State Politics & Right-to-Work

While much analysis has been forthcoming on the impact of the November 2010 election on the U.S. Senate and U.S. House of Representatives, it is harder to get compiled information on how that election affected political control of 50 states. An excellent source for this much larger body of data comes from the American Legislative Exchange Council, who just released the report Political Profiles of State Legislatures 2011, which, when compared to their report from last year, Political Profiles of State Legislatures 2010, provides dramatic evidence of the changes wrought by the November election.

A brief summary of what November 2010 did to the political landscape of the 50 state legislatures is this: Before the election the Republicans controlled both houses of 16 state legislatures (counting Nebraska, which only has a Senate), the Democrats controlled both houses of 27 state legislatures, and 7 states had one party controlling each house. After the election the Republicans controlled both houses of 26 legislatures, the Democrats controlled both houses of 15 state legislatures, and 9 states had one party controlling each house. If you simply total up the number of state legislators affiliated with the major parties, in state senates the totals changed from 1,025-897 in favor of Democrats before the election to 1,023-889 in favor of Republicans afterward, and in state houses the totals changed from 3,023-2,354 in favor of Democrats before the election to 2,916-2,466 in favor of Republicans afterward

There was an equally dramatic shift in Governor’s races, changing from 26-24 in favor of Democrats before the November election, to 29-20 in favor of Republicans afterward (Rhode Island’s Lincoln Chafee is an independent).

The three tables below put the shift in America’s political landscape into a more detailed perspective, dividing the states into three groups; Republican controlled states, Democratic controlled states, and so-called “battleground” states. The tables and sub-tables progress, somewhat subjectively, in a progression from solidly Republican to solidly Democratic.

In the above table it can be seen that in ten states, with a total population of 40 million, there are not only Republican governors and Republican control of both houses, but in both legislative houses the Republicans hold a 2/3rds majority (Nebraska’s unicameral senate has 2/3rds of the legislators self-identifying as Republicans). In another eleven states, with a total population of 98 million, there are Republican governors and Republicans control both houses, with three state senates and one state assembly having 2/3rds Republican majorities. It is interesting to note that all of the ten most solidly Republican states are right-to-work states, and five of the eleven next most solidly Republican states are right-to-work states. It is also interesting to note that at least three of these states, Texas, Florida and Arizona, with combined populations totaling over 50 million, have substantial percentages of ethnic minorities. Probably the most significant factor on this table is the presence of the big industrial states of Michigan, Ohio and Pennsylvania, totalling 34 million people, which have moved out of the battleground category – if not the solidly Democratic category – and come under the decisive control of Republican politicians.

The next table displays battleground states, where neither political party exercises clear dominance. These states are separated into two groups, the first with Republican governors, and the second with Democratic governors.

In the first group of eight states, totaling 33 million in population, four of the Republican governors have a Republican assembly and, with the exception of Alaska whose senate is split equally, a Democratic state senate. In the other four, the Republican governors confront a state legislature where both houses are Democratic. Five of these states are right-to-work states. The second group of eight states, totaling 52 million in population, have Democratic governors – with five of those governors confronting state legislatures where both houses are Republican. Only one of these states is a right-to-work state. Probably the most interesting battle ahead is New York, where a Republican senate faces off against an overwhelmingly Democratic assembly, with a Democratic governor whose positions on some issues are becoming, if not nonpartisan, emblematic of a schism developing between Democrats who are controlled by public sector unions who simply want to raise taxes, and those who are realistically trying to confront fiscal realities – and save their party – through reinventing social programs and reducing public employee compensation packages.

The next table shows those states remaining solidly under Democratic party control. Leading the list are the colossal states of California and Illinois, with a combined population of over 50 million people, and a colossal set of financial challenges.

If one compares the total population of states that have Democratic governors and 2/3rd majorities in both state houses, 15 million, with the total population of states that have Republican governors and 2/3rd majorities in both state houses, 40 million – and the total population of states that have Democratic governors and simple majorities in both state houses, 70 million, with the total population of states that have Republican governors and simple majorities in both state houses, nearly 100 million – the true size of the Republican victory last November can be readily apprehended – as well as what this portends for 2012.

