Intention And Purpose

Yesterday our guest minister raised the four questions that Man has asked and studied since Socrates, probably before.

Who am I?

Where did I come from?

Why am I here?

Where am I going?

In asking the questions we look inward to our purpose for Being. In answering we, perhaps, answer our intention for Living. Intention and purpose. Investigation of our intention and purpose is usually a discussion framed within the confines of religious doctrine or our faith. As we explore our ideas for our purpose in this life and our the intention for which we were give it we also explore our beliefs in respect to God, Spirit, Universal Energy, or whatever definition you wish to put on the Divine.

Intention and purpose. This week in particular, as we face deadlines to fund our government with our taxes, is a good time to ask the questions regarding intention and purpose about our government, our Republic. What is the purpose of our government? What is the intention we have for our government? Take the four questions at the top of this post and substitute "government" for "I."

Who is our government? It is supposed to composed of representatives of the people. Our government was established to be representative in nature and given guidelines by which to operate, our Constitution. Our government is to be us, we, the people.

Where did our government come from? From men who gathered from across a land that had been inhabited by European settlers for barely 100 years, a scant time in the history of Western Man. Men with common values, common beliefs and common principles established a form of governance never before seen. Our government was formed by men who thought to right down "all Men are created equal" and that among the gifts granted by Our Creator are "life, liberty and the pursuit of happiness." Our government came from men, who while flawed like all men, set forth the most closely perfect form of government to that point in history, or sense.

Why is our government here? Ah-ha! What is the purpose of our government? What purpose do we allow our government to have? This is the crux of political discourse and discord. What purpose our government has is the very foundation upon which we should base our votes.

Where is our government going? For Man this question is meant to imply where am I going when I die? For government the question is different as it is as close to eternal a body as we may know in our lifetimes. Where is our government going? What is its intention? Another foundation upon which our votes should be based. More than purpose, the intention of government and our representatives is fueled by ideology and personal opinion. And even more than purpose the subject of our political, and societal, unrest when we disagree.

This past week was "Tax Freedom Day." The approximate day in the year where all the work you have been compensated for no longer feeds government through taxes but now can feed you. The day is meant to commemorate that from January 1st to some day in early to mid-April all your earnings to that point have gone to pay your state and federal tax obligations. It is meant to give tax payers, citizens, an idea of how much we actually pay the government. Since most of us have income taxes withheld from our paychecks we can lose sight of how much of our hard earned income we do not receive.

Actually, I need to make a correction. "Most of us" is not accurate as data recently released shows that fifty percent, half, of American households pay no federal income tax. "Most of us" are not paying taxes. Put that in the context of the intention and purpose of government.

On Thursday, April 15th, all income earning Americans must make filings with the Internal Revenue Service and their state tax boards. Our taxes are feeding a Federal government that has is spending over $3.5 Trillion this year, is currently running a $1.4 Trillion deficit, is getting ready to debate a budget that pushes that deficit to over $3 Trillion and is in debt over $12.4 Trillion. In debt over twelve trillion four hundred billion dollars. To what purpose do we have our government? What is the intention of our government?

Is it the purpose of our government to keep us safe from enemies foreign and domestic?

Is it the purpose of our government to establish equal rules and regulations regarding trade and commerce?

Is it the purpose of government to supply and regulate a common currency?

Keep us safe, enable commerce and ability to earn a living to support our families, establish common laws that enable us to live with our liberty and freedoms. Broad, basic purposes.

Is it our intention that our government shall educate us and our children?

Is it our intention that our government shall regulate with great detail commerce and industry?

Is it our intention that our government shall establish laws that make work places safe for the workers?

Is it our intention that our government protect workers from their employers?

Is it our intention to decide whether future life shall occur or not is decided by a mother?

As our intentions evolve with our Republic so do does the purpose of our government. What the government provides the people through the representative government becomes an entitlement and a right that can no longer be taken away. Social security, Medicare, education, abortion, food stamps, day care, are some of the programs and entitlements created, supported and expanded by government over the past century and decades.

Now it appears the purpose of government is to try to ensure that if you purchase a home and can no longer afford the payments you will keep that home through government intervention. The intention of our government is to provide homeowners with less debt and monthly obligations that they agreed to if they so wish or claim financial hardship, but there is no intention for those not claiming hardship, who do not own a home or own a home with no debt. It is the intention of the government to take from those who live within their means to support the housing for those who have not. It is the intention to force banks and lenders to lose billions of dollars with forced modifications to allow some to remain in homes many should not have bought.

It appears the purpose of government is that if you have a company with enough workers who belong to labor unions and the company is failing in part because of labor agreements the government will purchase the company. The intention of the government is to protect jobs that were already protected, to guarantee retirement payments to those whose retirement was already guaranteed by the taxpayers and to make and sell better cars. It is the intention to take billions of dollars of tax revenues from the people and support a company that has been failing for over a decade and will continue to fail.

It appears that the intention of government is to insure, and ensure, everyone within the borders of the Republic, have equal access to healthcare; access that already exists for over 90% of citizens within the borders. It is the intention to of the government to destroy the current health care industries within our Republic and build new industries at the cost of the citizens, or those who pay taxes.

