Brown's budget:

By Peter Schrag

Unless everything we know about Jerry Brown is wrong, and everything that he said even before his election was misleading, what we’re going to get today (1/10) is a bare bones budget – austerity in its most Draconian form – coupled with a challenge that if the legislature and the voters want anything more, they’ll have to provide the funds to pay for it.

If he were to be totally clear he’d say that California can’t dig its way out of its fiscal crisis without both major cuts and major increases in revenues.

Brown’s cuts will include significant reductions in the budgets for the University of California and the California State University, the elimination, as already announced, of the state’s redevelopment agencies, and a sharp reduction in the prison budget. It’s also likely that Brown will call for cuts in community college funding.

Indications are that Brown will propose no further cuts in the K-12 budget in this round, but issue a warning that if the legislature and voters don’t approve additional revenues in May or June – among them extensions of the income and sales tax and the vehicle license fees due to expire this year – then the schools will feel the ax as well.

California’s school funding has already been severely cut in the last few years and, as a percentage of personal income, now ranks among the lowest spending states in the nation. Additional cuts would almost certainly mean a still shorter school year, still larger classes and the elimination of whatever few school counselors, librarians, reading specialists and arts programs still remain in the schools.

…But even that may not be enough. Nothing may be enough until the doors actually begin to close, bridges start falling down and the fire brigade doesn’t come at all. It could happen as early this summer when, according to the same fiscal expert, Wall Street stops lending to California and the state is completely broke.

Excerpts from the longer piece. Read the entire piece at California Progress Report.

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Peter Schrag, whose exclusive weekly column appears every Monday in the California Progress Report, is the former editorial page editor and columnist of the Sacramento Bee. He is the author of Paradise Lost: California’s Experience, America’s Future and California: America’s High Stakes Experiment. His new book, Not Fit for Our Society: Nativism, Eugenics, Immigration is now on sale.

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Jerry Brown appoints Honig

Honig Appointed to State Board of Education: More Support for Excessive Phonics Teaching?   by Stephen Krashen 

Reports of Governor Brown's appointment of Bill Honig to the State Board of Education have focused on Honig's previous legal problems.  More serious is Honig's stance on educational issues  ("Brown names top advisers," 1/6). 

After resigning as state superintendent, Honig became a dedicated supporter of intensive systematic phonics, the view that all children need phonics instruction that includes all major rules of phonics, presented in a strict order. 

Some basic phonics instruction is helpful, but evidence refutes the extremist intensive systematic position: Studies show that intensive phonics makes no significant contribution to performance on tests in which children have to understand what they read. 


Reading First, part of No Child Left Behind, is based on intensive systematic phonics. Reading First children performed no better on tests of reading comprehension than children taught by regular methods, even though Reading First children had more reading instruction.  

Studies also show that California's low reading scores are not due to a lack of phonics, but are because of a lack of access to reading materials. California has failed to support its public and school libraries, and studies relate library quality to reading achievement. 

Honig's misreading of research is more serious than his financial misdemeanor. 

Stephen Krashen


Sources:

Studies of intensive phonics and reading comprehension: Garan, E. 2001. Beyond the smoke and mirrors: A critique of the National Reading Panel report on phonics. Phi Delta Kappan 82, no. 7 (March), 500-506; Krashen, S. 2009. Does Intensive Decoding Instruction Contribute to Reading Comprehension? Knowledge Quest 37 (4): 72-74. 

Reading First: Gamse, B., R. Jacob, R., M. Horst, B. Boulay, and F. Unlu  2008. Reading First Impact Study Final Report (NCEE 2009-4038). Washington, DC: National Center for Education Evaluation and Regional Assistance, Institute of Education Sciences, U.S. Department of Education. 

Low reading scores not the result of lack of phonics: McQuillan, J. 1997. The Literacy Crisis: False Claims and Real Solutions. Heinemann.

California Budget crisis

 Feeding the Goose that lays the golden eggs.

It is clear that the California budget is in crisis, and the issues were  clarified in the budget summit sponsored by Governor elect Jerry Brown on Wednesday, December 7. There are no quick nor easy solutions. We can not simply cut our way out of the crisis, budget cuts and lay offs make the recession worse.

School funding reveals the nature of crisis.  In the last two years the k-12 budget “solutions” have cut 4.6 billion dollars from the schools. We have larger classes and fewer teachers.  School reform has stopped- except for the politicians hot air.  School funding makes up a total of 30% of the state budget.  Any crisis in the state budget and any cuts in the state budget will make school budgets worse.

