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:

After accounting for November revenues, total year-to-date general fund revenues are now behind the budget’s estimates by $1 billion, but expenditures for the year are over projections by $1.95 billion… The combined current year cash deficit stands at $21.5 billion.

The resolve to turn California against business started with Governor Jerry Brown in 1974. Brown saw government’s job as restraining growth, limiting development, and expanding environmental regulations. In 1977, Time Magazine declared “the California of the ’60s, a mystical land of abundance and affluence, vanished sometime in the 70s.” Fifteen years later Gray Davis, Brown’s chief of staff during the 1970s, became Governor in 1999. Davis signed 33 bills that the state’s Chamber of Commerce called “job killers.” Perhaps the most devastating was a restructure of worker’s compensation, which drove an increase in payments per worker from $2.30 per $100 of payroll to $6.44; tripling the annual employment costs to business from $9 billion to $25 billion. Three years later, voters recalled Davis and elected Arnold Schwarzenegger. Unfortunately, in 2006 the “Governator” signed the Global Warming Solutions Act that critics mourn will raise electricity rates in California by another 20%.

In a 2011 poll of various California business groups, 82 percent of executives and owners said that if they weren’t already in the state, they wouldn’t consider starting up there, and 64 percent said that the main reason they stayed in California was that it was tough to relocate their particular kind of business. For several years in a row, California has ranked dead last in the Chief Executive’s poll about the business environment of states in the U.S.

Limousine liberals, rich environmentalists, union bosses, and their pet politicians that comprise much of the top 25% of income earners in California have not suffered devastating income declines in the recent recession. Responding to the Chief Executive poll, Steve Smith of the Labor Federation of California charged that it represented “little more than corporate honchos throwing around their weight to try to further strip working people of important protections that improve lives.” But for the 75% of Californians not at the top income levels; California’s anti-business environment continues to inflict real pain on the lives of workers and their families.

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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.

First of all, Prop. 26 passed.  Prop. 26 makes it nearly impossible for Democrats to pass higher taxes by disguising them as fees.  Taxes require a two-thirds majority vote to pass in California.  Fees, usually defined as a payment for a specific government service, just require a simple majority to enact.  The problem is, that prior to Prop. 26, Democrats got quite adept at changing the definition of a “fee” to cover just about anything they wanted it to.  Assuming that Prop. 25 doesn’t allow Democrats to raise taxes with a majority vote by simply inserting a tax increase into the budget bill, Prop. 26 will make it very tough for Democrats to raise enough revenue to pay for all that government they love.

Secondly, Prop. 20 passed and Prop. 27 went down in flames.  Thanks to the foresight and funding of Charles Munger, Jr., a longtime Republican activist and atom smasher (he’s an experimental physicist at the Stanford Linear Accelerator Center), Prop. 20 will extend the mandate of the independent redistricting commission (created by Munger’s Prop. 11 in 2008) to include congressional seats too.  Prop. 27 sought to repeal Prop. 11 and would have canceled out Prop. 20 if it had received more votes, returning the responsibility of redistricting to legislative Democrats.  That Prop. 20 won with 61.4 percent, the most “yes” votes of any of the propositions, shows that the public remains extremely wary of its politicians.  The practical impact of Prop. 20 is two-fold: first of all, Republicans will likely gain a few more congressional seats in the 2012 election as Democrats lose their gerrymander advantage in California; secondly, legislative districts will be more competitive, causing some currently safe districts, both Democrat and Republican, to be in play in future elections.  This, by itself, is a victory for representative democracy.

Thirdly, Steve Cooley looks set to win the very close race for attorney general. This will mark the first time in 12 years that a Republican has occupied California’s top law enforcement office.  Always an important post, now it is especially so.  First of all, Attorney General-elect Cooley will be able to investigate political corruption.  Given that corruption tends to flower when one party has a lock on power, Cooley will likely be very busy for the next four years.  Next, with the state budget deficit at $14 billion and growing and Prop. 26’s passage limiting Democrats’ ability to hike taxes, there is a looming threat of a massive prison inmate release.  The state prison budget is about $11 billion a year. Rather than cut the $49,000 per year that it costs to incarcerate an inmate in California, more than double the national average of $24,000, Democrats would likely just vote to release violent felons as a way to free up more money for welfare.

Lastly, Republicans showed strength in the hard-hit Central Valley, with Andy Vidak defeating Rep. Jim Costa and David Harmer locked in a tight race with Rep. Jerry McNerney in two widely watched congressional races.

So, what do the results portend?

