William Voegeli has an LA Times article on the two different models of large state – Texas and California:
California and Texas are not perfect representatives of the alternative deals, but they come close. Overall, the Census Bureau’s latest data show that state and local government expenditures for all purposes in 2005-06 were 46.8% higher in California than in Texas: $10,070 per person compared with $6,858. Only three states and the District of Columbia saw higher per capita government outlays than California, while those expenditures in Texas were lower than in all but seven states. California ranked 10th in overall taxes levied by state and local governments, on a per capita basis, while Texas, one of only seven states with no individual income tax, was 38th.
California is not exactly a high-tax, high-service state – it is more of a high borrowing, medium service state, at least when compared with the corner solutions (CT, NJ, HI) – but the contrast with Texas is apt. What is the root of the difference?
The high-benefit/high-tax model can work only if things are demonstrably not equal — if the public goods purchased by the high taxes far surpass the quality, quantity and impact of those available to people who live in states with low taxes…Today’s public benefits fail that test… “Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California. Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California’s government and the middle class is constantly being renegotiated to the disadvantage of the middle class.”
That’s not exactly true. The roads are better in Texas. But perhaps the clue is in the definition of “middle class.”
Back in the day that Texas was run by bigots such as Allan Shivers and Price Daniel, California had Pat Brown, perhaps the best governor of any state. Water was pumped across the deserts, the freeway network was built, the public universities made into national champions. If there was ever a time of a grand bargain for the middle class, this was it, and the influx of migrants and skyrocketing land prices ensured that quite a few folks who started in the middle class ended up well north of it.
It was also the time not to be poor. The Federal government had not yet created Medicaid and told the states to pay for it. The schools were fully under local control, financed by the steady stream of local property taxes. The brown and the black were welcome to pick in the Central Valley or labor in the LA basin, but they were expected to stay off the coast.
In short, the California of old was a better-funded present-day Texas, minus the offensive accents.
The challenge for California was that it could not maintain its public services without being captured by its public servants.
California’s state and local government employees were the best compensated in America, according to the Census Bureau data for 2006…The “dues” paid by taxpayers in order to belong to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.
It is the key criticism for all of us who want a system of greater public goods. All of the cultural traits – the optimism, the energy, the dynamic desire to make money – that have made us a rich country work against effective management of our government offices. Our government representatives actually listen to the people, as opposed to Western Europe or China, where government is left to a small cohort of university classmates who act according to the consensus of their demographic (isn’t it odd that the Lisbon Treaty went into effect despite losing referenda – the leaders just kept reintroducing it wherever it lost without feeling the same need to reintroduce it where it won). When the people are public employees, the responsive representatives cannot control them as typical employers controlling employees; instead the inmates run the asylum.
This is especially true in California, where the optimism that draws people from around the world prevents people from understanding the concept of scarcity, that it is not indefinitely possible to spend more than you make. The teachers want something? Why not; they are good people. The firefighters want something? Why not; they are brave people. The poor want something? Why not; the meek shall inherit the earth.
The value that has kept Texas’ budgetary house in order is the simplest: not caring. The state has tolerated incredible poverty along the Rio for a century and a half; it sees no reason to stop now. It quite publicly does anything and everything it can to slow-play the processing of Medicaid applications – if you get tired of waiting, head west to someone who cares. It has far fewer land use restrictions and no personal income tax, which benefit people who already have capital and income. It is not precisely a state for the middle class, but it is a state for the middle class’ aspirations. If you work just a little bit harder, you’ll be happy we left you alone.
There’s a terrific series over at Daily Kos about some of the disasters that prompted government regulations. It’s important to bear in mind, when listening to the FOX news crowd bleat about taxes, that most government intervention did not arise for the hell of it. We have food inspections – and food inspectors – because companies relentlessly sold tainted food that got people sick. We have building codes – and building inspectors – because people burned to death in buildings that were death traps. We have old age transfer payments – Social Security and Medicare – because the elderly used to live their years after retirement in poverty.
The challenge is not cutting inherently wasteful programs, it’s cutting the waste from inherently valuable programs. This isn’t going to happen with some silver bullet idea like electronic medical records, however valuable such a system might be; it means paying people less and demanding more and better performance. It means pissing people off.
The experience in California is concerning because it shows how easy it is for a well-intentioned state to go off the rails, and how difficult it is to put it back together. Immediately after Pat Brown came Ronald Reagan, and he and his followers managed to end the property tax that paid for Brown’s programs and build a ballot initiative system that allowed voters to govern directly. What Reagan did not do was get rid of Brown’s programs, so the rot in the system was not immediately visible but rather dug its way through over the decades. Today there are middle-class people who pay the highest income and sales taxes in the nation and think that keeping Prop 13 is a good deal for them, despite the fact that it is the lack of property tax revenue that requires such high income and sales taxes. And the scarier thing is that their gut instinct might be right; would a new source of cash flow go to put the state on firmer footing, or would it simply be captured by the public employee unions?
If the state is going to care for its people, it needs to stop caring for its employees. Does it have the courage?
While I can’t speak for California, I lived in Texas the better part of 20 years, and wild horses couldn’t drag me back.
The idea of the public good just does not exist, and the concept of a forest preserve is completely alien. If I could sum up the philosophy in a few words it would be: “I’ve got mine. Screw you.”
This does not mean there are not some fine folks there. Howdy y’all.
I agree. The challenge is finding a mechanism to bring efficiency to the large high-benefit states (CA, NY, NJ); however difficult, this is probably easier than bringing social concern to the large atomized states (TX and FL). It requires taking on public employees and corruption, and that is terribly challenging once conditions become entrenched.
Swamped with little time to read this so I saved for later when I can savor it…. Great topic….
