By Katy Grimes

With cities all over the state closing community swimming pools because of budget cuts, a California lawmaker is pushing a bill requiring owners of public swimming pools to employ a “pool operator.”

California politicians have made it very clear that the residents of the state are not capable of managing their own affairs or those of their children and families. Consequently lawmakers have passed bans on smoking and plastic bag use, require fitted sheets in hotels, demanded mandatory breaks periods for babysitters, imposed regulations on fast food, required California public schools to serve breakfast, lunch, snacks, and dinners, and have even written laws requiring mandatory spaying and neutering of pets.

The pool police

AB 1726, by Assemblyman Michael Allen, D-Sonoma County, “establishes the Public Pool Health and Safety Act of 2012 which requires an owner of a public swimming pool, to employ at least one qualified pool operator,” according to the bill analysis.

But hiring a pool operator isn’t enough; the so-called pool operator must complete and pass a 14-hour pool health and safety course, register with a state agency, and pay a fee to that agency.

The “agency” referred to in AB 1726 is the State Department of Public Health, which already is tasked with supervising the sanitation, healthfulness, and safety of public swimming pools. Existing law already requires county health officers to enforce the public health department regulations.

In a not-so-subtle attempt to expand state government even more, the bill states that because “every year thousands of swimmers become sick from contaminated water, are injured from improperly maintained pools, or drown because of inadequate or unenforced pool safety measures,” more regulation is needed for the 65,000 swimming pools, wading pools, water attractions and interactive fountains in California.

The 14-hours of “pool operator” instruction must include training about “disinfection, water chemistry, water clarity, water temperature, operation and maintenance of mechanical systems, health and safety, including recreational water illness prevention, risk management, record keeping, chemical safety, entrapment prevention, electrical safety, rescue equipment, injury prevention, drowning prevention, barriers, signage and depth markers, facility sanitation, and emergency response; and, regulations, aquatic facility types, daily or routine operations, preventive maintenance, weatherizing, aquatic facility renovation and design, heating, and air circulation.”

When the training is completed, the pool operator will be a qualified Emergency Medical Technician, engineer, pool building contractor, chemist and lifeguard.

Lawmakers must be desensitized to even consider this bill at a time when the state has a $16 billion budget deficit and 11 percent unemployment. And California lawmakers continue to receive highly negative job ratings. According to the February 25 California Legislature approval ratings by Field Poll,  ”[T]hree times as many voters disapprove (64 percent) of its performance as approve (22 percent).”

AB 1726 originally would have established new state regulations only for the operation of swimming pools in rental housing communities, but was amended after Apartment Association groups opposed being singled out by the bill.  The recently adopted amendments now exempt rental housing from its provisions, and define a ”public swimming pool” as:

a) It is not a private pool.
b) It is operated by a public entity or is a place of public accommodation.
c) It is not a pool that is located within a public lodging providing no more than 15 rooms for public accommodation.

The California Hotel and Lodging Association and the California Association of RV Parks and Campgrounds oppose AB 1726 and see it as unnecessary “as both the market and current practice police the sanitary conditions of pools.” The RV Association also points out the certification course is costly at more than $400, and that the bill’s sponsor, as a certification training course provider, stands to financially benefit from the new training requirement.

The sponsor of the bill is the National Swimming Pool Foundation, which claims that AB 1726 “is necessary to help prevent drowning, injuries and the spread of  illnesses at public swimming pools and spas by ensuring that all public pools are maintained by well-trained pool operators.”

The National Swimming Pool Foundation offers the required 14-hour pool operator training and certification course.

Implications of the bill

Looking deeper into the bill reveals a much larger issue than just clean pool water. Taken out of the bill’s definition of a public swimming pool was federal Americans With Disabilities Act language: “‘Public swimming pool’ means a pool that complies with all of the following characteristics: (A) It is not a private pool.  It is operated by a public entity or that is a place of public accommodation to which the federal Americans with Disabilities Act applies .

David Miller with Allen’s office said that the ADA protections still apply, and they only removed the language from this bill because protections are always changing.

This is true.

The Washington Examiner recently reported that the Obama Administration’s Department of Justice issued a new guideline on January 31 interpreting a provision of the ADA, that now requires all operators of publicly accessible swimming pools—including cities, homeowners’ associations, hotels, spas, and gyms—to install a permanent fixed lift for the disabled, estimated to cost between $8,000 and $20,000 each.

