Blaze Books sat down for an in-depth interview in TheBlaze’s New York newsroom this past Tuesday with former Reagan appointee and California-based lawyer and political communications company executive Jim Lacy, author of “Taxifornia,” to discuss the major challenges facing California that threaten to turn the state into one big version of Detroit.
Below is our interview, transcribed from our interview with slight edits for clarity. All links are ours.
Make your elevator pitch for why Blaze readers should pick up this book?
Lacy: Well public employee unions are really transforming government throughout the United States and the negative effects of that are being played out in California right now. So what my book does is very closely examines the political control that the public employee unions—specifically the California Teachers Association (CTA) and Service Employees International Union (SEIU) have accomplished in the state, and it discloses their swamped political spending: spending that is three, four, five-fold more than traditional special interests like Chevron which is just completely dwarfed by their political spending. AT&T, the California Chamber of Commerce, none of them can match the political spending, and as a result of this political spending, the public employee unions really do have a lock on the outcome of political decisions in the state that effect the economy. And this involves a connection between the problems that we’re having with public employee pension obligations, bankruptcies of local government, and taxes being raised to the very highest levels in all categories.
[sharequote align=”center”]The state’s getting ready to explode economically in a negative way[/sharequote]
For two years in a row California has had the highest rate of poverty in the nation according to Obama’s census bureau. The unemployment is still completely out of whack. California has depending upon what survey you read either the first highest, third highest or fifth highest unemployment in the nation. So my theory is that people need to have that information because the information that they are getting right now from the mass media is that California has a surplus and Jerry Brown and the liberal Democrats are doing a great job and the reality is they aren’t – the state’s getting ready to explode economically in a negative way. And so that’s what my book, “Taxifornia,” is about.
Why should non-Californians care about California’s problems?
Lacy: Well we know that the largest municipal bankruptcy in the country was in Detroit right? Well before Detroit what was the largest municipal bankruptcy in the country? It was the city of Stockton, California. Yes again, California leads the nation – it leads the nation in municipal bankruptcies. USA Today says that there are probably ten more cities in California that are ready to go bankrupt. So we have to ask ourselves the question, “Well why?”
A big part of the reason that the municipalities are having these problems is because of public employee pension obligations. And as a result of those, they’re raising taxes. I’ll give you an example. San Jose is the third-largest city in California. It’s also the 10th largest city in the nation. So your question was “Why should the rest of the nation care?” And what I’m gonna tell you is that because of the way that the liberals and the public employees have controlled California politics, this is what’s coming in municipalities all across the nation. It’s just playing out in California first because the liberals have been in control for so long. The city of San Jose just put together its latest city budget, and they have a reform mayor. The budget’s a $1 billion budget. 30% of the budget is dedicated to paying for pension obligations for public employees that have already provided services. If 30% of the budget today is to service debt on past services by public employee union members, what’s it gonna be tomorrow, two years from now, or three years from now? Because people are living longer, and because of the salary obligations of two generous salaries that the politicians have given.
And I’ll give you an example. In the county that I live in, the average pay for a firefighter is $234,000 a year. That firefighter can opt to retire at age 50 or age 55 and depending upon the calculation from anywhere from 50% to 75% or 90% of that salary over time. In the last 10 years San Jose’s obligations to pay for public employee pensions, which by the way are all underfunded (they aren’t paying enough) have quadrupled to $300 million. So if they’re going to go up exponentially, I would say that probably in the next 10 years it’s quite conceivable that San Jose’s public employee pension obligations will constitute the majority focus of government spending.
So what’s happening in California is that the purpose of government is shifting – government is no longer primarily organized to provide police, fire and public safety services. What it’s primarily organized for right now – the direction that it’s going in — is to provide pensions to past employees. And that’s a real problem. And it finds itself in too-high salaries, and too-generous pensions under defined benefit plans. And there’s a whole reason that we have that in the state, and part of what “Taxifornia” does is reveal that.
What has been the public response in those municipalities that have had the biggest fiscal crises and went into bankruptcy?
