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Monday, January 11, 2010

J-O-B-S. JOBS! JOBS! JOBS!



With a nod to Jets fans, the cheer in the title is what all Americans should be cheering in unison in front of their state houses and the nation's Capitol. Particularly here in California, the chant of "Jobs, jobs, jobs" should be loud, clear and constant from all sectors of the economy and state as it appears our political season, commonly known as "budget discussions" are starting up again.

Last week Governor Schwarzenegger gave his State of the State speech and presented his budget; which needs to fill a $20 billion plus budget gap. Naturally the opposition immediately decried the budget because the Governor is requesting significant cuts to many programs, departments and sectors of the state government. Programs, departments and sectors that have grown exponentially in the past decade, primarily in the early part of this decade when unemployment was shrinking, incomes and property values were increasing and tax revenue was flowing into Sacramento like never before. The members of our Assembly and Senate during those boom times behaved as one would expect selfish, narcissist, self-serving politicians to behave: they gave political favors (read: money) to their friends and supporters, expand pet projects and liberal programs, and entrenched the primary financiers of the State Democratic party and its politicians, the public employees' unions, as the most powerful political force in the state.

Complicit in the spending increase has been the myopic California voter. Voting for measure after measure focused solely on the short term and/or the feel good "progressivism" of the measures on the ballot, the majority of California voters have saddled the state's income (or rather deficit) statement with hundreds of millions of dollars in interest payments on bonds. Bonds for water, bonds for science, bonds for rail, bonds for prisons, bonds for schools, bonds for bonds. Without any ability to connect the dots, without any desire to see the burgeoning budgets eating up temporary tax revenue windfalls, without any vision to see the long term consequences not only of the cost of the bond measures but the costs of expanding the size of the state government and subsequent salaries, benefits and pensions, the California voter checked "Yes" "Yes" "Yes" and (D) (D) (D) on their ballots.

Since January 1, 2008 the American economy has shed over 7.25 million jobs, almost 4.2 million in 2009 (U.S. Bureau of Labor Statistics). The worst hit states, as you can see from the map at left, are the far West, and swath from Michigan down to the Southeast. In a boondoggle of public spending and waste, in February Congress passed and President Obama signed the Stimulus Act whose purpose was to prevent unemployment from reaching 8% and would be used for "shovel ready" infrastructure projects. While some of us at the time screamed, "Pork!" now more are seeing how correct that cry was.

While Schwarzenegger complained in his State of the State that California only gets a little over seventy cents back on every tax dollar sent to Washington from California, he should have followed Texas Governor's Rick Perry's lead and refused any of the American Recovery and Reinvestment Act ("Stimulus") money. The funds are going overwhelmingly to public agencies which perpetuates their inefficient use of funds, creates more salaries, benefits and pensions on public payrolls and budgets, and do not create jobs. While title the ARRA, it should have been titled the Public Employee Job Guarantee and Expansion Act. Perry recognized this and did not want to burden his state with long term liabilities and government growth as a result of a Federal bribe to public employees.

Our state Legislature is behaving the same way as Congress. Their primary purpose at this point seems to be more about saving public jobs than improving conditions in the private sector and economy of the state. Since their campaigns, "their" being the Democratic majority who control budget negotiations, are financed primarily by public employee unions they focus their efforts on protecting those jobs, protecting those payrolls and protecting those automatic payroll deductions into the labor PACs. Schwarzenegger is properly focused in his budget to cut spending to reduce the budget gap.

With gerrymandered districts protecting the incumbent Democrats there will be little political consequences when the primaries coincide with the annual budget negotiations as the June 30, 2010 "deadline" approaches. The guaranteed majority in the districts will follow their same voting patterns with the result being zero accountability for the politicians who have created and perpetuated our budget crisis. And we can expect those same voters to protest and complain about the budget cuts being called for by Schwarzenegger and the members of the GOP in Sacramento. The guaranteed result is budget cuts and tax increases, and a budget deficit next year over $30 billion as the cycle repeats itself.

In order for the unemployment rate in January 2015 to reach 6% it will take 225,000 new jobs added to the economy every month for sixty consecutive months. This rate of job growth has occurred once in history: 2006. We will not add 225,000 jobs in January 2010, or February, or March, in fact we will see more job losses. So the number of jobs needed to get back to 6% unemployment increases accordingly. By adding more tax burdens to employers state and federal governments are disincentivizing job growth and hiring. Higher taxes reduces tax revenue, it has been proven time and time again. To create jobs and income tax revenue taxes must be cut, or at least the current tax rates retained, federally.

For California, we are losing jobs, people and wealth to other states by the tens of thousands. Who is left and what is the level of employment those left are able to achieve? We have a negative environment for new jobs in energy and manufacturing. Our service industries are leaving because with the technology and taxes available in other states it is easier and cheaper to work from another state, or country, than California. Our income tax, and sales tax, revenues will continue to decline as long as the Legislature is anti-business, anti-growth and pro-taxes and regulations that kill businesses and industries.

This past week saw typically bitter and freezing winter weather over much of the country east of the Rockies. In Southern California our weather has been over seventy degrees for the past few weeks. It, beautiful weather, is one of our primary resources that should draw and attract businesses, entrepreneurs and vital economic growth. Unfortunately our political climate is sufficiently foul as to counteract the incredible climate Divinely provided.

Jobs. Jobs. Jobs. Private sector jobs should be the only focus of our Legislature as they tackle the current and future budgets for California, and the United States.

1 comment:

Charles S said...

Dennis,
Thank you for a very compelling summary of what is starting as a disastrous year. Looking back to one of your earlier posts, the speed of money, I can't help but think yep, we're doomed. How can we possibly change our predicament? Is it too late?