California will need to raise taxes to fund the schools and to repair the social safety net.  Anti tax radicals and Republicans  oppose any tax increases.   The state ‘solutions’ of the last three years depended upon receiving federal stimulus money.  The stimulus monies are almost finished and with the Republican winning control  of Congress there will probably not be more funds.

The California economy , if it were a country, would be the 8^th. largest economy in the world.   The California economy is larger than that of Brazil, Spain, Canada, India, Russia, Australia and most of the rest of the world.  California can and should use Keynesian economic policies to find  our way out of this economic crisis.  We are, of course, a state integrated into a national economy, so the collapse of the U.S. economy will have a direct effect on our ability to use Keynesian stimulus to grow the economy.   For description of Keynesian economics see here.  http://www.newdeal20.org/2009/07/01/keynesian-economics-101-894/

The world wide economic crisis was created by  U.S. finance capital and banking, mostly on Wall Street ,ie. Chase Banks, Bank of America, AIG, and others.   Finance capital produced a $ 2 trillion bailout of the financial industry, the doubling of U.S. unemployment rate and the loss of 2 million manufacturing jobs.  More than twenty-five  million people are out of work. 

Since we are integrated into the national economy and effected by the decline of the U.S. economy,  some stimulus money generated and spent in California will be spent in other states, thus stimulating other states- and of course money spent in other states will stimulate the California economy.  However, over 60% of all economic business is local.  Money spent in California will help the California economy to grow.  Keynesian stimulus will work- it just won’t work as directly as the original theory predicted.

The economic stalemate in California has produced school funding cuts far beyond reasonable levels.  At present,  the state ranks 47^th among all states in its per-pupil spending, spending $2,856 less per pupil than the national average. The Brown briefing at the forum  detailed our standing in class  size, counselors, and librarians. To continue on this path is to produce another Mississippi or Alabama for our children.

The finance capital collapse and theft on Wall Street produced this crisis, not immigration.   Now Wall Street has recovered, but the states and specifically California is left with the destruction.  The best available response is for California to tax and spend to stimulate the economy- that is Keynesian stimulus. The anti tax radicals and the Republicans will oppose this approach.  They must be defeated.  

Specific proposals :

            Enforce the current California law taxing the sales of goods by out of state companies ( such as Amazon)  over the internet.  Gain. 1.2 billion $.

            Pass an oil extraction tax.  Require that the oil companies pay taxes when they take our oil out of the ground and then refine it and sell it back to us.  Gain. Billions.

            Establish a  public state bank such as the Bank of North Dakota. Initially move 25% of all state revenue, receipts and reserves into this bank and 25% of all PERS and STRS funds. Manage the bank as a public service. Over time, finance state borrowing from our own bank.   Gain.  6% of the budget.

            Continue efforts to eliminate waste, fraud and abusive where it exists.  There may be legitimate savings here.  For example not paying $13.2 billion for a Bay Bridge that originally was to cost under $6 billion.  And, not paying to import the steel for the bridge from China.

            Many more sources of revenue need to be developed.  Unfortunately we have been thinking too small and looking in the wrong directions.  Please make suggestions.

            Unfortunately we would be unable to tap  a major source of potential revenue because it is tied to the national economy.  There should be a significant tax on the sale of stocks, bonds, and financial instruments.  The sources of this tax are in New York and can be easily moved around the globe.  Some planning is necessary to develop this source.  Potential Gain.  $30 billion per year.

A limit on Keynes.

            A major limit on the use of Keynesian theories within one state is that most states- particularly California- are not allowed to go into debt.  Keynesian theory and practice call for public expenditures  and going into debt to pay for these expenditures.  Of course California has been going into debt each year for the last three years, it is just that accounting moves have been used to disguise the debt.

Since the state can not go into debt it will need to use tax policy to raise the funds necessary for public investments.  The state has also been targeting particular industries, notably the film industry with tax subsidies and local governments have been providing tax subsidies in the form of enterprise zones.  Along with needed  tax reform, these forms of subsidies (debt) should be reformed to focus on economic growth.    Tax suggestions were in the prior section.

California currently sells bonds.  We could develop bonds for more public investment.  At present we pay bond holders a market rate. To achieve a Keynesian stimulus we could sell many more bonds in particular to  the public employees retirement system PERS  and STRS.  These are among the largest investment funds in the nation. Their investment strategies should be re designed to promote in state economic growth.  After all, the money in PERS and STRS is California money.  And, the best way to keep these funds financially solvent is to improve the California economy.  So, directing investment in a manner to promote growth would provide significant capital for public projects.  We could sell bonds to PERS and STRS at a better rate than they are presently getting.  Further, by working with PERS and STRS we could develop a system where they serve as a marketing director to sell state bonds to their members.  There are many people interested in investing in public bonds.