Lacy: Well the response is to try and reform, but the system won’t let them reform. Now Stockton didn’t go into bankruptcy until the bank re-possessed their city hall. That was what sent them into bankruptcy. But part of the reason that they went into bankruptcy is because they were using funds for absolutely ridiculous economic development purposes, one of which was to build an ice hockey stadium when the city didn’t have an ice hockey team…unbridled spending. You know the response in San Jose has been to say well ok, what we want to do is change our pension system to one where the public employee union members accept more risk, where they pay more into the system, where they’ve got a 401k-type program as opposed to a generous defined benefits plan, and the tension is on whether or not you can go back and change the defined benefit plans and whether or not those rights have vested. And there’s all sorts of litigation on that, and despite the claims of the public employee unions that they care about society and that they want to have a good economy, they’re involved in this thing for very selfish reasons to protect those benefits. And as a result of protecting those benefits there hasn’t been as great an effort to reform.
[sharequote align=”center”]What the politicians do is just tax and tax[/sharequote]
So what San Jose has to do to provide basic services is rely on volunteers and retired police officers to form a new volunteer burglary unit because they had to close down that aspect of police services because there wasn’t money to pay for it. There’s potholes all throughout the state. Sonoma County which is a rich county has 1,500 miles of roads that need to be paved that can’t be paved because they don’t have the money because their paying it to public employee pensions. San Joaquin County which is an important rural county – it’s actually where Stockton is located – has another 1,400 mile of roads that need to be paved. It just goes on and on.
And what the politicians do is just tax and tax. California has the highest state income tax in the nation, the highest state sales tax in the nation, the highest gas tax at the pump – a consumption tax that really hurts poor people, and they’re talking about raising it another 15 cents a gallon so that they can do carbon reduction work. And even in raising all of those funds, the money doesn’t go to where the politicians pledge it’s going to go. Proposition 30 was supposed to go to the kids. It’s not going to the kids. It’s going for welfare, to build more prisons and to high public employee pensions.
So California does have a populist aspect to it – there have been many times when the people have more or less risen up against all odds to try and change things. Proposition 13 in 1978 was an example of that…cut property taxes by 57% against all odds. The recall of Gray Davis in 2003 was an aspect of it. And even last year, the City of Los Angeles, a very Democratic city, voted down a proposal to raise the sales tax because people hopefully are getting to see that the taxes that the politicians are asking them for aren’t helping – that the economy is just getting worse and worse. But it’s a very serious situation in the state and again I just come back to saying the overall purpose of the book – the purpose of the book is to really inform people, and to really just draw a baseline that can be given to the right people on the right side of the issue as part of the public policy debate so that they don’t just have to accept that “California has a surplus, how can you say that?” “Yea it has a surplus but it has 6.1 million people living in poverty, and more, it’s growing.”
The genesis of these problems as you mention in your book is based on two things: demographics and politics. Explain.
Lacy: On the demographics, the state has changed surely. Caucasians are no longer the majority population, it’s Hispanic. The state is about 39% Hispanic and 38% Caucasian, but I’m not so certain that the demographics would matter as much if the Republican Party hadn’t made some serious mistakes with the Hispanic community. And there was a time in California where people – Pete Wilson was running for re-election in 1994 – and he embraced a ballot initiative called Proposition 187 which would limit emergency services for illegal aliens that came into the state. And this started a downward spiral in Republican Party support among the Hispanic community. When Reagan ran for president in 1984 he got almost 47% of the Hispanic vote. By the time Romney ran that was down to like 20 or 22% so that’s been an aspect to it. But it’s a fixable thing in my opinion, it’s just the Republican Party needs to embrace the Hispanics that are already members of the party and do a better job of translating it’s political philosophy – communicating a political philosophy – because public opinion polls show that traditional Hispanic families match just as well if not better Republican core principles than Democrat core principles. So for me, it’s not so much focusing on that, although I have a whole chapter that has a couple pages devoted to that.
[sharequote align=”center”]Since 2000 public employee unions have spent a half billion dollars to influence…campaigns[/sharequote]
What I think is more remarkable about the change in California is the incredible political spending by the public employee unions. Since 2000 public employee unions have spent a half billion dollars in California to influence legislation or political election campaigns. There’s no way that the private sector has been able to keep up with that. In the same period of time the Chamber of Commerce has spent $50 million. Chevron spent $90 million. And Chevron has a lot of reasons to be concerned about who is elected to office and what legislation is passed in the state. It’s just absolutely phenomenal the way that these unions have been able to organize, take their money, and be successful. And they’re basically hoodwinking the electoral process, basically because again and again and again Californians have responded to the argument that the reason for this tax is to “do it for the kids.” The reason for this political outcome is to “do it for the kids.” The reason to support this legislation for more regulation is to “do it for the kids.” And again and again the kids continue to fail, the test scores are in the lowest percentiles – they’re ranked 45th, 44th, 48th in reading, math, science – you name it California’s at the bottom of test scores.
