California’s dysfunctional politics

Help on the way

Out west, a different supercommittee might yet do rather well

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California is a mess of epic proportions. I lived in California during the young years of my life, and after moving across the country to Virginia I realized how much better the school systems were and how truly terrible California's was. It just doesn't make sense to me how such a big state can struggle so greatly financially. Someone needs to step up and act, whether it be one person or an entire committee. It's not fair that young children should suffer through their education because of a terrible governing body.


The author wrote: "The Think Long Committee wants to fix this by extending sales taxes to services, and simplifying and cutting income-tax rates. This would be “only very slightly more regressive”, says Nathan Gardels, an adviser to the group, because the poor would get a sales-tax rebate and rich people tend to spend more on services (on accountants, lawyers, fitness instructors, etc). The new system would eventually raise revenues by about $10 billion a year."

And how will the State of California collect a tax on services if those services are performed by firms not based in California? Forget about the local mow-and-blow gardners and dog walkers paid in cash. The high priced service items are legal and accounting fees and the ones I use high-tailed it out of California along with Art Laffer. While businesses take deductions for accounting and legal expenses, thus establishing a figure against which the Franchise Tax Board can calculate its take, individuals don't necessarily declare those expenses. Nor do they report medical and dental expenses unless they exceed a certain percentage of income.

The author apparently left out the section covering the laws of unintended consequences.


All California needs is less public sector unions to fix its financial and education system problems. But the Economissed would never agree with that non-socialist solution to an over-socialistic problem.


California just got some good news from Massachusetts, of all places. Barney Frank decided not to run again for his seat, due to many things, but mainly to the fact that, his district's boundaries got redrawn and he could not count on a captive constituency. Basically he admitted publicly that his ideas and policies alone are not good enough to return him to Congress. It is good news for California, because Frank just demonstrated that the propositions on the last ballot here in California concerning the boundaries of political districts - and who draws those boundaries - were indeed the needed changes for California - and for the whole nation, really - , that will shake up those groups of cretinous thugs, masquerading as legislatures. Let's see what a few election cycles will do to the compositions of those legislatures. Hope is not dead, yet...


If the state allowed the local governments power to run their own education systems like in years past, many of these problems could be alleviated. With the centralized system, the differences of different towns is not taken into account and therefore the schools suffer because they are ran by something that does not understand each situation of a certain school.

Centralization is ruining the education system, and it is no more evident than right now in California, which once had an A plus educational system state-wide.


There it is again !! 'Vulnerable' Californians will suffer if budget cuts hit. And it's always the same 'vulnerable' ones to The Economist: school teachers and welfare recipients. Never the working stiffs in private business ( what little is left in the state) who pay all the bills. Nope. They're never 'vulnerable' in the eyes of The Economist, even though hundreds of thousands of them have lost their jobs.

Stephen Morris

The reference to “irresponsible voters” raises both philosophical and empirical questions.

Any suggestion that voters are not “responsible” invites the obvious response: “Responsible to whom?”

It is a common theme of paternalist thought that there exists some absolute reference of “right” and “wrong”, and that the People must be forced to adhere to it. But a moment’s thought reveals the absurdity of this argument. Who or what has established this supposed absolute frame of reference?

Invariably when one digs deeper, one find that those who employ such arguments are implicitly assuming that it is their own individual preferences that are the absolute standard. Voters are “irresponsible” if they fail to agree with the individual preferences of the writer.

But just because one has an unshakable belief in the self-evident correctness of one’s own opinions, that does not make that those opinions absolute truths. They will remain opinions – just opinions of a person too narrow-minded to conceive that others might believe differently.

It is tempting to apply to the same argument against Democracy itself: is it not a narrow-minded preference to insist that people govern themselves democratically? But again, a moment’s thought reveals that the symmetry breaks down. Because it is open to a democratically governed people to amend - or even repeal - their Democracy, and to do it democratically.

If the People of California do in fact choose to amend the details of their (partial) Democracy, it will prove not the failure of Democracy but its success. It will demonstrate that Democracy contains within itself the machinery to remedy perceived flaws, and to do so with the direct consent of the People.

We may contrast this with the ongoing disasters of paternalistic government-by-politician, whether in the chronically dysfunctional US Congress or in the Eurozone (where the Euro debacle was imposed by politicians who refused to give the Peoples of Europe – especially the German People – any direct say in the creation of the cockamamie currency union).

