A study issued by the Public Policy Institute of California (PPIC), a non-partisan think-tank, just confirmed that during the 2009-2010 recessions, every income bracket in California lost income faster than the rest of the United States. But even more disturbing, all but the top 25% of earners now make less than equivalent income classes in other states. Once known as a job magnet for its sunny climate, world-class universities, and burgeoning high-tech opportunities, California has been transformed into a toxic anti-business state that works hard at drive businesses away.

From 2007 when the recession began through its end in 2009, family incomes across all income classes dropped by over 5%. But instead of going back up during the recovery, they continued to plummet by another 6% in 2010. The declines weren’t spread evenly across the income classes. Families with incomes in the top 10% saw their family incomes decline 5%, but the bottom 10% of California’s poorest families saw their incomes plummet by 21%.

In surveys, business executives regularly call California one of the country’s most toxic business environments and one of the least likely places to open or expand a new company. Many firms still headquartered in California consciously refuse to expand their workforce. Brutalized by the bursting of the housing bubble and currently suffering an unemployment rate of 11.7%, 3% above the national average, California family incomes continue to rapidly lose ground.

Already boasting the lowest credit rating of any state in the nation, State Controller John Chiang just released his monthly financial report covering California’s cash balance, receipts and disbursements for November that demonstrates the state’s grim economic circumstances: (more…)

Recently an aide of presidential candidate, Tim Pawletnty said: Michelle Bachmann is drawing attention in part because of her sex appeal. He later apologized for the inapropriate yet flattering statement. Was Pawlenty’s aide wrong in saying that? I think it’s a fair and true assessment.

Michelle Bachmann, the Tea Party favorite is intelligent and attractive. However, she makes some serious mistakes. The mix up in birth places for American icon and film star John Wayne with  pshycotic clown/serial killer John Wayne Gacy is noteworthy. If not moderately hysterical in a sick and perverse way. OK, everybody makes mistakes, but I’m thinking if she researched Mother Theresa. Bachmann would come back and say Mother Theresa worked in New Dehli and made some really good sandwiches.

Substance is far more important than flash and charisma. Too many Americans were lulled into the smooth operator Obama trance. Practically, everybody bought into that. Even Coinstar wanted change.

So what if Mr. Pawlenty is slightly mannequinesque. I like him.

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Pejman Yousefzadeh and Elizabeth Blackney to discuss Jon Huntsman’s past support of Cap and Trade, the stimulus plan, and an Obamacare like individual mandate for healthcare.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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A Schwarzenegger hangover saved California Democrats from a wipeout as the Tea Party wave washed harmlessly up the High Sierra’s eastern slope.  Democrats won eight of nine statewide offices, with the race for attorney general looking more Republican as the late ballots get tallied.  Democrats also racked up their largest State Assembly majority since the Watergate blowout year of 1974 (52 seats of 80).  And, the passage of union-sponsored Prop. 25 allows Democrats to enact a budget with a simple majority vote.  But for visual confirmation of this election’s connection to the failed “Republican” governor, one need only look at governor-elect Jerry Brown’s ad showing Arnold Schwarzenegger side-by-side with Meg Whitman uttering the same platitudinous inanities we’ve come to expect from self-funded dilettantes who neither have the time to vote nor the inclination to first seek a lesser office so as to gain political experience.

It isn’t hard to see where things went awry in California: just look back to the heady years of the historic 2003 recall of Gray Davis.  Davis was swept out of office due a massive deficit brought on by his rapid expansion of state government during the dot com economy combined with his mishandling of the state’s electricity crisis.  Candidate Schwarzenegger won on a platform of “blowing up the boxes” of bureaucracy while “cutting up” the state’s “credit cards” – Schwarzenegger did neither.  Instead, he gave California seven years of uneven leadership, veering from the right to the left while calling his erratic leadership “post-partisanship.” Schwarzenegger pushed through the largest state tax increase in U.S. history, expanded government spending, debt and regulatory hurdles while shrinking the sphere of liberty – curious actions for a self-avowed fan of the late Milton Friedman.  Schwarzenegger’s voter approval rating hit 22 percent this summer, matching Gray Davis’ recall-eve rating – something Davis, if he wishes to indulge in schadenfreude, might see as poetic symmetry.

While the Democrats had a great election night in the Golden State, there are some signs of hope for the majority of Californians who don’t take their ideological cues from San Francisco.

