Proposition 13 & the effects of regressive policy in California

The financial crisis has hit California particularly hard. Poverty continues to spiral as unemployment reaches a post-war high of 12.2%. The political response has been to implement drastic cuts.

In July, the state legislature haggled for weeks over how to close a $26 billion budget gap. Instead of increasing taxes of corporations or the wealthy, the budget deal that emerged to be signed by Republican Governor Arnold Schwartzenegger ordered deep spending cuts, laying off tens of thousands of state workers.

Reduced funding for education, coupled with big tuition increases, sparked a student and faculty strike at California’s public universities. Programs for ex-prison inmates and parolees have been slashed. And the social safety net of healthcare and services for the poor, children and elderly - the least powerful and least vocal members of society - has been systematically shredded. [...]

A legal challenge has temporarily halted some of the cuts to elderly care. But Governor Schwartzenegger is trying to overturn the court ruling and re-institute the cuts. [...]

So, why has California been hit so disproportionately hard, and what are the causes of this drastic response? Whilst Schwartzenegger's regressive political attitude can take some of the blame, Proposition 13 plays the lead role.

Proposition 13 was an initiative that was enacted by the voters of California. The key components of the proposition were to cap property tax (even if the value rises) and put into law that a two-thirds majority is required to raise taxes and pass a budget. The bill gained popular support and the Californian constitution was duly amended.

Ever since its was written into law, Proposition 13 has played a duel role in exacerbating California's instability and inequality as well as preventing progressive reform.

It is so iniquitous because the maximum rise in property tax is considerably lower than the actual increases in property prices. Neighbours living in identical homes are liable to pay substantially different property tax depending upon when they purchased the property. This means that the tax liability is heavily tied to the date of purchase rather than the value of the property or financial circumstances of the owner. (A relatively well-known example of this is billionaire Warren Buffet, who pays less than 0.06% tax on a $4,000,000 Laguna Beach home purchased in the 1970s. Meanwhile, a working family in a modest, newly purchased home is liable to pay several times this amount).

By capping property tax, Proposition 13 effectively places the state’s budget in a straitjacket. As Krugman argues, "limits on property taxation have forced California to rely more heavily than other states on income taxes, which fall steeply during recessions," which is why California has been so heavily affected by the financial crisis. And, by putting into law that a two-thirds majority is required to raise taxes and pass a budget, Proposition 13 prevents progressive reform and encourages drastic regressive policy responses in times of economic hardship. With Proposition 13 in place, the response to people needing a safety-net in times of need will always be to take it away from them.

U.S. healthcare & Obama's concessions

The current U.S. system is expensive and inefficient.

[T]he incredible cost of US health care is breath-taking, whether you're a reformer or anti-reformist. The US spent some $2.2 trillion (£1.34 trillion) on healthcare in 2007. It is a mind-boggling number which amounts to over 16% of US GDP. That is nearly twice the average spent by other rich nations with advanced health systems - yet you have to wonder if this is value for money when, by most measures, the US is a less healthy nation than other rich countries, on everything from infant mortality to longevity.

The U.S. healthcare system needs reforming. Cue Barrack Obama, one time advocate of single payer healthcare system.

As Paul Krugman writes, the single payer healthcare system would be the best option for reform.

True “socialized medicine” would undoubtedly cost less, and a straightforward extension of Medicare-type coverage to all Americans would probably be cheaper than a Swiss-style system.

The evidence makes interesting reading.*

Despite his previous endorsement of single payer healthcare, Obama repositioned himself in opposition to single-payer healthcare during the presidential candidacy campaign. His new proposition was for a public option to compete with private insurers.

Since the presidential election, Obama has constantly made concessions. In March 2009, Obama talked about the importance of being pragmatic

Each of us must accept that none of us will get everything that we want, and that no proposal for reform will be perfect. If that's the measure, we will never get anything done.

This was an exceptional piece of positioning; he presented himself as being open-minded and pragmatic whilst simultaneously ruling out a single payer solution. Since then, Obama has gone even further to placate those in opposition to significant healthcare reform, Obama recently said:

[T]he public option, whether we have it or we don't have it, is not the entirety of health care reform. This is just one sliver of it, one aspect of it. And by the way, it's both the right and the left that have become so fixated on this that they forget everything else.