Currently the top 1% of income earners in our country pay 35% of the Federal income taxes in America. Fifty percent of income earners pay 100% of Federal income taxes. What becomes of our intent and purpose as expressed at the ballot when a majority of households are not paying any income taxes? What becomes of our intent and purpose of our government when the top 1% are paying 40%, 45%, 50%, of all Federal taxes and 40%, 35%, 30% of income earners are paying 100% of the taxes?

Is it really our intent to have over fifty percent of our citizens contribute nothing to the Federal Treasury and define our purpose? What results when over half the citizens are living under the rule of a government that is paid for by a shrinking minority? More programs that become entitlements paid for by fewer Americans?

It appears that the intent of the majority in our Federal government, and in Sacramento, and the White House, to increase taxes and revenue from the higher income earners, a definition which declines from $200,000 to $180,000, to $100,000 to $70,000...as more taxes are needed to fund more handouts to those not paying taxes.

It is the intention of our President and his allies in the majority of the Senate and the House of Representatives to redistribute wealth and income from those they deem "rich" to those they deem "in need."

What is the purpose of government? What is the intention of government? The answers to those questions are provided by the people of America when they vote.

Thankfully there are groups of people across the country now asking those questions clearly and loudly. Questions those in power do not like to answer: Who are you? Where did you come from? Why are you here? Where are you going, or if elected where do you want to go? What is your intention? What is your purpose?

We need to ask. Loudly, clearly and consistently.


DCS 04122010

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.

2010: Welcome To The Deficit Decade

On Friday we entered the new year and decade loading the Odyssey with the dog and kids and heading home. Having spent the week at my sister's in the hills of Marin County we ended the decade refreshed and relaxed, ready to head south and get ready for the routine of school, work, community service and recreation.


Not atypical for our annual sojourn, our journey home began under thick clouds and occasional showers as we wound through the green hills of Marin and the East Bay before connecting with the great Interstate 5 near Tracy and heading through the crops, orchards and ranches that feed California and beyond. Our ride into the new decade was bumpier than the year before due to lack of adequate road maintenance. Along the way we saw the familiar signs posted on the side of trailers and billboards put up by the farmers "Water is Food" "No Water, No Jobs = No Future" and "I Don't Water, You Don't Eat."


Very noticeable was the increase in CHP activity, leading Leslie to comment "the state needs the revenue." Also noticeable was the relative lack of traffic, the advantage of travelling on New Year's Day that falls on a Friday keeping most home at least one more day.


As we drove through the heart of the nation's state with the most population, the highest GDP, the most retail spending, the most international trade, the highest unemployment and biggest state deficit, I pondered, "What is the biggest issue we face in this decade?"


As I hit a small hole in the road driving past yet another closed state operated Rest Area (Next One Also Closed. And the One After That. And The Next One.) I knew it was money. Money, it is said, is the root of all evil; certainly true in political evil and most generally for the population at large as well. As we start the Twenty-Tens public money will be the root of future evil, and also our largest problem as a state and nation. Public finance will be central to the 2010 elections, and the 2012, 2014, 2016 and 2018 elections as well as our state and national budget problems are not going away very soon.


The State of California enters the new decade with a budget deficit of over $20 Billion and growing. As employment continues to shrink, foreclosures continue to grow and the economy continues to decline, future revenues look to continue to drop. Faced with this our Legislature's majority continues to complain about lack of revenue and rather than looking for even more cuts from the budget they bloated in the last decade with a 100% increase in spending, they continue to look for more taxes they can levy on an increasingly disgruntled populace.


Similarly the United States Treasury enters the decade awash in red ink, well over One Trillion Dollars and counting. With major health care reform measures passed in the House and Senate that add several trillion more to future budgets, and therefore deficits, law makers in the majority in both houses and the White House appear prepared to ignore the laws of economics, and politics, and widen deficit even further. Like their counterparts in Sacramento, the elected majority in Washington is looking who and how much to tax to pay for their spending.


When just the "rich" are being taxed the majority of Americans are fine with the proposition. They got theirs, they should share more of it. When the definition of "rich" starts to creep further down the income scale that is when political calculations and slogans begin to fall apart. Slowly the tax creep down the income scale overcomes the political rhetoric and one day a couple looks at their finances and realizes how much more it costs to register their car, how much less is in their paychecks due to higher withholdings, how much more it costs to buy gas, and shoes, and backpacks for their kids. Reading the news they know that inflation has been mostly absent from the economy, and their receipts show this. They also show higher sales taxes.


Entering a decade with huge deficits presents not only economic and budgetary problems for government, but also political and ideological challenges for the electorate. An electorate that has just made it through a whip-lash decade that began with a recession and then a lengthy and steady period of economic growth followed by an economic crash, is a bit shell shocked. Most Americans learned many lessons about consumption, spending, budgeting and saving. As they apply those lessons to their home economics they pick up the paper and learn that the lessons they learned from the last few years of the previous decade have been completely lost on those they voted into office. While we learned to not buy the shoes just because they are on sale our politicians are passing another multi-billion dollar bond measure we will have to pay interest on, or another multi-hundred dollar spending bill that pays for intersections in some backwater Midwest town among other items.