 After a 2-4 year transition period, a similar pool of available funds would develop in the new California Public Bank.

Alternative;

We can follow the process of Ireland and Greece and dramatically cut services and raise taxes and impoverish the economy.  Then, since the nation is poorer and has less income you will need to raise more taxes and cut more services all in an effort to protect the excessive profits of bankers and bond holders.

California can continue the current process of cuts and reductions.  The fiscal crises of the states – all the states- has caused major cut backs and retrenchment and made the economic crisis approach a depression.  The state cut backs are greater than the federal stimulus producing a prolonging of the crisis for working people.  Continuing on the present direction produces obscene profits for billionaires along with growing poverty and hardships for the majority.

Arguments against this view:

            Most academic economists will argue either that Keynesian economics does not work or that you can not apply Keynesian stimulus to a state rather than a nation in part because states do not have the levers of economic control.  Well, granted  you can’t apply Keynesian ideas to smaller states such as New Hampshire, Arizona, Mississippi or Alabama, but perhaps you can apply them in an economy as large as California.  If you can stimulate an economy in France,  Brazil,  or Canada, each of which are about the same size as California, perhaps you can stimulate an economy to growth in a state like California with a    $1.8 trillion dollar   economy.  It is worth a try.

Academic economists will dismiss these proposals as not possible.  They are by and large not interested  in the  looking at real alternatives to their present theories  like applying Keynesian economics to a state economy.  University departments and their publications  continue to promote the same  neo classical economic theories.  Recall, these are the very scholars who gave us the “myth of the rational market” and argued that markets would correct themselves we did not need governmental intervention.  Now, in this depression, we see the results of their theories.   Foundation based economists such as those in the Hoover Institute or the Peterson Institute, are funded by the super rich and are unlikely to see alternatives that would require significant taxation of the super rich. These economists  have, in fact, been deeply implicated in the construction of the new systems of technocratic  politics which serves  them well and the oligarchy.   Few seem predisposed to engage in self-critical reflection of why their theories missed the greatest economic crisis of the last 50 years.  

Sources

Gar Alperovitz, America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy.  (2005) John Wiley and Sons

Dean Baker,  Plunder and Blunder: The Rise and Fall of the Bubble Economy, (2009)

Justin Fox,  The Myth of the Rational Market: a History of Risk, Reward, and Delusion on Wall Street. (2009)

Jeff Faux, The Global Class War: How America’s Bipartisan Elite Lost Our Future- and What It Will Take to Win It Back. ( 2006)

William Grieder,  The Soul of Capitalism: Opening Paths to a Moral Economy. (2003).

Paul Krugman, The Return of Depression Economics and the Crisis of 2008.  (2009)

Nomi Prins.  It Takes a Pillage: Behind the Bailouts, Bonuses and Backroom Deals from Washington to  Wall Street. (2009)

Joseph E. Stiglitz.  Free Fall, America, Free markets, and the Shrinking World Economy.  2010.

Whitman V. Brown. The California Economy

Reviving California's economy: Meg Whitman versus Jerry Brown

Both have put forth plans to address the state's loss of industrial manufacturing. Neither goes far enough.

Harold Meyerson

For all their differences, Meg Whitman and Jerry Brown agree on one thing: California needs an industrial policy.

For half a century, aerospace was California's dominant economic engine. But then the end of the Cold War led to a radical contraction of the aerospace industry. Since then, the state has subsisted on bubbles, and it has wilted each time they popped. Neither the dot-com industry nor housing — the two chief sources of economic activity in this state for the past 15 years — offered the kind of sustainable and broadly shared prosperity that Californians took for granted in the years between 1940 and 1990. The high-tech companies that have flourished in this state over the past 20 years have created great wealth, but with much of their manufacturing done offshore, that wealth has not been shared with California production workers.

Both Whitman and Brown understand that loss of manufacturing is a key factor in the state's economic decline, and they have put forth economic plans to address it. But neither of their strategies does enough to restore the state to its onetime industrial preeminence.

Whitman seeks to remedy the problem through classic Republican policies: reducing taxes and regulations on businesses. Some of her targeted tax cuts make sense, like increasing the R&D tax credit and creating a tax credit for factory equipment. But the massive cuts she proposes to state services will only further the decline of California's aging infrastructure and harm a public education system that badly needs improvement.

Brown also favors tax reductions for factory equipment, and outlines other incentives to boost manufacturing. He also commits himself to major infrastructure upgrades, and he singles out the clean-energy sector as the industry the state should do most to help. Unlike Whitman's plan, his clean-energy program has a demand as well as a supply side: By mandating that 33% of the state's electricity come from renewable sources, his plan would create a larger market for the industry it seeks to boost.