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For months, California has been a laughingstock state, unable to pass an annual budget, facing a declaration of “fiscal emergency,” fighting over pay cuts and furloughs for government employees, threatening to issue IOUs to creditors. With a “framework” budget agreement expected to pass later this week, Reason.tv looks at why this long fight over a bloated budget may be good news for California’s future.

The Golden State is facing a half-trillion-dollar shortfall in funding its pension commitments to public employees. But this year, Gov. Arnold Schwarzenegger, who has fought the unions and lost many times, got the momentum on his side. As the public seethes over cuts to public services and excessive compensation to public employees, Schwarzenegger has used the budget negotiation as leverage to wring concessions from the Democrats and their patrons in organized labor.

The first steps toward reform have already been taken. Several government employee unions have agreed to less expensive contracts, and the budget deal reportedly includes the repeal of a 1999 law that drastically increased the unfunded pension burden on taxpayers. The termed-out Schwarzenegger won’t be back. But the fight to get the state’s pension crisis under control will continue.

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California leaders including Gov. Arnold Schwarzenegger have reportedly agreed a new budget deal, but as the state attracts jeers for its lateness in taking concrete steps to pass a budget, some are booing its leaders for their willingness to sign off on tax hikes when it is being reported that California is owed about $1.4 billion in tax revenue already collected by businesses from consumers, but never remitted to the state.

The LA Times reports:

California is owed nearly $1.4 billion by auto dealers, restaurants and other businesses that collected sales taxes from buyers but didn’t pass the money along to the state — a situation that is aggravating California’s budget crisis.

The tab is up about 25% from a year ago and has almost doubled since 2007, state records show.

That money could make a significant dent in the state’s $19-billion budget gap. Watchdog groups say the state’s failure to collect it is particularly galling because much of the tax money has already been paid by consumers — it just hasn’t been turned over by merchants to the state Board of Equalization.

“All of us want people to pay the tax they legally owe before lawmakers go looking to raise taxes,” said Jean Ross, executive director of the California Budget Project, a Sacramento nonprofit that advocates for lower-income Californians.

Indeed, reports indicate that Republicans in the Golden State have reluctantly signed off on one tax increase as a possible pathway to getting more tax cuts included in any budget.  According to the Sacramento Bee, as of last week, GOP leadership had agreed to a delay in implementation of a net operating loss (“NOL”) deduction originally intended to begin this year until 2012– a move that would supposedly bring in about $1.4 billion.

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Government restricting our constitutional rights in the name of “protecting the children,” is, sadly, nothing new. But when a guy who has made well in excess of $100 million making violent movies seeks to ban the sale of violent video games to minors – that’s individuals under the age of 18 – well, we are being treated to a truly breathtaking display of hypocrisy. As Governor of California, Arnold “the Governator” Schwarzenegger is the lead plaintiff in a case to be argued before the Supreme Court this fall that seeks to uphold a California law banning the sale of violent video games to minors.

I’m a little puzzled as to why SCOTUS even accepted this case. The law in question and similar statutes in other states rightly have been found unconstitutional by 12 different courts, including federal district courts and most recently, the 9th Circuit Court of Appeals. I’m hoping that the Supremes are simply taking this case to end this foolishness once and for all. But I digress.

Arnold Schwarzenegger’s ultra-violent Terminator, Predator and Conan series alone have reaped him tens of millions of dollars. And in case you didn’t notice, all of those movies spawned video games which I can only assume brought more money into Arnold’s pockets. And lest we forget, Arnold’s action hero flicks are routinely marketed to kids. Don’t believe me? Forgot about your Terminator action-figure that you left in your parent’s basement when you left for college?

The California ban is beyond legally dubious. It’s downright laughable.

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From the Los Angeles Times:

California welfare recipients are able to use state-issued debit cards to withdraw cash on gaming floors in more than half of the casinos in the state, a Los Angeles Times review of records found.

The cards, provided by the Department of Social Services to help recipients feed and clothe their families, work in automated teller machines at 32 of 58 tribal casinos and 47 of 90 state-licensed poker rooms, the review found.

State officials said Wednesday they were working to determine how much money had been withdrawn from casino ATMs by people using the welfare debit cards.

