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This fall I was invited to cover the the Keep It Made In America Tour put on by the Alliance for American Manufacturing. I spent a week driving around Michigan, Ohio, Pennsylvania and West Virginia, ejoying the fall colors and visiting small towns all along the way.

I live in Silicon Valley where in spite of the high unemployment -- still 10.6% -- it's still pretty nice here, so the extent and especially breadth of the decline of so many cities and towns was a shock. Everywhere you go you see America's infrastructure crumbling! Of course I know this has been going on, but when you actually come from somewhere that is still pretty nice and see it firsthand - and everywhere - you really see it.

As I drove around these states I saw pretty much the same thing in town after town. As you approach the town on the highway the first thing you encounter is what I will call the vulture circle that surrounds it. This is the circle of Wall Street-owned chains emulating the Wal-Mart model of sucking cash out of the area and sending it away to the wealthy elites who own ... almost everything now. These are the national chains that are all the same in every town, all selling the same stuff, all made in China, all putting the local small businesses out of business.

As you drive into town the next thing you encounter is the circle of home equity extraction, with newer houses that have taken on big first and second Wall Street mortgages. These houses mostly look OK -- except the foreclosures with the brown lawns and grass growing in the cracks in the driveway. This area has car dealers and strip malls that used to sell expensive cars or nice goods. These dealers and stores feasted on those "take money out of your house" refinancings or second mortgages. Now they have nail and hair salons or are just "for lease."

As you get closer to the center of town you come to the areas of older houses, more of them boarded up than you want to see, with old, boarded-up stores on a few of the corners of the larger streets. Where there are still-occupied houses they have bars on the windows.

Finally you come to the old, crumbling downtown where there are many empty storefronts, some boarded, the lost dreams of the local small business-owners. Here and there you see, between the vacant lots, a few government buildings.

And then somewhere is what they always call "the old plant." This is one or more closed-up, fenced-off, rusting old factories or mills. They are fenced off, with lots of broken windows, and maybe part of a building is falling down. This is where the people used to work but the jobs moved to Mexico or China.

Much of the country is like this now. So many of the older small towns, crumbling, the money sucked out by the Wall Street elite. The factories sold off, closed. The people can't make a living, the towns can't make a living, the country can't make a living, the Wall Street elite making a killing.

You can see the process starting here in Silicon Valley, too. As you drive around this area you see that one of every four or five office or light-industrial buildings has an "Available" sign. The region has the same number of manufacturing jobs as it had when the "tech revolution" began. The rest have moved to China. We don't make cell phones here. We don't make flat-screen TVs here. We don't make computers here. We certainly don't make iPads here -- even though Jobs is his name!

Even exclusive Palo Alto has empty storefronts on the main drag. (You know the economy is bad when the rug stores on University Avenue are actually going out of business!) It is even happening here. It will get worse.

In July Intel's retired CEO and Chairman Andy Grove wrote an important opinion piece,
How to Make an American Job Before It's Too Late, in which he warned,

Clearly, the great Silicon Valley innovation machine hasn't been creating many jobs of late -- unless you are counting Asia, where American technology companies have been adding jobs like mad for years.

[. . .] As time passed, wages and health-care costs rose in the U.S., and China opened up. American companies discovered they could have their manufacturing and even their engineering done cheaper overseas. When they did so, margins improved. Management was happy, and so were stockholders. Growth continued, even more profitably. But the job machine began sputtering.

Please take the time to read Grove's entire piece.

The storm that created the rust belt is heading our way, and we need to pay attention. What will it take for American companies to create American jobs rather than jobs outside America?


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Tax Cuts Are Theft

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This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

Conservatives like to say that taxes are theft. In fact it is tax cuts that are theft because they break a long-standing contract.

The American Social Contract: We, the People built our democracy and the empowerment and protections it bestows. We built the infrastructure, schools and all of the public structures, laws, courts, monetary system, etc. that enable enterprise to prosper. That prosperity is the bounty of our democracy and by contract it is supposed to be shared and reinvested. That is the contract. Our system enables some people to become wealthy but all of us are supposed to benefit from this system. Why else would We, the People have set up this system, if not for the benefit of We, the People?