“All 300,000 public pools in the United States must install a permanent fixed lift,” the Examiner said. “The deadline for compliance is tomorrow, March 15. Call it ‘Poolmageddon.’”

This is very interesting because last week the the Senate Judiciary Committee held a hearing about a bill to curb ADA lawsuit abuses. A long line of ADA activists testified in opposition to SB 1186, and several told about being denied access to hotel and public swimming pools.

Sen. Bob Dutton, R-Rancho Cucamonga, and Senate President Pro Tem Darrell Steinberg, D-Sacramento, joined forces and coauthored SB 1186, designed to curb abusive ADA lawsuits in California. Most of the ADA activists were opposed to the bill. And as distressing as much of the personal testimony was, it seemed carefully scripted.

The Examiner reported, “Compliance with the rule requires pool owners to have a lift for each ‘water element’ in their facility. So if your local community pool also has a spa, both the spa and the pool must be ‘accessible.’ But if you have two spas, don’t worry, only one lift is required.”

Apparently, most of the businesses with swimming pool pools were led to believe that, as long as they had one portable lift available, they were in compliance. “Pool owners claim they were led to believe that, as long as they had one device that could be wheeled out whenever someone needed help getting into or out of a pool or spa, there would be no need intrusive permanent fixtures,” the Examiner reported.

But then the proverbial organic substance hit the electric wind machine when the Department of Justice more narrowly defined the ADA requirements, leaving as many as 300,000 swimming pools potentially out of compliance this summer.

Hotels, public swimming pools, gyms and all public pools, with only one lift for the disabled, are fearful of more “drive-by” ADA lawsuits. Ironically, these lawsuits are what Steinberg and Dutton are trying to put an end to.

You know how regulated the people of California are when the federal government, the state, and millions of hungry trial lawyers go after swimming pools.

By John Seiler’

“Humankind cannot bear very much reality,” said T.S. Eliot. Nowdays, of course, American university professors brand him a “sexist” because he didn’t say “peoplekind.” “Human” implies “man,” which excludes “woman,” and so is sexist.

But he sure was right about California politics. Consider the new blog by Brian Calle, our editor-in-chief. He writes about Steve Maviglio, the omnipresent Democratic activist, objecting to one of the state’s major pension reform reporters, Daniel Borenstein. I’ve relied on Borenstein’s excellent work for years.

Calle quotes Borenstein:

“Spotting my scheduled appearance on an upcoming conservative think-tank panel to discuss public-employee pensions, union spokesman Steve Maviglio went into Twitter attack mode last week.”

“@stevenmaviglio branded me a ‘pension basher’ and called my ethics into question. His sad attempt to divert the debate badly mischaracterizes my position and further undermines serious discussion of a complex issue.”

And that’s what we need: a serious discussion — including from Maviglio.

Here are two news reports today:

S&P douses Democratic idea to forego budget reserve

And:

Fitch on new California budget problems: Don’t panic

It shows who’s really in control in California. It’s not Maviglio. It’s not Gov. Jerry Brown. It’s not the Democratic Party. It’s not the risible Republican Party. It’s not Treasurer Bill Lockyer.

It sure ain’t the voters of California.

It’s the bond houses.

It’s like what happens if you max out your credit cards. You’re frozen. You have to pay off that debt before you can do anything else. And it’s hard to pay off.

Can you work harder to earn more money? Maybe. But what if you’re already working 16 hours in a day, seven days a week? Then you can’t work more. That’s why California can’t raise taxes: Because we’re already maxed out on what we are able pay.

And the state treasury still spends too much. And state and local governments owe $1 trillion, according to Dan Walters.

For many people and companies, the solution is simple: Leave the state.

But California can’t leave itself. So it’s stuck.

Soon, not just future pensions will be cut, but existing pensions. Brown’s proposed budget includes $4 billion to pay pensions of current retirees. That’s almost half the $8.5 billion he’s calling for in tax increases. That $4 billion is just going to grow. Cities, also, are facing massively increasing pension payments, which is why some of them are headed to bankruptcy.

Because there’s no money. And no chance of ever getting more.

Does the state constitution guarantee the payments? The bond houses don’t care about the constitution. They want their money. And they’re running the show.

