The next crisis

Unable, or unwilling, to solve the health care crisis, Assembly Democrats have now moved on and want to start working on the "housing crisis." I'm still not sure we have a housing "crisis" or just a housing market downturn, but I am pretty sure that nothing the Assembly is going to do in a special session this year is going to affect it one way or the other. Well, they are probably capable of making it worse. But I don't think they can or will do anything to increase the value of my home, and while I'd love the help, I don't particularly think they should try.

Meanwhile, here is a fun blog by a new California resident who is trying to buy a home and is working her way through the meaning of Prop. 13, Mello-Roos, flood control districts and all the other fun stuff the voters and the Legislature have already done to "help" homebuyers and homeowners. Among other things, the author is not thrilled with all this talk of propping up home prices while she is on the outside looking for a home she and her husband can afford.

The only thing we have to fear is...EVERYTHING!

Wow.

I tuned into the CNN/YouTube Republican presidential debate Wednesday night and was surprised to see so much fear. I thought the GOP was supposed to be the "daddy" party -- all strong and manly. But these guys were quaking in their loafers about any number of threats to our safety and livelihoods. From Islamic terrorism to Chinese manufacturers, European farmers, Mexican laborers and even Canadians (yes, Canadians!), the Republicans seem to think the world is about to take us down. Their solutions vary. Some want to curl up in a little American ball to shield ourselves from attack. Others want to "stay on the offense" with the military to keep the bad guys at bay. Nobody really conveyed a sense of confidence in the future, or in the American people's ability to prosper peacefully in a more competitive world.

Of course, the Democrats are not much better. They deny that the Islamists are a threat but see even bigger monsters in the economic closet and are even more eager than the Republicans to protect us from competition and change.

The sad thing is that these candidates must know that a lot of voters share their insecurities, or they wouldn't try so hard to feed them. But doesn't anybody on the campaign trail speak for dynamism, the creative spirit, innovation, and the potential of individuals to do great things? Doesn't anybody running for president think that Americans can compete -- even thrive -- by participating in, not fleeing, a growing global economy? This is the dawn of the Information Age. The world is changing fast. Yet these folks all sound as if they think it's 1955. The Cold War and the Red scare all over again.

I work in what's commonly thought to be the 21st Century equivalent of the buggy whip industry, yet even I have a far cheerier outlook about the future than any of these guys exhibited last night. It was almost as if they were trying to channel Lou Dobbs, or they were hypnotized by that great CNN fearmonger on their way into the studio.

PS to my Republican friends: I know CNN did a lousy job picking the questions and half of them came from people with links to Democratic candidates and causes. But they didn't pick the answers. The candidates still had their say. And in two hours of yakking, I don't think I heard a single sentence expressing confidence in the ability of individuals to pursue happiness on their own. Isn't that what the Republicans are supposed to be all about?

Cheaper than coal

Here is Google's statement on its plans for a huge investment in technology with the potential to produce renewable energy cheaper than coal.

The seen and the unseen

Why are declining home prices bad news? Not only bad news, but a public "nightmare."

It is great news when the price of energy, food, transportation, health care and consumer electronics drops. But for some reason it is bad news when the price of shelter drops.

That has not always been the case.

A couple of years ago, reports like this one from the California Association of Realtors were considered bad news, because fast-rising home prices were making housing less affordable to the middle class. If I recall, those reports sometimes were the lead story in newspapers across the state under headlines screaming about the terrible consequences of high home prices. A nightmare for homebuyers, even.

So now that housing prices have stopped soaring and in some places are dropping, shouldn't that be good news? Shouldn't we be seeing stories filled with anecdotes about formerly priced-out middle-income families finally getting their chance at the American Dream?

I understand why foreclosures are bad news, and why the impact of losing a house when you can no longer afford to make the payments is a compelling story. But for every house sold because the buyer couldn't make the payments, there is a buyer on the other end of that transaction who got a good deal. And for every foreclosure, there are probably 10 buyers of nearby homes who benefitted from the general easing of house-price pressure.

I'd like to hear some of their stories.

What kind of budget problem?

This post at Calitics says the media are already spinning the next budget crisis as a spending problem, not a revenue problem. The author urges his fellow liberals to man the ramparts to push for a big tax hike to balance the budget rather than settling for a slowdown on spending.

No doubt barrels of ink and millions of pixels will be spilled in the coming year debating that question.