Obama's change of discourse suggests that the competing public option proposal is now off the table. In a generous light, the initial change of stance could be viewed as born of the ugly reality of electoral politics rather than unprincipled toadying. If Obama makes this latest concession, which he seems willing to make, there can be no such generosity. In three moves Obama's stance on healthcare has changed from seemingly principled, to apparent pragmatism, to sell-out.

In the light of Obama making concession after concession, will the considerably watered down healthcare reform package pass?

At this point, all that stands in the way of universal health care in America are the greed of the medical-industrial complex, the lies of the right-wing propaganda machine, and the gullibility of voters who believe those lies.

Oh dear ... The lessons of Clinton healthcare plan of 1993 teaches us that this is a formidable opposition.

During the Clinton administration, support for completely rebuilding the health care system peaked in the spring of 1993 [55%] and declined subsequently. By June 1994, just 37% said the health care system needed to be completely rebuilt.

This does not mean that the opposition to healthcare reform is insurmountable. Healthcare reform has popular support. As Chomsky notes in Failed States, the majority of Americans recognise that their healthcare system needs reforming.

"An NBC-Wall Street Journal poll found that ‘over 2/3 of all Americans thought the government should guarantee everyone the best and most advanced health care that technology can supply'; a Washington Post-ABC News poll found that 80 percent regard universal health care as ‘more important than holding down taxes'; polls reported in Business Week found that ‘67 percent of Americans think it is a good idea to guarantee health care for all U.S. citizens, as Canada and Britain do, with just 27 percent dissenting'."

Regardless of the fact the U.S. polity is contradicting the will of the majority, the question is whether a reform so far removed from perfect is worth 'getting done' at all?

On the one hand, the reform itself is to be welcomed for improving America's healthcare system by potentially providing universal healthcare. The proposed healthcare reforms will make U.S healthcare more like the Swiss healthcare system, which primarily provides universal coverage through regulation and subsidy.

On the other hand, whilst the Swiss system provides good care, it is expensive. The only reason that the Swiss-style system is an improvement is that the status-quo is so inefficient and iniquitous. Obama has thrown away the opportunity to implement a progressive government-run healthcare system that would benefit more Americans significantly more so than this fudge. (Even his seemingly discarded proposal of 'competitive public option' system would be preferable).

With his endless concessions, Obama may have bought the votes of the odd 'blue dog', but by and large, the latest proposal continues to face the same opposition that a proposal for a single payer healthcare system would have faced. America needs Obama to be the strong and principled leader he portrays himself to be. America needs a president that ignores manufactured opposition, listens to the right-minded, and defends the interests of the people he serves. What America has is flaccid corporatist**.

*UK citizens might be interested to note that the NHS is comparatively cheap and efficient. In contrast to the current U.S system, it provides better care on almost every measure and costs around 40% as much per person. Although, when considering healthcare provision, it is important to bear in mind more than the degree of privatisation and amount of expenditure. Policy priorities significantly influence results. For instance, Cuba's universal healthcare includes preventive health care provision. Japan's citizens have healthy lifestyles. In both of these considerations the U.S. lags behind, which makes U.S. healthcare very inefficient in terms of expenditure versus life expectancy. A point well made by Chris Dillow at Stumbling and Mumbling. The American system is also hugely wasteful in term of 'over-treating' the elderly. (Of course, the argument could always be made that such factors are economically determined, but I digress).

** The link is to an excellent (but very long) article by Paul Street about Obama. As it is on Znet, you may have to register to view it.

Update

I might try to re-write this and offer it as a new post in the future, because, in attempting to pre-emptively defend my argument, it has become diffuse. The latest article by Paul Krugman reiterates some of the arguments contained above in a clearer manner.

[T]here’s a point at which realism shades over into weakness, and progressives increasingly feel that the administration is on the wrong side of that line. It seems as if there is nothing Republicans can do that will draw an administration rebuke: Senator Charles E. Grassley feeds the death panel smear, warning that reform will “pull the plug on grandma,” and two days later the White House declares that it’s still committed to working with him.

