Jerry Brown's Budget Soap Opera

At Wall Street Journal, "As Sacramento Turns":

'All My Children" may be off the air, but the soap opera is still running in Sacramento. In the latest installment, Governor Jerry Brown divorced his fellow Democrats by vetoing their budget. Democrats and unions are furious and plotting revenge, while both sides blame the evil Republicans for refusing to sanction a referendum that would give voters a chance to endorse a tax increase.

Where's Susan Lucci when you need her?

Mr. Brown deserves credit for vetoing the Democratic budget that reverted to Sacramento form to close a $9.6 billion deficit, deferring several billion dollars of bills into the future, borrowing from special funds, and raising the state's sales tax and vehicle registration fee without the constitutionally required supermajority vote. Even the Democratic treasurer warned that the state couldn't finance its short-term debt with such a risky plan, and Mr. Brown cashiered it.

Democrats are now blasting him for suggesting that an "all cuts" budget is the only alternative if Republicans won't agree to allow a vote on a five-year extension of what was supposed to be a temporary income tax surcharge, among other tax hikes. Democrats are frustrated because they expected Republicans to cave months ago. But Republicans have shown laudable discipline, and they know that their relevance in state politics hinges on extracting concessions from employee unions that will reduce the future cost of government.

Mr. Brown needs at least two GOP votes in each chamber to put the tax increases on the ballot. And Republican lawmakers have said for months that they're willing to do so in return for modest pension and regulatory reforms and a hard spending cap.

More at the link.

Unions are basically killing any deal, even one that includes GOP concessions to Jerry Brown tax increases.

RELATED: At Instapundit, "SHOCKER: Companies Leaving California In Record Numbers."

Jerry Brown's Budget Soap Opera

At Wall Street Journal, "As Sacramento Turns":

'All My Children" may be off the air, but the soap opera is still running in Sacramento. In the latest installment, Governor Jerry Brown divorced his fellow Democrats by vetoing their budget. Democrats and unions are furious and plotting revenge, while both sides blame the evil Republicans for refusing to sanction a referendum that would give voters a chance to endorse a tax increase.

Where's Susan Lucci when you need her?

Mr. Brown deserves credit for vetoing the Democratic budget that reverted to Sacramento form to close a $9.6 billion deficit, deferring several billion dollars of bills into the future, borrowing from special funds, and raising the state's sales tax and vehicle registration fee without the constitutionally required supermajority vote. Even the Democratic treasurer warned that the state couldn't finance its short-term debt with such a risky plan, and Mr. Brown cashiered it.

Democrats are now blasting him for suggesting that an "all cuts" budget is the only alternative if Republicans won't agree to allow a vote on a five-year extension of what was supposed to be a temporary income tax surcharge, among other tax hikes. Democrats are frustrated because they expected Republicans to cave months ago. But Republicans have shown laudable discipline, and they know that their relevance in state politics hinges on extracting concessions from employee unions that will reduce the future cost of government.

Mr. Brown needs at least two GOP votes in each chamber to put the tax increases on the ballot. And Republican lawmakers have said for months that they're willing to do so in return for modest pension and regulatory reforms and a hard spending cap.

More at the link.

Unions are basically killing any deal, even one that includes GOP concessions to Jerry Brown tax increases.

RELATED: At Instapundit, "SHOCKER: Companies Leaving California In Record Numbers."

Back to Teaching at California State Universities

From Naomi Schaefer Riley, at Los Angeles Times, "Cal State system: It's time to get back to teaching."

There's no quick quote to capture the essence here. Full-time faculty don't do much teaching, it turns out, or at least not "the bulk" of it. Mostly adjuncts nowadays. It's weird, though, because I had the best professors at Fresno State. I think I had one grad student TA, in math. And the professor referred all questions to him, and while the TA was a good guy, proficient, etc., that's probably not the best example of cutting-edge teaching. The Political Science Department was great though. So much better than the University of California, in terms of access to the professors. I mentioned previously that the more hands on attention professors provide, the more they'll help their students. That's what happening in my classes, and I still can't do enough to overcome the skills deficits kids bring to college. So yeah, focus on teaching at Cal State. (And check that link: Schaefer Riley notes that Cal State's at risk of closing ten campuses and turning away 100,000 students --- seems unreal.)

Back to Teaching at California State Universities

From Naomi Schaefer Riley, at Los Angeles Times, "Cal State system: It's time to get back to teaching."

There's no quick quote to capture the essence here. Full-time faculty don't do much teaching, it turns out, or at least not "the bulk" of it. Mostly adjuncts nowadays. It's weird, though, because I had the best professors at Fresno State. I think I had one grad student TA, in math. And the professor referred all questions to him, and while the TA was a good guy, proficient, etc., that's probably not the best example of cutting-edge teaching. The Political Science Department was great though. So much better than the University of California, in terms of access to the professors. I mentioned previously that the more hands on attention professors provide, the more they'll help their students. That's what happening in my classes, and I still can't do enough to overcome the skills deficits kids bring to college. So yeah, focus on teaching at Cal State. (And check that link: Schaefer Riley notes that Cal State's at risk of closing ten campuses and turning away 100,000 students --- seems unreal.)

