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Introduction of Senator Tom McClintock by Claremont Institute President Brian Kennedy:
Our speaker this evening used to be a member of our staff. We still count him among our number.
He is a man who has dedicated his life to fighting for freedom here in the state of California, but it is a fight that extends all the way to Washington and the issue of what it means to be a citizen.
Tom McClintock is today a state senator, having also served as a state assemblyman. Under different circumstances he would be today the state controller and would be Gray Davis's worst nightmare. Actually, he is still today Gray Davis's worst nightmare, since it is Tom McClintock who understands the state budget backwards and forwards and knows just what a fraud is being perpetrated on the California taxpayer with what is going on with the Administration—and he explains this regularly to the state press corps.
Tom has been recognized as one of the leading minds in California politics for better than 20 years now. Before rejoining the legislature he served as Director of Economic and Regulatory Affairs for the Claremont Institute's Golden State Center for Policy Studies. There he wrote on the state budget and was a leading scholar on Proposition 209 that ended quotas and preferences in California state government.
Tom is an old friend of mine and is a rare commodity in Sacramento. The reason is because he works harder than everyone, he does not bend on principle, and he does not give up the fight, no matter what the odds are. He is not today state controller but I have every confidence that this would have been among the least of his offices. It is a great pleasure to introduce a great Californian, Senator Tom McClintock.
Senator McClintock's Remarks:
Brian, thank you for that kind introduction regarding my knowledge of the state budget. All I really know about the state budget is this: if you spend every dime that comes in during a good year, you are going to be in a world of hurt in a bad year. And that's all you really need to know about California's budget. I want to thank all of you for everything that you are doing and for supporting the Claremont Institute and its decisive work in the cause of freedom. It's that work that makes the Claremont Institute one of the most influential instruments of public policy in California today.
Everything that you are doing to support this Institute is the foundation of that influence and success. And it's so critically important. Because if you stop and think about it, what is politics? It's always been one thing and one thing only: it's been a fight for freedom. In every political conflict and every political debate since the dawn of recorded history, it all comes down to that basic question. Do people have a right to lead their own lives, make their own choices, enjoy the fruit of their own labors, raise their children according to their own values and standards, enter into voluntary agreements with each other for their own mutual betterment, or does there exist a special class above us entitled to make those decisions for us? That has always been the question. And as the premiere public policy institute in the country dealing specifically with that question, never has the Claremont Institute's work been more important than it is today—especially today and especially in California.
I want to talk a little bit tonight about some forces that I see growing in this state. I believe we are about to take a quantum leap in the public policy debate. I think that we have now entered the fourth quarter of a contest that began in this state many decades ago and is now coming to fruition. Meteorologists will occasionally refer to what they call a "100-year storm," a storm so large that it occurs on an average of about once a century. It's as powerful as it is rare. And as I look back upon my now 31 years of active involvement in California public policy, with a majority of those years spent as a member of the state legislature, it has become very clear to me that just ahead of us is fast converging a combination, and indeed you might say a culmination, of political forces that promise to produce a 100-year political storm in this state with the potential, I would use the word "promise," to change the entire political landscape of California and by doing so, to proclaim liberty throughout all the land and unto all the inhabitants thereof.
I'd like to begin this discussion with a very important question to all of us. What are the mechanics of change? When does change actually occur in society? Meaningful change is a very rare thing. We are all, after all, creatures of habit. We model our institutions on this quality. With good reason, change by its nature is risky. A precipitous change can be downright dangerous. And thus, all experience has shown that mankind is disposed to suffer while evils are sufferable, than to right themselves by altering the form of government to which they have become accustomed. So we see history unfold not as a seamless trend of gradual adjustment, but rather as a herky-jerky combination of long periods of political stasis and gradual decay and decline, punctuated by sudden climacterics that dramatically alter the governing agenda and the political coalitions of society for decades and sometimes for generations. Change occurs when the necessity for it finally ultimately overcomes our resistance to it, when a long train of abuses and usurpations simply can no longer be tolerated.