A lot depends on Jerry Brown’s back-to-the-future act.  As governor in the 1970s, Brown dismantled the merit-based civil service system and erected the public sector employee union system in its place.  Ever since, state employee costs have increased almost as much as the rate of government union donations to politicians.  Gov. Brown has a chance to undo some of this damage, in an “only Nixon could go to China” sort of a way.  In interviews after the election, Brown has broadly hinted that voters showed their opposition to new taxes in their votes for Prop. 26 and against Props. 21 and 24.  The difficulty for Brown will be in finessing the majority’s new power to pass budgets without an single Republican vote with the fact that taxes will be very tough to increase. This in essence gives Democrats all the responsibility for the budget but none of the authority to balance it short of acting like Republicans (cutting spending) and / or irresponsibly releasing 50,000 violent inmates on largely Democrat-voting urban areas.

Of course, there is the possibility that Democrats will move to reopen the historically-late 2010-11 budget, as suggested by Senate President Pro-Tem Darrell Steinberg, and vote to increase spending.  Such an act would accelerate California’s date with insolvency.  In doing this, Democrats would seek to force the hand of Sacramento’s remaining band of legislative Republicans, trying to pin the blame of IOUs and bond defaults squarely on their shoulders unless they vote for a $20 billion tax increase.  This drive-the-car-off-the-cliff blackmail maneuver worked in February 2009 when Republican legislative leaders decided to “responsibly” raise taxes rather than allow California to go broke.

Gov. Brown may be reticent on taxes, knowing that there is little voter appetite for them and perhaps understanding that higher taxes won’t create jobs, but in the area of “green” policy, Brown appears ready to double down on Schwarzenegger’s errors.  A recent L.A. Times Op-Ed by 60s radical and Brown ally Tom Hayden illuminates Brown’s green path.  Hayden lauds California’s coming green era, seeing it as a long-awaited opportunity for centralized government planning to pump billions of dollars into “green” energy while at the same time using it as a mechanism “…to ensure that all Californians benefit from the state’s green energy push.”  Hayden says that this green push must benefit “black and brown” and warns that “the green future cannot be purely white.”  He then links these green jobs for minorities to the prison system, writing that “…it makes far more sense to employ at-risk youth weatherizing homes and installing solar collectors than locking them up in the largest mass incarceration system in the world.”

Given Spain’s utter failure to generate a cornucopia of green jobs – 2.2 old-fashioned, but paying, jobs were destroyed for every “green” job created at the cost of $774,000 per subsidized employee, it’s hard to see how Brown’s green effort will do anything other than serve as just another avenue for wealth redistribution.

The next two years will likely see California mired in recession, increasingly lagging behind the rest of America.  Texas will become the favored destination of hard-working Californians and their jobs-creating capital.  California’s continued economic pain will be compounded by liberal policymakers who never see a problem that government couldn’t make worse.  This will provide an opening for Republicans, but only if they have the moral courage to offer a bold break from the failed Democrat policies.

California remains America’s largest manufacturing state.  The Golden State generates a prodigious amount of new technology.  One of eight Americans call California home.  Should California not reform itself soon, it will remain the misfiring cylinder in America’s economic engine, acting to slow the national recovery.

In politics, nothing lasts forever – including the Democrats’ dominance of California. For California’s sake, and America’s, all Americans should hope California voters catch up with the rest of America in 2012.

At first blush, it is a race between a big government, union-supporting incumbent – Democrat John Chiang – and a conservative, limited government reformer, State Senator Tony Strickland.  While there are many races that may fit that description, the Controller’s office is not just another political office.

Keep in mind that despite intervals between Republican and Democrat Presidents, Republican and Democrat Governors, Republican and Democrat Legislatures and Congresses, the size of the federal and state governments has exploded since the 1960’s.  The quaint, 1960s, pre-Great Society, federal budgets of $130 billion have given way to a $4 trillion dollar monolith.  Many state budgets, including California’s have seen similar growth.

That explosive growth, under the watchful eyes of both parties, occurs because more often than not, political discourse is a simple matter of what can government do and how can we fund it.  Far less often do meaningful discussions occur about making government accountable for the money it already has.  If limited government is to make a comeback, the latter must take precedence over the former and (1) today’s environment is the time to do it and (2) the California Controller’s race is the election on which to make that stand.

In recent weeks, in California alone, we have heard the stories of Bell, California where that small town was paying a city manager nearly twice what the President makes.  Less publicized are the stories about how California schools are paying as much as $125 million, each year, too much for roof repairs and how John Chiang’s Controllers office has spent over $70 million dollars and literally can’t update the State’s antiquated payroll system.