While asking us to pay more taxes our elected officials in Sacramento and Washington continue to spend more of the taxes we are already paying. With no plan to stop the deficits from growing there certainly can be no plan to wipe out the deficits entirely, or at least bring them down to an acceptable percentage of Gross Domestic Product.


And this will be the issue of our nascent decade: Government Deficits. How to pay for them? How to shrink them? How to prevent them?


Politically the question in California becomes when will the electorate change its voting habits and patterns to ensure these questions will be answered by our Legislature. Will the voters determine this issue of budget deficits is significant enough when it comes time to vote for Governor? When it is time to re-elect their current members of Assembly or Senate? Is there any chance the electorate will wake up to its collective responsibility and realize the size of government in Sacramento is way too large, spends way too much and is way to complacent in giving tax money to the public employees that control most elections? At what point does the California voter realize his/her vote has consequences and repercussions and we are living those today from votes s/he made over the past decade?


Our state is on the verge of bankruptcy. Our nation is heading to financial insolvency based on the current deficits and spending bills passed or in the legislative pipeline. The amounts of money and percentages of the overall economy tied up in debt and debt service is staggering. Like the economy as a whole that became over leveraged on a real estate pricing bubble, our state and national debt has become over leveraged on tax revenue bubbles that grew tremendously in the previous decade. What happens when that bubble pops? It is already leaking air, and we are seeing the initial reactions of our elected officials: pump in more air in the form of taxing more.


The Deficit Decade is upon us. With the public at large already showing signs of reducing spending on consumer goods, paying down their debt and increasing their savings, how long before their personal changes in habits will trickle into the ballot box?


Happy New Year.

Creating Unemployment: Squeezing America's Economic Engine

I don't think our company, Stratis Financial, is much different than many companies in America. A few guys were dissatisfied with their existing employer, had no stake in the company or its future, a few issues came to a head soon everyone was looking to go somewhere else. Meeting to talk about our woes, one person says, "I'm looking into just renting a small space and going it alone." Pretty soon we were engaged in what would be needed to start a company where we all had a stake. A few months later we opened with leases for space and furniture. We financed computers, and took out equity loans on our homes to capitalize. We made personal guarantees on our financial agreements and also with our vendors. We were personally risking our personal savings, equity and credit because we believed in our vision and each other.

Finally ready and opening our doors in two locations we had four people on payroll that had to be paid on the 15th and 31st of every month. We went four months before any of us took any commissions for ourselves, continually returning our earnings from our sales back into the company. Our wives supported our vision and made sacrifices at home. We struggled but we slowly continued to grow.

We had a boom period that we used to pay debt down and off, update and upgrade equipment and technology, invest in our company. This was followed by a slow leak and then a complete bust. But we knew the drill, we tightened our belts, re-arranged some schedules and worked hard to ensure minimal impact on our staff and their families. We again used equity lines to capitalize the company and ensure operating funds. We struggled, but we kept our doors open and our staff kept their jobs. With the slow business we would have been justified in restructuring, laying people off, closing an office, consolidating. But we love the people we work with, the have pictures or our children mixed with pictures of their own. We are a family, we look out for each other. We struggle, we try to minimize their struggle.

Now we are growing again, because we struggled and stayed open we are attracting people who want to work with us instead of their current companies--if they are still open. But we are not rushing into growth. We are slow and steady and making sure everyone fits. Our over riding motto in bringing people into our company is "would you have them over to Sunday dinner?" It's not just about how many sales you can do, how fast you can do the work, it is about how well you do your sales and how well you do your work. Does the client come first and right on top of that quality? We are open because we adhere to our core values and principals. Better someone not get a loan they cannot afford than we get a closed deal and a commission. We are still open because it works.

We are using the growth of this year to reinvest in our company, retain earnings so we can be prepared for the challenges that continue to hit our business and industry and be prepared for 2010 and beyond. We are a small business, we need to be ready for what is coming next that could slow down our sales volume through regulations, policies and politics. We need to ensure that our business model allows our people to still have jobs and we are still able to help our clients attain and retain homeownership.

We are a small business but not unlike millions of other small businesses throughout the United States. The statistics vary but companies that employ less than 100 people account for approximately 35-40% of the jobs in this country. In the current economy the number of small businesses and self-employed individuals starting companies is actually growing. Out of work and tired of using their creative talents and skills for someone else the inner-entrepreneur and American spirit of adventure leads them to give it a go. They are risking their personal finances and credit to provide jobs for others so they can achieve their visions. They are bringing sack lunches to work and hurting other small businesses--restaurants--by cutting back on their nights outs so they can ensure they can make payroll in five days. Most of them are family run and employees are like family. Benefits like insurance and retirement are provided and shared contributions are made. Labor laws are followed and concessions made because of the personal nature between ownership and labor. Sometimes it is a struggle, but everyone works together to ensure doors stay open, customers are taken care of and everyone can pay their bills. In times of crisis personal loans are made.