So what's converging just ahead of us as we look ahead at California's public policy? I think there are three major tempests, any one of which I think could produce profound political change. Together, I believe they do constitute a legendary hundred-year storm. The first of those forces is the culmination of what Greg Lucas once described as—I love this term—the "kumbaya über alles environmental movement" that was introduced in California public policy in a very sudden climacteric in 1974 with the election of Jerry Brown. He called it his "era of limits." It was punctuated by, you remember, such new age nonsense as the mantra "small is beautiful." It is, in fact, a radical and retrograde ideology that operationally manifested itself with the simplistic notion that if we stop building things, people won't come. So in 1974 we stopped building things—and people came anyway. And now we face the culmination of this ideology with the administration of Governor Jerry Brown's Chief of Staff, Gray Davis.
We have to give Jerry Brown his due. The basic premise of the policies that he began has continued unchanged through two Democratic and two Republican administrations. In 1974 the state cancelled its highway program, literally walking away from highway projects in mid-construction, literally abandoning them. Since 1974 the miles driven by Californians has increased 116 percent. Our lane mileage has increased by eight percent. Construction has slowed even more radically since 1990. In 1990, you may recall, we doubled the excise tax on gasoline with the promise that that money would be used for road construction. In the next 10 years the miles driven by Californians increased by 30 percent, while our lane mileage increased by just one percent.
The same ideology devastated the water delivery system of the state. We abandoned dams in mid-construction. We shelved the plans for the aqueducts and the conveyance facilities necessary to complete the greening of California. Since the mid-1970s California's population has grown about 60 percent. Our water storage capacity has grown about 12 percent. And that trend has also accelerated in the last 10 years. While the population has increased 15 percent, water storage capacity has increased by two percent. We've now reached a day when the state can store less than one year's water consumption in its entire system.
And in those years we've also lost a significant entitlement to Colorado River water. When dam construction came to a screeching halt, so too did the promise of abundant hydroelectric power. Though the population increased, again 60 percent since 1975, hydroelectric production has increased just seven percent. As the power system has stretched beyond its capacity, peak generation costs have devastated consumers, our electricity imports have doubled, and Californians now pay the highest electricity prices in the entire United States, save Hawaii.
We stopped people from building houses in that same period. It's estimated that since then our housing supplies have increased at less than half the rate as required by population growth. So we're now living with the result of three decades of this retrograde ideology that has destroyed the infrastructure of California. We've now reached a period of crisis when these policies can simply no longer be sustained. I drove in from Santa Barbara today, three hours and 52 minutes on the road. Average speed: 33 miles an hour. I'll tell you we've taken a giant leap backward in our highway technology alone. And that, by the way, is just the first storm that is converging immediately ahead of us.
Consider the second one, and that is what can only be described as the collapse of California's finances. And to understand this phenomenon you basically need to understand just three numbers: 21, 25, and 40. Once you understand those three numbers, you'll understand everything there is about California's finances. In the last four years, inflation and population have grown at a combined rate of 21 percent. Revenues coming into the state's coffers have increased 25 percent. That is after the 'dot-com' collapse, after the car tax was trimmed, after the state's revenues plunged. We are still seeing revenue growing significantly faster than inflation and population combined. So this is not a revenue problem. The problem is in that third number, 40. We've had a 40 percent increase in state spending in the same period. And it is this rapacity and recklessness that turned a $12 billion surplus into a $35 billion operating deficit in a period of less than two years. And that, by the way, is only the tip of the financial condition of the state of California.
We hear so much about the $35 billion deficit, we also forget that four years ago this state owed $7 billion in general obligations. Today we owe $41 billion in general obligations. Three years ago our pension obligations to the state's two pension systems combined were less than $1 billion a year. This year they are $2.2 billion a year. And by next year they will climb to $2.8 billion. And don't worry about that—the legislature doesn't. Since they don't have the money to pay our $2.2 billion pension obligation this year, they're simply going to finance it over the next five. Which of course raises the interesting question, if we can't afford a $2.2 billion pension payment now, how are we going to afford a $2.8 billion pension payment next year while we're also retiring the debt, including an extra $300 million for the loan we took out to meet this year's obligation? And so I would submit to you that we have reached a point where these policies, too, cannot be sustained.