But these public employee unions continue to get in national terms relatively high pay – top level pay for teachers – and they continue to protect these very generous, overly generous defined pension plans that are causing localities to not only reduce services but to increase the taxes. I mean there’s no reason why the guy who runs the maintenance yard at the Bay Area Rapid Transit (BART) District in Oakland, should get paid $271,000 a year with overtime in the year 2012. There’s absolutely no reason and of course now that guy has gotten a raise under the new contract so he will make between 9 and 11% more. That’s more than members of the Supreme Court are paid. So there’s no reason for that other than the fact that the union that that guy represents has bought and paid for the members of the board of directors of the Bay Area Rapid Transit District who are elected officials. There’s absolutely no reason for it – it’s irrational. It defies reason that in Oakland there should be a $100,000 janitor and across the bay you know in the school system also a union member the janitor is getting paid $65,000, when the average pay in California is $52,000 for a family of four. So and this again goes to what you’re saying about the national implications – the national implications are there to observe because when citizens lose control of their government or lose cite of what’s important to be monitoring in government, this is what can happen, and it’s certainly playing itself out in California.
So that begs the question, why is it that enterprises have not been able to compete in terms of their political advocacy with the unions?
Lacy: It’s a combination of factors. One is the weakness of the Republican Party because of the perception that it’s anti-Latino or anti-Hispanic, which started with a Republican governor Pete Wilson. That’s a problem and it’s one that the Democrats and the public employee unions very cleverly exploit and have continued to exploit over time. The largest issue is the fact that the California Teachers Association has been able to raise so much more money to communicate their message, and that they’ve been continuing to be successful with this notion that there’s a higher calling to their political viewpoint than to the political viewpoints of opponents or people that would simply try to advance a different idea.
To show you how they’ve completely spun the argument around, California used to have a modest “enterprise zone” plan, but under the logic of the public employee unions and the liberal Democrats in control, they killed that enterprise zone plan, which was limited to areas where there was economic disparity – so in other words it was intended for largely minority communities represented by high levels of unemployment. It was killed off because the unions said that the corporations were getting special treatment, and that 60% or 80% of the benefit was going to the corporations. Well the corporations are the employers, and so their response was to say that the minimum wage in California, which was recently raised from $7 to $10 in the enterprise zones should really be $15, which of course takes away from all the logic of why you have an enterprise zone. The idea of an enterprise zone is that you loosen the government regulations, you alter the financial structure so that people can actually get employed, and this type of anti-free enterprise reasoning frankly is something that resonates throughout many of the political institutions of the state that are beholden to the California Teachers Association. And one thing I say in the book is that when Jerry Brown put together his last budget there were 3 people with him in the room: one was the Democrat leader of the state assembly, one was the Democrat leader of the state senate and the other was the lobbyist for the California Teachers Association. Those are the four people that came up with California’s last budget. So that’s how ingrained it is. So it’s not to say that someone can’t try to be successful in California. Certainly many Silicon Valley entrepreneurs are being successful, but Donald Trump was not successful in California, and one of the reasons he wasn’t successful was because it took him four years to get an application approved to put a flag pole up on his resort. That’s California today.
Do you see any willingness among the citizens of California to embrace a reform-minded governor a la Scott Walker?
Lacy: That’s what Arnold Schwarzenegger was all about. You have to remember, Arnold Schwarzenegger became governor when the prior governor, a liberal Democrat was recalled, and one of the reasons he was recalled was because he had raised the car tax. There are also some issues involving energy companies and the rising cost of electric utilities which by the way are going through the roof right now in California because they won’t allow carbon, it’s all natural gas. You cut the source and the price goes up. But the idea was that Schwarzenegger would correct these issues, and I discuss in “Taxifornia” Schwarzenegger going up to the Republican convention and saying “I am a Republican. I support Republican values. And I like Milton Friedman, not Karl Marx.” But he didn’t implement any of it. And the reason he didn’t implement it is because he got stung several times by CTA in the process, and he lost courage. He lost heart because in order to bring the fight that the people elected him to do – that he told the people he was going to do – he had to confront the Left. And he was unwilling to confront the Left. That’s a big problem. When your best shot at reforming the state not only fails to reform the state but actually ends up increasing the budget, increasing taxes, it doesn’t help your credibility as a Republican Party. And I hear this frequently even – I have a Facebook page where we promote the book and it’s great – but many of the arguments that come back by the liberals say “What are you talking about? It’s Arnold Schwarzenegger that caused the deficit. Jerry Brown is fixing it.”