They are the backbone and the economic engine for America and its economy.

Under the Pelosi health care plan recently passed by a bare minimum of votes most of these small American businesses are now categorized at "big business" with the definition being total payroll. If a business has a payroll of $500,000 or more it is considered "big business" and under the legislation fully responsible for health care insurance for their employees. It doesn't take much for a company to reach $500,000 in payroll, look at the family owned restaurant with an executive chef, a couple of dishwashers and busboys, some wait staff, personell upfront, perhaps employing fifteen to twenty people; simple math puts the average salary at just over $2000 per month. Consider the small manufacturer specializing in auto upholstery with fifteen employees and specialists in pattern making, sales people, shop manager, how hard is it to get to $500,000 in total payroll? Add 10-15% to the costs of the employer and what has to happen? maybe now we have 14 employees, or 13.

Under the constant push to pay for programs President Obama and Democrats seem to have set the income limit for "America's wealthiest" at $250,000 per year, frequently the verbage is $250,000 for a married couple. Consider the small business owners who have their ups and downs, on the up years they pay down and pay off debt incurred in the down years to keep their business open, continue payrolls, sacrificing to ensure those dependent on them are safe. In the up years profits are plowed into the debt and savings to repay and reload. While our family has not experienced this sort of income, it would be nice to be able to and know that our sacrifice and hard work to get to this income level is not instantly penalized so that we can support wasteful spending in Washington. Support another TARP or stimulus package. Many people see that income level and think of CEOs and attorneys and doctors and other "rich people." In reality a couple that has an upper level government employee and a tenured teacher with several years and creditials reach that mark as well. But it is the small business person who pays the taxes at the expense of their business.

More taxes for small business means less reinvestment in their business. Higher fees and costs means less money available for raises or bonuses. Higher costs imposed on small businesses means someone is probably losing a job. Small business owners have it all on the line, personal guarantees on leases, their monthly income directly tied to company profitability, payroll that at times comes out of their own pockets. Like a mom who feeds her child first and herself second, America's small business owners pay their dedicated and loyal employees first and themselves second. At some point however if it is between their child's education account or a receptionist, we are going to have to answer the phone ourselves.

Sadly I do not find it ironic but rather normal that in front of the cameras Congressional leadership and the White House are talking about jobs, jobs, jobs and trying to spin and rationalize the abomination of waste that is becoming evident from the stimulus package. Telling America they are working to create and save jobs while unemployment rises and they push more and more debt onto the balance sheet. Inside away from the microphones they are voting for more taxes on the very people that create and save jobs. Inside conference rooms they plan how to increase taxes on those who write payroll checks and decide to lay off or hire depending on their business revenue and cash flow.

History has proven time and again and in economies across the world that lower taxes on business leads to higher employment. Ronald Reagan's tax cuts from Jimmy Carter's oppressive marginal tax rates led to a massive economic recovery and slashing of unemployment. George W. Bush's tax cuts led to record tax revenue for the Treasury and over 95% of Americans being employed. Give American business, especially small business, more cash flow and they will reinvest it in their companies and more people will be employed. Take away cash flow, take more of the revenue and people will lose jobs.

With one year left until the 2010 midterm elections watch how the incumbents and party in the majority spin the discussion on jobs. They will rail against the "rich" and how we need more for the "common worker" and defend taxing employers to help workers. In the end increasing taxes on small employers that sign the paychecks for 40% of Americans means fewer paychecks.

Somewhere today a few guys will get together to talk about opening their own company. They will commit to leases and pulling together funds to put together some operating capital. They will hire some workers. They will make a huge leap and take a risk to start a small business. Let's hope they succeed....despite the intentions of their elected leaders.


For a look at small businesses cropping up in Long Beach, particularly Bixby Knolls check out the article Leslie had in this week's Uptown Gazette "Women Dominate Uptown Business Scene"

Charitas Dictator: My Solutions to CA Financial Crisis

Even San Francisco rejected them. By a landslide the voters of California told its government, "We do not want more taxes. We do not want you raiding one account to pay others. We do not want to extend your ability to spend our money with impunity." So now what? What will our dysfunctional state government do to change its culture of spending on salaries and expanding government?

Were I placed in the role of Charitas Dictator of California I would enact the following decrees as solutions to California's budget difficulties today and fix them for future years. Someone has to stick their neck out, goodness knows our Legislature will not as evidence by their continuous use of Propositions to do their jobs.

Make it harder to get Propositions on the ballot. Too often our state Legislature shirks their responsibility in making difficult decisions by putting propositions on the ballot and letting the voters decide. The Propositions that were on the ballot on Tuesday never should have been sent to the voters. Not only did voters say "No" to tax increases and more spending, they also said "No" to the Legislature when asked to do their job. Restrict the Legislature from placing any propositions on the ballot, increase the number of signatures required for the people to place an initiative on the ballot from 5% of the turnout from previous gubernatorial election to 10%.

