Divided Nation or Antiquated Voting Rules?
Amazingly, this year's election may be even closer than last year's. The last thing I saw before I turned off the TV tonight is exit poll data showing George Bush with 269 votes, the remaining states may go to Kerry, giving him 269 votes as well. A tie. Last year the debate was over who won a pivotal state called Florida and the courts (also split) decided the outcome of the election. This year, the parties may split the country right down the middle. The resolution would be easier (the House of Representatives will decide) but it would make it even harder to give the winner legitimacy in the eys of the other half.
Most people point to these results as proof of a sadly divided country. I look at it and see the expected result of the electoral game. We have an election process that concentrates political power in only two parties. More to the point it puts more power in the Party (no matter how nonsensical the coalition) than in the individual candidate. If you have two large organizations equally competing to split the vote between them, the average result should be a dead heat. For years the balance has shifted back and forth (sometimes wildly) around this average. Now, as our political professionals (like Karl Rove) have become super sophisticated at splitting hairs just enough to win, we've settled into an uneasy equilibrium.
Our country is not intrinsically divided, but the rules of our political game encourage the two parties to divide voters among them. This is not a conscious or intentional division. It arises from people playing the rules of our electoral game. Empirically, our process has always resisted a three party system. Third parties usually dissolve into the platforms of the two large parties and sometimes replace one of the large aprties. Theoretically this arises from a federal system that encourages states to concentrate power with "winner take all" laws for electoral votes, campaign finance laws that favor political parties, and a simple majority election system.
I wish the winner of this election good luck in "healing the rift", but if we really want to make the division disappear, we need to reform of election process, specifically doing away with the simple majority method of picking a winner. Thankfully there are some paces were political experimentation are alive in America. My hats off to San Francisco for giving ranked choice voting a try. In fact, I think it is the single most important social experiment in this country since the New Deal. My heart is also with the voters who participated San francisco's District 5 election where they must vote for 3 out of 22 candidates (that's divided!). It'll be confusing, and unnerving, and some may not be happy with the results, but theoretically (in all but one case) the process will pick the candidate with the best chance of uniting the 22 different factions (Google: "Condorcet's Rule"). If the experiment plays out well in SF and the push is on for the national version, I think we'll see a United States of America again by 2012 - 2008 if we are lucky.
California Proposition 1A - remembering Proposition 13 (1978)
This is an extended revision of a letter I wrote to a group of fellow voters who met at my house to discuss the statewide propositions. If you just want an analytical summary of Prop 1A jump down to the section called "Present", but the juiciness of this proposition really is in its relationship with Prop 13.
Past - Proposition 1A is a soft referendum on Proposition 13 (1978)
Prop 13 was enacted in the late seventies during the peak of national stagflation (combined inflation and unemployment) and a state governement surplus fueled by tax increases Ronald Reagan instituted a decade earier as governor to balance the budget. It was the leading edge of a tax revolt that culminated (ironically) with the Reagan era of federal tax cutting and the replacement of stagflation with supply side economics. The apparent success of the Regan tax cuts at beating stagflation fostered the tax-cut ideology most recently implemented in the two tax Bills of the George W. Bush presidency.
Despite all the doomsayers, Prop 13 did not result in immediate cutbacks to basic services and has since been elevated to almost irreproachable status in California politics. Its early critics (mostly state legislators, but also the business lobby) claimed it would eliminate money to pay for police, fire, emergency medical, etc. In reality, it forced those same critics to find other ways to pay for these services.
Part of the means for doing this was cutting real pork out of the state budget, but a big chunk came from deficit funding public schools. This policy was reversed in 1993 (as bonds were refinanced), shifting tax revenue back to schools. Regardless of any immediate benefit to taxpayers or lack of immediate costs to government services, most of the impact was simply deferred. The questions posed by Prop 1A force a reconsideration of the "success" and soundness of Prop 13.
The recent budget crisis shows that the "fiscal accountability/austerity" that supposedly came from Prop 13 has at the very least evaporated. I would argue it never existed and the state has played accounting games for over a generation to hide shortfalls that have resurfaced as a crisis. The wisdom learned here is that the only way to cut spending in government is to
cut spending in government. Indirect means like cutting revenue (i.e. taxes) don't work to reduce the size of government, they just redistribute the costs - in the last resort, they redistribute them to future generations.
Many proponents of Prop 13 argued the tax freeze would force lower/more efficient government spending. This is a myth. The present fiscal crisis is really the deferred crisis of Prop 13. Legislators replaced property tax increases with deficit spending (i.e. deferred taxes). When that trick stopped working around 1993, they started appropriating money from local jurisdictions to make up shortfalls.