And then there's a third storm converging in the same period in our history. And I think you can best describe it as Milton Friedman once did when he asked in exasperation, "What makes them think socialism works any better in California than it did in the Soviet Union?" We are now spending more as a percentage of your earnings that at any time in the history in California, we are delivering less than at any time in the history of California and the question occurs, "Where is all that money going?" We certainly haven't seen a 40 percent increase in highway construction, or school construction, or academic performance, or electricity generation, or water storage, or all the other things that we are paying this government to provide, the answer is that it's going into a bureaucracy. It is growing at the expense of the freedom that produces prosperity.
And I'll offer for your consideration just one out of hundreds of examples, the Workers' Compensation System. Over the last several years, major new costs have been mandated upon that system, and today employers are being crushed under their weight. It's not unusual to see 200 and 300 percent increases in the costs to businesses as a result. In testimony before the Senate Labor Committee last week, just before the ruling party on that committee killed every significant reform bill that was submitted to it, an electrical contractor who employs 20 people said that he now has to confront the fact that with his workers' comp increase, he himself would actually bring home more money if he fired his 20 employees and went back into business as a one-man shop. Another, a bag manufacturer in the Inland Empire, testified that his workers' compensation increase this year required a lay-off of 40 employees just to balance the books. We were having a discussion at dinner tonight. Johnny Zamrzla is a major roofing contractor. His workers' compensation costs are now one dollar for every dollar of payroll. One dollar of workers' comp costs for every dollar of payroll! And that is typical—that is the roofing industry today. And that workers' comp crisis is just one example, one program, out of the thousands of regulations that are destroying our commerce.
The California Chamber of Commerce estimated that a California business needs to increase its bottom line 10 percent this year just to meet the cost of new regulations enacted by the state of California last year. Last week one of two Fortune 500 companies that are left in Santa Barbara County announced that they were moving to Florida. The CEO was interviewed on television and this is what he said, "This was not a complicated decision. There is no income tax in Florida, the sales tax is six percent, and it costs 40 bucks to register your car. What is the big mystery?" I spoke to a woman a few weeks ago who just sold her business in San Diego. Before she and her husband did so, they made very sure it was incorporated in the state of Nevada. That state also has no income tax. And she, by the way, made very sure they were legal residents of Nevada. She asked me, "Have you seen Reno recently?" I haven't, I had to admit. She said, "You would not believe what is going on there." She described in vivid detail the booming construction industry that's going on and abundant palatial homes being built there, and a booming economy. She said, "It's all being fueled by Californians."
That set me to thinking about Tocqueville's observation as he traveled through the Ohio River Valley in 1831. He spoke of the fertile and bountiful valley divided by the Ohio River. He said on one side of the river was Ohio, and the other was Kentucky. This is what Tocqueville wrote,
The two states differ on only a single point: Kentucky has accepted slaves, the state of Ohio has rejected them from its midst.
The traveler who, placed in the middle of the Ohio, allows himself to be carried along by the current to the mouth of the river in the Mississippi, therefore, navigates so to speak between freedom and servitude; and he has only to cast glances around himself to judge in an instant which is more favorable to humanity.
On the left bank of the river, the population is sparse; from time to time one perceives a troop of slaves running through half-wild fields with an insouciant air; the primitive forest constantly reappears; one would say that society is asleep; man seems idle, nature offers the image of activity and of life.
From the right bank, on the contrary, rises a confused noise that proclaims from afar the presence of industry; rich harvests cover the fields; elegant dwellings announce the taste and care of the laborer; on all sides comfort reveals itself; man appears rich and content: he works.
And it occurred to me, as this woman talked about conditions in the middle of the Nevada desert, that we are, in this generation, beginning to witness the same demarcation beginning to form, as one sails down the Colorado River which divides the most fertile and bountiful state in the nation from the most desolate territory on the continent; desolate by every measure but one—freedom. And it's freedom that now makes a forsaken desert a more desirable place for people to live and work and raise their families than right here in California. And now right ahead of us these three terrible storms spawned by a retrograde ideology, by unprecedented fiscal recklessness, and by an oppressive misuse of state power, now converge directly ahead of us.