Eliminate term limits. Combined with the changes in the redistricting process that become effective in 2012, we should eliminate term limits for members of the Assembly and Senate. The revolving doors in Sacramento create revolving doors in elected offices throughout the state creating instability and politicians spending more time collecting donations and working for election to the next level than paying attention to their current jobs and constituents. Elections are term limits, do not limit how many an individual may win.

Spending cap mandates on the State budget. Regardless of revenue the growth of the state budget should be capped at a formula of population growth and inflation. If revenues exceed spending funds should be divided between paying down debt, funding reserve accounts, returning funds to counties and cities and returning taxes to tax payers in the form of rebates. Increased revenues over a prolonged period should not enrich those who work for the state, but rather should be returned to those who provided the excess revenue.

Budgets are made on revenues received not forecast. In conjunction with the previous item, lawmakers will not longer use budget projections to create budgets. Too often the projections are wrong, or are misleading, to allow higher spending and balancing the budget for signature only to see revisions later in the fiscal year. All budgets going forward would be based upon prior fiscal year revenues--you can't spend what you did not collect. The current budget crisis is worsening because of the spending built into the budget and a complete failure to accurately predict revenues for the current fiscal year. I realize this proposal has a one year lag time; we are already spending fiscal year 2008-09 revenue leaving none for FY 2009-10. Therefore a special bond would be floated to provide revenue for the first fiscal year of the new budgeting process. Every budget for the next fifteen years would first carve out funds to pay down the bond from revenue collect the prior year before any other spending items are placed in the budget.

Negotiate with public employees: a lot of job losses or fewer job losses. California has 235,000 employees, does anyone really feel everyone of those jobs is necessary? As charitas dictator I approach each of the public employee unions and offer them option A or option B, their choice: Option A is the elimination of 15% of the jobs represented by that collective bargaining unit. Option B is the elimination of 10% of the jobs and those who remain will have new contracts reducing benefits and limiting salary increases to be the same formula used to allow for increases in the budget. Benefits would change such that all employees would contribute on par with those contributions in the private sector to retirement accounts: the state will match 50% of your personal contributions up to a maximum amount that equals the limits imposed on private sector employees. Medical benefits would be paid based on the MediCal rates of coverage; our state is already insuring and paying for the medical benefits of millions of Californians, if this insurance is good enough for them it should be good enough for the 200,000 plus public employees. If an employee wants private insurance they will be credited the amount of the insurance premium payments equivalent to the MediCal premiums. These reforms are enacted for all state employees, not just those who are union members, but anyone who receives a check from the State of California.

No more state resources used to collect political donations. The state will not longer allow payroll deductions to collect donations made to the political units of the employee unions. The state will not pay for the accounting, collection and distribution of funds used to elect individuals to public office. Public employee unions must collect their political donations directly from the individual union members not from the state through their paychecks.

Reform MediCal so it is equal through the state. There is so much institutional dysfunction in the MediCal system that wastes so many millions of dollars that it is hard to know where to begin; so let's over simplify the program. First, all hospitals will receive the same reimbursement for the same treatments, no more tiered payouts depending on where the hospital is located or whether the hospital is contracted with MediCal--the same for payments to doctors and other health care providers. If it is mandatory that anyone walking into any hospital be treated then it should be required for the state to reimburse all health providers equally. This alone will eliminate the need for a huge amount of staff that is currently utilised to review and deny claims, process appeals, approve claims, cut the reimbursement, all on a patient by patient basis. If a hospital or health care provider is found to have engaged in fraud then immediately begin fraud prosecutions, and put in place a leadership team to ensure the hospital stays open. This single pay provision will also save hospitals and health care providers up and down the state hundreds of millions of dollars in personnel costs used for accounting the current complex MediCal system of payments. It will benefit patients in that they will not have to be transferred from non-contracted to contracted hospitals and no matter what hospital they go to in the state they can expect the same level of care.

Reform the education system. Eliminate the mandates for programs that create a one fits all mentality. Cut the State Department of Education in half and push the savings down to the local school districts. Allow the school districts to have more control over their budgets and how they wish to spend their revenues. Using standardized tests, if districts fall behind take over the district and slowly re-integrate local control; such as occurred with Compton Unified School District in recent years. Put more control closer to the parents through their local school boards and Superintendents. With increasing power in Sacramento we have decreasing opportunities and programs for our children, we need to reverse that trend.


Encourage department managers to succeed and reward success. Too much money is added to our budgets to maintain prior years' funding, whether the funds are needed or not. Reward department managers who are able to show year after year after year savings with financial incentives. Allow managers to present five year plans for projects and place into their budgets funds to save for future expenditures for capital improvements. Allow managers of our public funds to operate as their counterparts are allowed to operate in the private sector, plan for success and reward success. Our current system does not bring accountability into the management of public funds nor does it allow for long term planning; managers are operating on a year to year basis without encouragement to be innovative or creative in product delivery. Changing the culture will encourage more entrepreneurial management and will attract individuals who thrive in such an environment.