In truth, there is an endless supply of such stories to be told everyday – and this is the fine point of the matter:  If voters truly knew the extent of such waste, would they succumb to yearly Democrat pleas for them to part with an extra $1500 more each year in taxes?  If voters knew that up to $125 million of the education dollars every year were being wasted would they believe that we are under-funding education? The Tea Party movement more than suggests that the answer to those questions would be a resounding NO.

Unfortunately, Republicans have not worked hard enough to expose the Bell California/John Chaing type stories.  One reason is that Republicans around the country do not value holding the State Controller offices nearly enough.  That office has the power to audit every phase of state government and to expose government waste at every turn.  Indeed, John Chiang’s office knew (or should have known) of the Bell, California spending scandal and did nothing about it until the LA Times, of all outfits, made it a story.

All of which brings us to Tony Strickland.  He may well be the ideal candidate to start this Republican Controller’s tide.  As an Assembly member, he stood alone and sued then Governor Gray Davis because Davis refused to disclose the details of the awful energy deals he signed.  Those terrible deals were costing Californians billions and until Strickland stood alone – Davis was getting away with it.  Strickland won his lawsuit, forced disclosure of contracts, and with that you can trace not only the end of those rip-off Enron energy contracts but also the end of Gray Davis’ political career.  California desperately needs a Controller like that today as opposed to John Chaing who is resisting government reform at every turn.

Simply stated, the key to changing the national dialogue from how to feed government to making government accountable to the money it already has is to open the vault of the Controller’s offices around the Country and especially in California where waste occurs on a grand scale.  That effort must start with the election of   Tony Strickland for California State Controller.

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.

Gov. Arnold Schwarzenegger, who learned of the issue when asked to comment for this story, promised to take immediate action.

“We have instructed our vendors to prohibit these cards from being accepted at ATMs located in casinos and card rooms,” Schwarzenegger spokesman Aaron McLear said Wednesday. “It is reprehensible that anyone would use taxpayer money for anything other than its intended purpose.”

Administration officials said the social services agency contracts with a private ATM network to handle the electronic transfer of benefits to people on welfare, and hadn’t noticed that the taxpayer money was being withdrawn at gambling establishments.

McLear said the system of paying out welfare benefits via bank cards was created under Schwarzenegger’s predecessor, Democrat Gray Davis. Since the late 1990s most states have adopted this system, which is a viewed as a more efficient way of distributing and tracking government aid.

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For decades, American business has wined, dined and lobbied the American politicians. Some have sought preferential tax benefits for themselves or their industries.  Others have sought preferential regulations or corporate welfare for the same reasons.  Still others feed the alligator that is government in hopes that it will be kind to them in the future while it consumes others today.

Perhaps no greater example of the latter mentality exists in California.   Year after year, business interests donate millions of dollars to Democrats in the hope that they will act reasonably.  The coup de grace of which was the 2002 election for Governor between then Governor Gray Davis and challenger, and business man, Bill Simon.  Under no uncertain terms, Simon campaigned on lower taxes and regulations.  Davis offered record deficits and coming tax increases – not to mention an ever increasing regulatory burden.  Incredibly, Big Business gave to Davis three to one over Simon.  They did so because they did not give Simon much of a chance and they wanted to curry favor with Davis – hoping he would be kind to them when he won.

Without a doubt there were two losers in that election.  Simon lost by less than 5 points (far closer than business imagined) and California businesses now face the highest combined tax and regulatory burdens in American history.  In other words, California businesses have received a very poor return on their investments into California Democrat politicians – so much so that California’s desert neighbor, Nevada, leads the nation in new business development.

The same story, of course, could be told nationally.  Businesses around the country have been feeding the giant alligator which is now our government for decades.  Until the 1960’s, government was less than a $100 billion enterprise ($600 billion or so in today’s dollars).  Today it is a $4 trillion dollar behemoth.   In this last year, despite funding Obama, the alligator has turned on them to an unprecedented degree with Obama policies that have included destroying bond holders rights in GM and appointing czars that determine their pay – not to mention adverse multinational taxation policies, unaffordable health care mandates, union empowering rules and much, much more.  In other words, business has not received a good return on its investment in Obama either.

Knowing all of that, and knowing that a Republican Congress is a distinct possibility, the question must be asked, as the 2010 election approaches:  Will American Business stop feeding the alligator that is our government?