Another interesting correlation – because it is nearly absolute, is the presence or absence of right-to-work laws in states that are either solidly Republican, 10 for 10, or solidly Democratic, 0 for 4. As one picks their way through the states in between these extremes the correlation continues to apply – the more Republican a state is, the more likely it is to be one of the 22 states who have right-to-work laws. A good source of information on right-to-work can be found on the Labor Union Report website in an article entitled “Advancing the Right to Work.” And if one wonders whether or not the presence of right-to-work laws is the cause or the effect of Republican political control in various states, it is helpful to consider precisely what these laws mean. Here is the definition of right-to-work, in summary:

A “Right-to-Work” state forbids workers from being fired for non-payment of union dues or fees.

A “Non-Right-to-Work” (or forced unionism) state, allows unions to negotiate contracts with companies that require union dues and/or fees to be paid. If a worker refuses to pay union dues or fees (often referred to as agency fees), or falls behind, the union can demand that the worker be fired from the company. The company, by contract, must comply and fire the worker.

Looking at these definitions in the light of day, it is difficult to understand what possible justification there is for forcing someone to join a union if they don’t want to. Compulsory unionism, especially in the public sector, provides unions with the ability to pretty much force their membership to pay union dues. In turn, union dues are used, especially in the public sector, to elect politicians who will create and expand government programs in order to increase the number of unionized government workers, as well as increase pay and benefits to government workers. In most states where Democrats still wield formidable control – New York, Illinois, and California – the source of their power is the absence of right-to-work laws combined with the power of public sector unions.

Ultimately, the solution to the financial crises facing state and local governments lies in how politicians and voters respond to the power of public sector unions. In this regard, the political landscape which has suddenly turned blue states into red states in unprecedented numbers could be short-lived. Because the Democrats themselves have realized their party is controlled by unions, especially public sector unions. They have realized that because they are paying unionized government workers total compensation packages that dwarf what ordinary private sector taxpayers can ever hope to make, there is no longer any money left to continue worthy social programs or infrastructure projects. How Democrats resolve this dilemma, that they have created a unionized government monster that is consuming the productive resources of this country for its own gain, instead of the public interest, yet this monster is the source of nearly all the money they have available for their political campaigns, is the key to what happens in American politics in the elections of 2012.

How to Revive California’s Economy

The previous post, “Balancing California’s Budget,” recommends spending cuts that extend well beyond incoming Governor Brown’s proposed budget (ref. Full Budget Summary), especially in the areas of (1) entitlements, (2) prisons, and (3) education. In all these areas, the case is made that thoughtful restructuring and downsizing of these institutions will actually improve societal outcomes. At the same time, as Governor Brown himself has included in his own budget proposal, state worker salaries and benefits need to be lowered to competitive market rates. But making these reforms to put California into a situation of budget surpluses is only half the battle to revive California’s economy. At the same time, new government initiatives combined with new private investment – spurred by deregulation – are necessary to maximize the speed of California’s economic recovery, and lay the groundwork for a new golden age in the golden state.

Here are some projects – public or private or both – that will make California great again. They are based on a simple premise: It is the job of government to invest in infrastructure that will make energy, water and transportation less expensive, not more expensive.

(1) Build nuclear power plants:
The latest generation of nuclear power technologies are safer than ever, and there is an abundant supply of nuclear fuel within North America. Adding a few nuclear power stations in California would have a dramatic impact on the price of electricity. Claims that nuclear power is more expensive than alternative energy are based more on the cost to overcome regulatory hurdles and lawsuits, not the actual construction costs, and certainly not the fuel costs. Nuclear power development is a key element towards delivering cheap energy again in California.

(2) Build an LNG terminal off the California coast:
Along with new North American sources of natural gas from shale, there is abundant natural gas around the world, and a global market exists for liquified natural gas that is transported by tanker. A few years ago an LNG terminal was proposed to be built fourteen miles off the coast in Ventura County, but was nixed by California’s legislature. By receiving LNG tankers 14 miles offshore, and piping in the less hazardous gaseous fuel, this terminal would not have posed any threat, however remote, to onshore communities, and would allow California to diversify their sources of this abundant and clean fossil fuel.

(3) Build desalination plants off the Southern California coast:
Desalination technology has advanced to the point where it is now possible to desalinate a cubic meter of seawater using less than 2.0 kilowatt-hours of electricity. Put another way, the energy necessary to desalinate seawater is now less than the energy currently required to pump an equivalent unit of seawater over the mountains from the California aqueduct into the Los Angeles basin. Because the California current is one of the biggest ocean currents in the world, the brine that would be discharged from 10 million acre feet of fresh water recovered from seawater would have an insignificant environmental impact. The brine could be discharged through pipes that would run atop the seabed with the outfall 10 miles offshore where the California current would disperse it immediately. Desalination is a key element towards delivering cheap water again in California, and like nuclear power, claims that desalination is prohibitively expensive are based more on the cost to overcome regulatory hurdles and lawsuits, not the actual construction costs, and certainly not the operating costs. For more on desalination at scale, ref. “Sverdrups & Brine,” and “Affordable Desalination.”