Cut taxes. Roll back the sales tax by 2.5% across the board. Roll back auto registration fees by 10%. Cut the income tax rates by 1.5% for every level and raise the income levels for each tier so they more closely match those at the Federal level. You cannot tax your way out of a recession. Study, after study, after study shows that raising taxes cuts revenue, lowering taxes raises revenue. Look at the states that have done well during our recession and you will see states that are attracting businesses and jobs because of their low tax rates. Even during the economic growth from 2002 through 2007 California's business community grew slower than most states. Taxes are killing job development and growth in this state. We need to attract wealth and investment, we do that by allowing success to accrue to those who succeed.

Drill for oil. Open the coastal oil fields for development and extraction. Follow the leadership of Governor Sarah Palin in Alaska and the deals negotiated with the oil companies to extract oil and natural gas from her state. For the Palin haters ignore who and concentrate on the results, a tremendous spike in revenue for the State of Alaska. California is sitting on hundreds of millions of dollars of revenue that could benefit our state, unfortunately a small minority has been allowed to deny those funds to the people of California. I find it appalling that the Legislature and Governor find it okay to throw a huge tax burden on the families of this state but refuse to extract the millions of dollars of revenue sitting right off our shores.

Sue the Federal government. Require providers of service receiving state funds to document whether the recipients are legal residents of the United States. If they are not then send a bill to Washington D.C. Prisons, hospitals, schools, law enforcement are all expending resources to pay for services provided to illegal aliens allowed into this country by lax federal enforcement of our borders. Take the Feds to court and recoup the billions spent by California tax payers every year as a result of the problems created by Washington's inability, or refusal, to address this problem.

Require and accounting and spending of money from Propositions. We have billions of dollars that have gone unspent because of voter passed initiatives; from stem cell research, to Rob Reiner's cigarette tax, to fixing the Delta to avoid a Katrina type collapse, to countless other propositions passed and funded but not accounted for to see if the projects have been completed or even worked upon. Every proposition that requires bond funds would also have an audit component for review every two years. If within five years at least half the funds have not been spent to accomplish the purpose of the proposition then the funds are returned to the State, the bond is paid off and the project(s) shut down. There is no accountability for any of the funding for the multitude of propositions passed by the voters, seemingly on a whim. Most of the spending propositions benefit a very narrow segment of the population, make them accountable for the funds or they lose all of them.

Keep the two-thirds majority requirement. I would not change the requirement that all budgets and tax increases require a two-third majority vote in the Assembly and Senate. One can imagine the budget problems we would be having if it were not for this rule and if the Democratic majorities in both houses had the ability to pass budgets with a simple majority. Only the hold out of Republicans have lowered the tax increases from initial Democratic proposals and lessened the spending in the proposals. Unfortunately every year the necessary two or three Republicans have eventually jumped over the line and allowed the horrendous budgets of the past decade to pass. Removing the two-thirds obstacle will remove any filter on the budgeting process.

Given the ideological bent of this state and the control the public employees have I am certain that these proposals would probably fail in any general election, which is why I would have to enact them as the Charitas Dictator, or Benevolent Dictator. For our budget problems in this state to be solved in the short and long term we will need someone, or more likely several someones, to have the courage to stand up and loudly proclaim specific solutions to our problems.

California Math: Double Spending = Cutting Funding

After writing my post earlier this week on the inability of school districts to remove bad teachers I began to think of the lack of control our local school districts really have. It seems the closer one is to the student the less control there is in the education and the decisions relating to it. The control and direction of funds is upside in my view. The on-site administrator, the principal, has almost no budget control; the local school superintendent is pushing money into boxes established by the State Department of Education; and the State funding and spending is also dependent on the Federal Department of Education. The person closest to the student has the least say in what programs may be needed at a school and what programs are not needed.

This has evolved because of several factors, primarily because our education system has evolved into one size fits all. This results in mandates and programs that must be implemented for students in rural Turlock as for urban San Francisco. Not trusting school districts to properly care for the children in their own communities, the state mandates how funds are to be spent restricting the maneuverability local school boards and superintendents need to fit their students in their district.

In the background of this is of course the budget, which is actually in the foreground. I am having a very hard time understanding how our State Legislature has passed budgets that have doubled spending from Sacramento in the past ten years, yet my local district is cutting programs that existed ten years ago. How bad is your government when it doubles in size across the state in a decade, but the programs available to your children ten years ago have to be eliminated because of lack of funding from the state? It speaks to the corrupt culture that is so pervasive in our election and budget process that those public employees' organizations who have donated so many millions across the past decade to elect the majority of our legislators have received raises and increased benefits in budget after budget, yet at our local school we are raising money to retain a computer lab instructor.

I will beat this drum again, and again, and probably several more times, the California voter has no idea what he or she is voting for when punching a ballot. Every single summer we go through the same budget crisis and some time in July or August or even September a few Republicans will cross the line and vote for another budget that increases spending in California--but not in the classrooms. Raises will be given to prison guards, state sanitation workers will be given higher retirement benefits and a guaranteed no lay off clause, Assembly aides will be promoted and paid well into six figures, and no voter will bat an eye to vote for the same person in the next election. All of this abetted by first Gray Davis and now Arnold Schwarzenegger.