All the way back in 1978, in his book A Time For Truth, Bill Simon’s father, former Secretary of the Treasury William E. Simon, warned us that “most of our politicians [were] careening toward more and more central planning and our society ruled by a small band of moral and economic depots.”  He decried the fact that American businessman of the time had been:

“more concerned with short-range respectability than with long range survival. Most appear morally afraid of antagonizing the egalitarian gurus of our society.  They do indeed seek to protect their enterprises, but with little understanding of the philosophy that justifies their actions.  Consequently, they do so secretively, and often guiltily, in the form of lobbying, financing politicians and, not infrequently, bribing them.  Even more disturbing, they also seek to protect their enterprises by endorsing the very values of their worst enemies and financing their causes.  If American business consciously wished to devise a formula for self-destruction, it could do no better than this.”

He exhorted business leaders to start a “countermovement” to not only preach but practice free enterprise.  Simon Sr., and his son, both understood what Thomas Jefferson warned us of long ago: that “Government can do something for the people only in proportion as it can do something to the people.”  The Obama Administration certainly should be the final lesson for American business on that important historical lesson.  2010 should be the seminal year they decide to learn that lesson once and for all before it is too late for us all.

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.

On private payrolls unions lost 835,000 members and union density fell from 7.6 in 2008 to 7.2 percent, but in public employment unions gained 64,000 members and union density increased to 37.4 percent from 36.8 in 2008.

This is an alarming fact where it concerns the right of the voters to control their own government. As bad as unions are for productivity in the private sector, shy of government interference, at least market forces ultimately serve as a check on union over reach. But when wholly ensconced in the not so real world of government unions have little check on their power.

Unfortunately for the voters, unions wield the great power of deep-pocket, political contributions and their large donations affect lawmakers in a much greater way than the mere vote of individual citizens. It is a vicious circle. Unions donate to politicians to get favorable laws passed and friendly rules put into effect, politicians then acquiesce to union demands in order to get those contributions, then unions turn back around and give even more to politicians who respond with even more favors, all in a never ending cycle of money, power and special interest favors. This continues without end because neither the unions nor the politicians ever pay any price for this incestuous upping of the ante as it is the taxpayers, the ones without any power in this cycle, that pay the price.

In fact, even when voters do attempt to elect politicians that campaign on putting curbs on the power of public employee unions their will is thwarted by the courts to which unions run for cover. California is a perfect example of this. Voters threw out Governor Gray Davis for Arnold Schwarzenegger who told voters that he’d rein in the budget. But even the modest checks on unions Schwarzenegger has tried to implement to solve the Golden State’s budget problems have failed. When he tried to give some public employee union workers furlough days to lower the cost of government the unions ran screaming to the courts, courts that immediately backed up the unions acting against both the will of the voters and of common sense.

Like a criminal racket, the taxpayers are constantly being robbed by politicians to pay unions so that unions can give donations back to politicians only to repeat the cycle. It easily invokes the old idiom of Robbing Peter to pay Paul. And the taxpayers are poor, put upon Peter.

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.

We have seen this problem in particular in the health care battle, where Congressional representatives have displayed the attitude that the people are too gullible, confused and misled to understand the issue, and should be ignored by the wise elected officials who know better.  Elected officials have responded to citizens voicing their objections with name calling, labeling them Nazis, racists, and tea baggers.  These officials are still threatening to adopt a thorough government takeover of health care on the idea that the people will never be able to unscramble the mess.  The right of recall is needed to shortcircuit this tactic.

Another increasing problem is candidates who campaign as conservatives to get elected, and then once they get in office they join with the far left to pass their agenda instead.  With the right of recall, voters who feel they were snookered in this way can act to remove their representative once this pattern becomes apparent.  With this power in place, candidates would be less likely to try to get elected on false pretenses in the first place.

The right of recall would also counter the growing problem of voter fraud.  If voters feel there were too many shenanigans in a vote count, and don’t trust the result, they can act to provide for a new election.  A perfect example is the recent extended vote count for Sen. Al Franken in Minnesota, which was based on a developed art form of focusing the recount on districts that heavily favor one party, where votes can be manufactured.  With this success, rest assured that this will be tried again and again.

A recent example of recall in action was the 2003 removal of then recently reelected California Gov. Davis.  The people voted overwhelmingly to remove him from office in a recall election, and replaced him with current Governor Arnold Schwarzenegger.  This example shows that the recall process is practical and not counterproductively disruptive.

But anyone who wants to pursue such a recall, or the process of initiative to adopt recall for their state, should realize from the start that this is a time consuming process requiring the collection of likely millions of signatures on petitions, all in strict compliance with the letter of the law.  You can bet that opponents will be looking for any legal variance to deny the whole effort.  Therefore, the effort needs to be organized from the beginning with sufficient resources and experienced input to be successful.