(4) Develop new surface storage and aquifer storage for storm runoff:
California’s system of reservoirs provide ample fresh water to agriculture, industry and residential/commercial users in years with normal rainfall, but inevitably there are cycles of drought when the existing water storage infrastructure is inadequate. It is probably possible to add another 5 million acre feet of storage without resorting to high dams by identifying areas within the Central Valley where runoff can be collected in great bulk and kept there until spring irrigation draw-downs begin, or systematically transferred to underground aquifers. The capacity of underground aquifers to store water in California is still poorly understood, but California’s water commission estimates there could be 10 million acre feet or more of underground water storage capacity in California. There is plenty of runoff, even in drought years, that isn’t being harvested. To allow California’s agricultural industry access to cheap, abundant water (agriculture consumes well over 80% of the fresh water diverted in California), better storage of storm runoff is essential. For more ref. “California’s Water System.”

(5) Widen and upgrade interstate freeways:
Along with freeway upgrades, widen and upgrade all major freeways, highways and boulevards in California. Widen and retrofit bridges and tunnels. California needs smart lanes on upgraded roads, not the “bullet train.” As energy becomes abundant and cheap – and technology guarantees this will occur – the most convenient personal transportation appliance ever conceived, the automobile, will become even more indispensable. Cars of the future will be not only clean operating and fuel efficient, but will go faster than ever and be capable of operating on autopilot. To participate in this revolution in transportation, Californians need to upgrade their roads, not attempt to discourage people from using them by neglecting their maintenance, upgrades, and expansion.

(6) Upgrade existing rail corridors:
It is not necessary to develop bullet trains for passenger transportation in a state that will never have more than 50 million people living along an 800 mile corridor. But fast intercity rail, using existing track that is upgraded to tolerate speeds of 120 MPH is a viable proposition, particularly if these upgraded rail lines are also still utilized for faster freight transportation, which will always be more efficient via rail. Diverting public funds into bullet trains and light rail is folly, when immediate returns would accrue to investments in better roads and better existing rail. For more on the economic futility of a bullet train in California, ref. “Bullet Train Boondoggles.”

(7) Streamline permitting process and allow more mines and quarries:
California has abundant mineral resources, but nothing can be developed without years of permit applications and legal battles. As a result, basic raw materials have to be imported at far greater cost than necessary. Making development of mineral resources in California more expensive than virtually anywhere else on earth robs Californians of jobs, and constitutes a drain on every facet of California’s economy that relies on these resources.

California has a gigantic, diverse economy – nearly 2.0 trillion in economic output each year. But California has an energy, water and transportation infrastructure that was built for 20 million people, in a state that now approaches 40 million in population. It is ironic that the Governor who once sold the freeway corridors owned by the state, held in reserve for future transportation corridors, is the same man who has just taken office again. Back in the 1970’s, Jerry Brown presided over the dismantling of California’s plans for infrastructure development, at the same time as he signed legislation enabling unionization of California’s government workers. Today we are suffering the ultimate consequences of this decision, as we live in a state where overpaid state and local government workers collect the tax revenues that should be put to use to maintain and expand our energy, water and transportation infrastructure.

Compounding California’s policy decision to fund over-market government employee compensation instead of infrastructure investments is the crippling impact of environmental regulations. Realistic, ongoing revisions to regulations enforcing environmental quality are desirable, but the current fixation on regulating anthropogenic CO2 emissions is a tragic mistake. Global warming “mitigation” is environmentally useless (ref. “Investigating Climate Alarmism“), and it ignores the following: Less expensive energy, water and transportation form the basis of increased prosperity, and as prosperity increases, literacy increases and birthrates decrease. This, in-turn, leads to a lower maximum population globally, which results in reduced pressures on resources and wilderness.

Spending taxpayer’s money on infrastructure development that will yield cheaper energy, water and transportation, causes a lower cost of living at the same time as it stimulates more rapid economic growth. This translates into higher tax revenues which can then be used to pay higher wages and benefits to government workers. By enacting policies that deliberately make resources more expensive, while paying over-market wages and benefits to government workers, policymakers have put the cart in front of the horse. They have gotten their priorities reversed.