These dysfunctional systems demonstrate no machinery for self-repair: adversely selected, self-serving political agents will continue to act in their own interests with minimal regard for the subjects whose lives they ruin, and there is little those subjects can do to remedy it.

Leaving aside arguments based on the superiority of individual preference, it is possible that voters could be caught in a game (such as Prisoners’’ Dilemma) that leads them to behave in ways that many or most of them would prefer to avoid. That is, voters may behave “irresponsibly” not because they are individually irresponsible but because the game in which they are caught gives them a dominant strategy of irresponsibility.

But here again the paternalist argument fails, for two questions arise:

a) is there any evidence of such failure? and

b) is there any evidence that paternalistic government is to be preferred?

Let us consider the first. The only time The Economist ever discusses Democracy is to disparage it, typically in the context of California. But California is only a partial Democracy operating under the pernicious influence of the anti-democratic US Constitution. The problems afflicting California are those beyond the democratic control of its citizens:

i) its legislature is infected by the hyper-partisanship which afflicts the rest of the United States;

ii) its ability to limit the power of sectional interests is removed by an anti-democratic judicial oligarchy (as catalogued so thoroughly by Mr Spadijer earlier); and

iii) its problems are in many instances the problems of a successful state within a federation, notably its inability to regulate the rate of inflow of internal migrants into the state in good times, and their outflow in bad times. This would test the ability of any polity.

In contrast, The Economist resolutely refuses to mention – ever, ever – any successes of Democracy. For example, as noted previously, The Economist resolutely refuses to acknowledge the role Democracy has played in the moves to introduce less partisan forms of Congressional redistricting in California and Florida.

The Economist resolutely refuses to mention such democratic measures as the Swiss referendum to increase consumption taxes (VAT) to balance the budget.

And finally, The Economist fails entirely to demonstrate that paternalistic government-by-politician is superior.

But surely the final word should lie with the People. Why have the People never been given the freedom to choose the system of government they prefer?


Andrew Oliver

Another alternative is to require initiatives to be zero sum, i.e. require each initiative to identify a levy or a tax increase that is sufficient to fund it. This would deal with the special interests who want spending but do not want there to be tax increases. And in respect of contradictory or incoherent initiatives, let the elected representives sort them out not some elitist council of elders or judges ...


I'm surprised by the mention, without comment, that in this proposal poor people would have some sales taxes refunded. The nature of being poor is that most or all of the money one has must go immediately toward the expenses of supporting oneself. Giving tax refunds presupposes a financial cushion, an ability to get by until the refund arrives. While that sounds reasonable for middle-class people, it shows a total lack of understanding of what poverty actually is.


Replacing the money lobbyists give to lawmakers for election campaigns with money from venture capitalists does not remove special interests from politics. Rather, it sounds like one group of special interests is replacing another.

David Crane’s ideas -- for California’s legislature about an “ethical bloc” and a new effort to find candidates who are not beholden to lobbyists -- are worthy. I pray that they come to fruition! That, of course, is the rub: how to overcome the mind-set of political junkies that they cannot escape the present system. I would gladly contribute to candidates who have shown themselves to be able to take the middle ground. The far-rights and the far-lefts have brought us to these crises, and they need to be shown the door!

Soquel by the Creek

The article discusses how California's General Fund budget is now greatly more dependent on Personal Income Tax (PIT) revenues. As a consequence, there is now a deeper divide of the electorate between those that want increased government funding but pay little taxes and those that pay the majority of taxes who want limited spending.

CHART: California General Fund: Sources of Revenue (2011-2012)

The 67% supermajority of California taxpayers contribute just 6% of state income tax revenues. The taxes from this group contributes just 3% to the California General Fund. These taxpayers and potential voters are essentially insulated from the true cost of operating the government.

Meanwhile, the 33% superminority of taxpayers contribute 94% of state income tax revenues. As the California General Fund derives 58% of its revenues from Personal Income Tax, this 33% superminority also contributes 55% of the entire General Fund. This electoral minority feels the full load of funding the government, but lacks power at the ballot box.

Likewise, based on Franchise Tax Board (FTB) data, this 33% minority also pays significantly higher effective tax rates than the vast majority of Californians.