I saw an article last year that SEIU had donated to California Republicans. This seemed counterintuitive. Is it a trend that you’ve seen?
Lacy: The new chairman of the Republican Party is a very skilled insider and frankly the party I think was lucky that he would take it on with Republican registration down at 29% which is the lowest it’s been in the history of the party. His name’s Jim Brulte. But he has a reputation as being like Mitch McConnell – a conservative but a Capitol Hill insider willing to deal with the other side to get some good things done. And when he became chairman, the party was I think $800,000 in debt, and the SEIU sent a check for $10,000 to the Republican Party. Which it cashed. The public employee unions might want to react to criticism that they only support liberal Democrats by making some faux contributions along this line. But the reality is is that many of their members are Republicans – again in the county that I live in that happens to be a southern California county, Orange County, the Orange County Firefighters’ Association will tell you that a majority of their members are Republicans, but the unions themselves don’t on a statewide basis respond because the things that they would have to ask a Republican in office to do are counter to their political philosophy.
Why would a Republican who’s elected to office even with the support of CTA vote in favor of a defined benefit plan that’s literally bankrupting the localities – bankrupting the states. It has to be reformed. I know of no Republican elected official currently in the state I’m in contact with them that would support the continuation of defined benefit plans. Yet they say they want to continue defined plans and that they have a right. And that they resist taking the natural form which is to take new employees and make them accept more risk. So it’s sad that the unions don’t reflect even who their own members are, but from a political standpoint they’re highly organized, and they’re absolutely not going to give ground. And that’s the history of it.
Related to CTA, I think our readers would be particularly interested in the fact that there are liberal California Democrats who are against Common Core. Explain how that came to be.
Lacy: Well I read this book by Amanda Ripley who’s no conservative but who’s an award-winning author with TIME Magazine. She wrote a book called “The Smartest Kids in the World: And How They Got That Way.” And she discusses at some length the so-called PISA test which is an international test that had been developed over the years and that was showing that kids in the United States were not as smart as kids in the rest of the world, and that test scores of kids in the United States were falling into the second tier. And so she went in and she did some research and she studied three different countries, and the long and the short of it was that teaching of critical thinking was vastly more useful in getting kids to be able to make progress on their test scores than the current system in the United States, and also getting teachers who are motivated. Part of that book is about having testing that’s standardized and that’s meaningful.
Now I look at Common Core or standardized testing rather as an important taxpayer tool. As an accountability tool. If I’m a taxpayer and I’m making an investment in education, whether my kids are in the system or not, I want to be able to see some return for it because there’s a correlation between good education and crime reduction over a period of time and economic expansion and general commonwealth. So California isn’t measuring up to other states and other localities under the current standardized testing, and in fact California tests the hell out of kids, but the tests aren’t meaningful. You’re still going to get your high school degree whether you pass the test that they give or not. So my view is that from a taxpayer accountability standpoint, looking at how Amanda Ripley looked at the PISA test, out of which Common Core sort of comes, that Common Core can be a very good thing if it means that standardized tests are going to be used and that you can compare them from locality to locality, state to state, and as a result of those standardized tests judge what’s working, what isn’t, where the kids are ranked, and then make adjustments.
And the adjustments might include sending teachers for re-training, or changing teachers around. And it might also include rewarding teachers whose kids do well on standardized tests and re-designating teachers that aren’t doing a good job so that they can get better. So the CTA hates that because that becomes a labor issue. And in Los Angeles the Los Angeles Unified School District has done everything it possibly can to delay implementation of Common Core, because they’re concerned that when Common Core is implemented, it will reveal who the good teachers are and who the bad teachers are. And for them that’s a labor issue because they don’t look at it as an exceptional teacher or a non-exceptional teacher, they look at it as they both get the same pay, they both get the same benefits, because they all pay the same union dues.
So this is where the CTA has had problems and I have to say to conservatives you know I understand the concern about federalization and so on and so forth – I understand the expression of it – but I don’t really think that’s what Common Core is all about. And I haven’t made my book about promoting Common Core. But I certainly favor standardized testing and I think for example a great reform in California and this is supported by Michelle Rhee and Gloria Romero, two Democrats is that somebody ought to be able to pass a test when they get out of high school to get out of high school. Take the test. If they can’t pass it, re-do the year and take it again. And then if you still can’t pass it well then you got a third time to think about what you’re going to do to that kid.