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Just as a frog will jump out of a hot frying pan, but will sit in water that slowly goes from cold to hot until he cooks to death; California’s politicians have sat quietly as the accumulation of chronic budget deficits bubbling up from an uncomfortably warm problem to a scalding hot crisis.  Even the release of Governor Schwarzenegger’s $19.1 billion budget deficit projection for the coming July fiscal year appears to have failed to bludgeon the state’s political establishment into action to avoid a looming credit rating downgrade to sub-prime that would set off a Greek style default on steroids.

The media, after months of missing the potential consequences of a Greek default, have now become focused on the similarities between California and Greece.  Both do owe gobs of money, have huge budget deficits, massive unfunded pension liabilities and can’t print their own money; but California’s situation is worse!  The California economy is 5 times larger than the Greek economy.  Los Angeles alone is twice the size of the $356 billion Greek economy.  Greece is less than 2.5% of the European Union (EU) economy, but California is over 13% of the US economy.  From 2000 to 2008, the Greek economy grew at 3.1% annually, the second fastest growth in Europe, whereas California’s growth of 2.3% during the same period was only slightly better than the rest of the US.  Greek unemployment just hit a crisis 12.1%, unemployment in California is 13% and has been above Greece’s since the start of the year.

What started out a month ago with Greece having trouble making a $10 billion debt payment has mushroomed into a worldwide liquidity crisis.  Germany and France have been forced to lead a $1 trillion bailout.  Even the U.S. was required to kick in $50 billion to the support International Monetary Fund’s contribution.  For a few days this block-buster financial backstop calmed the bond markets and allowed short-term interest rates across Europe to decline, but by the end of the week Greek interest rates were headed back up.

Chief Executive Josef Ackermann of Deutsche Bank, Germany’s largest financial institution, said last week he was “doubtful whether Greece will really be in a position to achieve” the repayment of the emergency loans.  However, he went on to stress that Athens had to be propped up, because if it fell, it would lead “with great certainty to a spillover to other countries,” sparking “a type of meltdown,” he added.  Ackermann’s comments are all the more surprising because they follow recent reports that Deutsche Bank itself is preparing to provide €500 million ($625 million) in loans to Greece on the same conditions as those set by the German government.

Last September the state of California sold $8.8 billion of prime rated short term debt to investors at an interest cost of 3%, similar to rates Greece was paying before the threat of default sent the rate to 24%.  The Governor Schwarzenegger’s new budget projections indicate that California will need to borrow $12-15 billion just to get through the fall.  Given that state’s economy is five times larger than Greece, if California is downgraded to sub-prime this fall and the crisis spreads to  municipalities and other states, it might take up to a $5 trillion bailout to stabilize the situation.

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Unionism is failing miserably in this age of a greater world market and an increase in competition for business across the globe. More nations than ever have left behind the 18th century and are taking bold steps into a world made smaller by technology. No longer is but a handful of nations leading the world in manufacturing while the rest wallow in abject poverty. This greater competition is increasing the standard of living in nearly every corner of the earth but because there is so much competition, unions in the U.S. are dying out.

American unions are not conducive to the 21st century and companies shackled by them are finding that either unions have to lose their once overpowering control over production or the businesses simply have to shut their doors as foreign competitors beat them up in the world market place.

But these antiquated, jobs killing unions won’t go quietly into the night and they’ve found their path to existence: government. Unions are growing wildly in the public sector because there are no market forces to curb their excesses.

The latest statistics from the Bureau of Labor Statistics shows that overall unions lost 771,000 members in 2009 and the percentage of private sector jobs held by union members fell to 12.3 percent, the lowest since unionism became de rigueur in the U.S.

But while they are falling to new lows in the private sector, unions are growing rapidly in the public sector. Government is unionizing at an increased rate.

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It’s hard to find a politician who isn’t eager to “do something” about high unemployment. Turns out California has found one way to save and create certain kinds of jobs—spend like mad and raise taxes.

That job-creation strategy has worked quite well for government-sector workers. Problem is the statewide unemployment rate is still among the highest in the nation, and many private-sector employers are heading to states like Texas, where taxes are lower and regulations are lighter.

“I would love to have companies calling me saying, ‘We’d like to move to California, can you help us with that relocation?’ I get none of those calls,” says business relocation coach Joe Vranich. “The calls I do get are, ‘Hello, we want to move out of California, can you help us do that?’”

Vranich says there’s no one reason why businesses leave. He calls it “death by a thousand cuts,” where job creators get fed up with everything from high taxes to traffic gridlock and legal hassles.

