Prop 23 = AB32 Relief (updated 19aug2010)

George Rebane

[This is the submitted form of my August Union column which appeared in the newspaper’s 14aug2010 print and online editions.]

Almost all surveys, polls, and analyses say that California is at or near the bottom of America’s economic ladder.  Our perennially inept legislature in Sacramento has worldwide notoriety - we are the international poster child of how not to do it.  It? damned near anything related to public policy.  More and more economists and commentators see us on the threshold of a “failed state”.  Only the progressive elites, public service unions, and their local minions continue assuring us how more regulations and taxes are going to solve all of our problems.

The latest tumor metastasizing our Golden State was the passage of AB32, the claimed cure-all to man-made global warming.  This new law is causing untold grief to our state’s businesses with reams of new regulations already in force, and new ones being discovered and enforced every day.  Many businesses are escaping elsewhere as fast as they can.  Others are cancelling plans for growth, and laying off as many workers as possible to reduce costs as the storm approaches.

The malady has already hit Nevada County businesses like Robinson Enterprises and Hansen Brothers.  The only ones still baying for their bone from Washington are our legions of government funded NGOs and large corporations.  These have learned to play the ‘Washington game’ of preferential subsidies and competition stifling legislation that spells oligopoly.

   

To illustrate the general and broad-based effect of laws and regulations burdening businesses and our economy, I offer the above graphic.  It shows how piling on more reams of state mandates creates ‘friction’ in the growth of an economy.  The horizontal axis shows the amount of regulations enforced by government, and the vertical axis indicates the resulting growth rate of the economy that such regulations enable/inhibit.

It is clear that some modicum of regulations is needed to enforce contract law, protect consumers, and maintain the environment.  Without that an orderly society could not function.  However as we witness today, once we exceed that parsimonious set of laws and regulations, economic growth rate begins to go down.  Twentieth century autocracies have shown that growth rate can go negative leading to the collapse of the state.  This is described by the illustrated Regulatory Impact Curve (RIC), which in its naming, modesty prevented my following the lead of Art Laffer.

When we try to peg California on the RIC, the Legislative Analyst Office in Sacramento has pronounced AB32 to be a net cost to the state.  The LAO goes on to say that California Air Resources Board has done a poor job of analyzing the “economic leakage” that AB32 will cause.  This means that AB32 pushes California to the right and downward on the RIC as indicated.

The jobs lost to this bad law are now in the thousands, and for that reason our Assemblyman Dan Logue is spearheading passage of Proposition 23 on this November’s ballot.  Prop23 would delay the implementation of AB32 until California’s unemployment rate drops from its current 12+% to 5.5%.  A YES on Prop23 appears to be the least we can do to help ourselves during this Great Recession which has been more than mishandled from Washington, and now threatens to become a double dip disaster or worse.  We don’t need to make it worse in a state that is already scraping bottom.  (Prop23 info www.suspendab32.org/resources/ab-32/)

Of course, all this is lost on the left that continues screaming for higher taxes, more state control, and bigger government.  Their cry is loud enough to give second thoughts to established ‘middle of the road’ politicians who should know better.  It has even scared the pre-natal RINO Meg Whitman into opposing Prop23 with the caveat that once she’s governor – wink, wink – she’ll postpone AB32 for one year through an executive order.  That little ploy is designed to endear her to the left, and sweep up the innocents on the right.  Right.

Meanwhile, CABPRO and the Tea Party Patriots are the only local organizations so far to have thrown their weight on the side of Prop23.  Our electeds remain silent to sullen on the matter.  Nevertheless, Supervisor John Spencer will soon ask the BoS to endorse Prop23.   But business development outfits like the ERC are keeping mum.  Does this mean that we in Nevada County have pretty well pulled in our horns and mortgaged our future to ‘Chinese Cash from Washington’?  Exit question – and how long will that last?

George Rebane is a retired systems scientist and entrepreneur in Nevada County who regularly expands these and other themes on KVMR, NCTV, and Rebane’s Ruminations (www.georgerebane.com).

[Exit question #2] – Russ Steele at NC MediaWatch asks ‘What happens if Prop 23 fails?’

[18aug2010 update] - The future of California is clearly visible in Europe (here).

[19aug2010 update] - To once again illuminate the substance of loud, loutish, and shameless leftwing voices which are often found in these comment streams, please examine the US government data on recent California vs national GDP growth rates that the above RIC illustrates - US 0.7%, CA 0.4%.

 

Comments

[Russ Steele]

Good column George, I think the RIC will have some future utility. Well Done. Thanks for the link to NCMW.

[George Rebane]

Dear readers, in the event that some of you missed it in the comment thread of the Union’s online version of my column, I am reprinting it here. Steven Frisch, president of the Sierra Business Council, a local government funded NGO, is one of the brightest progressive bulbs hereabouts who constantly illuminates our world from stage left. This comment is a priceless illustration of both his understanding and thought. Enjoy.