Brown's ideas are good as far as they go, but they don't go far enough in one key particular: identifying the revenue sources for the improvement of our infrastructure and the rebirth of our manufacturing. History here may provide a guide.

Contrary to libertarian myth, California's economic ascent was largely funded and devised by its governments. To obtain the water that enabled the state to grow during the early 20th century, California historian Kevin Starr wrote, "Los Angeles, and, to a lesser extent, San Francisco, functioned more like entrepreneurial corporations … than passive municipalities concerned narrowly with public safety and the delivery of local governmental services." In the years following World War II, government spending on defense was the primary fuel for California's growth. And it was investments by Pat Brown, California's greatest governor, in the state's universities, roads and water systems that made the state's economy the marvel of the world for much of the second half of the 20th century.

How can the state, in its sadly depleted condition, make that kind of investment now? One possibility might be a state infrastructure bank of the type proposed on a national level by Connecticut Democratic Rep. Rosa L. DeLauro. As DeLauro has sketched it out, such a bank, by committing $25 billion in public funds, could generate close to $600 billion in public-private funds going to build or improve rails, roads, bridges, airports and the like. Another possibility could be a state innovations bank, which could fund some of the clean-energy activities that Brown has proposed, and could help innovative new companies scale up to mass production here rather than go abroad. Former Intel CEO Andy Grove has identified this stateside scaling-up issue as crucial to America's economic future. If California has any of the ingenuity and gumption it used to have, surely the state can play a role in helping innovative companies thrive here.

During Jerry Brown's first term as governor, a number of California economists argued for establishing a state bank, but the idea never took off. California needs one now a lot more than it did in 1975. Brown's current ideas are, on balance, better than Whitman's when it comes to rebuilding the state's economy, but they too will fall short without a plausible source of funding. The question will be whether Californians can summon the will, as they did throughout much of their history, to create the policies and commit the funds to reconstruct their state.

Harold Meyerson is editor at large of the American Prospect and a columnist for the Washington Post. He is doing a six-week guest columnist stint on our Op-Ed page on Tuesdays.

Los Angeles Times

Candidate from Goldman Sachs wins Republican primary in California

 billionaire CEO Meg Whitman won California’s Republican gubernatorial primary “after months of obscene campaign spending,” says Art Pulaski, executive secretary-treasurer of the California Federation of Labor.

In the race for Sacramento against Attorney General Jerry Brown (D), Whitman will now “use her seemingly unlimited fortune to try to stage a hostile takeover of our state.”

She’s made clear that, if elected, she plans to bring a Wall Street agenda to California. What that means for working families is more massive tax giveaways for corporations and the wealthy and wholesale cuts to education, public safety and programs that our state’s most vulnerable rely upon.

Pulaski says the contrast between the candidates “couldn’t be starker.”

Jerry Brown shares the Main Street values that built this state’s economy into a global powerhouse and expanded our middle class. Brown has a spent a lifetime fighting for working families. He presided over the creation of nearly 2 million jobs as governor. He fought the exploitation of workers by large corporations as attorney general.

Read Pulaski’s full statement here.

Boom ! Is it all over for Obama ?

Here are a quick few conclusions I draw from this spectacle:

-- We knew all along that the Democratic victories in 2006 and 2008 owed in great part to rejection of George W. Bush and a bankrupt Republican Party more than it did to a pro-active love for Democrats.

-- The election of Barack Obama did not heal the racial divide in America. He merely and temporarily bridged it because he was, indeed, an inspiring alternative to the crumb-bum Bushies (and that includes a dottering McCain and a wacky Palin).  But as soon as elected and the shine was off, the racial divide widened up again led by those strange creatures known as "independents" ( i.e. basically conservative white folks who look upon politics the way hotel guests view room service).

Read the entire blog at: Marc Cooper.  His blog is at http://marccooper.com/boom-is-it-all-over/ This entry was posted on Tuesday, January 19th, 2010 at 9:27 pm and is filed under Main. 

Brown finally gets some facts

Is BoE Governor King worried over UK Creditworthiness?

The Chancellor of the Exchequer, Alistair Darling, speaking from the fifty million pound G20 meeting finance minister's wining and dining and doing nothing weekend in Horsham to BBC Radio 4 informed John Humphries categorically within the past half-an-hour that Governor of the Bank of England, Mervyn King, was not worried about the nation's creditworthiness.

If that statement is true then Bank of England Governor, Mervyn King, should be fired on the spot today!

If that statement by Alistair Daring is not true then Alistair Darling should resign on the spot - after all the economic dumb shit for whom they both work is now so incapable of seeing reality he cannot be any longer expected to make a rational choice between tea or coffee!