Take Rick and Jack Newcombe, the father-son team that runs Creators Syndicate.

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Eighteen states provide for recall elections to remove state officials.  Nine of those provide for the same for their Congressional representatives.  But such a right of recall can and should be adopted in every state.

Ideally this would be done by amending the state constitution to provide for such recall elections.  But it can be done through statute as well, with the New Jersey Uniform Recall Election Law as a good model.

The greatest opportunity is in the states that already provide for citizen initiatives to put state constitutional amendments or proposed statutes on the state ballot for a vote of the people for adoption.  In these states, the citizens can act directly, without depending on the politicians to adopt a check on their own power.

The right of recall is desirable because it maintains democratic accountability to the people throughout the entire term of elected officials, rather than just at election time.  This is more relevant now because increasingly we see an attitude among elected officials that they know best and the people are ignorant yahoos who should be ignored until they need to be fooled again at election time.  The people need a right of recall to remove officials who display this anti-democratic attitude after they are elected.

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California has the worst bond rating in the nation, hovering just above junk bond status.  A lower bond rating means higher interest rates when selling bonds – and California already spends $10 billion per year in bond principal and interest repayments.

In this, as in many other things, California leads the nation, for better or for worse (repaying the money borrowed for President Obama’s Stimulus will cost every American $280 a month for life).

Some people place a portion of California’s debt problem at the feet of voters who approve nearly every bond initiative, from $3 billion for an embryonic stem cell research bond to $10 billion in debt to build a high-speed rail system.

It’s hard to blame citizens of the Golden State for voting for debt when the most famous Californian, Governor Arnold Schwarzenegger, proclaims bonds “a gift from the future.”  It’s also hard to blame voters for approving bonds when the bond ballot descriptions and arguments are chock full of shaky claims.

Take November 2008’s much promoted High-Speed Rail Initiative, Proposition 1A.  Voters approved it by 52-48 after proponents, such as train manufacturers and unions poured $2.5 million into the effort.  As with almost every bond measure, there was no funded opposition.  The measure’s proponents, big business and labor unions, claimed that the trains would offer time-saving travel “AT A CHEAPER COST!” than air travel or car.  And that, the train would, “give Californians a real alternative to skyrocketing gasoline prices and dependence on foreign oil while reducing greenhouse gases. Building high-speed rail is cheaper than expanding highways and airports to meet California’s population growth.”

Really?  Who checks these claims?
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There are two distinct sectors in the economy: the private sector and the government sector.  The private sector is the productive part of the economy.  Competition in the private sector promotes greater efficiency, productivity and innovation than the public, or government, sector is capable of.  Yet it is government employees who are the highest paid and have the most job security.  This helps explain why so many states are facing acute, budgetary crises.

A new report by Chris Edwards of the Cato Institute highlights the sharp disparity between public and private compensation.  Despite producing very little compared to their private counterparts, public sector employees of state and local governments averaged 45 percent more per hour in wages and benefits.  And because government never shrinks, public employees are “rarely terminated for cost-cutting or job performance reasons.”

\Unionization appears to be a factor in public sector pay.  With a few exceptions, Edwards shows that the states with the highest public pay advantage also have the highest share of union workers.  But whatever the cause may be, the excessive pension plans provided by states has placed taxpayers in a virtual stranglehold.  Unless cuts are made, they are the ones who will have to pony up to provide for public sector workers.

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From the Sacramento Bee:

Attorney General Jerry Brown’s office has opened an investigation into the controversy surrounding videos that purportedly show members of community organizing group ACORN giving advice on how to open a brothel.

In a letter to Gov. Arnold Schwarzenegger dated Sept. 25, Chief Deputy Attorney General James M. Humes said the office has “opened an investigation of both ACORN and the circumstances under which ACORN employees were videotaped.” The governor had asked Brown two weeks ago to look into the incidents.

The probe was sparked by a series of hidden-camera videos in which a couple posing as a pimp and a prostitute are advised on how to set up a prostitution business by people identified as workers for the Association of Community Organizations for Reform Now. The videos were taken in Washington D.C., San Diego, San Bernardino and cities in several other states.

Members of the organization are also under investigation in other states for alleged irregularities in registering voters.

Schwarzenegger issued a statement praising Brown’s decision to investigate. “I am outraged and deeply concerned by these allegations,” the statement said. “If these reports are true, they warrant prosecution under the fullest extent of the law.”