Tweet that, Steve Maviglio!

By John Seiler

Our friend Mike Shelton sent another great cartoon:

By Dave Roberts

In California, there are three certainties: death, taxes and the re-election of Sen. Dianne Feinstein. In 2006, she shellacked Dick Mountjoy by 24 points. In 2000, she trounced Tom Campbell by 19 points.

The grande doyenne of California Democrats has been in the Senate for 20 years and will turn 79 next month. She’s up for re-election and, short of serious illness or death, it’s likely she’ll still be in the Senate when she’s 85 and 91 if she wants.

So it’s not exactly a shock that prominent Republican congressmen like Darrell Issa, David Dreier and Dan Lungren have chosen to sit this one out. That has left the field of challengers to 14 Republicans, five Democrats and four minor party candidates — all of whom have zero to little electoral experience or name recognition. In a crowded field of nobodies, getting their party’s endorsement provides an advantage in winning the second spot in the new top-two primary system and its ticket to the general election in November.

The top two system was instituted by Proposition 14 in 2010.  Under it, the top two winners of June 5 primary will face off in November. No other candidates for U.S. Senate will be on the ballot. Assuming Feinstein is the top vote getter, that means just one other person will face her on the ballot, likely a Republican. Third party candidates will be shut out.

The function of the political parties has been reduced to official endorsements.

In March, the California Republican Party endorsed more than 100 candidates for a variety of offices, including for the U.S. Senate. “As the party prepares to be a vigorous contender in California’s first top two primary, we seek to promote the most competitive candidates in the field this primary season,” said Party Chairman Tom Del Beccaro in the press release announcing the endorsed candidates.

Elizabeth Emken won the GOP nod as the most competitive candidate to face Feinstein. However, the Danville autism advocate’s only electoral experience is finishing fourth out of four candidates in the 2010 Republican primary in Democratic Rep. Jerry McNerney’s district. Emken received 16.7 percent of the vote. In a district that winds through four counties, Emken didn’t even win her own Contra Costa County, finishing second, just 270 votes ahead of the third-place finisher.

Such a poor showing might be understandable if a candidate were running a token campaign, placing her name in contention for publicity’s sake but doing little campaigning. But Emken ran full out in 2010, spending $456,404 — more than $200,000 of it from her own pocket. That equates to $40 per vote. At that rate Emken would need to raise more than $200 million to best the more than 5 million votes Feinstein gathered in 2006. As of March 31, Emken had raised just more than $300,000. Feinstein’s campaign treasury had more than $7 million on hand.

‘Most competitive candidate’?

So what makes Emken the “most competitive candidate” in the eyes of state GOP officials? One factor is that her senior communications advisor is Mark Standriff, who in January left his position after two years as communications director for the California Republican Party. “Mark has been a tireless member of our senior staff and dedicated himself to improving the CRP’s communications efforts by helping me reach more voters in more corners of our state,” California GOP Chairman Tom Del Beccaro said in a statement upon Standriff’s departure.

In an email interview, I asked Jennifer Kerns, who replaced Standriff as the California GOP communications director, whether it was helpful for Emken in getting the endorsement to have Standriff on her staff. Kerns did not address the question, saying simply, “He was free to consult with any campaign once he departed the CRP.”

Said Standriff in a phone interview, “The only thing it helped is that I am a professional communications director and somebody who has worked on campaigns for years and was able to put together a comprehensive package. I contacted no board members. Frankly, I wish I had that kind of power.”

Standriff said Emken’s experience two years ago in one district’s partisan Republican primary is not relevant to today’s statewide, top-two primary.

“You have to take everything that happened pre-Prop. 14 and throw it out the window,” he said. “All of these other candidates seem to think this is still a partisan primary, and it’s not. It’s open to everybody. That’s why you will see 24 different names on the ballot. So the Republican Party said, ‘Who do we think is the most electable, who has the best chance to get through June 5th and take on Dianne Feinstein?’ Everybody had the chance to present their financial package and show how much money they will be able to raise and present their positions. She’s the only one who has ever gone to Washington D.C. and stood up and said, ‘Enough is enough.’ And that’s a big thing.”

Kerns said Emken’s experience as an autism lobbyist was a major factor in her endorsement.