California is a truly exceptional place, a land of staggering resources and breathtaking natural wonder, with world leadership in art and technology. California’s high-tech entrepreneurs should abandon their lobbying for global warming mitigation legislation, which will force people to consume needlessly expensive energy, rationed water, and inefficient transportation. Instead they should lobby for the projects set forth here, which will put money back in the pockets of consumers, enabling them to buy high tech innovations still barely imaginable – from geriatric cybernetics to space tourism. If energy, water and transportation were cheap instead of “green,” rationed, and expensive, California’s technology industry can direct itself towards providing qualitative improvements to the lives of an aging, prosperous population.

Balancing California’s Budget

Last week California’s incoming Governor Jerry Brown unveiled his proposed state budget for 2011. Despite the fact that Brown’s budget has deep cuts to nearly all state programs, the success of the budget – even if it should be approved by the state legislature – depends on tax rates staying the same. And California’s voters, regardless of whatever else their contrarian behavior may indicate, do not like taxes. If you read the Governor’s Budget Summary, on page 10 you can view the projected state general fund tax revenues – assuming voters approve an extension of the tax increases:


Also on page 10 of the Governor’s Budget Summary is a table showing the projected state general fund expenditures, already reflecting the proposed cuts to expenditures (note that the tables have been altered here for simplicity’s sake, such that only the column of numerical data showing the proposed amounts is retained). From comparing these tables, one will see the general fund according to these projections will enjoy a $5.0 billion surplus in the fiscal year 2011-12. But is Jerry Brown going far enough with his cuts? Because not only is California a state with some of the highest taxes in the U.S., but it is very likely voters will not approve extending the tax increases.


Areas where Brown did not propose cuts include pensions, and because state employee pension funds are not adequately funded, if benefit formulas are not reduced, more money will need to be allocated for pensions. Put another way, if the pension funds adjust downwards their projected investment returns – and they need to do this – necessary annual pension expenditures will stay the same even if benefit formulas are reduced.

And what if California wanted to embark on new infrastructure projects without issuing bonds, or wanted to pay down bond principle, or wanted to lower taxes? Other than pensions, where else could cuts be made? When one looks at California’s $84 billion budget, there are three areas that stand out – health and human services, corrections and rehabilitation, and education.

Health and Human Services:
Without diving into the details of California’s health and human services budget of $21 billion, there are two areas that immediately come to mind where cuts can be made, welfare benefits and benefits to illegal immigrants. With respect to welfare, it is fairly well documented that California has 12% of the U.S. population yet has over 30% of the U.S. welfare recipients. If California simply modeled their welfare policies along the same lines as the rest of the U.S., which complied with the federal reforms enacted by the Clinton administration, it is likely that California’s welfare caseload would begin to settle down to national norms. This could save billions. While the issue of providing benefits to illegal aliens is an issue that attracts a great deal of controversy, and while denying essential services such as emergency health care to illegal immigrants is certainly a humane policy that should be continued, it is not necessary to continue all of California’s generous entitlements for illegal immigrants. Restructuring California’s policies in these two areas would probably save California’s taxpayers several billion dollars each year, and should be considered.

Prisons and Rehabilitation:
California spends nearly twice as much per prisoner as most other states in the U.S. California’s overcrowded prisons should have their populations reduced to normal capacities, not by allowing thousands of inmates to pour back out onto the streets before they’ve served their sentences, but by exporting prisoners to far less expensive private facilities located outside California. Another way to reduce California’s prison expenditures would be through thoughtful revisions to sentencing guidelines. Currently nonviolent offenders are often forced to reside in expensive prison facilities, when more appropriate rehabilitation facilities would not only cost less, but offer programs to better help inmates overcome substance addictions, and learn marketable job skills. These reforms could probably save California’s taxpayers several billion per year.

K-12 and Higher Education:
In Governor Brown’s proposal, California’s budget for K-12 and higher education consumes more money, $46 billion, than all other state programs combined. How can these costs be cut, while maintaining or even improving the quality of education? First of all, instead of putting a measure to maintain tax increases onto California’s ballot, Governor Brown should propose to place a measure on the ballot that will repeal Prop. 98. This citizens initiative, passed in 1988, entitled the “Classroom Instructional Improvement and Accountability Act,” amended the California Constitution to mandate a minimum level of education spending. But how much money is spent on education obscures whether or not California’s public education system is being managed to optimize educational outcomes. Here are some ways to reduce spending on education while improving the quality of public education at the same time:

(1) Increase class sizes. There is no reason classes can’t have 30 or more students per teacher. One way to make it easier to increase class size without compromising education is to stop “mainstreaming” marginal students. Disruptive students, or developmentally disabled students, should not be in the same classrooms with normal students, because they consume a disproportionate amount of the teacher’s efforts. Disruptive students should go to reform schools where they can be controlled efficiently. Developmentally disabled students should attend classes where they receive instruction among their peers at a level calibrated to provide them as much educational opportunities as possible.

