Friday, July 26, 2013

Distracting Moonbeams

Jerry Brown, So Far

Even California Liberals Should Reject Jerry Brown

By, Lanhee J. Chen, a research fellow at the Hoover Institution who also teaches public policy at Stanford University, July 25, 2013, Bloomberg News

The mainstream media here inCalifornia and across the country have fallen in love (all over again) with Jerry Brown. According to the popular narrative, Brown has brought California back from the precipice of disaster, balanced its budget and jump-started the state’s job-creating engine.

All of these feats would merit his re-election -- if, in fact, they were true. Unfortunately, Brown’s record as governor reflects more failure than actual accomplishment. He won election in 2010 by promising to be a no-nonsense problem-solver who was pragmatic, not ideological. But a closer look at Brown’s record reveals a string of missed opportunities and broken promises that ought to disappoint conservatives and liberals alike.

The first problem Brown promised to tackle was the state’s broken budget. He boldly claimed that he would cut discretionary spending, engage in much-needed pension reform and fix the budget process. All of these promises were on top of the claim that he would balance the budget free of the smoke and mirrors that have accompanied past efforts.

While Brown and his Democratic colleagues in the Legislature claim they’ve kept their promise to balance California’s budget, the facts tell a different story. As usual, lawmakers have resorted to some questionable accounting, blissful ignorance and outright gimmickry to reach their conclusion.

Accounting Gimmicks

To get to what Brown calls “balance,” California’s 2013-2014 budget relies on almost $6 billion in revenues from voter-approved tax increases, which are intended to fund the state’s education system. But those revenues are temporary and may not be extended. The budget also ignores unfunded pension and retiree health-care liabilities. These liabilities are substantial: The California Department of Finance estimated there are more than $100 billion in unfunded state employee pension and retiree health-care obligations, while other analysts have produced estimates that are far higher.

And the California budget continues to be balanced with the help of garden-variety accounting gimmicks, which have become all too common in Sacramento and other state capitals. For example, the budget is balanced by “borrowing” money from a number of special funds that are earmarked for specific uses. For one, it takes about half a billion dollars dedicated to reducing the state’s carbon emissions to cover budget increases for state Medicaid and welfare benefits. Rather than changing the way Sacramento does business, Brown has perpetuated California’s profligate ways.

Second, Brown has insisted on hyping the state’s chimerical and high-priced high-speed rail project over other important priorities -- including some critical infrastructure needs such as road and bridge repair and dam replacement. The project began when California voters in 2008 approved the issuance of $10 billion in bonds to fund construction of a $45 billion high-speed rail system connecting the state’s major urban areas. Voters were promised high-speed trains that would connect Los Angeles with San Francisco in less than three hours.

But the project has been besieged by cost overruns, delays and mismanaged expectations. The project is now expected to cost $68 billion, and that price tag was only made possible when plans to construct high-speed rail lines leading into Los Angeles and San Francisco were scrapped in favor of a plan to have high-speed trains share track with slower trains. But this means that a nonstop journey from the Bay Area to Southern California will take almost four hours, and as long as six hours if intermediate stops are included.

Worst yet, a recent study by the Reason Foundation concluded that taxpayers could be on the hook for up to $373 million a year in operating costs and financial losses once the high-speed rail system is up and running.

Ineffective Actions

Rather than direct his affections (and taxpayer dollars) in a more productive direction, such as funding pension liabilities or more urgent infrastructure projects, Jerry Brown has stuck with the high-speed rail project. He proposed a 3,000 percent increase in funding for the state’s high-speed rail authority in his 2013-2014 budget, primarily so the agency could hire more than 40 new staff, pay existing staff more and secure extra office space. And he signed into law $3 billion in construction financing for the first part of the project, a 130-mile stretch of track -- not between major urban areas but from Bakersfield to Madera, two towns in California’s more sparsely populated Central Valley.

Finally, Brown campaigned on the promise that he would get California working again, with job creation as his top policy priority. While the unemployment rate has declined during his term, to 8.5 percent from 12.1 percent, it remains the country’s eighth-highest, well above the national average of 7.6 percent. And the percentage of people who are unemployed, who have stopped looking for work or who work part time but want full-time work, is the second highest-in the country, at nearly 19 percent.

Examine the data more closely to see what’s happening in some of California’s communities, and the picture looks even more grim. Nine of the 15 metropolitan areas with the country’s highest unemployment rates are in California. El Centro, in southeastern California, is the metro area with the country’s second-highest level of joblessness at nearly 23 percent. And unemployment rates remain in the double digits in 10 of the state’s 26 metropolitan areas.

Brown’s actions on jobs have not been effective enough. His efforts have focused primarily on stimulating the creation of green jobs, as well as incentivizing business formation and growth through a combination of minor tax breaks. But he’s ignored the big-ticket reforms that could actually get the entire state’s economy going.

Missed Opportunities

Despite campaign promises to cut regulations, Brown has failed to engage in any meaningful reform of the state’s Byzantine regulatory framework. He’s evinced no interest in reforming California’s broken tax code, which continues to result in massive revenue volatility and discourages growth and investment. And Brown has refused to open up more of the state’s vast oil and gas reserves to responsible exploration, a policy change that could unleash a flood of job creation in the parts of the state that have been hit hardest by the economic recession.

Brown’s record should be of concern not just to conservatives -- who naturally support fiscal restraint, regulatory relief and pro-growth tax reform -- but to liberals as well. By obsessively focusing on high-speed rail, ignoring the state’s continuing budget problems and failing to more aggressively focus on jobs, Brown is jeopardizing the very priorities Democrats hold dear. Whether it’s providing more affordable higher education, facilitating a generous social safety net or growing the middle class, Brown has let some of his staunchest supporters down.

Should Jerry Brown choose to stand for re-election next year (and there is nothing to suggest that he won’t), he is sure to present a litany of “accomplishments” to convince Californians that he deserves a second term in office. Voters shouldn’t be fooled. Brown’s governorship, which started with the promise of real reform, has become a series of missed opportunities that voters should hold him accountable for at the ballot box. 

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