More Parents Buying Apartments for Their Children

This is an amazing story, a testament to Americans' financial resilience amid the Obama Depression.

At New York Times, "The Gift Apartment From Mom and Dad":

FOR some parents, an engraved pen set just won’t cut it as a graduation present. It seems so insubstantial, so unoriginal. Anyway, the kid will just lose it. So how about a New York apartment?

Real estate brokers say that in the last year, they have seen more parents shopping for apartments for their grown children, hoping to take advantage of low mortgage rates and apartment prices that are still about 20 percent down from the market’s peak.

“I got a digital watch for graduation,” said Barry Silverman, an executive vice president of Halstead Property, “but I’ve worked with families where the children are getting an apartment.”

These congratulatory apartments are often studios or small one-bedrooms, but on occasion they are bigger-ticket items, he said, because “the parents see it as a long-term investment and a good place to park their money.”

In many cases, brokers say, the parents do not live in the New York area and view the apartment as a potential pied-à-terre for themselves when the child decides to move on. Some buy it as a straight-out gift, a gesture of profound affection sweetened by the current generous tax exclusion. Others buy it as an investment and retain ownership, and still others acquire it through a family trust for joint ownership.

These purchases raise a number of financial and estate planning questions, and lawyers and building managers advise parents to structure the arrangement carefully.

That's for sure. Check that link at top for the rest.

More Parents Buying Apartments for Their Children

This is an amazing story, a testament to Americans' financial resilience amid the Obama Depression.

At New York Times, "The Gift Apartment From Mom and Dad":

FOR some parents, an engraved pen set just won’t cut it as a graduation present. It seems so insubstantial, so unoriginal. Anyway, the kid will just lose it. So how about a New York apartment?

Real estate brokers say that in the last year, they have seen more parents shopping for apartments for their grown children, hoping to take advantage of low mortgage rates and apartment prices that are still about 20 percent down from the market’s peak.

“I got a digital watch for graduation,” said Barry Silverman, an executive vice president of Halstead Property, “but I’ve worked with families where the children are getting an apartment.”

These congratulatory apartments are often studios or small one-bedrooms, but on occasion they are bigger-ticket items, he said, because “the parents see it as a long-term investment and a good place to park their money.”

In many cases, brokers say, the parents do not live in the New York area and view the apartment as a potential pied-à-terre for themselves when the child decides to move on. Some buy it as a straight-out gift, a gesture of profound affection sweetened by the current generous tax exclusion. Others buy it as an investment and retain ownership, and still others acquire it through a family trust for joint ownership.

These purchases raise a number of financial and estate planning questions, and lawyers and building managers advise parents to structure the arrangement carefully.

That's for sure. Check that link at top for the rest.

Whatever happened to antitrust?

One century ago today, May 15, 1911, the Supreme Court upheld the federal government's lawsuit under the heretofore unused 1890 Sherman Anti-Trust Act against the Standard Oil near-monopoly in refining. The company founded in 1870 by John D. Rockefeller was broken up into 34 companies, including ones that eventually became Exxon and Mobil.

Of course, today they are back together again as ExxonMobil.

One of the less expected changes in public life over the last third of a century has been the growing apathy over the subject of antitrust (known outside of America as "competition law"). For example, the proposed merger of AT&T and T-Mobile, reducing the number of national cell phone network competitors from four to three, isn't popular in the Senate, but it doesn't seem to be a big news story with the public.

The last time I can recall anybody trying to make a big deal out of antitrust was in the mid-1990s when Pearl Jam, the most popular rock band of the period, sick of the absurd fees that Ticketmaster adds to concert ticket prices, tried to run a successful national tour without venues dominated by Ticketmaster.

Pearl Jam failed. People seemed to take away the message that, well, sure, Pearl Jam might have seemed cool and their crusade public-spirited. But their economic failure just shows that, deep down, they are losers. What's really cool is having a monopoly.

It's hard to explain to today's youth what a big deal trust-busting was just a third of a century ago. Alternatively, it's hard to figure out why nobody cares much anymore about cartelization.

When I was majoring in economics at Rice in the late 1970s, monopoly was a massive topic. I took a semester-long course devoted to propounding the emerging libertarian line that there was very little to worry about. Competition would tend to rapidly eliminate monopolies. This popular idea of businessmen getting together in smoke filled rooms to agree to keep prices up was a stereotype. I got a very good grade in that course. I believed. 