The American Social Contract is supposed to work like this:

virtual_cycle

A beneficial cycle: We invest in infrastructure and public structures that create the conditions for enterprise to form and prosper. We prepare the ground for business to thrive. When enterprise prospers we share the bounty, with good wages and benefits for the people who work in the businesses and taxes that provide for the general welfare and for reinvestment in the infrastructure and public structures that keep the system going.

We fought hard to develop this system and it worked for us. We, the People fought and built our government to empower and protect us providing social services for the general welfare. We, through our government built up infrastructure and public structures like courts, laws, schools, roads, bridges. That investment creates the conditions that enable commerce to prosper - the bounty of democracy. In return we ask those who benefit most from the enterprise we enabled to share the return on our investment with all of us - through good wages, benefits and taxes.

But the "Reagan Revolution" broke the contract. Since Reagan the system is working like this:

virtual_cycle_diverted

Since the Reagan Revolution with its tax cuts for the rich, its anti-government policies, and its deregulation of the big corporations ourdemocracy is increasingly defunded (and that was the plan), infrastructure is crumbling, our schools are falling behind, factories and supply chains are being dismantled, those still at work are working longer hours for fewer benefits and falling wages, our pensions are gone, wealth and income are increasing concentrating at the very top, our country is declining.

This is the Reagan Revolution home to roost: the social contract is broken. Instead of providing good wages and benefits and paying taxes to provide for the general welfare and reinvestment in infrastructure and public structures, the bounty of our democracy is being diverted to a wealthy few.

We, the People built this country's prosperity and this built wealth. We reinvested that wealth, building the world's most competitive economy. Now a few people are gaming the system and breaking the formula, taking for themselves vast riches, leaving the rest of us to clean up the mess.

We must recognize and understand these tax cuts for what they are. They are a broken contract. These tax cuts for the wealthy are theft. And we must recognize the Reagan Revolution for what it has cost us. Our democracy has been corrupted and our political system has been captured. A wealthy few are taking all of the benefits of our efforts for themselves. The lack of investment in infrastructure, courts, schools and other public structures is making our country less competitive in the world. The Reagan Revolution is stealing our future.

Other posts in the Reagan Revolution Home To Roost series:

Reagan Revolution Home To Roost -- In Charts
Reagan Revolution Home To Roost: America Drowning In Debt
Reagan Revolution Home To Roost: America Is Crumbling
Finance, Mine, Oil & Debt Disasters: THIS Is Deregulation


Comments (2)
Lots of people want to live in California.  This is a good thing.  Conservatives try to portray this as a bad thing.  Let me explain.

George Will repeats the conservative narrative that people and companies leave California because of taxes and regulations.  He writes,

It took years for liberalism's redistributive itch to create an income tax so steeply progressive that it prompts the flight from the state of wealth-creators: "Between 1990 and 2007," Voegeli writes, "some 3.4 million more Americans moved from California to one of the other 49 states than moved to California from another state."

Actually, any people and companies that move from California do it because the cost of living is so much higher and that is because it is a desirable place to live.  California was the envy of the rest of the country through most of the 20th century.  The best state government in the country used our taxes to build the best public structures -- the schools, colleges, roads, courts, water systems, etc. that attracted the innovative industries and the economy prospered even more.

What conservative propagandists like Will leave out is that so many people want to live here because of what the taxes and regulations created.  These public structures are what attracted so many people and businesses that the cost of living here went up.  They are trying to make people think this is a bad thing, and are trying to make people think the government and the public structures it builds are the problem rather than the source of our prosperity.  In essence they want to sell off what We, the People built and keep the proceeds for themselves.

The social contract used to be that We, the People built up the infrastructure of "public structures" like the legal system, schools, roads, water system, etc.  And this is what enabled businesses to prosper.  Then the businesses and people who did well paid back by pitching in with the proceeds to keep that system of public structures up to date.

It worked.  California built up the best schools and colleges, etc. so places like Silicon Valley and biotech grew up and thrived, and the state became a great place to live, attracting so many people and industries.  But this infrastructure was taken for granted.  Because this system was so solid and well-maintained people were able to start deferring maintenance, cutting everything, etc so that the big corporations and wealthy could have their taxes cut.  (Yes, the middle class got a bit of that through Prop 13 but even that primarily benefited commercial property.)

