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The debate Brown and Whitman should have

What's needed is reasoned give-and-take on the catastrophic state of the California economy and a moral approach to an unsustainable public pension bill, free of rhetorical mythology.

June 23, 2010|Tim Rutten

California's gubernatorial campaign already is underway in earnest. Now the question is whether it will be waged over emotionally charged but marginal questions — like immigration — or engage this state's most pressing issue: the catastrophic state of our economy and the way in which Sacramento's dysfunctional public finance system exacerbates the crisis.


FOR THE RECORD:
Tim Rutten: His June 23 column on the gubernatorial race included several inaccurate figures in its comparison of California and Greece. The state's gross domestic product, which the column put at $333 billion, is in fact about $1.85 trillion. Greek unemployment is not the highest in the Eurozone; Spain's, at about 20%, is higher. The column said California generates 17% of United States GDP, but the actual number is closer to 13%. The column also said that Sacramento was "sitting on" $500 billion in debt; that number referred to an estimate of unfunded pension liabilities. The inaccurate numbers in Rutten's column were taken from an article on the Web -- http://usactionnews.com/2010/05/will-california-be-our-greece -- that was subsequently corrected. They should have been double-checked for accuracy and, to the extent that we relied on the research of others, attributed to the original source.—

With another of the state's appalling annual budget stalemates as backdrop for their contest, you'd think Jerry Brown and Meg Whitman would debate nothing else. The billionaire former EBay executive, however, seems determined to spend another $100 million or so from her own fortune to finance a corporate-style ad campaign punctuated by carefully controlled personal appearances before sympathetic audiences. Brown — to his credit — is pressing for a series of face-to-face debates, but it's unlikely that Whitman will agree to more than a minimal number of rigidly formatted confrontations. That's a pity, because without that kind of give and take, we're unlikely to learn precisely which of the ideas Brown — who has one of the most fertile and quirkily independent minds in American politics — would bring to bear on this crisis.

The debate our gubernatorial candidates ought to have should start with a realistic appraisal of what's at stake. Earlier this year, JPMorgan's Jamie Dimon raised a lot of savvy eyebrows when he told an investors' conference that, while his analysts thought the crisis surrounding Greece's sovereign debt would abate, California's public finances posed an even greater risk to global markets. A clear-eyed look at the numbers explains why:

Sacramento and Athens govern economies of virtually equal size — $343 billion in annual GDP for Greece, $333 billion for California. They're also sitting on similar piles of debt — $500 billion for Sacramento, $552 billion for Athens. The Greeks' unemployment rate is the highest in the euro zone; California's is even higher. Moreover, while Greece — with a population just over 11 million — accounts for only 3% of the European Union's annual economic activity, California — with a population of 38 million — generates fully 17% of the yearly activity in the world's largest national economy.

If Sacramento allows our public finances to spiral further out of control, the consequences will be felt in markets and places far beyond our borders. It's less easy to disentangle serious solutions from the rhetorical mythology that goes unchallenged in our hit-and-miss discussions of the crisis. There's little appetite anywhere in the political establishment to talk about raising taxes, but California's inflation-adjusted tax burden is, in fact, at a 60-year low. Nor are we, as is commonly assumed, a "high tax" state. When it comes to that ranking, California doesn't even rank in America's top 10.

As UC Berkeley political scientist and public opinion scholar Bruce E. Cain recently pointed out, our combined state and local tax tab is — on a per capita basis — the 18th largest in the United States. Another bit of political folklore is that the state's level of public employment is out of control. Whitman, for example, has said she'd cut 40,000 public-sector jobs. In fact, as Cain has observed, California has the nation's second-lowest number of state employees on a per capita basis — far fewer than such red states as Texas, Arizona and Nevada.

There is an issue when it comes to the pensions of current and former public employees at both the state and local levels. Whitman is correct when she argues that Sacramento can't sustain a pension bill that has grown 2,000% over the past decade.

Pension reform, however, has to be treated as a moral as well as an economic problem. Public employees long have traded income for secure benefits, particularly retirement plans that pay a defined benefit. Changing the terms of that benefit when people are near or have reached the end of their working lives is a socially complex question requiring clarity, candor and presumptions of goodwill that are in painfully short supply these days. It's also a step that could have its own set of unintended financial consequences in a still-struggling economy.

This — along with a frank discussion of the structural inequalities engendered by Prop. 13 and the insanity of requiring supermajorities to pass state budgets — is the debate Brown and Whitman should have. Don't hold your breath.

timothy.rutten@latimes.com

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