The young professor making these arguments against antitrust law in the late 1970s saw himself as a rebel against orthodoxy. Today, though, his free market ideas seems to have become conventional wisdom, or at least nobody cares that much to argue against them.

The funny thing was that when I got a job with a young company, however, it turned out that competition, from the perspective of owners and employees holding stock options, was awful. It's like Adam Smith said, in a genuinely competitive market, it's hard for a business to make more than the risk-adjusted cost of capital, which is not much fun at all. Why go through the immense amount of hard work to invent a new, better way of doing business if that's all you'll end up with? To make good money, the kind of money the stock market demands you make, you need some kind of quasi-monopolistic edge. 

The founder of the company, as strong a competitive personality as you could want, looked at the high fixed cost economics of this submarket of marketing research and quickly sold the firm to our chief competitor for a lot of money. But the Reagan Justice Department shot the deal down because our clients whined so much. That began a price war that quickly drove the third firm in the industry out of business, and kept the two survivors from making decent profits all through the prosperous '90s. As I had jobs over time with both competitors, I came up with various novel ways to reduce competition, but top management, knowing the government was keeping an eye on them from their earlier merger attempt, was unenthusiastic. So, years of minimal profits rolled on.

This dreary fate did not befall most other industries, though. The Dow Jones average is about an order of magnitude higher than when I started to work in late 1982, because profits are vastly higher. It's easy to understand the high profits of, say, Apple, but why does Procter & Gamble make so much off toothpaste and detergent these days?

One difference is that in the inflationary 1970s, it was common for members of the public to suspect that rising prices were caused by monopolistic practices. With the prices of manufactured goods stable or even falling in much of the time since the 1970s, however, it's common to assume that anticompetitive activities can't be a problem because, say, cell phones or TVs keep getting awesomer. Psychologically, it's hard to worry much about whether prices should be falling even faster.

My old articles are archived at iSteve.com -- Steve Sailer

Aspie Economists

Here's a long article by Benjamin Wallace-Wells on Paul Krugman's personality, such as it is. Economists have been called "worldly philosophers," but a lot of them come across as being awfully out of touch. For example, this article uses Krugman's long relationship with Larry Summers to help explain Krugman. By contrast to Krugman, when it comes to being a people person, Summers is practically Oprah. Yet, Summers was a notorious failure in the fairly easy job of being president of Harvard. 

Wallace-Wells does do a good job of zeroing in on Krugman's best piece of writing:

Back in 2006, when he was writing The Conscience of a Liberal, Krugman found himself searching for a way to describe his own political Eden, his vision of America before the Fall. He knew the moment that he wanted to describe: the fifties and early sixties, when prosperity was not only broad but broadly shared. Wells, looking over a draft, thought his account was too numerical, too cold. She suggested that he describe his own childhood, in the ­middle-class suburb of Merrick, Long Island. And so Krugman began writing with an almost choking nostalgia, the sort of feeling that he usually despises: “The political and economic environment of my youth stands revealed as a paradise lost, an exceptional moment in our nation’s history …” 

Krugman remembers Merrick in these terms, as a place that provoked in him “amazingly little alienation.” “All the mothers waiting to pick up the fathers at the train station in the evening,” he says, remembering. “You were in an area where there were a lot of quiet streets, and it was possible to take bike rides all over Long Island. We used to ride up to Sagamore Hill, the old Teddy Roosevelt estate.” The Krugmans lived in a less lush part of Merrick, full of small ranch ­houses each containing the promise of social ascent. “I remember there was often a typical conversational thing about how well the plumbers—basically the unionized blue-collar occupations—were doing, as opposed to white-collar middle managers like my father.”

This starting point, which is awfully similar to where I'm coming from (see my post above about Mildred Pierce's L.A., in which Benjamin Schwarz eloquently describes our shared appreciation of the Paradise for the Common Man), potentially opened up for Krugman the opportunity to develop a more wide ranging critique of What Went Wrong. Was it merely tax cuts? At times, he's dipped his toe in the heretical possibility that, say, massive immigration wasn't wholly an unmixed blessing to somebody with his vision of the Good Society, only to quickly run back up on the beach.

Now, obviously, even Paul Krugman is under a lot of career pressures to Not Talk About Unpleasant Topics. But, Wallace-Wells could have pointed out the important effects of Mrs. Krugman, a blue-eyed, long-haired woman who strongly self-identifies as black, has had on keeping Mr. Krugman on the politically correct straight and narrow, and pushing him toward his present view that racism is the root of all Republican evil. There was a period in the 1990s, when Krugman appeared to be developing in an interesting direction intellectually (here's his excellent attack on Stephen Jay Gould). But the advent of Mrs. K. seems to have coincided with putting the kibosh on his tendencies toward crimethink.

My old articles are archived at iSteve.com -- Steve Sailer