It’s hard to avoid the sense that Mr. Obama has wasted months trying to appease people who can’t be appeased, and who take every concession as a sign that he can be rolled. [...]

[T]he supposed alternative, nonprofit co-ops, is a sham. That’s not just my opinion; it’s what the market says: stocks of health insurance companies soared on news that the Gang of Six senators trying to negotiate a bipartisan approach to health reform were dropping the public plan. Clearly, investors believe that co-ops would offer little real competition to private insurers.

Also, and importantly, the public option offered a way to reconcile differing views among Democrats. Until the idea of the public option came along, a significant faction within the party rejected anything short of true single-payer, Medicare-for-all reform, viewing anything less as perpetuating the flaws of our current system. The public option, which would force insurance companies to prove their usefulness or fade away, settled some of those qualms. [...]

So progressives are now in revolt. Mr. Obama took their trust for granted, and in the process lost it. And now he needs to win it back.

Basically, Obama should take a leaf out of Barney Frank’s book.

Barack Obama 182 days in office

In the course of electioneering, Barack Obama massively exaggerated his intentions. He played on hope, built expectations, and was destined to disappoint. As a president he presents himself as mindful that his predecessors have left him a considerable agenda. He is faced with formidable opposition to almost everything that he sets out to do, he needs to act tough and make enemies for the sake of the principles he claims to uphold. He needs to carry his public goodwill to shore up his reforms, push through a second stimulus package if needed, ensure that healthcare reform is anything like the plans he speaks of, leave Iraq and stand-up to Israel.

His actions belie his rhetoric. For all the plentiful ‘tough talk’ there have been few strong actions. He fudges issues and fails to deliver his promises. For those that think that his policy half-measures are better than nothing, please bear in mind that an insufficient stimulus package and half-baked heathcare reform could well prove counter productive. Critics of the plans will be able to say, “we tried them once and they didn’t work. Now you want more money? Why throw good money after bad?”

The highlights of his presidency have been the reversal of Bush’s restrictions on federal funding for embryonic stem cell research, his easing of restrictions on Cuba, and the change of rhetoric on many issues. With the exception of providing government funding for stem cell research, his achievements are easily exaggerated. His presidency has been characterised by morally deplorable foreign policy, compromises that please nobody and competent public relations management in the face of a largely servile media. (When Obama is criticised by the media, it tends to be on insignificant or spurious grounds).

In regards to the change in rhetoric, little else has changed. During his presidential inauguration speech Barack Obama said, “America is a friend of each nation and every man, woman and child who seeks a future of peace and dignity, and we are ready to lead once more.” This is nonsense. America is a friend to its client states and an enemy to those that get in the way.

Obama has proclaimed his commitment “to governments that reflect the will of the people” and of ‘democracy promotion’. Indeed, Obama called for increased investment in ‘democracy promotion’ in Latin America. As it turns out, those investments were to do the opposite of what he claimed they were to do. Democracy promotion funding has been used to support a military coup d'état in Honduras, which overthrew a democratically elected president with a progressive agenda.

The money for democracy promotion funds the National Endowment for Democracy (NED) and United States Agency for International Development (USAID). These agencies heavily funded the various organisations that formed Democratic Civil Union of Honduras.

Its [Democratic Civil Union of Honduras] only objective was to oust President Zelaya from power in order to impede the future possibility of a constitutional convention to reform the constitution, which would allow the people a voice and a role in their political process.

Despite apparent ‘condemnation’ through careful description of the coup as “not legal”, Obama has tacitly supported the coup d'état and the coup government financially and militarily. When Obama talks about ‘difficult’ issues his speech is laden with considerable obfuscation. All too often it is what he deliberately omits the objectionable truths. Obama has not acknowledged the coup d'état as a coup d'état for fear of forcing his own hand.

Obama has portrayed himself as being tough on Israel. He told Israel’s Prime Minister, Benjamin Netanyahu, “settlements have to be stopped”. Yet Obama has done nothing about the continued expansion of settlements. America continues to fund the Israeli government. The U.S. has plenty of leverage over the Israel and there is historical precedence in using it. For example, during his presidency George H. W. Bush (by no means the most progressive president) suspended loan guarantees to Israel because of settlement expansion. Obama chooses to do nothing.