But here is a decent place to start: Total state spending, as a percentage of the state's economy, appears to be at a record level this year and is approaching $10 for every $100 in personal income. It may have exceeded that benchmark, in fact, because the most recent numbers available are from the governor's budget proposal in January, which understated eventual spending and probably overstated the growth in the economy.

As of that writing, general fund spending was expected to total $6.86 per $100 of personal income. This is roughly in the range of where it has been for a generation, meaning that even as the economy has exploded, the size of state government has kept pace. If you want to go back to the dark ages when Pat "The Builder" Brown ran the state, the government then was spending just over 4 bucks in its general fund for every $100 produced by the economy, or about 70 percent less than the state is spending today.

I'm not saying that a case can't be made for more spending on any particular program. I'm just saying that it is far from clear that overall, state government is getting by on the cheap, at least relative to what California taxpayers historically have spent on public services.

Paying their own way

The Economist wonders why the record of self-financed congressional candidates is not better than it is.

Mortgage relief less than advertised?

I am still trying to figure out exactly what the deal that the governor and mortgage lenders announced yesterday actually means. It's being sold as a "freeze" on mortgage rates that are about to reset to higher levels of interest. But I suspect there is less here than meets the eye.

It sounds like the lenders have agreed to be more pro-active in contacting borrowers who might be in distress, while offering them a "streamlined" process for seeking relief. But this is not the kind of across-the-board freeze that FDIC Chairwoman Sheila Bair recommended and which I critiqued here. The process the governor announced Tuesday would still involve a case-by-case evaluation of each borrower, as even Schwarzenegger said.

This strikes me as good business practices on the part of the lenders and a potential benefit to borrowers who truly cannot afford to repay their loans when they jump to a higher interest rate. It's also good PR, for the lenders and the governor. But it's nothing like the sweeping move that Bair recommended.

Here is the Bee's description:

The deal asks lenders to freeze low interest rates for subprime homeowners who reside in their property, are current in their payments and show they cannot afford a scheduled rate increase. Those homeowners who already have missed payments and who are threatened with foreclosure don't appear to benefit from Tuesday's agreement.

"To lose your home, as probably everyone knows, through a foreclosure is an emotional crash, and it sometimes takes years to recuperate from," Schwarzenegger said. "But we don't have to sit idly by to watch the American dream become the American nightmare."

Lenders could freeze rates for five years or longer, but terms will depend upon each borrower's situation, Schwarzenegger said.

Under the arrangement, the four lenders agree to contact borrowers before their rates adjust and establish a streamlined process for handling loan modifications. They also will provide data on the loans they service so the state can track their changes.

Cavala on Walters on Boyarsky on Unruh

Dan Walters doesn't like the history in Bill Boyarsky's bio of Jesse Unruh. And Bill Cavala doesn't like the history in Dan Walters' column on the book.

Friends of the River on a water deal

Here is a nice exposition of the enviro viewpoint on the water storage issue from the Friends of the River (via Steve Maviglio). On above-ground storage, they almost seem to be in sync with Tom McClintock's view on the subject: it's ok, but let the users pay for it. I'm sure they would go their separate ways on the environmental issues raised by any storage project, but on the financing, they are in agreement.

Sorry, Mr. Speaker

Steve Maviglio updates his top 10-rankings of the Democrats with a chance to be the next governor. He puts his boss 8th.

Costa on redistricting

Here is Ted Costa's take on the various redistricting reform proposals that are floating around, including his own. I don't think it's worth attracting opposition from both parties in Congress by including them at this point. That will simply doom the thing one more time. But I think the rest of his arguments make a good deal of sense.

A one-woman survey

Sara Nichols says Clinton is doomed in California, at least according to Sara's best political prognosticator -- her mother.

Perata a 'no' on 92

Senate Leader Don Perata opposes Prop. 92, the community college initiative that would cut fees while increasing spending -- ballot box budgeting at its worst.

The autism epidemic

Maggie Mahar offers some words of caution about the "autism epidemic." And she doesn't even get into the implications for government programs focused on the condition. Those implications are enormous.

Feeling lucky?

Liz Hill said all the right things -- the state is out of easy solutions, it's time to really fix this problem. But don't count on it. There is no way that the Republicans in this Legislature are going to raise taxes, and it is almost as unlikely that these Democrats would accept real, ongoing spending reductions of the kind it would take to solve the problem. They are not even likely to split the difference.

