the debate over national health care. And if the reforms currently percolating at the state level help provide momentum for a national health care system in the next few years, all the effort will have been worth it. If they don’t, however, they may ultimately prove detrimental. If high-profile efforts like those in Massachusetts and California can’t be properly implemented, or are launched and then collapse, they’ll become powerful weapons in the hands of protectors of the status quo.

There is a world in which bad policy ideas can actually be worse than now policy at all. We have to tread very lightly and ensure that doesn't happen in California.

On Gimmicks

The Democrats in the state Legislature are announcing a health care compromise at this hour, which appears to include an individual mandate with exemptions (making it, um, NOT a mandate), subsidies for families up to $62,000/year, a cap on cost at 6.5% of income (that's where the exemptions kick in) and a funding mechanism including employer payments and a two-dollar-a-pack cigarette tax.

It's also worth noting that this would be on top of the 61-cent-per-pack federal increase as part of SCHIP expansion - making California cigarettes $2.61 more expensive per pack. But maybe they can rebrand them as "CALIFORNIA CIGARETTES" with trips to "cigarette country" and tasting rooms and train tours. If not, I'm sure people will either quit, or figure out a way to buy them online or on the black market. The revenue projections won't hold.

The bottom line is that poll after poll has shown that people are willing to pay for better health care services, and shuffling the burden off onto gimmick sin taxes is weak and wrong. At some point, Democrats have to take a stand and prioritize what's worth funding. That doesn't mean I don't support the plan; I support SCHIP because on balance it's a successful program and you can't hold kids hostage to bad tax policy. I'm waiting for the details, particularly on what the insurance actually is required to provide, whether there's guaranteed issue, and whether there's community rating. I also think that state efforts like this are swimming mightily uphill, and considering that the state is in fairly dire financial straits I think it might not be a time to supplant what may happen on the federal level.

UPDATE: Boy, this is awesome leadership.

"We're a hop, skip or a jump from a deal we hope the governor can embrace," Núñez said. "If he doesn't, Senator Don Perata and I will have to sit down and figure out what more movement we could possibly make."

Shorter Fabian Nuñez: "We're going to give Schwarzenegger whatever he wants, and if he rejects it, we'll buy him a pony, too."

That's the worst negotiating stance I've ever seen. And the point is that Nuñez and lesiglative Democrats need to put something on the board this year so they can justify being sent back through a change in term limits laws, a battle where they will now have a major opponent. There's literally no reason for Schwarzenegger to accept this, because he's already been told that the Dems are willing to cave even more.

I've had it with this leadership.