The recent Tom Perkins editorial – what was your take on it, and what was the reaction in the Bay Area and California more generally?
Lacy: The Occupy movement in California has become harassing and threatening, and there’s no question according to the research that the California Teachers’ Association is pumping money into it – there’s absolutely no question. And this is missed by the general news media. But the fact is they are. They’re paying for the signs, they pay for the sandwiches, they’re paying for the coffee, they pay for the tents. They pay for all of that. And it’s gotten so bad in California that Wells Fargo couldn’t even have their annual meeting there last year. They decided to move it to Salt Lake City for the first time – San Francisco used to be a financial capital of the West – they can’t even out of fear for the Occupy movement. There is class warfare going on on this. The Silicon Valley wealth should be embraced by California, and it started to be embraced by the city of San Francisco.
Now they complain about the real estate rates going up in the city of San Francisco and so on and so forth but the reality is is that there’s a lot of poverty and there has been a lot of unemployment, and even the San Francisco Board of Supervisors decided to create some economic development in the mid-market area by giving some tax incentives for Silicon Valley companies to get off of their campuses – remember that criticism that they’re too insular – and come to the urban environment so that they can participate in the city. And Twitter did that. And I think Google has done that. And so now that they’ve been invited the Left has now changed the argument, because the argument used to be that they were separate from us, and they weren’t participating, and now that they’re participating in the city, the argument changes into this income inequality and income disparity, and goes to the Perkins’ comments.
[sharequote align=”center”]If you want to talk…income inequality…get the pay-scales of every public employee in the…(BART)[/sharequote]
And, it’s so ridiculous in several ways. The first thing that’s ridiculous about it is – and I think it’s missed in the debate – if you want to talk about income inequality in California, just get the pay-scales of every public employee in the Bay Area Rapid Transit District (BART). You know in Oakland where the Occupy movement was very strong, the electricians who work for the city went on strike and there’s quotes about “We gotta do this, we need a living wage. We’ve gotta change it, we’re mad as hell.” They were striking over $133,000 average salary that they were already getting. This is in a city that is the third most dangerous city in the country, that Jerry Brown was Mayor of for eight years. Where there’s 4,000 robberies a year out of 400,000 people. You know where the average salary is probably $30,000. You know, so they go on strike, these are Occupy people that would show up that are making $133,000 a year. So if you want to talk about income disparity, let’s talk about the pay-scales for the Bay Area…let’s talk about the fact that there’s 10,000 or 20,000 city employees in the city of San Francisco that make over $100,000 a year. So if you want to talk about income disparity, let’s talk about these public servants. And I think that’s really missing in the debate…so to foist it on entrepreneurs and people that are creating jobs is completely wrong.
I don’t know that California is going to be able to reform itself – I don’t know if the Republican Party is going to be the vehicle, but I know one thing. I know that as these engineers that actually do move to San Francisco and that get involved and see how screwed up things are in the city, what they’re going to do because they’re engineers is they’re going to try to fix things. And if they don’t embrace electing people to public office or getting involved, they’ll just go out and start businesses. There’s this guy that started Leap Transport that’s completely different from Uber and Lyft. Leap Transport is a very simple notion – it’s a notion that the San Francisco municipal bus system is full of crime, it’s unhealthy, they’re dirty buses, they’re always late, and that there’s gotta be a better way to do it. So what this guy did is he went out and bought a couple of these big touring buses — he bought three or four of these things and he brought them to San Francisco and he outfitted them with Wi-Fi and nice leather seats and so on and so forth and he put up a sign that said get in and for $6 I’ll take you anywhere, and he just mimicked the municipal bus system and he’s got a great business. They’re safe. You can track on your iPhone where you’re going. The fare is higher but it’s quicker and it’s on time. And that’s I would think a wonderful private sector initiative to help solve a problem that doesn’t involve getting involved in electoral politics or whatever. Now of course the Board of Supervisors are giving him hell, and I think I just saw…whether it was Google or some company that was pretty much extorted from a PR standpoint to by a whole bunch of free bus passes on the “muni” for economically poor off people, but the people in Silicon Valley that are going into San Francisco should be embraced.