Which is why I see a big lottery deal looming in the state's future. The bankers have opined that the state could bring in somewhere between $14 billion and $37 billion by leasing the lottery to a private operator. Hill cautioned against it, but it still seems like the most likely scenario. It would allow both parties to wiggle out of this without doing what they don't want to do. So if that's the most probable path of least resistance, it is probably time to start thinking about how they might do it in the "least irresponsible way" possible.

Interestingly, Hill's report shows that the biggest problem is in the short term, over the next two years, when the state will be around $18 billion short of what it needs to fund all services at their current levels, plus population growth. The problem is about $10 billion next year and $8 billion the year after. Beyond that, once the deficit bonds are repaid, the problem shrinks to about $3 billion a year. And on a $120 billion to $130 billion general fund budget, that's really not that big a deal. You are talking less than 3 percent.

So if Schwarzenegger is going to propose using the lottery, he should not repeat the mistake he made at the beginning of his first term as governor, when he proposed and agreed to a big deficit bond without a binding plan to close the deficit. He got the borrowing but not the long-term solution.

This time, they could use the lottery for the big short-term problem, and at the same time adopt a three-year or four-year plan that would, at long last, permanently (as best as anything is ever permanent) close the gap. They would need to adopt about $3 billion (or maybe $4 billion or so just to be safe) in ongoing solutions that would be phased in over three years so that once the lottery money covered the short-term problem, the permanent fixes would solve the long-term problem.

There's talk around the Capitol that the CTA is not wild about re-tooling the lottery. But there are two reasons why I think the union's opposition will fade. First of all, Liz's numbers show that even if the state fully funds Prop. 98 next year, the education budget will be almost $2 billion short of what the schools need to pay for a cost of living increase and enrollment growth (with all of that growth coming in the community colleges). CTA needs a find a way to get more than the state "owes" the schools, to use the union's favorite choice of words. The lottery would be the easiest way to do that.

Second, the state's needs for budget-balancing are on the low-end of the projections for what the lottery lease might bring in. The school lobby has been trying to find a way to get more money for the longer term. Suppose they were promised a share, a big share, of any lottery revenues in excess of the $18 billion or so the state needs over the next two years. I think they might begin to like the idea a lot more than they do now.

Then again, maybe I'm wrong about this. Maybe the governor will propose a package of tax hikes and spending cuts that will solve the problem without the lottery gimmick, and both parties will rush to pass it with a two-thirds majority.

Right.

LAO: big deficit looming

Liz Hill's report is here. The headlines will all be about a projected $8 billion operating shortfall in the coming year. But note that one year out from that, she says the gap should shrink to $3 billion. If she's right, that would be an opportunity for budget writers to take a bunch of painful short-term measures that could be phased out over three years as the budget comes back into balance -- exactly what they should have done four years ago.

Latest fiscal numbers

Here is the latest monthly report from the Finance Department. Revenues are down again, $324 million for October alone and $1.1 billion for the fiscal year. Much of the softness is in sales tax, reflecting slower growth in retail sales than the administration projected at the time the budget was adopted. On the bright side, withholding from paychecks, a good measure of current economic activity, was just about what had been projected.

In a few minutes Liz Hill will deliver her five-year economic and fiscal forecast, which is likely to be something of a downer.

CLCV rates the Capitol

Schwarzenegger scored 63 percent this year on the California League of Conservation Voters annual ratings of the Legislature and the governor -- his highest marks ever, according to the environmental group. You read the whole thing here.

Letting the boom go bust

Here is my column from Sunday on why it would be a mistake, if it is even possible, to unilaterally freeze subprime adjustable rate loans at their current rates. And here is a related story from San Diego on one big reason why: foreclosures are making homes (and rents) affordable again for people at the margin who did not overreach and take out loans they could not afford.

Health Not?

Here is a potentially explosive story from the LA Times about HealthNet paying bonuses to its employees based on how many sick people they manage to drop from the company's rolls.

The bonuses came to light in a lawsuit filed by a woman whose insurance was cancelled while she was in chemotherapy for breast cancer:

Health Net contended that Bates failed to disclose a heart problem and shaved about 35 pounds off her weight on her application. Had it known her true weight or that she had been screened for a heart condition related to her use of the diet drug combination known as fen-phen, it would not have covered her in the first place, the company said.

The alleged misstatements, of course, had nothing to do with breast cancer. If she had lied about having had cancer and then socked the company with a big bill, there might be some logic, even if unfortunate, to the firm's behavior. But in this case the company was simply trying to cut its costs any way it could and looking for excuses to drop the woman after she became a burden to its bottom line.