(2) Reduce administrative overhead. Currently nearly 40% of the employees in public education in California do not teach in the classroom. This top-heavy system should be restructured, with at least half of these administrative positions getting eliminated. This can be accomplished through returning control of schools to local school districts, by consolidating school districts where appropriate, and by contracting to the most competitive private sector bidders for many services.

(3) Restore teacher accountability. One way to greatly improve California’s public education system is to streamline the process of firing incompetent teachers. Currently this is a nearly impossible process. But simply by restoring merit as the criteria for keeping and advancing in a teaching career in California, educational outcomes would improve even while overall expenditures decline.

Governor Brown’s budget, as it is, reflects a realistic assessment of California’s budget challenges, and offers a great deal to displease special interests. But it doesn’t go far enough. By tackling the additional categories of spending in pensions and benefits, health and human services, corrections and rehabilitation, and public education, California can not only balance its budget and lower taxes, but implement rational policies that will improve societal outcomes and improve overall economic prosperity.

Pension Reform Proposals

Last year in a post entitled “Pension Reform Options,” the following suggestions were made – none of them terribly original – for ways to restore equity and sustainability to public sector pensions in California:

(1) Lower annual pension accrual to 1999 levels for new hires:
(2) Lower annual pension accrual to 1999 levels going forward for existing
(3) Reverse any retroactive pension accrual enhancement ever granted existing hires.
(4) Retired public employees will see no change to their pension benefit.
(5) Spread “final year” salary calculation over five years and eliminate “spiking.”
(6) Establish ceiling on maximum pension benefit.
(7) Raise eligible retirement age.
(8) Reduce pension benefit by amount retiree earns in new job.
(9) Eliminate tax-free or reduced tax pensions.
(10) Aggregate multiple pensions under same ceiling.
(11) Require conservative pension fund investment strategy.
(12) Require public employees to contribute a fair share to their pension fund.

Last week a group advocating pension restructuring in California, the California Foundation for Fiscal Responsibility, published online two pension reform proposals. These proposals, put forward by experts on the issue, are interesting examples of what may be necessary in order to maintain pension solvency without either punitive tax increases or grotesque service cuts. They are also interesting because, along with including basic recommendations such the ones listed above, they include many nuances that most publicized pension reform proposals don’t cover. Because they are the product of in-depth analysis by qualified experts who have spent years studying the issue, anyone seriously interested in this issue should click to these online proposals and review them carefully. Here are some of the suggestions, not listed above, that are designed to correct less publicized, but equally critical problems with the current system:

(1) Disability benefits for public employees hired on or after July 1, 2013 shall be provided through insurance policies.
(2) No public employee hired on or after July 1, 2013 may receive lifetime or formulaic retirement medical benefits prior to age 65.
(3) Before each decennial anniversary of the July 1, 2013 transition date, the Legislature shall adjust this age requirement to reflect changes in longevity.
(4) The defined retirement income benefits for employees hired on or after July 1, 2013 shall not exceed the median statewide household income ($56,344 in 2009). [a subsequent item provides for adjusting for inflation]
(5) All benefits from Social Security and California public pension plans shall be integrated for the purpose of determining such employees’ retirement income benefits, not including income from defined contribution plans.
(6) After January 1, 2014, at least two-thirds of the members of a public pension plan’s governing trustees shall be independent of that retirement system and its participating employers.
(7) At least two-thirds of independent trustees shall be qualified for service as certified or licensed financial, actuarial, accounting, legal, benefits or investment professionals at the time they are selected.

The pension reform proposals on the CFFR website are comprehensive enough to form the basis of legislation with very little modification, and they fill some huge holes. Item (1) moves the awarding of disability retirement benefits into the private sector, greatly reducing the opportunities for retirees to fraudulently claim disability in order to receive 50% of their retirement pension exempt from state or federal taxes. Item (2) begins to address the huge looming liability for retirement health benefits that often begin when retirees are still quite young. Item (4) places a cap – a pretty low cap at that – on the maximum allowable defined benefit pension. Item (5) prevents retirees from receiving social security and a pension (or social security and two pensions, etc.), if those benefits combined exceed the cap established by item four. Item (6) attempts to ensure an independent governing body for pension benefits, and item (7) attempts to ensure (gasp) that the people on this governing body are qualified to oversee multi-billion dollar pension funds.