Present - Prop 1A is a decision avoided in 1978
The essence of Prop1A is an argument between state government and local government over an ever-shrinking (relatively speaking) pot of tax revenue (property and sales mostly). The doom of cutting local services arrived thirty years later (the fire station near my house is an example). Governor Schwarzenegger negotiated Prop 1A in response to the defiantly local government leaning Prop 65 (all backers of prop 65 have shifted their support to 1A). There are four key components:
1. State government is presently allowed to take property tax revenue from local government to pay for public schools. The Proposition restricts this activity to a clearly defined emergency case...and only after 2008. This emergency case was the key bit negotiated by the Governor. Note: it doesn't matter much that the money is nominaly marked for public schools because the state would only do this when they under funded other programs.
2. The Proposition requires the State to payback local governments if they reduce the VLF (car tax) below current levels.
3. If the Proposition passes, the state would no longer be allowed to reduce local sales taxes below present levels. After 1A passes, sales taxes could not be reduced and they could only be increased by a 2/3rds majority (per Prop 13). Important note: these local sales taxes are mostly used for transportation projects like city buses.
4. State mandates would be suspended in any year the state is unable to fund these mandates, except for public school and employee rights mandates. In all other cases, state mandates (i.e. regulations that cost money) may be suspended during bad budget years. The provision also expands the definition of a mandate. If local governments take over services that the state had formerly provided, that may be considered a mandate. In essence this means that local governments never need to deal with unfunded mandates, but it also means that mandates you support could be decimated by a series of bad budget years. Strangely, there has been little focus in the media on this provision, which could be used to dismantle government programs.
This may seem like an awful choice to make: state services versus local services, but that's the legacy of Prop13. Legislators for over 30 years ago have punted on this decision and the ball just landed with the voters. To make the decision easier, keep in mind that Prop 13 may be dismantled someday, but the basic question of Prop 1A would still be valid: Should government (taxation and spending) be decentralized to the cities/counties or centralized in the state. A yes vote will decentralize government money to the local level and limit the potential for future centralization; a no vote will keep things the way they are, presently a trend toward further centralization.
Future - It's all about taxation
Just like Prop 13, the trend set by Prop 1A will likely lead the nation into a debate about both government decentralization and the fiscal limits of tax-cuts (the present national deficit is a mimic of the CA deficit). Regardless of the outcome, some government official's job will be a lot harder. If the measure passes, the state legislature will enter a period of heavy arguments about spending. If 1A fails, local governments will find some less transparent way to raise revenue (i.e. fees, and penalties). Regarless of the outcome, government at all levels will have greater incentive and argument for gaining back some taxation power.
Arguments against repealing Proposition 13 usually rest upon the idea that unfettered property taxes will lead to a repeat of 1978, when long-time homeowners were forced to sell their homes. Such an argument ignores the larger context of taxation in 1978. For instance, the federal tax on income and dividends was 70% (and 50% of the highest wage), we were suffering from inflation caused by underproduction of food and an oil shock, and President Carter had embarked on poorly conceived recovery program: a deficit funded job creation program and voluntary price and wage controls. In Carter's defense, he was faced with the equally ill-founded (if well intentioned) legacy of Johnson's Great Society (expansionary Keynesian theory), and politically unequipped to implement the harsh Keynesian remedy (higher taxes or lower spending). Perhaps the one thing that could have healed the economic malaise was also out of Carter's depth - managing the whims of OPEC.
For better or worse, the problems of 1978 are not the problems of 2004. In fact the fundamental causes of the crisis in 1978 are unlikely to repeat. Alan Greespan has a strong hold on inflation and more importantly the tax code doesn't unduly encourage capital flight to real estate. The one thing that could repeat is a spike in oil prices, but that only exacerbated the other more fundamental problems with our economy at that time. Proposition 13 was California's landed taxpayer's response to economic mistakes that were larger than California and have since been corrected at the national level.
What remains from Proposition 13 is the problems it created: arguments between local a state government resulting in generationally displaced costs, decreased improvement or redevelopment of "old" property, greater stealth taxes (like the Vehicle License Fee) that are often regressive in practice, increased tax inequality between commercial and residential real estate, increased tax inequality between young and old (much like Social Security). In sum, Proposition 13 displaces the tax burden to young homeowners/renters in cities, especially those that turn to government as the provider of last resort for key services, and creates a civic culture of competition and confusion.
The reality is that Proposition 13 did a very good job of immediately dealing with the crisis that befell the people who voted for it in 1978, but since it did little to fix the causes of those problems (which were national), it just transferred the pain over to groups that had less political power at the time. When you are dismayed by the apparently dammed either way choice of Proposition 1A, take a moment to consider the legacy of Proposition 13. At some point it may be tractable to recall Proposition 13 and replace our current tax system with a more sensible one (Google "land rent" for an idea), but I would not recommend a reactionary repeal of Proposition 13 . However, Proposition 1A shows it is time for thoughtful reform to distribute the costs and benefits equitably.