In essence the state has been living off of the past savings account of infrastructure that was built up in the 60s and 70s.  But now we're in 2010 with a 70's system. The schools are near the bottom in the country and the college and university system has been gutted.

We're STILL just getting by on living off of the last of what we built up in the 60s and 70s, but that is at an end now and the savings account is exhausted.  It is time to start to rebuild the infrastructure we used to be so proud of.  It is time to ask the wealthy and corporations that are here because of what the taxes and regulations built to pitch in again and start to rebuild that savings account of public structures and infrastructure.

Comments (1)

You hear it over and over again from California conservatives, "Cut taxes and cut spending," and "government spending is too high."

So what does this mean to YOU? How does this affect your life?

Simple answer, cutting spending means that your schools, roads, police and fire protection, lines at the DMV, parks, environment, food safety inspections, services to help small businesses and courts all deteriorate. It means that it costs more - much more - for you to send your kids to college. That is what "cut government spending" means.

And in spite of what you think, their promise of cutting taxes rarely means your taxes. There is a huge concentration of income and wealth at the very top, which means that tax cuts really mostly benefit the very, very wealthy. Even the well-known Prop 13, thought of as helping homeowners, shifted the tax burden from the corporate owners of commercial property to middle class citizens. From, Corporate loopholes make Prop. 13 crippling for state:

Thirty years ago, commercial property owners contributed 59 percent of property tax revenues and residential property owners contributed 41 percent. Today, we see a virtual flip: commercial property owners contributed just 43 percent of property taxes in 2008, while residential property owners contributed 57 percent.

Another thing you constantly hear are calls to cut the number of government employees and their benefits. If you think about it, layoffs and pay cuts for government workers (teachers, police, firefighters, road workers, etc.) translates into increasing pressure to cut your own wages as well, plus it means fewer customers for California's small businesses, fewer teachers in our schools, increased crime rates, etc. Cutting their benefits means that your own benefits come under pressure as well.

Conservatives promising that cutting taxes and spending are good for you have held sway for the last few decades. They are always promising that tax cuts will make things better for regular people. But they haven't gotten better. The real tax burden keeps shifting further and further away from the wealthy and powerful and onto the backs of the middle class. Meanwhile the things that our government does for us are reduced and reduced, so life gets harder.

The lesson to learn is: glowing promises of a free lunch usually mean that you are the lunch.


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California Senator Dianne Feinstein has joined a group of Senators threatening to allow the nation to default on its debt unless a commission to "fast track" cuts to Social Security is created. 

Talking Points Memo describes what is going on,

Moderate and conservative Democrats want to empower an outside entitlement commission to reshape major domestic spending programs like Medicare and Social Security, and they're threatening a truly nuclear option to get their way. If Congress does not create this commission, they say, they will vote against must-pass legislation to raise the nation's debt ceiling, which would trigger a default, and, perhaps, economic calamity.

"I will not vote for raising the debt limit without a vehicle to handle this," Sen. Dianne Feinstein (D-CA) told McClatchy. "This is our moment."

About this commission,

As proposed, it would hand a significant amount of Congressional authority over entitlement programs to an outside body. That body would make recommendations that Congress would have to vote on, up or down--no filibusters. That's a bridge way too far for liberals, who see the commission as a backdoor approach to gutting Social Security.

Here's the problem.  Many people believe that there is a problem with Social Security - that it is "going broke."  But the fact is that Social Security has a huge reserve in the bank.  Social Security runs a huge surplus, and that surplus has been added to this reserve every year for decades.  Social Security will continue running a surplus until at least 2017, and can then draw on that trust fund to make up any shortfalls for at least the next 30-40 years.

Ah, but where is that trust fund?  According to a recent Washington Post story, 

The Treasury Department has for decades borrowed money from the Social Security trust fund to finance government operations. If it is no longer able to do so, it could be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors. And at some point, perhaps as early as 2017, according to the CBO, the Treasury would have to start repaying the billions it has borrowed from the trust fund over the past 25 years, driving the nation further into debt or forcing Congress to raise taxes.

So there is the problem in a nutshell. They spent it. They spent it on tax cuts for the rich, and now that people are retiring and want that money, Senator Feinstein and the others don't want to raise taxes on the rich to pay back what was borrowed from the nation's retirement account.