Here are the complete proposed pension reforms coming from the California Foundation for Fiscal Responsibility’s website:

Pension Reform Alternative A:
The Fair and Sensible Public Employee Retirement Plan Reform Act

Pension Reform Alternative B:
The Fair and Sustainable Public Pension System

Alternative B contains very provocative language, because it not only proposes lowering rates of pension benefit accruals going forward for existing employees, but provides a method for doing so – declaring a fiscal emergency. Here’s the language:

“Freeze all current defined benefits (DB) plans at all state and local government agencies.  Amend the California Constitution to declare the level of unfunded liabilities in current db plans a fiscal emergency and suspend further accruals to plans under 90% funded until they demonstrate they have maintained their funding levels above 100% for three consecutive years using asset market values and conservative actuarial assumptions (5% liability discount rate, 6% earnings assumption).  After three years above 100% funding, the governing board of the jurisdiction may place the question of re-opening the current plans before their voters on a statewide general election ballot subject to a majority vote of the affected jurisdiction.  The freezing and re-opening of plans shall be excluded from collective bargaining.”

Anyone reviewing these proposals will hopefully already realize that public sector pension benefits in California are going to have to be reduced. They were negotiated during a time of unsustainable, debt-fueled economic growth, and hence are calibrated on unrealistic economic expectations. The more relevant questions are what the specific reforms will be, who is affected, and how deep the benefit reductions will need to be. What is also evident from reviewing these proposals is that there are solutions. This is encouraging to all of us who care about the future of California.

The Billionaire Givers Club

Last year two of the richest individuals in the world, Warren Buffet and Bill Gates, announced they intended to donate over 50% of their wealth to charity. Since that time at least 57 people, with an estimated total net worth of at least $320 billion, have joined this group. For more information, one may view their website “The Giving Pledge,” or view the Wikipedia data which includes links to biographical sketches on most of the group’s members including estimates of their individual net worth. Here are some of the well-known individuals who have signed The Giving Pledge:

It is hard to dispute the good intentions that undoubtedly motivate these altruistic decisions. But what happens if all the wealthy people in the United States decide to give away their fortunes, instead of subjecting them to the estate tax? How much revenue is denied the federal government by virtue of these decisions? The table below calculates that at the current marginal estate tax rate of 45%, if the current members of the billionaire givers club fulfill their pledges, at least $72 billion will be denied the federal treasury via the estate tax.

To put this in perspective, the next table calculates how much taxpayers who are not members of the billionaire givers club, those Americans who are neither billionaires, nor even millionaires, will have to pay in taxes in order to cover the $72 billion that the billionaire givers club has denied the U.S. treasury.

The sum of $720 probably doesn’t seem like much to a billionaire, and, of course, this is a one-time hit based on an estate tax, not an annual assessment. But how big is this group going to get? How many more billionaires will divert 50% or more of their entire fortunes to philanthropic entities and deny the federal government the estate tax? What happens when this club grows 10 times bigger?

Another relevant question hinges on who would decide what these billionaires are doing is desirable, and why. A libertarian would certainly applaud any decision to replace compulsory taxes with voluntary philanthropy. But what about activist Democrats who are participating in the billionaire givers club? How do they reconcile themselves to the fact that the actions of their club will essentially impose a regressive tax on people who aren’t as financially accomplished as they are? How do they justify taking this money away from the big-government programs that they support ideologically?

Sooner or later, the federal government of the United States will need to engage in spending that does not exceed revenues. Members of the billionaire givers club should recognize the consequences of their decision are not entirely positive, and they should be particularly aware of this moral ambiguity if they are big-government democrats.

California’s Green Godfathers

It is an article of faith among environmentalists, conventional wisdom in the media and academia, and a massive delusion afflicting California’s voters, that the climate skeptic community receives massive backing from oil companies and other corporate “polluters.” But when you start to look at who stands to gain from climate “mitigation” policies, and really examine the money trail behind legislative lobbying and political campaigns, the notion that the money is on the side of the deniers doesn’t hold up.