This kind of stuff seems to be the inevitable road down which the industry is moving. If not recissions after-the-fact, companies are getting better and better at minimizing their risk in the individual insurance market by denying people coverage in the first place.

And that's why both the governor and the Democrats in the Legislature favor guaranteed issue, which would require insurers to issue policies without regard to pre-existing conditions. Whether that passes or not, the state is clearly going to need some kind of improved, easily accessible high-risk pool for people who cannot buy insurance the way the market is currently structured.

California v. USEPA

On behalf of Schwarzenegger et al, Jerry Brown has filed the long-awaited lawsuit against the feds for failing to act on the state's request for a waiver so it can regulate auto emissions for greenhouse gas content. You can read the whole lawsuit here.

Kent McManigal?

This web site has a quiz you can take on the issues to help you decide which candidate for president is best for you. I took the liberty of answering the questions the way I thought Schwarzenegger would, based on his history, and his record as governor. Here were the top 10 candidates it spit back with their compatability rankings:

1. Theoretical Ideal Candidate (100%)
2. Christopher Dodd (71%)
3. John Edwards (70%)
4. Al Gore (not announced)
5. Hillary Clinton (68%)
6. Barack Obama (65%)
7. Wesley Clark (not running, endorsed Clinton) (63%)
8. Rudolph Giuliani (62%)
9. Bill Richardson (60%)
10. John McCain (60%)

Then again, it said my ideal candidate would be this guy:

The cities' machine

Jon Fleischman compares the League of California Cities' political machine to the legendary Chicago Mayor, Richard Daley. That might be going a bit too far. But I too have always been skeptical of the way city officials have managed to create a political operation to support and oppose ballot measures with very little scrutiny. Fleischman links to a league memo instructing mayors to get city employees to gather signature for their ballot measure on eminent domain, which is meant to head off a more comprehensive measure proposed by private property advocates.

Local finance measure round-up

Michael Coleman reports in with his usual round-up of local government tax and finance measures on the ballot this week. He says it looks like 63 percent of the measures passed, including 7 of 9 school bond measures.

As certain as death and taxes

Ward Connerly on the spiraling cost of higher education.

Brown sues over denial of workers' comp coverage

Jerry Brown is suing an employment consulting firm for what sounds like a real ugly scam that deprived construction workers of workers' comp coverage.

Money to burn

I wish I had Steve Poizner's money. If I did, I bet I could find something better to spent $1.5 mil of it on than trying to kill Prop. 93, the legislative leaders' attempt to change term limits in California.

I know I'm supposed to be real agitated that the proposal would allow assembly members to serve 12 years rather than six, and senators to serve 12 years rather than 8, and it even applies to lawmakers already serving. But to me it's a big yawn. I don't think it makes much of a difference either way. Once this crew washes out, the new members will serve a maximum of 12 years rather than the current 14, and they can serve it all in one house or the other. Is that going to change the world? I doubt it.

I was here before term limits, and I've seen them in play. They've done some good but they've also done some bad, especially by making legislators into job-hoppers from their first day in the building. Maybe splitting the difference between the old system and the current system will be a small improvement, or a small setback. Is it really worth spending $1.5 million, or more, to defeat?

'They treated her like an animal'

Here's an incredibly compelling anecdote for Michael Moore's next film on the evils of private health care. Oh, wait. This happened in a county hospital:

LOS ANGELES -- The family of a woman who died earlier this year after writhing on the floor of an emergency room lobby as employees ignored her has filed a $45 million lawsuit accusing the county of a "catastrophic failure."

The lawsuit filed Monday in Superior Court claims negligence, medical malpractice and wrongful death on the part of Los Angeles County, county police and some of the staff at Martin Luther King Jr.-Harbor Hospital.

Edith Isabel Rodriguez died May 9 of a perforated bowel after suffering in pain on the floor of the emergency room lobby for 45 minutes. She was discharged and sat on a bench outside the facility, yelling in pain.

County officers called there took the woman back inside and tried to get a nurse to help. Officers then found that Rodriguez was wanted for a parole violation. She was arrested but became unresponsive as the officers took her in a wheelchair to a patrol car. She died in the emergency room.

The coroner's office ruled her death accidental.

The lawsuit claims Rodriguez's treatment "fell below the standard of care in the community."