In Long Beach the district has had to cut the science camp trip for fifth graders, a rite of passage in the culture of the district, as I said our campus is raising $50,000 to retain a full time computer lab teacher, other friends say they are losing Spanish instructors, or physical education (we already lost ours), or what music or art instruction they may have. Program after program is being cut from a budget that is getting less and less funding from Sacramento despite the doubling of the budget in the past ten years.

The new math in California: double spending while cutting funding. And we can expect it to continue because the public employee organizations will poor millions more into the coffers of our elected officials, primarily Democrats--or I should say exclusively--who will pass more budget items favoring the employees over the citizens, favoring their salaries and job security over children's education.

Our system is truly broken and needs to be fixed. For education my proposal is to release the mandated spending from the state and give funds to the districts. Then let the districts determine how best to put the funds into the classroom. Release control of education back to the local community. If a district is failing and it is evident the funds are not being spent in a way that is educating the children of its community then the State can step in with a program to rehabilitate the district. But do not make every district suffer because of the few who may mismanage their funds. We already have classes that tend to teach to the lowest common denominator, let's not have funding on the same principle. If Turlock feels more funding is needed in language arts and less in music let them spend their funds to support this, if Capistrano wants higher math scores and less funding for language arts let them spend their money how that community sees best for its students and its needs.

With the placing of Propositions 1A-F on the ballot the Governor and Legislature have shown the California people they have no clue how broken the system is, what is very scary is they have shown the people they have no clue how to fix the system either. The only way to force it to be fixed is to break it further--and the start to the fix must be returning control of funds for education to the local school boards, to the communities that paid the taxes should go the control on how they are spent. Take control away from the special interests in Sacramento and bring it back to parents and communities.

Do The Math On Taxes

Math Problem #1: Tax burden increase on Californians. Remembering all the rhetoric from Democrats the past several years about “the working family” and “saving/protecting the middle class” and the “working poor”, remembering their rhetoric let’s see how their huge tax bill they passed in Sacramento last week (with a few Republican accomplices) helped these families. There are tax calculators all over the web for you to put in your own numbers, here’s one to save you the Google search. If you take a reasonable middle class family, Mom and Dad both work—let’s say they are both teachers and while not new not yet at the average salary and make $45,000 each for a total of $90,000. They each have a car, let’s say a minivan and a small SUV or crossover worth about $25,000 each for a total of $50,000 and they also have two kids. Under the taxes just passed in Sacramento this family’s tax payments will increase by $1227.

Now let’s say there is a hip young professional with no kids, has his master’s degree and works for the state college system as a senior administrator pulling down $140,000 annually and drives a sporty BMW X5. With no kids and a higher salary the tax burden on this young man will increase $966 per year. Making 55% more money that our married family and with no children to support gives a tax advantage of $261 per year to Californians.

So next time you hear anyone from Sacramento talking about budgets and helping America’s or California’s families ask them if they voted for the tax increases in February 2009—if they are in office and a Democrat they did—and then know they could care less about families and “working people” as they are typically defined.

Math Problem #2: President Obama and the Democrats hit the national campaign trail hot and heavy in 2008 giving speeches about how they were going to also help the middle class and unless you were in the top 5% of income earners in the United States you would not see your taxes go up. This past week Obama began the tax talk and has spoken about increasing the marginal tax rate for America’s highest income earners to help pay down the deficit—including the $2 trillion they just added to the deficit with the Porkies I stimulus plan.

A few weeks ago Obama and Congress announced that they were going to cap the pay of individuals who are employed by firms who received TARP (Troubled Asset Relief Program—the $750 billion bank and Wall Street bailout from October 2008) to $500,000. This was met with widespread applause and happiness from many in America who feel that if the banks have gotten $350 billion of tax payer money—never mind that it was traded for stock—that those in charge should have their income capped at a “reasonable level.” Given that the former head of Merrill Lynch was seeking a $10 million bonus for leading his company into an $11 billion loss and extinction the sentiment is very understandable. But the universe operates on cause and effect and not every plan is perfect.

This plan has a few flaws however and this is where some math will come in. First the caps also apply to commissioned individuals—those on commission get paid based on what they earn for the company. With the new caps after a very successful broker hits his $500,000 limit with say Chase he can/will quit and go to Citi and earn his next $500k taking his clients with him. What will occur is a huge merry-go-round of talented sales people through Wall Street brokerages as they maximize their personal income under the TARP compensation limits. But this is just part of the flaw. Let’s get to the math.

Under the current tax tables individuals earning over $372,950 are in the 35% tax bracket. So capping income at $500,000 caps the marginal tax amount on earnings over $372,950 at $44,500 to use round numbers ($500,000 – 372,950 = 127,050 x 35% = $44,500). Given the numbers on Wall Street I am going to use for my math problem the number that 200 individuals have earnings over $5,000,000 and work(ed) for TARP companies.
If there are 200 individuals with income of $5 million their marginal tax amount is $1,619,500 (rounded up $32.50) per person, or approximately $324 million collectively. With Obama’s compensation caps these individuals will now pay $9 million in marginal taxes in the 35% bracket, a loss of approximately $315 million to the Treasury. Sniffing around the internet my estimates of 200 individuals and $5 million is very conservative and it is likely the compensation cap imposed by Washington on Wall Street will result in a loss of income tax revenue far greater than $315 million. But at least we all feel good about capping what those greedy b**stards make! Right?