That was echoed by Jeff Corless, Emken’s campaign manager. He said, “She, unlike the rest of the candidates, not only has business experience and experience helping those truly in need, but also understands the legislative process from day one when she goes back to the Senate, because of her experience in advocacy for autism.”

Endorsement process

Perhaps it’s a case of sour grapes, but several Republican candidates who did not get the endorsement or chose not to participate in the endorsement process, with its $500 buy-in for consideration, have harsh words for the way things went down.

“I believe the Republican Party has committed fraud in its endorsement of Elizabeth Emken by doing so without providing an opportunity for all candidates to be heard,” said Dennis Jackson, an aerospace general manager from Rancho Cucamonga. “Due to the open primary, there were no party debates or any type of debate that was televised.

“I have been a voting Republican since 1968 and would destroy Elizabeth Emken in a debate or in a comparison of backgrounds that would best serve this nation. However, I was never contacted by the Republican Party about any meeting to review my candidacy, policies or background. In making the endorsement in such a manner, the party is playing king-maker and insulting the intelligence of the voters as well as attempting to silence the voice of the candidates that they never even took the time to meet. The party politics seem more in line with the Bolsheviks than the Founding Fathers.”

Disappointment

Also ticked off in Rancho Cucamonga is MBA student Dirk Allen Konopik, who said, “The California Republican Party’s leadership, to include Chairman Tom Del Beccaro, has been a constant disappointment; from their continuous failure to support viable candidates, to the unethical decision to charge U.S. Senate candidates $500 just to consider them for the CRP endorsement. I chose not to pay. It is now very clear to me, after ramping up our U.S. Senate campaign since January 2011, why the Democratic Party controls California. It’s because the CRP is inefficient, ineffective and corrupt. In my opinion, I would rather have the California Federation of Republican Women lead the CRP.”

Also critical is Orly Taitz, the Laguna Niguel attorney who has become known for challenging President Obama’s citizenship.

“The nomination process was a complete fraud, and a number of the candidates are considering suing the corrupt 24 board members,” said Taitz. “Two candidates … talked to the Chair of the Board Tom Del Beccarro and another board member, who told them that the meeting and discussion was just a formality, the decision was already made. So, the Board has collected several thousand dollars from candidates under false pretenses. They used this money to have a nice weekend at a nice hotel and announced the predetermined decision. They defrauded the candidates and the voters.”

Another unhappy candidate is Rick Williams, a Los Angeles attorney.

“I believe the California Republican Party acted improperly by engaging in a process to endorse one candidate in the United States Senate race from a field of 14 good Republicans running for the seat,” he said. “I declined to participate in their disgraceful process. I realized it was a sham and wanted nothing to do with it. The decision as to which candidate should represent the Republican Party against Dianne Feinstein is for voters to make — not a tiny group of insider political operatives at the state party who were trying to tilt the playing field.”

Nachum Shifren, a Santa Monica rabbi, believes the state party snub of his campaign may be an asset: “My chances are helped, since the GOP mafia and good ol’ boys club will never nominate or support a true conservative that threatens the status quo,” he said. “I am having success in precisely distinguishing myself from the other RINO candidates and those that simply won’t take on the difficult issues.”

Kerns dismissed the criticism of the endorsement process, saying, “We provided every candidate the opportunity to be heard, in writing, by phone, and in person. This was to ensure the fairest process.”

If party officials had decided to base their endorsement on the candidate with the best electoral experience, they would have chosen Greg Conlon, a Burlingame CPA.

“I probably have the best chance because I ran statewide in 2002 for state treasurer and received over one million votes in the primary and three million votes in the general election against Phil Angelides, an incumbent,” said Conlon. “Therefore, even though it was 10 years ago, some will remember the name and vote for me now.”

The GOP endorsement may ultimately be irrelevant to the outcome of this year’s election. It’s likely that whoever wins the primary from among the 14 largely unknown and inexperienced Republican candidates will become a sacrificial lamb led to the Feinstein slaughter in November.

By Joseph Perkins

Josiah Citrin, owner and chef at Melisse Santa Monica, hosted a special seven-course tasting last night at his Michelin award-winning restaurant. Each dish was prepared by celebrated chefs from around the state using foie gras as an ingredient.

The purpose of the culinary event was to call attention to a pending state law, scheduled to take effect July 1, which would ban the sale or use of the delicacy — made from duck or goose liver –throughout California.