It was a liberal John F. Kennedy that said “a rising tide lifts all boats,” and I think that to just come back to the point, the Left isn’t going to be satisfied with financial success, regardless, whether these people stay insular and they stay on their campuses in Cupertino 35 miles away from San Francisco or actually emerge to come to San Francisco being welcomes for their economics and then to have these confrontations. It’s like you could say they can’t have it both ways, but you know as we sit here they do have it both ways. Because they’re the ones in control. We have to expose it. We have to get the information out. These people have to be looked at as special interests. They need to be seen for the selfish attitudes that they have that are causing high taxes so that these defined benefit plans can be maintained and so that these public employees can continue to have salaries at three, four or five times higher than the average Californian. Eventually the information will break through, and if it can break through to enough people, California can reform itself, but not till the CTA is seen as a special interest.
You talk in the book about energy and the energy capabilities in California. It seems as if their could be a huge energy boom were it not for the hyper-regulatory state on an environmentalist basis and a class-warfare basis. Explain for readers what the energy climate is like, and what potential there is for energy growth out of California.
Lacy: Well the outlook is just awful. I think the statistic is is that oil production has been reduced almost 50% in the last 20 years in a state that has in the Monterrey Shale one of the largest formations of shale for fracking in the country – it actually may be even bigger than the deposits in the Dakotas or Pennsylvania. California has always had immense natural gas and oil, not only in the state but offshore, but because of the unfortunate oil spill in 1969 – and I mean this is even recognized by political science professors with academic works written about California – after the 1969 spill the environmentalists just seized upon the troubled shores of Santa Barbara to really change the political thinking about offshore oil drilling and as a result of it there has been practically no new oil exploration off the coast, and because of the green movement over the last few years and efforts by environmentalists to make California the leader in carbon reduction for the globe, state policymakers have embraced something called AB32, is not a policy that’s carbon neutral but that is dedicated to stamping out carbon not only in the state of California but throughout the globe.
So the idea – the policy of the state is to not exploit our offshore reserves — to only exploit fracking under recently passed legislation which industry didn’t like, and to close down every single carbon burning power plant in the state — there’s only one nuclear plant open in the state. And to basically turn the energy resources, almost 95% over to natural gas. There’s some hydroelectric obviously but the natural gas can’t be California natural gas, because politicians and environmentalists won’t let us exploit that – it’s got to be imported natural gas, even though natural gas is clean, apparently California natural gas isn’t clean. So we have to import it, so what this does is it exports jobs to other states where there is natural gas that we can access, it increases the cost of utilities — utility bills are up anywhere between 30% and 50% — and that’s something by the way that’s happening not only in California but it’s happening in other parts of the nation as well.
So California’s energy industry has really really gone down and the alternatives haven’t worked. You know it wasn’t that many years ago when Jerry Brown was running for governor and he would have this speech that he would give about wind and solar and waves and how that was all going to be able to create energy, but the biggest wind farm that has been built in the state has been closed because environmentalists objected to the deaths of some condors and eagles as a result of being hit by the windmills which was of course entirely predictable. And some of the solar, one of the biggest solar facilities has been closed down because of Indian artifacts being disturbed and some reptiles being disturbed that folks care about.
So you know there’s a real misplaced judgment in the state about energy development that comes from this unfortunate oil spill in 1969 coupled with the high-minded notion of environmentalists that California should become the world’s green policemen, and it may have its place at some point, but at a time of economic distress where you have so much poverty, where you have so much unemployment in the state, it’s completely misplaced. And you know from an environmental standpoint, the restrictions we’ve already got in place have been working. In California the smog in Los Angeles and the Los Angeles Basin – they don’t talk about this enough but in the last 40 years the smog is down something like 95% maybe 99%. And as we move towards more use of electronic vehicle just on the natural as well as federal rules, supplemented by California rules, the smog created by automobiles is going to become near obsolete in the future. So keeping these policies that resist even the smallest amount of risk to the environment are really not harmful. They’re really hurting the economy. In the meantime California continues to uphold regulations that define the smell of baking bread as a pollutant. And a bakery was actually fined millions of dollars in the last few months in Lodi, California for not having proper cleansers on it’s emission of the smell of baking bread.