"The graph created by George really says it all. The practice of the author of comparing California to the Soviet Union, and by doing so thus imply that anyone who supports policies to reduce greenhouse gasses and control climate change is a card carrying member of the communist party bent on the destruction of the United States, exposes the tactics being used by deniers in this debate. There is little to no room for reasonable people to disagree in the debate as framed by George. You are either with him, or a totalitarian.

This is not the mind set of, nor is it the tradition comfortable to, most Americans. In my country we can disagree about issues of the day and still be patriotic Americans committed to the betterment of our lives without running the risk of being painted pink with the brush of latter day McCarthyism."

[Dixon Cruickshank]

Just gave me another idea for another comment that apparently won't be posted LOL

[Steven Frisch]

For those of you who missed it I must clarify that the graph is wrong because California has a higher economic growth rate than the US does in the last 50 years. Consequently California should actually appear higher than the USA on the chart. Consequently the RIC is useless as an analytical tool since the data is, as George is prone to provide, FALSE.

[George Rebane]

SteveF, of course the historical growth of California has been higher than the national growth, and that even for more than 50 years. The dots on the RIC are placed to show the portent of the current state of affairs should California be made to suffer the full brunt of AB32 in addition to all the regulatory burdens it already has in place. That is why a date was added to the 'USSR' label to indicate its shrinking economy at the time of its collapse.

The RIC is is not offered here as an "analytical" tool, but only as a communicative graphic. And, I fear, it truly is "useless" to the progressive mentality that continually promotes the message that more government regulations induce higher growth rates.

[Steve Frisch]

In other words the graph is not an accurate abstract representation of anything other than your opinion. In which case why do do need a graph. Especially since the key point, the relative positions of the USA and California vis a vis the USSR is inaccurate.

It is plain and simple, a lie.

[George Rebane]

SteveF, I believe you're embarrassing yourself more than you know.

[Michael Anderson]

I have a question that I'm hoping someone reading this blog can answer. That is, in the state of California can the governor unilaterally order a review of all California codes, with the goal being to root out redundant, obsolete, and/or overbearing codes? Or is this the prerogative of the legislature?

Take a look here. That's a steamin' heap o' code! (and I ain't talkin' software): http://www.leginfo.ca.gov/calaw.html

I would like to see an initiative that requires that the California Senate and Assembly can only pass legislation if a like amount of obsolete and redundant legislation is expunged. Has this ever been attempted?

[George Rebane]

That is a great question Michael. It comes up every few years and people even have written short stories about it (in the sci-fi genre). Wouldn't it be great if a jurisdiction's legal codex could only contain this many characters or bits or ... ? To put something more in, the whole body would have to be reviewed to see what could be taken out.

That problem happens often in technology and has been solved in ingenious ways. (I would cite the Mk130 digital computer, the first on our nuclear submarines in the 1960s; it had a 4K real core memory into which everything had to fit for many years.)

By copy I'm asking Kim Pruett to see if the good offices of Tom McClintock can be brought to bear on this inquiry. It would be interesting to see what, if any, efforts in this direction have been made in Washington over the last two centuries.

[Michael Anderson]

Thanks George, I look forward to learning the answer (if there is one) for your question to Kim.

This subject reminds me of a personal story from about 18 years ago. My oldest son was in first grade and I had just been elected to the Nevada City Elementary Site Council. We were in a meeting, trying to figure out what to do with some Site Council funds that we had to spend. Most of the meeting was spent with the principal of NCE giving us the categories for which we *couldn't* spend the money. After this went on for a while, I raised my hand.

"What rulebook says we can't spend the money on these things?"

He looked at me kindly, lightly amused by my naivete. "Why, the California Education Code of course!"

Later that afternoon he took me to his office and showed me the entire bookshelf dedicated to that code. I've been code-abhorrent ever since.

Oh, and my youngest kids, who just started kindergarten and fourth grade on Wednesday, now go to Grass Valley Charter. Charter schools are exempt from many of the Sections in the California Education Code. (-;

[Steven Frisch]

So George the PIC graph is a representation of where you think the future of the California economy is going in relationship to the US and the former Soviet Union? If so, you are now in the business of future economic forecasting? Well, I find that a little hard to believe. Not to mention it does not respond to the point that the graph itself never held such a disclaimer, so it was deceptive to readers to begin with.

[Steven Frisch]

Two groups I have been working with on the state level support a review and simplification of the California code and the California Constitution, which is about 15 times larger than the US Constitution.

The groups are California Forward and the California Stewardship Project.

As part of the California Forward reform agenda the proposal is to do a review and simplification of California code, establish sunset provisions for new codes, boards, commissions and agencies, establish performance metrics for the same, and review and eliminate them on a regular basis if they are not meeting their mandate.

I would propose that a similar approach to 21st century government could be implemented at the federal level and would save the taxpayers billions every year. I am in complete agree with those that believe that when a law is no longer relevant it should be eliminated.

[Michael Anderson]

Steve,

I had not heard of the California Forward or the California Stewardship projects. Very good news indeed. I will look them up to get further information. Thanks for the note.

Michael A.