“This is low hanging fruit,” said Chef Citrin. It’s “easy to go after the foie gras.”

Indeed, animal rights activists insist that the method used to produce foie gras, French for “fat liver,” is inhumane.

People for the Ethical Treatment of Pets claims that its secret investigation of Sonoma-Artisan Foie Gras, California’s last producer of the gourmet food item, found ducks “crammed a into filthy, feces ridden shed” as well as “barrels full of dead ducks who had choked to death or whose organs had ruptured during the traumatic forced-feeding process.”

So disturbed were PETA’s investigators that they decided to “rescue” 15 ducks.

Citrin says that he and other chefs endeavor to ensure that the food they serve in their restaurants is produced as humanely as possible.

“All the ingredients that I try to use, I really work hard to find humanely-raised animals by farmers who really care about it,” he said.

And so do other chefs around the state, he said, including those who participated in last night’s tasting at Melisse. They are members of  an advocacy group, the Coalition for Humane and Ethical Farming Standards (CHEFS), which opposes the pending ban on foie gras.

Rather than outlaw foie gras, CHEFS argued, in a petition it recently delivered to Assembly Speaker John Perez, D-Los Angeles, the state should regulate its production.

That would include regular monitoring by animal-welfare authorities, raising geese and ducks in cage-free settings, hand-feeding birds by methods that don’t restrict breathing and limits on the fattening birds.

CHEF’s proposal has been summarily rejected by PETA and other animal-rights groups who insist on nothing short of an outright ban on foie gras. They note that the ban was approved by the Legislature in 2004, but that lawmakers gave Sonoma-Artisan Foie Gras, one of the nation’s largest producers of the delicacy, until this year to comply.

Opponents of the looming ban argue that it’s not just about foie gras, but about the very real prospect that a ban on one food over which special interest groups raise objections will lead to similar bans on other foods.

They note that some activist group or another has raised issues about the method used in production of not only foie gras, but practically every other food — meat as well as vegetable — that may be found on California restaurant menus.

By Katy Grimes

It appears that Democrats aren’t really sincere or even serious about working toward solutions that will actually help California solve the economic crisis in the state. Last week, Democrats voted against a smart consolidation program which would have provided an additional $1.3 billion to the state.

After Gov. Jerry Brown announced Monday that California’s budget deficit has grown to nearly $16 billion, astoundingly higher than the $9 billion deficit amount announced in January, one would assume that every California politician would be looking under every rock for money to shore-up the debt.

Apparently politics trumps economic stability.

Welfare system maze

One way to cut government is consolidating redundant services. If politicians are looking for redundancy in state government, the biggest mess  is also the most obvious: California currently has four different systems which run Medi-Cal, CalWORKS, and Food Stamp programs. Every county has its own maze of welfare programs as well.

Last week during the Senate Budget Subcommittee No. 3 on Health and Human Services hearing, Democrats moved to repeal the 2009 law directing the state to move towards a single, centralized system for Medi-Cal, CalWORKS, and Food Stamp programs.

In a 2010 report, the Legislative Analyst’s Office found “the new statewide process is intended to achieve two primary outcomes: (1) providing better service to people applying for these programs and (2) lowering administrative costs through better use of technology.”

Even with the LAO’s recommendation to consolidate, for efficiency, simplification, better record keeping, and cost savings, Democrats opposed consolidating the four state programs into one system – even with the $1.3 billion incentive from the Federal Government to do this.

With this opposition, Democrats have jeopardized much needed federal funds. This decision highlights the purely political problems involved in balancing our budget – government jobs and government spending, over efficiency and a slimmer state government.

In 2011 California applied for $1.3 billion in federal funding to streamline the four systems in the state’s largest welfare programs. The U.S. Department of Health and Human Services responded in April that they were approving the funding request on the condition that California consolidate the welfare system.

But Democrats said “no.”

By Brian Calle

If you have not read or heard anything about California’s unfunded public employee pension crisis, you’ve probably been living under a rock or, like union bosses and too many members of the state Legislature, the governor’s office and local elected officials, you are happily in denial.

Tensions are mounting too as pension deniers or pension reform “obstructionists, as Mercury News writer Daniel Borenstein called them, are attempting to publicly shame those of us pointing out that pension liabilities could bankrupt California without serious reform.