Many thanks,
Econolicious
Taunter, I value your insight in many topics, but one that I do not understand is your obsession with unions and your belief that they offer no value to the middle class. While you criticize the Fox News crowd for “bleating on” about government regulation, you fail to recognize that unions, too, came about because corporations and employers could not be trusted to care about their employees. This includes workplace safety, job security to avoid capriciousness on the part of managers, and to allow people to feel confident enough that they aren’t going to be fired tomorrow so that they can purchase something that costs more than their monthly paycheck (e.g., college education, cars, houses, etc.). Unions — especially the auto workers that you seem to disdain so much — exist because people were exposed to horrific working conditions and people died, in fact they still do.
Public employees trade foregone wages for job security. In almost any comparable industry, I would hazard to guess that public employees get paid less than private ones — I know this to be true for high-education positions and suspect that it works pretty well down the socioeconomic ladder. If you want them to be at-will like the rest of the American work force, then you are going to have to compensate them for the fact that they don’t have job security — I mean why get paid less when you can make the same amount in the private sector with no increase in benefits beyond salary? And, given your tone, I don’t suspect that you are advocating that government should pay MORE to public employees. It would not be any wonder why government would do poorly since it would hire from the ranks of those not skilled enough to get the high-paying private jobs.
And, what will we do to support the government employees that we fire? Hand them twelve weeks (or, I guess more, now) unemployment and tell them good luck? Tell the predominantly African American employees (at least in many urban city governments) to take a hike and hope that they can find a job, especially since a white criminal has a better chance at getting employment than a black man with a clean record?
I agree with you that taking real leadership involves standing up to interest groups. And, there are certainly ways to do that; but, to lay the blame at the feet of public employees (who, it is worth mentioning are also citizens of the state — a fact that your last statement fails to acknowledge) and unions generally (and, to be fair, you are also critical of bank execs) is wrong unless you can explain how the economy will absorb those workers and not leave them out in the cold. Of course, unless, that is what you are saying.
That is precisely the problem. I don’t want employees who value security over compensation; that’s the ultimate adverse selection. I have no problem paying government employees more money individually, so long as that pay is tied to performance. The productivity gain and benefit from losing the bottom tier will more than cover the increased wage. For an example, look at Singapore.
As for the government employees who were let go, sure, I would offer the typical severance packages plus standard unemployment insurance, the same as if they were fired from a private sector employer. Let the employees who cannot perform find another job that does not entail wasting government money. I happen to disagree with the entire concept of public employee unions; while it isn’t a matter for the government whether the profits of Boeing accrue to the shareholders who put up the capital or the machinists who did the work, it is not acceptable to get anything other than the maximum service level out of a given amount of government expenditure.
I don’t know why anyone would assume the layoffs would particularly target African Americans. To believe this you need to believe some combination of (a) government agencies in predominately African American areas are especially bloated; (b) African Americans are disproportionately represented at the bottom of the performance spectrum. I make neither assumption.
As for unions in general, America is a better place for having had organized labor, but your example of the UAW is interesting to me because that is a union that I know reasonably well. And I can say with some confidence that out of the giant disaster that is the American auto industry, with plenty of people to blame for its failure, the UAW stands at the top of the pyramid. Its obsession with restrictive work rules and preserving the jobs of the poor performers destroyed any hope of building complex systems well. There was and is an alternative – a focus on maximizing the wages of the good performers that would have tied pay with individual performance. The UAW has never been interested. It isn’t inherent in organized labor. The CTM folks in Mexico have wages that are higher in proportion to the national average than the UAW, but they are merciless about trying to purge shirkers from their ranks.
Taunter, I make no bones to defend the UAW in particular; in fact, my experience with them is that their stringency is a problem not only for innovation in management (though, I think that GM’s management-by-stock-price-chasing is more to blame) but also for innovation in labor. However, you miss my more important point, which is that unions enable workers to stand up for their rights and for their own health and safety because management has shown — time and again — that they cannot be trusted to do so. The boss is the single best organizer — the boss doesn’t care about the workers, they are going to strike back. How, without unions, would you propose that they are protected?
On the matter of hiring African Americans, this is an argument that we have had before. First, the history of discrimination meant that African Americans tended to end up in government jobs because private employers would not hire them. Those 50-65 year-olds are who you are talking about firing. Blacks tended to live in cities with overburdened infrastructures and declining populations, so I imagine that they would be disproportionately affected by layoffs. Lastly, you seem to think that employment discrimination does not exist despite the overwhelming evidence that it still does. Also, I would suspect that many African Americans traded security for wages because they were concerned that they would be fired (a concern based in the historical legacy of discrimination that made this much more prevalent among blacks than whites). So, I maintain that they would be negatively affected.
Finally, I fail to see how mass layoffs will help the economy. Sure, give them the standard severance package (I’m not sure what that is besides a pink slip and two weeks notice) and unemployment. Do you honestly think that everyone will find work in newly created private-sector jobs somehow created by the economy? Sounds like Reaganomics re-branded to me. The innovation will somehow trickle down to the masses. And, without collective bargaining power, they better take what management will give them, even if it is an unsafe, unhealthy, and underpaid job, because otherwise they will be unemployed.
Finally, the failure to get rid of poor employees is a failure of management. First, management agreed to contracts that bound their hands — if they wanted to have flexibility in labor supply, then they would have to pay for it through increased wages or benefits. Second, no union contract is airtight that makes it impossible to fire employees, managers just need to be trained and competent enough to make a case against them. Instead, managers take the easiest route and simply transfer employees or choose not to fight. This is like holding defense attorneys responsible for crime because they defend guilty clients. Unless I believe that managers are never capricious in who they let go (I don’t), then I think that workers have the right to be represented against accusations (I do). I’m not sure where you fall on that question, but I believe that workers should not simply be fired at the will of the employer.