Where the money really is in the global warming debate, as well as reasons why anthropogenic CO2 may not be pollution after all, has been explored at length already here in previous posts including Investigating Climate Alarmism, Credible Climate Skeptics, The Hijacked Public Interest in California, Public Sector Deficits & Global Warming “Mitigation”, California’s Proposition 23, Who Are The Carbon Criminals?, Implementing California’s Global Warming Act, The Climate Money Trail, and The Climate Alarm Industry. In this post, the intent is to take a closer look at who was behind the annihilation of California’s Prop. 23 last November, a citizens initiative that would have suspended implementation of California’s “Global Warming Act,” tepidly backed by a handful of oil companies (most oil companies sat on the sidelines), that was outspent by three to one by members of what might be termed a green plutocracy. What killed Prop. 23 was money, in particular, individual donors who wrote checks for $1,000,000 or more. To view all of the major donors to the No on 23 campaign, ref. Ballotpedia. In this analysis, the photos and most of the biographical information is from Wikipedia. Who are these green plutocrats, what are their motives, and why are they well intentioned but misguided?

THE GREEN GODFATHERS

The Financier – Thomas Steyer, est. net worth $1.2 billion – is the founder and Co-Senior Managing Partner of Farallon Capital Management, LLC, managing $20 billion in capital for institutions and high net worth individuals. Since 1986, Steyer has been a partner and member of the Executive Committee at Hellman & Friedman, a San Francisco-based $8 billion private equity firm. Steyer is a leading Democratic activist and fundraiser. An early supporter of Hillary Clinton for President, Steyer became one of Barack Obama’s most prolific fundraisers.  In 2010, Steyer and his wife, along with Warren Buffett and Bill Gates, signed the Giving Pledge to donate half their fortune to charity.

Steyer’s contribution to defeat Prop. 23 – $5,000,000. To put this in perspective, Steyer’s estimated net worth is $1.2 billion. If someone who had paid off their home and managed to save several hundred thousand dollars in a 401K plan, i.e., if they had accumulated a net worth of $1.2 million, a donation of $5,000 would make the same minor dent in their fortune as the $5,000,000 made in Steyer’s. As for Steyer’s decision to donate half his fortune to charity – to digress – isn’t Steyer a Democrat? Doesn’t he want to support government spending? Don’t Democrats base much of their economic philosophy on higher taxes for the rich? When people like Tom Steyer, Bill Gates, Warren Buffett, and other unbelievably wealthy individuals transfer 50% of their assets to private non-profit charities of their choosing, the rest of us pay higher taxes (ref. The Billionaire Givers Club“). So what does Steyer hope to gain by spending Prop. 23’s proponents into the ground? First of all, he probably actually believes that anthropogenic CO2 causes catastrophic climate change, a misconception that is possibly forgivable. But Steyer also apparently labors under a less justifiable misconception, given his formal training and extensive experience in finance and economics, which is that by making energy cost more – along with water, land, and other basic resources; climate mitigation policies make everything cost more – this will somehow stimulate economic growth. One can only hope Mr. Steyer will reexamine both of these premises before he writes his next big check.

Before moving on, it is important to at least wonder how Steyer’s financial concerns will benefit from CO2 emissions trading schemes. If the capital investments funded through emissions trading schemes actually yielded positive economic and environmental benefits, such as massive nuclear powered desalination plants on the southern California coast, one might be tempted to embrace the noble lies that justify them. But cramming down anthropogenic CO2 emissions will do NOTHING to alleviate pollution. What they will do is fund costly alternative energy technologies that will be obsolete before they’re deployed. And the financial commissions on CO2 emissions trading will transfer billions into Wall Street. For nothing.

The Venture Capitalist – John Doerr, est. net worth $1.7 billion – is a partner at Kleiner Perkins Caufield & Byers in California’s Silicon Valley. Kleiner Perkins has made investing in “green” technology a major focus of their private equity funds, recently adding as partner the global warming crusader Al Gore. It has to be said that nothing is wrong with green technology – the idea of discovering methods to refine liquid fuel from biomass, either from a waste-stream or specialized crops is a terrific opportunity. That we may eventually harness electricity from the sun in a cost-effective manner is also a tantalizing possibility. Fascinating developments in water filtration for wastewater treatment or seawater desalination promise to eventually eliminate water scarcity. Advanced materials sciences promise to deliver building materials and manufactured goods that no longer require scarce resources or materials extracted in a ecologically disruptive manner. Research needs to continue along all of these vital fronts. But John Doerr, well-intentioned though he may be, has forgotten what made Silicon Valley great.