Borenstein is joining CalWatchdog contributor Steven Greenhut and David Crane, a former California State Teachers Retirement System board member,  and me for a panel on pension reform in San Francisco on Thursday.The unions have already gone on the attack about the event.

“Spotting my scheduled appearance on an upcoming conservative think-tank panel to discuss public-employee pensions, union spokesman Steve Maviglio went into Twitter attack mode last week,” Borenstein wrote for the Mercury News.

“@stevenmaviglio branded me a ‘pension basher’ and called my ethics into question. His sad attempt to divert the debate badly mischaracterizes my position and further undermines serious discussion of a complex issue.”

Fortunately as unions get louder so do the cries from taxpayers and advocacy organizations.

Christina Tobin, Founder and Chair of Free and Equal Elections Foundation and Vice-President of Taxpayers United of America, this week has been holding press conferences in California cities to draw increased attention to California’s pension crisis, including a planned event in Fresno on Wednesday and San Francisco on Thursday (in the morning before the reform panel).

Instead of denying the flood of economic problems looming because of pensions, it’s time to face the facts and fix the problem.

By Chriss Street

If there was an Academy of Motion Picture Arts and Sciences award for the best acting performance by a CEO, Jamie Dimon of J.P. Morgan Bank would surely win the Oscar for his dismissal of a $2 billion off-shore derivative loss as “a complete tempest in a teapot.”  Dimon tried to use all his theatrical skills to distract the American public from discovering that the U.S. Federal Reserve’s policy of loaning money to banks at zero-interest-rates has made derivative trading wildly profitable, but made lending to American businesses less profitable.

As fallout from the J.P. Morgan fiasco exposes the bloated derivative activities of major banks, the Federal Reserve will be forced to terminate the zero interest rate policy and let rates rise to retard bank speculative actions.  Higher interest rates will stimulate banks to make more commercial and industrial loans, resulting in higher U.S. economic growth.

Achilles Macris, J.P. Morgan’s CIO in their London office, began using the bank’s access to cheap capital from the Fed to amass a huge over-the-counter derivative gamble that high yield and sovereign debt interest rates would fall, after MF Global suffered a $1.2 billion loss on similar bets and was forced to file for bankruptcy last October 30.

Morgan’s gamble became very profitable after December 21 when the European Central Bank began making $640 billion off three year loans at 1 percent interest, referred to as “Long Term Refinancing Operations” — LTROs – available to the banks of Portugal, Ireland, Italy Greece and Spain — the PIIG countries.  By the end of December, J.P. Morgan’s total derivative exposure was $70.2 trillion on just $1.8 trillion of bank assets, according to the U. S. Controller of the Currency.  Morgan is reported to have continued heavy derivative buying in January and February.  Its profits soared again when the ECB announced LTRO2 as another $714 billion in three year low-interest loans to PIIGS banks.

The stock of J.P. Morgan vaulted from $29 per share in December to $45 a share in March as rumors swirled that Achilles Macris and his London team of six had already made $2-3 billion as high yield and sovereign debt interest rates continued to fall.  A jubilant Jamie Dimon announced that J.P. Morgan would increase its dividend and buy back $15 billion of its stock.

France and Greece

Everything seemed rainbows and unicorns for J.P. Morgan until two weeks ago, when France and Greece elected hardcore leftist candidates who want to abandon austerity spending cuts and increase social welfare spending.  Interest rates on the PIIGS sovereign debt shot back up and J.P. Morgan appears to have suffered a $4-5 billion loss.  It also appears the bank has been unable to limit its losses to $2 billion by selling out of their enormous derivative positions.

Jamie Dimon tried to dismiss the losses by promising heads will roll. But congressional hearings will soon illuminate to American taxpayers that the Fed has provided the capital that has allowed America’s three largest banks to engage in $173 trillion in leveraged derivative speculation:

The derivative exposure of these three banks alone exceeds 11 times the American economy and 2.7 times the economies of all the nations on earth.  On December 30, the derivatives leverage ratio of these three banks stood at 37 times.  Menacingly, this leverage ratio exceeds the average leverage ratio of 32 times assets for Lehman Brothers, Bear Stearns and Merrill Lynch, shortly before the shock of their collapse instigated the start of the Great Recession in 2008.