The $45 million in damages represents $1 million for each "agonizing minute . . . she suffered and was deprived of health care," according to the complaint.

"She was a human being, and they treated her like an animal," said Franklin Casco Jr., an Irvine attorney who is representing Rodriguez's three adult children, Edmundo, Christina and Kimberly Rodriguez, all of Bakersfield. "She could have been saved," he said.

Details on the individual mandate

The summary released this afternoon of the Democratic proposal says the individual mandate they support would be enforced by an education campaign and the automatic enrollment of uninsured people into the state pool, presumably when they show up for care without insurance. But this is tantamount to no mandate at all. There are big questions about whether a small penalty of the kind proposed by the governor would be enough to make a mandate meaningful, but no penalty at all means it is not a mandate. If it is coupled with guaranteed issue of insurance without regard to pre-existing conditions, there would be a huge incentive for healthy people to not buy insurance until they needed care, at which time they would be signed up automatically. This is a loophole that's probably a fatal blow to the entire concept of an individual mandate. Why go through all the hoops of assuring "affordability" and even allowing exemptions when there is no penalty for not complying anyway?

UPDATE: Steve Maviglio from the speaker's office says the only difference between their plan and the governor's plan on the enforcement is that in the governor's plan, the Secretary for Health and Human Services decides on the enforcement mechanism while in the Democratic plan that responsibility falls to the Major Risk Medical Insurance Board.

"There will be penalties," he says. "It's just who decides."

Details of Dem plan

AP has a story on the terms of the Democrats proposed health care deal with the governor:

--An employer fee with a sliding scale topping out at 6.5 percent
--a $2 per pack increase in the tobacco tax
--an individual mandate
--and an expansion of "public programs" to people earning up to 300 percent of poverty, or $62,000 for a family of four. It's not clear from the story which public programs this refers to, but it can't possibly be Medi-Cal, unless there was a buy-in from the consumers.

Update:

More details.....First, the proposed employer fee would top out at 6.5 percent, not 6 percent as the AP reported earlier. It would slide from 2 percent on employers with payrolls up to $100,000, to 4 percent on employers with payrolls between $100,000 and $250,000, and 6 percent above that.

The tobacco tax is projected to raise $1.8 billion after backfilling for revenue due to programs supported by earlier tobacco tax increases.

The proposal includes authorizing the state to do bulk purchasing of prescription drugs.

The individual mandate would exempt people whose health care costs exceeded 6.5 percent of their income, and the state agency running the program would be able to consider "hardship" exemptions for others on a case by case basis.

All kids would be covered in families with incomes up to 300 percent of poverty, and single adults with incomes up to 250 percent of poverty would be eligible for Medi-Cal.

Individuals making between 250 percent and 450 percent of poverty would be eligible for a refundable tax credit to help them afford premiums.

Dems: New health care proposal coming

Senate Leader Don Perata and Assembly Speaker Fabian Nunez say they plan to unveil a new proposal for comprehensive health care reform Tuesday morning at 10 a.m.

Private engineers win again

For what seems like the 19th time, the state's private engineers have won a court battle with the state engineers over who should be allowed to design new highways. This time it was in the state Supreme Court, and the answer was the same: the voters, in approving Prop. 35 in 2000, wanted CalTrans to be free to contract out that work. The Supremes thus struck down a provision of the state engineers labor agreement with the state that sought to keep more of the engineering work in-house.

Hot topic

PG&E is bullish on solar thermal technology, which produces electricity by using the sun's energy to heat water into steam, which then turns a turbine.

On strike

So Hollywood's television and film writers went on strike this morning. It seems odd that thousands of independent writers working with dozens (or hundreds?) of different entities would even have a way of standardizing payment for their work. It's as if free-lance magazine writers got togther and said every article of 5,000 words would be worth X. I know it's more complicated than that, with DVD and online rights and all, but it still seems strange to me. Like every other information industry, I think that one is headed for big change soon...

4 spots ahead of Kos

The Telegraph of London names Schwarzenegger's America's 8th most influential liberal. He's right after Michael Moore, and right before Oprah.

Governing: Nunez is a "public official of the year"

Governing Magazine names Fabian Nunez one of its "Public Officials of the Year," the only legislator to win the award in 2007. The mag says Nunez has embraced biparitsan consensus to create "a sustained period of legislative achievement that many thought had become impossible in California's tense political climate." The description seems a little dated at the moment, but there you go.