Doerr’s contribution to defeat Prop. 23 – $2,100,000. California’s Global Warming Act, which Prop. 23 would have derailed, would have done nothing to improve California’s environment. What it will do, however, is force consumers to consume products that cost far more than they should cost, in order to deliver billions of dollars of revenues to “green” technology companies whose products are not ready to compete against conventional solutions. There is no doubt that John Doerr actually believes that CO2 causes global warming – just watch his closing remarks at a recent TED Conference, where he has to fight off tears as he describes his commitment to deliver a better world to his children. Despite his sincerity, Mr. Doerr may wish to consider what happens when the entire world, starting with California, is impoverished because immature solar and impractical wind technologies are deployed in a futile and expensive attempt to satisfy global energy demand, instead of using abundant reserves of coal, gas and oil that can be developed and deployed at a fraction of the cost. Clean fossil fuel, emitting nothing but CO2, will create prosperity, which will enable the human population to stablize at 8.0 billion or less, instead of 10.0 billion or more. As the reserves of fossil fuel become somewhat more difficult to extract cost-effectively, the ability of ever-more-competitive alternatives to be voluntarily purchased by consumers is enhanced. There never has to be an energy shortage. Environmentalists, because they think CO2 is pollution, risk condemning the world to an unnecessary future of poverty, war, and overpopulation. Silicon Valley companies, and the venture capitalists who fund them, need to go back to earning money the old fashioned way, by building things that are better, faster, cheaper, and provide genuine solutions to genuine problems.

The Movie Mogul – James Cameron, est. net worth $650 million (ref. Celebrity Net Worth) – is one of the greatest filmmakers of all time, with mega-hits to his credit including The Terminator (1984), Aliens (1986), True Lies (1994), Titanic (1997), and Avatar (2009). In total, Cameron’s directorial efforts have grossed approximately $2 billion in North America and $6 billion worldwide.

Cameron’s contribution to defeat Prop. 23 – $1,000,000. Cameron’s most recent blockbuster, Avatar, depicted a planet inhabited by sentient beings who lived in harmony with their environment, threatened by humans who wanted to extract the valuable mineral resources on the planet. This movie, which, like all of Cameron’s movies, is terrific entertainment, belies a contradiction that Mr. Cameron may wish to ponder: The amount of land destructively disrupted by mines and wells is considerably less than the amount of land destructively disrupted by biofuel plantations, solar farms, wind farms, and the many roads and transmission lines necessary to connect them to markets. James Cameron is a complex, creative, inventive man, with not only a fascination, but an aptitude for science and technology. He has been a strong advocate for a robust program of space exploration and development. Cameron may want to read the work of Burt Rutan, an aerospace pioneer, who has published a comprehensive study on what he terms the “Global Warming Science Fraud.” Cameron is also, presumably, someone who cares deeply about human rights. One has to wonder if he would still support subsidizing the high tech industry’s enabling of total surveillance of citizens via “smart meters” and GPS-based mileage trackers, etc., and the denial of aspiring nations to develop cheap conventional energy in order to more rapidly lift their citizens out of poverty, if he didn’t truly believe in the alleged science of catastrophic climate change caused by anthropogenic CO2 emissions.

There is a version of environmentalism that is entirely legitimate – eliminating toxic discharges on land, or in the water or air, preserving wilderness and wildlife, and moving systematically towards sustainable consumption – that has been eclipsed completely by the goals of CO2 mitigation. There is also a school of economics, ignored by the goals of CO2 mitigation, that encourages policies to channel innovation and competition towards lowering the costs for energy, water and land in order to create prosperity. And there is a school of demographics that claims prosperity is the principle cause of negative population growth – perhaps the most compelling environmentalist goal of all. Do California’s Green Godfathers understand this? Do they care? At the least, they might stop attacking “deniers” as bad people, and reopen the debate as to whether or not CO2 mitigation yields any genuine benefit to the environment. Because on that answer hangs the fate of the world today.

What California’s Green Godfathers represent are interest groups – big finance, big technology, and the entertainment/media complex, who have the financial wherewithal to control the debate over climate change. These interest groups include individuals and coporations (from PG&E to GE) who can spend as much as they wish to advance the agenda of CO2 mitigation, and who in most cases stand to make billions, if not trillions, as a result of CO2 mitigation policies. The idea that the “deniers” hold a financial advantage, or have a hidden financial agenda that eclipses the agenda of the climate alarm interests is absolutely false. The defeat of California’s Prop. 23 is just one recent example of this reality.

* * *

* * *