Federal Reserve Policy

After five years of miserable unemployment numbers and virtually no growth, it seems clear the Federal Reserve’s $2 trillion increase in bank lending at zero interest rates has been better at expanding the international derivatives markets than expanding the American economy.  The Federal Reserve owns much of the blame for this phenomenon.  By keeping interest rates so low, banks were unable to make a rate of return above their cost of capital on traditional lending.

Kansas City Federal Reserve Bank President Thomas Hoenig in a recent interview warned that an extended period of ultra-low interest rates invites speculative behavior:

“When you have zero rates that go on indefinitely, you are inviting future problems.”

The recent J.P. Morgan derivatives fiasco has demonstrated that the Fed’s zero interest rate policy has encouraged risky financial speculation that is highly dangerous and potentially destructive.  It’s time for the Fed to let interest rates rise, so banks can get back to the business of financing America’s real-economy.

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By John Seiler

One centrist Democrat I’ve read for years is Walter Russell Mead. He writes the Via Meadea blog for the American Interest. The name is a pun on several levels: his name, mead the beverage, media and via media, Latin for “middle of the road.” So he practically defines centrism in the Democratic Party.

He just commented on Gov. Jerry Brown’s May Revise budget proposal and call for $8.5 billion in tax increases. Mead:

“California’s budget woes combined with poor economic results have long made it a poster child for poor fiscal management. The state’s credit rating has been downgraded to an A- by S&P, the lowest rating for any U.S. state, and its budget and pension shortfalls are infamous. Even more so than in other states, the main political challenge for California’s politicians will be to put the state on firm fiscal footing. Given the state’s poor current condition [and] the rotten condition of its non-Hollywood, non-Silicon Valley economy, this process is bound to take years….

“California’s budget woes combined with poor economic results have long made it a poster child for poor fiscal management. The state’s credit rating has been downgraded to an A- by S&P, the lowest rating for any U.S. state, and its budget and pension shortfalls are infamous. Even more so than in other states, the main political challenge for California’s politicians will be to put the state on firm fiscal footing. Given the state’s poor current condition the rotten condition of its non-Hollywood, non-Silicon Valley economy, this process is bound to take years.”

Remember: Mead is a top Democrat.

“It is all getting worse in a dismal cycle. New business is stifled even as many employers and successful people flee the state or opt not to go there in the first place. The housing bubble covered over some of California’s starker problems, but it will be some time before the residential construction industry picks up again — especially if the rest of California’s economy continues to languish.

“Behind it all is the reality that California is too large and too diverse to be effectively run as a single state. The regional and economic differences among the voters produce political gridlock and the huge size of the state with its many expensive media market make the power of special interests even greater than in most of the rest of the country.”

Most California Democrats still are too dense to get what’s going on. Like Brown, they think the mess can be solved by hitting up rich folks for more tax dollars. After all, who would leave the most beautiful place in the world? Who would not want to “man up,” as Brown himself once urged, and love being gouged for higher taxes?

“Governor Brown is now asking Californians to pay more for less: to raise taxes even as services decrease. In effect, he is behaving like the Greek and Spanish governments — offering voters nothing good, reduced to arguing that all their choices are worse than the swill he is asking them to drink.”

The rest of the country — even other Democrats — is gagging on the smell of the big California goernment whale rotting on the beach.

Some day Californians will smell it, too.

By Chris Reed

SAN DIEGO — The smug, insufferably superior politics of the faculty lounge have gone mainstream on the Left in the past decade to the point where many “progressive” pundits and Democratic lawmakers openly act as if it is a given that their side always knows best and that those who disagree are dimwits, rednecks or charlatans.

This was on full display in a recent post by Mother Jones’ Kevin Drum, which carried the headline, “The War Between Data and Storytelling”:

“Krugman the liberal is all about the data: he hauls out charts, models, ‘signatures,’ and international comparisons. Brooks, by contrast, barely admits that data even bears on this question. He’s all about telling a plausible story: the chickens of globalization, failing education, high federal debt, and political sclerosis have finally come home to roost, so what do you expect? Of course the economy is in tatters.

“You see this play out on TV too. Conservatives tell a story, and Krugman then explains impatiently that the data simply doesn’t back up what they’re saying. Every week it plays out the same way. It’s like a kabuki show.”