When discussing America's 'new' approach to counterterrorism Obama said, “America's moral example must be the bedrock and the beacon of our global leadership”. Yet extraordinary rendition continues unabated. The “historic consensus” on significantly cutting carbon is a cynical exercise in greenwashing. It is full of loopholes and too long term to really effect Obama’s presidency. The planned departure of US troops from Iraq is a weak line of action that comes up short. It is an unquestionable fudge.

Obama has eased restrictions on Cuba and said that he seeks “an equal partnership”. These changes are, as Fidel Castro rightly considered them, "positive although minimal". The U.S. trade embargo against Cuba is still in place. The U.S. continues to punish Cuba by keeping in place this hangover from the Cold War whilst continuing to support dictators and aggressive regimes that it views favourably. A global superpower continuing to undermine small island is not grounds for an equal partnership.

The actions of the Obama administration expose Obama for the largely unprincipled and wilfully deceptive man he is. In the light of the military coup d'état in Honduras Hugo Chavez addressed Obama via Venezuelan state television. He said, "don't deceive the world with a discourse that contradicts your actions". Fat chance

Update

I should have included the reckless killing of civilians in Afghanistan and the failure to reform the financial sector too.

100 Days: Barack Obama has taken some steps in the right direction - but let’s not kid ourselves

Unless connected to their predecessor, presidents are able to enjoy the luxury of blaming their predecessor for a while. Obama may have extended this period through some impressive political posturing. The disclosure of the memos authorising detainee abuse was inevitable due to an American Civil Liberties Union lawsuit, releasing the memos early allows Obama to distance himself from their contents.

The closure of Guantánamo Bay is to be welcomed, but it too seems more likely to be politically motivated rather than morally. Its geographical proximity and historical connotations means that it carries considerable symbolic value beyond its terror suspect prison status both in the US and elsewhere. Nowhere will the symbolism resonate more greatly than Cuba, it was, after all, once Cuban land before US ‘intervention’.

New relations with Cuba are, so far, tiny steps in the right direction. The archaic trade embargo, a hangover from the cold war, is still in place. In fact, all that has been undone are additional restrictions brought in by George Bush Junior. Nonetheless, Obama’s move away from Bush’s stance on Cuba, Venezuela, Iran and Europe is to be welcomed. Welcomed but not exaggerated.

His burgeoning presidency has seen some less contestable successes, for example, allowing wider research on stem cells is unquestionably the right move. The planned departure of US troops from Iraq, on the other hand, is an unquestionable fudge.

Obama is all too willing to make concessions when he deems it politically expedient. His pledge to speak “truthfully about the Armenian genocide” was avoided through deliberate obfuscation. His calls for peace in the Middle East feel like empty platitudes. The subtext of past speeches has revealed him to be reluctant to criticise Israel. Given that Israel's coalition government is particularly right-wing and the shift rightwards of Israel’s Labour party, it seems peace can only come at the expense of Palestinians.

Obama has not had it all his own way, Europe rejected sending more troops to Afghanistan and refused an economic stimulus package on Obama’s terms. Nor will he have it all his way in the future: Pakistan is becoming increasingly unstable. North Korea seems as defiant as ever having fired ballistic missiles. Afghanistan’s impending national elections will likely trigger greater disturbance in the region.

His nation awaits a much-vaunted health care reform plan.

When ‘socialist’ means ‘liberal’

Paul Krugman ‘Tea Parties Forever’

President Obama is being called a “socialist” who seeks to destroy capitalism. Why? Because he wants to raise the tax rate on the highest-income Americans back to, um, about 10 percentage points less than it was for most of the Reagan administration. Bizarre.

But the charge of socialism is being thrown around only because “liberal” doesn’t seem to carry the punch it used to. And if you go back just a few years, you find top Republican figures making equally bizarre claims about what liberals were up to. Remember when Karl Rove declared that liberals wanted to offer “therapy and understanding” to the 9/11 terrorists? […]

So what’s the implication of the fact that Republicans are refusing to grow up, the fact that they are still behaving the same way they did when history seemed to be on their side? I’d say that it’s good for Democrats, at least in the short run — but it’s bad for the country.