Many of the regulations don’t have appropriate cost-benefit analyses attached to them. So you’ll go to the extremes and have people who’ll say and will actually get to the elected officials with ideas like banning fireplaces in residential homes. Actually banning them. Trying to close down fireplaces in homes that exist. And then having discussion about “Well, we can’t do that so for new residential developments you actually can’t have a fireplace.” In Santa Barbara you can’t burn wood in fireplaces. What you can do according to local regulation is you can have a light switch put up a weak flame. California can be whacky and many of the environmental laws that we have are not really based on a rational cost-benefit analysis, and because right-thinking people have been so out of power for so long, it’s just gotten worse and worse and worse.
If Reagan were governor today, what would he do, and what do you anticipate will happen in the next decade?
Lacey: Well one of the reasons Reagan didn’t have this problem was because during his governorship the California Teachers’ Association existed, but they didn’t have a so-called “union shop.” In other words they could not mandate union dues from non-members. And right after Reagan left the governor’s office in ’74 and ’75, one of the first bills that Jerry Grown ever signed (which was promoted by CTA) created the union shop that allows the CTA to pull $1,000 a year for politics out of its 325,000 members and its affiliate the California Federation of Teachers can do the same with their 125,000 members. Reagan left office with a huge surplus which was squandered but he didn’t come in to the office of governor as a huge tax cutter. He certainly did when he became president of the United States. What he did was – and I think there was one year where he did actually raise marginal taxes to balance the budget – but I think he put his priority on preserving California’s natural resources, keeping to the requirement in the state that there be a balanced budget without manipulating the budget, and making decisions that took the states’ future in mind.
The Democrats, particularly in 1999 by completely changing pension benefits and adding six additional pension benefits when we had a booming economy weren’t thinking about the future. They were thinking about the now. They were thinking about placating the political lobbies that existed at that particular time. And that’s actually the second peg of how California’s troubles started. California first started with this union shop with CTA in ’75 and then they were compounded when they basically gave the store away to the public employee unions. I think the model though – I think if Reagan had served his governorship and served his presidency and came back to be governor of California, I think the first thing that he would do would be to cut taxes because particularly when the consumption taxes were cut, it would immediately lift tens of thousands if not hundreds of thousands of families in California out of poverty.
The consumption taxes at their highest levels in California are creating poverty. You want to get people out of poverty. The next thing you want to do is you want to take steps to stir job creation. And the way to do that is not to raise the income tax but is to drastically reduce the tax, so that guys like Bill Maher and Tiger Woods and Phil Mickelson actually stay in the state and pay taxes, rather than talking about leaving it. And I think that looking at California’s regulations from a cost-benefit standpoint, and not as again making California into some sort of a global leader when it doesn’t need to be a global leader in reducing greenhouse gas, would be among our most important things to do. I don’t think punishing the CTA by necessarily supporting so-called paycheck protection legislation would be the issue, I don’t think we should use – I don’t think Reagan would want to use laws that would reduce the speech of the CTA, but I think he would use the bully pulpit and say “Look these people are doing it out of their interest, not your interest.”
I don’t see it [things in California] getting better unless there’s a cataclysmic event that causes people to reconsider their current line of thinking. Right now, the majority of the population is somehow convinced that there’s a budget surplus, while there’s almost $500 billion in unfunded liabilities for the two pension plans and cities are going bankrupt and roads are going unpaved and police services are getting fewer and fewer in these municipalities because of these problems, and so I think that there’s probably going to have to be an event. And I actually talk about Arthur Schlesinger’s “cyclical history” – that cyclical history should apply to California, but the pendulum right now is stuck. It doesn’t look like there’s any way that that pendulum is going to move over unless something happens. With Proposition 13 something did happen people because of inflated values of real estate and the way that they assessed property taxes, people were being taxed out of their homes, literally out of their homes, senior citizens. That propelled the pendulum in the other direction. The Gray Davis recall is an example of that. I think something is going to happen and it’s probably a very large or a series of very large municipal bankruptcies where people are just completely left without services, where Wall Street won’t come in and bail out the cities, and related types of issues that might even go to the state public employee pension system.
But I don’t see a lot of good in store for California. I think that it’s only going to get worse. There’s incremental things that can happen, the Republican Party can fight back on the two-thirds majorities in both Houses of the legislator – that’s what Brulte is doing. I would certainly support that, but people need to understand that this problem is here, and it’s why “Taxifornia” and other information is out there. They can change there thinking and connect the dots and say “Well this is what the Democrats are doing and these are all the bad things” what they’re doing here are creating these bad things, then we can start to change. But we weren’t served well for Arnold Schwarzenegger and I think that that has exacerbated the problem, not contributed to solving it.