I laughed so hard when I read this that I was at risk of breaking a rib. Why? Because I came upon Drum’s onanistic ode to the smarts of his side just hours after reading two amazingly damning passages in “The Escape Artists: How Obama’s Team Fumbled the Recovery,” Noam Scheiber’s new book about economics policy-making in the Obama administration.

The first part involves the sophisticated way Obama’s aides decided where to spend tens of billions in the stimulus package they would soon present to Congress. This is from Page 102:

“In December [2008], the economic team dutifully prepared a team of drab but high-bang-for-your-buck outlays to [Rahm] Emanuel. The list included … $20 billion to repair existing roads and bridges, $5 billion to repair public housing units and another $5 billion to upgrade sewage treatment facilities. …

“Emanuel’s brother, Ezekiel, a doctor who was joining the administration as a health care adviser, happened to be staying with the future chief of staff when the list arrived via fax. “There’s nothing that really gets my heart racing,” the brother later complained. “What would get your heart racing?” Rahm Emanuel asked glumly. “I don’t know. How about high-speed rail — getting from New York to D.C. in 90 minutes?” Within days, some $20 billion in high-speed rail investments had immaculately materialized on the list.”

Are you kidding me? The Obama administration’s obsession with high-speed rail began as a way to get Dr. Ezekiel Emanuel’s heart racing? This is at the root of the president’s determination to trick/bully California and other states into building immense boondoggles by providing them initial billions until the projects became too big to fail?

Bullet train

Just last week, U.S. Transportation Secretary Ray LaHood came to Sacramento to warn the Legislature it better launch construction of the California’s bullet train soon or it risked losing the $3.3 billion in federal funds that had come its way because of Doc Zeke. The fact that California has less than 20 percent of the funds in hand that it needs for the $68 billion project and no prospects for outside investment went unmentioned by LaHood. Instead, he exhorted the broke state government to make the bullet train a priority — and, incredibly, Gov. Jerry Brown appears to agree.

Yo, Kevin Drum. Yo, Paul Krugman. This is not the triumph of “facts” over “storytelling.”

But what’s incredible is that, on the very next page of Scheiber’s book, there’s an even more depressing/appalling/insane anecdote. President Obama has spent three-plus years talking about how green jobs will rescue the economy. All along, he’s known it was a lie. The book reads:

“Energy was a particular obsession of the president-elect’s, and therefore a particular source of frustration. Week after week, [economics adviser Christina] Romer would march in with an estimate of the jobs all the investment in clean energy would produce; week after week, Obama would send her back to check the numbers. “I don’t get it,” he’d say. “We make these large-scale investments in infrastructure. What do you mean, there are no jobs?” But the numbers rarely budged. The U.S. clean energy industry was so microscopically small that even doubling or tripling the size of it, a major accomplishment that could take years, would produce an insignificant number of jobs relative to the size of the country’s workforce.”

So Obama has understood this since before he took office, thanks to the honest counsel of the UC Berkeley professor who would become chairwoman of the president’s Council of Economic Advisers. Yet he hasn’t changed course, constantly hyping the “green jobs” narrative and continuing to throw billions at Solyndra and similar projects while being hostile to the thriving conventional energy industry and indifferent to the larger private-sector economy.

Yo, Kevin Drum. Yo, Paul Krugman. Who’s using data? Who’s engaging in storytelling?

Green jobs

This is all particularly galling in California. The green jobs cult is so powerful in both Sacramento and the media that one routinely hears the absurd narrative that a 2006 state law forcing a gradual unilateral switch to cleaner but much costlier forms of energy will help the state’s economy, not create a huge competitive disadvantage. The much more likely result is that we’ll look back at the present 11 percent unemployment rate as the good old days.

We’re also home to the only remaining state-federal bullet train project. Other states having figured out that high-speed rail is incredibly costly, requires perpetual operational subsidies, and doesn’t carry nearly enough passengers to substantially reduce congestion and pollution.

But we have a Democrat-dominated Sacramento, our state leaders are advised by lots of sharp Krugman acolytes, and we’ve got Kevin Drum dispensing wisdom from his home in Orange County, so it’s just a matter of time before data triumphs, storytelling recedes and prosperity blooms.

If anyone out there actually believes this, please be in touch. I’ve got a subdivision in Riverside County I’d like to sell you.

Reed is an editorial writer for the U-T San Diego newspaper (formerly the San Diego Union-Tribune) and runs the Calwhine.com politics blog.