This is the same as the situation in California. They cut taxes and made up the shortfall with various gimmicks, until the gimmicks ran out.  So now that the bill is due the protectors of the wealthiest talk about "spending" - which is government coming through for the people - as the area to cut, instead of turning to the people who received all the benefits of the earlier actions.

Senator Feinstein, keep your hands off of my -- and everyone else's -- retirement account.  You borrowed that money, now pay it back.  Don't think you can solve this problem by asking me to accept less than what I was promised because you handed that money out to the wealthy.  The people who got it should be the ones paying it back, not the people it was taken from.  You already took money from the taxpayers to bail out the wealthiest, don't do it again.


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Here at Speak Out California, we're trying to bring some clarity and varying perspectives to the water wars that have been the hallmark of California politics since statehood. With the fight for precious water resources dividing the state along geographic as well as ideological lines, it is important that we bring you all sides of the debate....just in case anyone wants to really try to solve the problem for the betterment of the state.  While accusations are flying fast and furiously from north to south and east to west (and all places in-between)we hope the truth will emerge from healthy dialogue such as we hope to bring you here at Speak Out California.

The following post is the second in a series from Carolee Krieger whose organization, C-WIN, has been a leading resource in fighting to make sure we have enough water to keep our state going. Here are her comments. We welcome yours as well--especially from opposing points of view.  -- HBJ


California and Its Water Crisis

Carolee_Krieger.jpg

California is not running out of water; our water is just being badly mismanaged for the profit and greed a few people.  There are a few facts that we all need to be aware of when thinking about this complex question:

FACTS

  • ·         80% of the developed surface water in California is used by agriculture; 40% of that water is used to grow cotton, alfalfa and irrigated pasture.
  • ·         Only 11% of all the developed surface water is used by all the people, lawns, swimming pools and showers.
  • ·         The cost to agriculture for much of its water is subsidized by the taxpayers.
  • ·         Many of the crops grown, like cotton, are subsidized by the taxpayers.  In some years, the farmers are paid not to grow it.
  • ·         1.3 million acres out of a total of 9 million acres of farm land in California is poisoned with salt, selenium, arsenic, and other toxic metals.  Taking this land  out of production would free up almost 4 million acre feet of wet water.
  • ·         The California State Water Resources Control Board, the agency with the fiduciary responsibility to grant and revoke all water rights permits in California, including the State Water Project and the federal Central Valley Project, has publically stated in their July 2008 Strategic WorkPlan, that they have issued 8 1/2 times more water rights permits that actual water exists in the Delta watershed.  So every drop of water has been promised 8 1/2 times over.
  • SOLUTIONS

    The solutions are simple to understand and make a lot of common sense.  But because of greed and entrenched power, these solutions are very difficult to achieve politically.

  • ·         Retirement from agricultural production of all 1.3 million acres of poisoned farmlands in the federal Central Valley Project and the State Water Project.  Redirect some of the current subsidies to encourage production of something California really needs; clean solar energy.  All of these lands are in semi desert; this could be a win/win solution.
  • ·         Remove the "paper water", the water that isn't real, from all State Water Project and Central Valley Project contracts and abide by long established law protecting the area or origin and senior water rights holders.  The State Water Resources Control Board could and should do this.
  • ·         Enforce the Clean Water Acts and other water laws.  A good place to start would be to give the State Water Resources Control Board protection from political influence and adequate funding to do its job.
  • ·         Uphold the Public Trust Doctrine.  Our public resources, especially water, must be managed for the good of all; the people and the environment.
  • We must stop allowing subsidized crops to be grown with subsidized water on poisoned lands.

    We must stop allowing the system to be gamed by people and big corporations for personal profit.  Once such abuser gained over $200 million by selling "paper water" that he had "banked" in an underground aquifer to the federal Environmental Water Account.  This speculator got his $200 million; the fish, however, never got their water; it was only "paper water".