The wind has already shifted. As we look at polling data, it indicates the electorate is awakening and focusing upon what has been done to their state. Old political coalitions are beginning to break apart. New ones are beginning to form. I know that for a fact. In last November's election I received more independent and more cross-over Democratic votes than any Republican running on the 2002 ballot despite a five-to-one funding disadvantage. Although I received less financial support from the Republican Party than any other competitive race on the ballot, I received broader electoral support from the voters of Californian than any other candidate on the ballot. And that did not happen, I assure you, by minimizing my differences with the ruling party of this state and its policies.
I moved to California with my family in 1965. I was nine years old. My folks came here looking for a better future for their children. My dad had been out of work for over a year. My mom was a homemaker. And they came here in the summer of 1965 in desperation. When they arrived in California that summer they both immediately found good jobs. They found the home of their dreams; a four-bedroom, ranch-style home with a 40-foot swimming pool and a half-acre landscape, and they bought that home in the summer of 1965 for $35,000. California was a land of opportunity. Taxes were low, the jobs were plentiful, and the highways were the finest in the world. My dad commuted 40 miles to downtown Los Angeles every morning. It was about a 45 minute drive in rush hour in those days. Our hydroelectric and nuclear plants were making electricity so cheaply that electricity meters were supposed to become obsolete within 10 years. Our water storage was so immense that many communities didn't bother with water meters. We came from Westchester County, New York where the schools were supposed to be the finest in the country. I had to scramble to catch up to where the California schools were in comparison. I remember that state. It was real. I lived there. And it's gone.
The home my parents bought for $35,000, if it were new, today, after all the inflation has occurred, should be selling for about $180,000. But the homes in that neighborhood (my folks still live there), now 40 years older, are selling for more than two-and-half times that amount. Which means my parents wouldn't have been able to afford that house if they came to California today.
They wouldn't have been able to find work, either. Californian's lost 200,000 jobs last year. If they had found work, I don't think they would have gotten there. Downtown Los Angeles is now two hours from Thousand Oaks during rush hour. They couldn't have afforded their taxes, either. That year the state spent a little over $6 from every $100 that people earned. Today Gray Davis is spending nearly $10 out of every $100 that you earned. Which means that my family and every family like ours, in looking for a better future for their kids, would have stopped at the Colorado River.
Today, according to the statistics people look at, even with California's bountiful resources, the most equitable climate in the entire continent, and with every blessing that God could bestow upon a land, people are finding a better place to live and work and raise their families out in the desolation of the Arizona and Nevada deserts. No conceivable act of God could ever wreak such devastation upon our state. It takes a government to do that. And it has. And that brings me back to the beginning. When does change occur?
In April of 1775 a column of British soldiers moved up the road from Boston. They mowed down the colonial militia at Lexington and marched unhindered to Concord. But something happened on that day. Without phones or faxes or e-mail, word spread to every village and hamlet, every farm and home, and spontaneously American farmers and merchants left their families to gather along the road to confront the most powerful army in the world; not because they wanted to, but because they had to—because the situation had become intolerable, and could no longer be ignored. I believe we're seeing the civic equivalent occurring here in California today. Men and women who have never cared much for politics are today turning their attention to public policy. They're beginning to become politically active, not because they want to, but because they have to. One by one they are reaching a turning point in their own lives. A simple question confronts each of them—fight or flight? There is no third alternative. Some will flee California. Many already have. But one by one the ranks of those that determine to stay and fight are growing. You can see it everywhere. And one by one we approach that point on the political scale where equilibrium is reached and the balance suddenly shifts. That's the mechanics of change in democracy and we are nigh upon it.
A 100-year storm is fast approaching, and as Lincoln said, "The occasion is piled high with difficulty and we must rise with the occasion." We have difficult times straight ahead of us that will test once again the capacity of a free people for self-governance. But through those hard days I am absolutely certain that there lies the destiny of this generation of Californians, to bestow upon our children the California of boundless opportunity that our parents once bestowed upon us. And I thank you all for being in the front line of that fight by supporting the Claremont Institute.