California Voters: Please Tax Me! Enrich Yourselves!

My friend John Greet has been very consistent for the past few years commenting on various blogs and websites, and now as a regular contributor to the Long Beach Post, that we as citizens deserve the government we get because that is who we elect. And he is right. Unfortunately, the minority must live with the bad decisions of the majority, as they see them, especially in the State of California.

California has a majority of voters registered as Democrat, and a shrinking minority (around 35%) of registered Republicans. With the exception of the Governor’s office, where the personification of a Rino holds office (Republican In Name Only), Democrats control the State of California from local through Federal offices. They were elected by the people, so they rule the people. Up and down the state we are in financial crisis due to the year after year after year increases in spending: new programs, new mandated spending for all levels, more employees, all have added up to budget deficits for public coffers.

It has become somewhat de rigueur to blame the national economic crisis on the budget problems, and to this I say “Bunk.” Particularly in Sacramento, the state was headed into financial crisis before any whiff of trouble was approaching the credit markets and Wall Street. Why? Because state legislators, enabled by our governor, kept spending more and more and more money. It has been well documented that the past several years when state tax revenue increased 20% our elected officials increased state spending 40%--and that is the fault of the national economy how?

So now the legislator and the governor have reached a compromise to balance California’s budget, they did so by raising taxes on the highest taxed people in the country by $14.4 billion per year—for up to five years. The reports say that there would be $15 billion in cuts—which many would take to mean cuts in spending. This is a ruse, spending by the State of California for the coming fiscal year will not go down $15 billion from the year before, in fact it goes up.

How does this happen? A budget is a projection of revenue and spending. If a department is budgeted to receive and increase in funding from $100 million from the current $90 million it receives now and instead the budget is revised to only increase the department’s budget to $95 million then that department can say, “Our budget was cut $5 million.” Sure, but you are getting $5 million more than you did before so your revenue has increased. This is happening all across the budget negotiations, and the $15 billion in cuts is consisted by almost half of it being no reductions in spending but rather cuts in the projected increases to departments and programs.

Only in Sacramento does it make sense to tax taxes, and that is what is in this budget proposal. If you pay the state $1000 in taxes the state is going to tax that payment, a “surcharge”, of up to 5%. So after you pay your $1000 you can add an additional check for $50. Already the highest income tax in the nation, the state of California will now tax its taxes—genius.

Gas prices too high, the highest in the Continental U.S. with the highest taxes at the pump? So what pay more, the proposal adds $0.12 per gallon. Already the highest sales tax in the country add an additional 1% to all your purchases that are taxed—and look for that list to expand.

So where does this $14 billion go? Well most of it will go to state and public employees since payroll is far and away the biggest item on every budget. And how many public employees are losing their jobs because of this budget? How much is the legislator and top level employees of the state seeing cut in their pay? State employees already enjoy more paid holidays than any other workers—currently 14 days off for paid holidays on top of their vacation and sick days. The proposal has deeply upset the public employees’ unions because it has the audacity to cut two of the paid holidays from their calendars, so now they get one paid day off every month on top of their vacation and sick days.

Looking back on my life I realize that perhaps the biggest mistake I made was not going to work for the State or a public entity when I graduated from college in 1984. I would now be approaching twenty five years of service and at the age of 46 be eligible for a very comfortable retirement package and still young enough to start a second career—most likely as a consultant to the state, counties or cities at higher pay than I received in salary. Because of the give aways over the years to the public employees unions they have incredible job security, you almost have to kill someone to get fired and even then the union would file a grievance, lifetime retirement and benefits and guaranteed pay raises as your union dumps millions of dollars into campaign contributions of the Democrats who control all the purse strings from El Cajon to Mendocino.

California voters will not learn their lessons. In 2010 up and down the ballot a majority will vote merely by looking for (D) next to someone’s name, or the name they are most familiar with after being inundated with flyers, postcards, mailers and phone calls paid for by the unions. You don’t think union money matters in California? Ask Jenny Orepeza why she lost to Laura Richardson for a seat in the United States Congress.

So we will continue to be governed by politicians suckling on the union teets for campaign contributions and looking for their next job when they are termed out. We will see more growth in government, more people subsisting on government hand outs, higher payrolls for government workers, and more taxes for the people of California.

We can stop this cycle. Call, write, email, knock on the door of every Republican legislator in Sacramento and tell them if even one of them votes to pass this proposal, or any proposal with tax increases, you will not give the party one cent, you will not vote or volunteer for any currently elected Republican, you will essentially help crash the party in this state (which looks like it has already happened).

We pay and the politicians get re-elected for more junkets, lunches, dinners and royal treatment from those buying their votes. John Greet is right, we deserve it.