    Carolee Krieger, President, founded C-Win in 2001. She helped lead the campaign to prevent delivery of State Water Project water to Santa Barbara and San Luis Obispo Counties. On behalf of the Citizens Planning Association (CPA), Carolee also led the fight against the Monterey Amendments to the State Water Project contracts. These amendments attempted to deregulate the State Water Project, give away public assets to private special interests for profit and make "paper water", water that doesn't exist, legal.  C-WIN has led the fight to stop speculative development in Southern California based on "paper water."  C-WIN is currently focusing its efforts on the fight to save the San Francisco Bay Delta and keep the salmon from going extinct.  She brings to C-WIN her passion for protecting public trust resources and stopping wasteful use of water in California..


    Comments (0)
    Republicans like to claim that businesses leave California because of having to pay taxes.

    I used to own and run a business, and I have some news for Republicans:  Businesses only pay taxes on profits.  You don't pay taxes unless you are making a profit.  Paying taxes means you are making a profit.  Making a profit is a good thing, and California businesses pay a small percentage of the profits to the state to help cover the expenses that enabled you to make that profit.

    I'm not sure how many different ways I can say it.  You pay taxes after you make a profit.  At the end of the year you add up your revenue and you subtract your expenses and other deductions and then you know what your profit is.

    Oh, one more thing for the slower-thinking Republicans out there: profits are a good thing, not a bad thing.  And when you are making a profit the last thing you do is pack up your business and leave behind the circumstances that enabled making that profit.

    I understand that Republicans hate government and are enraged by the idea of actually giving something back to the community to help pay for the roads, bridges, courts, police and fire protection, educated citizenry and the other parts of the state's infrastructure that created the environment that led to the ability to make a profit.  Yes, they hate that.  I understand.

    But the fact is that businesses do not pack up and leave when they are making profits.  So if Republicans want to trick people into supporting tax cuts for the big companies that shelled out so much cash put them in office they really do need to come up with better stories than trying to claim that businesses pack up and leave the state because they are making too much profit. 

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    Government Spending

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    Corporations have convinced the public that government and government spending are bad for the economy.

    Question, was President Eisenhower's building the interstate highway system good or bad for the economy, the public and in the end for corporations?

    Discuss.

    Comments (10)
    There is a myth that businesses and people are leaving California in droves because of taxes.  A recent example is George Will, in California as Liberalism's Laboratory, writing as part of an anti-tax column,

    For four consecutive years, more Americans have moved out of California than have moved in. California's business costs are more than 20 percent higher than the average state's.
    Notice the obfuscation.  Will cites "costs" and the thrust of his column implies that he means taxes are forcing this exodus.  But the costs that cause businesses to leave California are the high real estate prices, not taxes.  This higher cost of owning and renting in California is, of course, because more people want to live here than other places

    A December LA Times story, More are moving out of California than in, made clear the reasons for the exodus,

    The outflow -- last seen during the economic and social struggles of the 1990s -- started when it became too expensive for most people to buy homes in the state, and has kept going throughout the bust with the loss of so many jobs.

    [. . .] "This was the epicenter of the housing meltdown," said John Husing of Economics & Politics Inc., a regional economic research firm. "People started leaving California because of housing prices -- particularly younger couples that just couldn't afford to buy a house."
    The Public Policy Institute of California studied California job losses in 2007 and released, Are California's Companies Shifting Their Employment to Other States?,

    ... Given that this shift was sharpest during the economic boom of the late 1990s, it cannot be attributed to business climate problems unless one is willing to argue that the business climate was worse during that period, which strikes us as implausible.
    One thing to understand is that taxes are not a cost, because taxes are calculated after the end of the year, all costs are subtracted before calculating the profit, and only profits are taxed.  Salaries and other business expenses are deducted before profits are calculated. Companies that are not making money are not taxed at all. 

    Actually there is a tax problem affecting businesses here.  The effect of Prop 13 on commercial real estate gives a tremendous disadvantage to new businesses - the very entities that provide most new jobs.  Commercial property held for a long time has a much lower tax rate, providing advantages over innovative new companies.

    Another tax problem (data from California Budget Project) is that the poorest fifth of California's households earn and average of $11,100 a year and pay 11.7% of their income in taxes, while the wealthiest 1 percent bring in an average of $1.6 million and pay only 7.1% of their income in taxes. 

    Looking past the surface hysterics there is something disturbing about the implications of this conservative-corporate threat to move companies rather than pay taxes.  What does the threat say about their perception of the relationship between the people and the corporations?  After all, who is supposed to be in charge here?

