Over 300 state policymakers, researchers, advocates and service providers explored driving a progressive political agenda to expand economic opportunity and financial security at the Policy Insights 2018 conference held last week in Sacramento. Facts and ideas presented at the event “could help form the basis of a new, future-oriented economic agenda for California in areas like tax policy, health coverage and family supports,” California Budget & Policy Center executive director Chris Hoene told participants as he reviewed the state landscape within Trump World. “It’s about bringing more prosperity to more people and to deepening their well-being.” The nonprofit, nonpartisan Budget Center, which says it engages in independent fiscal and policy analysis to improve “the well-being of low- and middle-income Californians,” hosts the gathering every year. A summary of some of the panels’ discussions follows below.

Despite growth and low unemployment, labor’s share of the economic pie is paltry, Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities in Washington, DC, said in the morning’s keynote address. He detailed many connections between economics and politics, linking workers’ pay and productivity, unions’ difficulties, fiscal and monetary policies, and state and federal budgets. The best progressive policies are the most direct, Bernstein said during a Q&A. “We need to think about direct job creation for folks left behind in rural and urban communities,” he told a panel moderated by Los Angeles Times staff writer John Myers. Such a jobs policy should find a home in the upcoming election season, Bernstein added.

State Senator Holly Mitchell (Photo: Joanne Kim)

Advancing Gender Justice: Boosting Women’s Well-Being Through Economic Security, Employment and Earnings

In a gender equity and justice workshop, Mary Ignatius, statewide organizer of Parent Voices, a grassroots group advocating better childcare policies, stressed the importance of a public platform for the voices of struggling, low-income women. Such a platform can and does help to dispel myths that blame working females for their plight, she said. These women often have no option other than to seek costly and scarce childcare while working outside the home, she said.

Heather McCulloch, founder and director of Closing the Women’s Wealth Gap, said research shows women experience this shortfall as a group. Therefore, organizing with a “strength in numbers” focus to build coalitions is a useful tool to improve women’s investment and savings, McCulloch said.

In blue-collar occupations such as those in the building trades, women’s sexual harassment is rampant, said Jessica Stender, an attorney at Equal Rights Advocates, which describes itself as a national civil rights organization dedicated to protecting and expanding economic and educational access, and opportunities for women and girls. This harassment makes the goal of females “getting in and staying in” such high-paying blue-collar jobs critical, Stender said. She also discussed exploitation of low-wage women workers, saying remedies for occupations such as janitors and restaurant servers range from individual to class-action litigation.

California Budget Prospects for 2018-19 and Beyond

KQED-FM reporter Marisa Lagos moderated a panel on current state budget and policy proposals for the 2018 legislative session, and which featured state Senator Holly J. Mitchell (D-Los Angeles) and Assemblyman Phil Ting (D-San Francisco).

The two legislators focused on new priorities for the criminal justice system. Mitchell urged reforming policies that criminalize poverty and addiction. This change is underway, she said, with more work required. The recent legalization of marijuana for recreational use is a case in point — people are behind bars for crimes that no longer exist. Ting noted that the state prison population is down, but spending for it is up. Both urged fellow lawmakers to support bills that shift spending from prisons to meet the social needs of low-income Californians — such as child nutrition and early childhood education. A related means of improving low-income Californians’ lives is to increase the CalWORKs cash grant, Mitchell said.

She also stressed that closing the education equity gap requires sufficient funding to ensure that all kids who enter kindergarten are prepared to learn. Ting noted that at the local K-12 school district level, better budgetary transparency is necessary to track spending and student results.

Mitchell and Ting said it is vital to continue state laws and policies that deal with the impacts of climate change. They also urged lawmakers on both sides of the aisle to continue to work to improve immigrants’ lives — which they said the Trump White House opposes.

Building on Health Care Reform: Next Steps in State Health Policy

The University of California, Berkeley’s Laurel Lucia noted that despite the Affordable Care Act cutting the number of Californians without health care insurance (from 17 percent in 2012 to seven percent in mid-2017), three million remain uninsured. Undocumented adults (10 percent of the labor force and 58 percent of the uninsured), do not have access to the ACA and Medi-Cal, said Lucia, director of the health care program at the university’s Labor Center. She backed policy options such as Senate Bill 974, introduced by Sen. Ricardo Lara (D-Bell Gardens), to address that.