CHART: Average Effective Tax Rate for California Personal Income Tax (PIT), by Taxpayer Population


maybe the majority of the economy is services BECAUSE they aren't taxed. If we begin taxing, and disincenting services, revenue may increase, but economic activity and associated job creation will slow. What's up with "smart" people doing static analysis? The problem is too much spending & regulation!

Perhaps California's antiquated tax system and dysfunctional state government manifests itself in other data.

CHART: Development Counsellors International survey on the states with the least favorable business climate

CHART: Tax Foundation ranking on states with the worst business tax climate

CHART: Unemployment rate by state (October 2011)

Stephen Morris

Mr Spadijer’s intricate knowledge of these matters never ceases to amaze me.

It is a pity The Economist no longer employs journalists who research their articles as thoroughly.


Oh spade and Stephen Morris on the same forum again.... *yawn!

Good article, I was always wondering if it was possible to fix such a dysfunctional system - seems it just might be.

Stephen Morris

In summary then:

1. Democracy has the mechanisms with which to remedy perceived flaws in Democracy, and does so with the direct consent of the People.

2. In contrast, paternalistic government-by-politician – without Democracy - has no such mechanisms for self-repair, and has never been approved directly by the People.

As Nobel laureate James Buchanan observed (alluding to the problem of “adverse selection” which afflicts government-by-politician):


But not – it would seem – supported by paternalistic scribblers at The Economist.

The Economist has still failed to acknowledge that the moves to introduce less partisan forms of Congressional redistricting in California and Florida were made possible only through the mechanisms of Democracy.

When will such an acknowledgement be forthcoming?

And The Economist has still failed to acknowledge that the power of special interests in Californian initiatives is a result not of Democracy, but of the savagely anti-democratic, unelected judicial oligarchs of the US Supreme Court who declare money to be “free speech” and corporations to be “people”.

By why lets facts get in the way of elitist prejudices?


In recent years, however, the once respected newspaper has been infiltrated by paternalistic ideologues who take every opportunity to disparage democratic government ("voters out of their depth", "insane"), and who, with each passing week, become ever more desperate as their world collapses around their ears and they try to explain away the manifest failure of their incoherent ideology.

Stephen Morris in reply to hikeandski

The failure lies not with The Economist itself. The Economist wasn’t always like this. There was a time when it was known as a defender of Democracy.

When the history of The Economist is written (or next re-written) its current unimaginative, illogical, poorly researched and paternalistic editorial policy will be seen as an embarrassing stain on the record of a venerable institution originally established "to take part in a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress."

Sorry for my intemperate second message before ...

However, I think to achieve "good government" requires more than initiative referendum and recall being in a democratic constitution. Democratic traditions amongst the leaderships of political organisations matter too. And democratic traditions require said leaderships to value such traditions. What I am trying to say is that there is more required than natural rights charters and democratic constitutional principles.

Many former European colonies started out independence with the finest democratic constituions, but lacked a political class with democratic traditions, and some were taken over by military dictators.

And let us take the example of Germany 1918 - 1933. The Weimar constitution had a pure form of proportional representation. However, this was designed by the political class that came to power in 1918 to exclude the aristocracy from having much influence. However, by 1922 a nationalist movement arose that was not committed to democratic traditons. Its leaders were values deficient, most dishonourable ...

Therefore I would argue that it is not possible to get to a democratic utopia overnight. Whilst initiative and referendum might be useful and helpful to democracy they require political education of all citizens ... in the current technological era this might involve the press, Internet bloggers, not to mention responsible individuals in the political class.

From Australia I have read much in the press about the United States. As someone who hopes that Australia progresses towards a more democratic republican polity, I recognise that this will not happen overnight.

From my reading of Australia's political class, I think that there is a new class of bureaucrats which together with beneficiaries of some government programs has handed out unmeritted benefits to themselves at the expense of the general public. No doubt the same is true in most developed countries.

From my involvement as a former local branch activist in a political party (of which I am no longer a member), may I say that it seems to me that is not so much the legislators personally as that the parliamentary system has been hijacked by vested interests outside. Parliamentarians tend to neglect the ordinary people, the poor, and vote too much on the basis of what the real beneficiaries of programmes demand.

Only by getting more people involved can anything much change.