    Corporations are creations of our government and We, the People created them to benefit US.  (Why else would we have created them -- to harm us?)  Our laws enable their existence in the first place, our courts enforce the contracts and settle disputes, our police and firefighters protect them, they deliver their goods on our roads, and we educate and train their employees.

    We created these entities, and gave them rules.  And now they are telling us that if we ask them to share the gains with us, they will throw a tantrum, pack up and leave?  It sounds like it is time for We, the People to put our foot down and explain the rules: We tell you what to do, not the other way around.     



    Comments (8)
    Not.

    The Forbes list of states that tax their citizens the most is out!  And California ranks ... well, California isn't even on the list.

    Forbes: Where Americans Are Taxed Most:
    10. Pennsylvania (not California)
    9. Wyoming (not California)
    8. Washington (not California)
    7. Massachusetts (not California)
    6. New York (not California)
    5. New Jersey (not California)
    4. Minnesota (not California)
    3. Connecticut (not California)
    2. Hawaii (not California)

    Drum roll ....

    ... keep scrolling ...

    --- And the winner is ...

    1. Vermont (NOT CALIFORNIA!)

    So yesterday I'm driving and KGO radio has a show about the "tax revolt" that is "taking place all over California," with people rising up and having "tea parties" to protest the "incredibly high taxes" in California.  Here is KGO's program listing:
     

    2 PM - Growing Anti-Tax Revolt in California? And What About Prop 13?

    Taking inspiration from a landmark 1970s tax revolt, a determined group of activists say the moment is right for another voter uprising in California, where recession-battered residents have been hit with the highest income and sales tax rates in the nation. And like Proposition 13, the 1978 ballot measure that transformed the state's political landscape and ignited tax-reform movements nationwide, they see the next backlash coming not from either major political party, but from the people. How real is the latest anti-tax sentiment and has Prop 13 run it's course?
    Guest: John Coupal, president Howard Jarvis Taxpayers Association

    Mr. Coupal was on the show to say that California is the highest-taxing state, and state taxes should be lower, and the government wastes all the money it takes in, and can't be trusted, and is too big.  He talked about how other states get by with lower taxes while providing better services than California. He said, for example, that there is no income tax at all in Texas -- without mentioning that Texas taxes oil taken out of the ground while California doesn't.  He said that California spends more on schools than any other state, and called for "school choice" -- which is getting rid of public schools and only having education for those who can afford it.

    He said a lot of things that turn out not to be factual if you look into them.  But you can't bother be factual and argue for lower taxes and spending.  As Dave Dayen points out at Calitics,

    "Right now we're at the bottom of per capita spending in almost every major category - 44th in health care, 47th in per-pupil education spending, dead last in highway spending and 46th in capital investment among all states."   
    But here's the thing.  HE was on the radio, telling Californians that we are the highest-taxing and spending more on schools, etc. than any other state.  And the other side was not on the radio telling Californians the truth.  So he wins. 

    Californians don't really have much choice except to believe the anti-tax, anti-government, pro-corporate arguments because they are not hearing anything else

    This was just one radio show of the hundreds of radio shows every month that repeat this message.  And the newspapers repeat it.  And the TV shows repeat it.  And there are even public speakers, funded to go from civic group to civic group around the state to repeat this message!

    Why is it that he was on the radio and the other side was not?  Because there are so few "other side" organizations for radio stations to call on, funded, with people trained and ready to talk on the radio and TV, write columns, speak to public groups, and generally make the case that government serves a purpose, roads and schools and public safety and are beneficial and that democracy is better than rule by corporations.  Corporations are enabled by our laws to amass incredible sums of money with little oversight, and are using some of that money to influence the state's policies, always to further reduce oversight and amass ever greater power.  That money leaks out of the corporations and into the political system, while pro-democracy organizations have few sources of funding.  

    The result is that the Howard Jarvis Taxpayers Association is very well funded and is widely quoted in the media. Organization that makes the case for government and democracy are not.  And democracy in California is the loser.  So if we think we're going to be able to persuade Californians to overturn the 2/3 vote requirement for a budget or to increase taxes, we're going to have to come out swinging... At the moment, we don't even have a batter at the plate.


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    This page is an archive of recent entries in the Public Investment category.

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