Anthony Wright, head of Health Access California, a nonprofit advocacy group, focused on policy steps the state could take without federal help, given what he called the national GOP’s and President Trump’s antipathy. Wright announced the launch of Care4All, a new campaign to achieve universal health care coverage in California. A step toward that goal is to expand the affordability of the ACA in the individual market and Covered California marketplace. In this way, he said, consumers would spend less of their income on premiums, copays and deductibles. Wright mentioned SB 910, authored by Senate Health Committee Chair Sen. Ed Hernandez (D-West Covina), that would ban the sale of short-term health and substandard insurance policies that Trumpcare’s ACA overhaul favors, beginning in 2019.

Michelle Cabrera, health care director of the Service Employees International Union, State Council, detailed the causes and effects of high medical prices, including the upward spiral of those costs created by health-plan mergers. As an antidote, she cited Assembly Bill 595, introduced by Assemblymember Jim Wood (D-Healdsburg), to boost the Department of Managed Health Care’s oversight of such mergers. These mergers hike consumers’ prices, she said, and are partly why the U.S. spends more per person on health care than all other nations, yet delivers high-priced and low-quality coverage. Measures such as AB 595 could shed light on the hidden negotiated prices between health plans and providers — the kind of transparency that is now unavailable. Price transparency could expand an overdue discussion of the proprietary forces driving high health care prices, according to Cabrera.

Crafting a New Economic Agenda for California

The conference ended with a plenary discussion of building a new state economic agenda, moderated by the Budget & Policy Center’s Hoene. University of Southern California sociologist Manuel Pastor looked at what worked in California’s postwar economy before its boom ended and social inequality grew to its present extremes. Pastor, director of the USC Program for Environmental and Regional Equity and the USC Center for the Study of Immigrant Integration, urged state politicians to approve a new Master Plan for Higher Education to ensure low-cost access for students, and to increase investment in affordable housing. Such policies, given the state’s changing demographics to a nonwhite majority, can cut the impacts of structural racism, he said.

Hoene described California’s corporate-friendly economy as one that puts employers first and workers last. Alma Hernández, executive director, SEIU California, urged politicians to back better labor standards, which she said would empower working people in their fight to weaken current corporate power over politics and policies. Employers who fracture work into precarious, non-union jobs, for example, harms workers’ lives on and off the job, she said. Natalie Foster, co-chair of the Economic Security Project, pondered the role of political narratives. Who tells whose stories matters in overcoming current social divisions, symptoms of rising income and wealth gaps. “Big ideas matter,” she said, adding that one example is a wealth tax that could generate more revenues for progressive policies.

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Nancy MacLean is a historian in a hurry. Leaning forward, hands pressed on the table in front of her, she is telling a room full of activists that an assault on democratic institutions has created an “all-hands-on-deck emergency” on a scale that “we have not seen in our lifetime.” MacLean has a dramatic flair in her writing and in her personal presentations. She speaks with the urgency of someone who recognizes a pivotal historical moment when she see one.

Seated in the windowless basement of a union hall that is shared with a local economic justice non-profit, she is dressed in a white blouse and blazer.

Those assembled take turns expressing dismay over a divided country, over the daily attack on immigrants, and over the legendary discipline of an extreme right-wing political movement that has advanced all the way to the White House.

“Economic libertarianism produces a kind of social Darwinism — the idea that anyone who is not thriving in the economy must have something wrong with them.”

The Duke University professor says she discovered the intellectual underpinnings of the country’s rightward tilt while digging through the archive of a Southern economist named James McGill Buchanan. She laid out her argument in her impassioned and highly readable 2017 book, “Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America. That history holds important lessons for those resisting the right’s ascendance, she tells the group.

The “days of silos are over,” says MacLean. Whereas the left has been focused on discrete campaigns and issues, the extreme right, she warns, has undertaken “an audacious bid that has been six decades in the making to fundamentally change the relationship between the government and the people — and to do so permanently.”

Buchanan, who was 93 when he died in 2013, provided a key set of anti-democratic ideas that propelled the libertarian right’s effort to dismantle the liberal state, while giving plutocrats free rein, according to MacLean. Part of his agenda, MacLean says, included shielding the “makers” from the “takers” by eroding the public’s faith in government as a means to protect the rights of the property-owning class.