And though I was intemperate I can only support zero sum referenda where the referenda specify how the proposed programme or policy is to be funded. The history of referenda contains a number of dictators who have put contested bad policies to the electorate in rigged ballots. Such as Napolean. Though a form of legislation which may prove necessary to fix up the Californian situation, I think that any democratic provision can be utilised by demagogues or dictators or vested interests to do wrong to minorities, or majorities.

I have been reading The Economist since 1983. Whilst I think that the Economist may have become more conservative in ideology and less neo-liberal, I think that the complexity of many an issue requires considered thought and consider The Economist well worth reading nevertheless.

Believe me I have been pushing for a republic in Australia for many years ...

Commenter Andrew Oliver raises useful points regarding forms of government.

In response, let me clarify a possible misunderstanding about the nature of Democracy. There are two quite distinct aspects to the employment of Democracy:

a) Democracy as a form of government (a matter of preference); and

b) Democracy as a means of choosing a form of government (a matter of logic).

Dealing with (a), it may be observed that different people have different preferences concerning forms of government. Steven Spadijer has produced a mountain of empirical evidence that might lead many people to regard Democracy as the preferred form of government. James Buchanan, cited earlier, supported “direct democracy add-ons to existing decision rules” but retained a preference for some constitutional restrictions. Andrew Oliver has presented arguments suggesting others variations.

Yet others – like the current editors of The Economist - are savagely opposed to Democracy and never mention it but to disparage it.

Significantly, none of these preferences is a priori correct, which leads to (b), the question of how a set of individuals may go about choosing a form of government, or - more precisely - an “aggregation device” (the mechanism by which they aggregate conflicting preferences) without an agreed device with which to aggregate their preferences.

Paradoxically, it is precisely because no one preference is a priori correct that we may determine a logical means of choosing.

It may be observed that, for an arbitrary set of individuals choosing an aggregation device:

a) there is no known principle by which to identify individuals whose preferences are to be privileged a priori over those of others in the set. (Although many people believe that their own preferences ought to be privileged, such a belief is itself a matter of preference which invites the recursive problem of how to aggregate it with those of other people who believe that their own preferences are the ones to be privileged); and

b) the only means of aggregating preferences without privileging some of them is to privilege none of them.

We could say that non-privileging devices are the eigenfunctions for preference aggregation in the absence of (logically indefensible) a priori privileging: they are the only solutions which do not require the doing of something that is logically impossible to do (i.e. identifying a priori privileged individuals).

What do such devices look like? We can identify some necessary characteristics:

a) the votes for and against any option must be weighted equally (to avoid privileging some individuals by giving their votes greater weight);

b) the options to be voted upon must not be pre- or post-vetted by some privileged group (to prevent a privileged group vetoing viable options); and

c) the order in which options are eliminated must not be controllable by a privileged group (which in turn requires an indefinite-pass system, because any definite-pass system either could be manipulated in the final pass by those who control the order of elimination, or would collapse into a de facto lottery - which would privilege a priori those who prefer the choice to be made by lottery over those who do not).

We can see that these conditions describe an initiative-and-referendum system: the eigenfunction is itself one of the possible systems of government.

What form of government might such a device choose? It’s not for me to say. God hasn’t granted me a Monopoly on Wisdom in this matter. It might very well choose to prohibit or restrict initiative-and-referendum. It might choose a dictator, or a oligarchy, or a (so-called) “representative” system. It might choose a lottery. More plausibly it might choose some hybrid combining elements of each of these.

What we do know as a matter of historical record is that:

a) in most jurisdictions people have never been permitted to choose their preferred form of government in such a process (i.e. in which the options have not been pre-vetted by self-serving politicians organised into powerful parties, determined at all costs to maintain their collective monopoly on power);

b) where people have been permitted to choose (most famously in Switzerland, but to a limited extent in some US states) they have almost invariably chosen to adopt the initiative-and-referendum process as an ongoing part of their government; and

c) where people enjoy the right of initiative-and-referendum, they do not vote to abolish it, even though it is a straightforward exercise to call a referendum for that purpose.

That is not to suggest that such an outcome is the “right” one. That would be inane. It is, however, the outcome that arises in the absence of logically indefensible a priori privileging.

So why are the People not permitted to choose the form of government they prefer for their country??



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