Buchanan, a Nobel Prize winner, favored requiring supermajority votes to approve tax increases, making it more difficult for public officials to meet the needs of ordinary citizens. In a long and varied career, he advocated dismantling Social Security, counseled the government of Chilean dictator Augusto Pinochet and nurtured generations of scholars at Southern universities, including at a center he founded at George Mason University with the help of $10 million from the right-wing billionaire Charles Koch.

One of her book’s insights is how conservative legal scholars and economists have understood the degree to which the devil lay in the mind-numbing detail of policy.

“The wicked genius of Buchanan’s approach to binding popular self-government was that he did it with detailed rules that made most people’s eyes glaze over. In the boring fine print, he understood transformations can be achieved by increments that few will notice, because most people have no patience for minutiae,” she writes.

That passage refers to the advice he gave Pinochet’s government, which she argues has hampered Chile’s current president, Michelle Bachelet, from enacting social programs in spite of a strong popular mandate.

Now MacLean is warning progressive activists that the Republican tax bill and its projected $1.5 trillion deficit could help fuel a growing right-wing clamor for a state-led constitutional convention, whose first order of business would be a balanced budget amendment to curtail future government spending.

“While the eyes of most journalists and citizens have been fixed on Washington” and Trump, she warns, “scores of organizations and elected officials funded by Charles Koch and his donor network” have been “quietly lining up the state authorizations” needed for a constitutional convention that will curtail legislators’ ability to serve the needs of the governed. “They now have 28 of the 34 states needed to call such a constitutional convention under Article 5 [of the U.S. Constitution].”

Such a move, she adds, would put the country further down the path toward the “glorious period of liberty” favored by Koch and Buchanan — a place in which workers have “no legal right to organize for collective voice and power” and where corporations are “all but free of democratic accountability” — and where privatization had eliminated Social Security, Medicaid, and Medicare.

Nobody is immune from the right-wing attack on government, says MacLean. “Every civil rights activist, every feminist, every environmentalist, every queer and every retirees’ group who goes to government to move a public agenda is a target for this and will suffer if it goes through,” she says.

Yet this creates a “perverse source of strength,” she says. “Our common need for government can potentially unite all these constituencies across groups to protect and expand democracy.”

MacLean’s fifth book has received a slew of positive reviews from major publications and a National Book Award nomination. Not surprisingly, Democracy in Chains has also drawn an avalanche of attacks from the very right-wing think tank networks that she critiques, as well as complaints from some left academics.

MacLean’s claim of Buchanan’s centrality to the rise of libertarianism, wrote political scientists Henry Farrell and Steven Teles, could be misleading to a progressive movement “liable to overestimate the extent to which the right is operating by a single plan. The most serious danger is that the left might look to this mistaken understanding of the right’s success as a model for how it should organize itself.”

Speaking to Capital & Main, MacLean actually gives some credit to Buchanan, who in spite of his deeply reactionary politics, was “probably the most original thinker about democracy in the last 50 years,” she said.

But Buchanan’s “very, very reductionist analysis” was deployed to erode popular trust in government, she argues.

“He sought to build a case that government could not do what it promised because politicians were not really seeking to advance the public interests as they claimed. They were just trying to get themselves elected using other people’s money. The same was true of all public actors, according to Buchanan,” as she told the union-hall gathering.

MacLean’s book anchors Buchanan’s thinking in the South’s troubled history of segregation and slavery. He advocated for state-funded voucher systems for private schools in the late 1950s, after local officials had closed public schools as part of massive resistance against court-ordered desegregation.

MacLean is careful to say her research found no evidence that Buchanan operated on the basis of racial animus — although he must have understood the context of his proposal for school privatization. MacLean joins conservative scholars in connecting Buchanan’s ideas to those of antebellum South Carolina Senator and plantation owner John C. Calhoun, who thought democracy needed to be curbed because it failed to preserve the liberty of the slave-owning elite.

And what about today’s libertarians? She believes there is a reason libertarianism has remained an overwhelmingly white cause.

“Economic libertarianism,” she told this website, “produces a kind of social Darwinism — the idea that anyone who is not thriving in the economy must have something wrong with them. There’s always this slippage between [economic libertarianism] and the really ugly white-supremacist right,” she says.

MacLean’s fundamental message is that Buchanan – and the extreme right – have an Achilles heel. Their ideas are extremely unpopular and so they have had to proceed by stealth – whether through voter suppression laws, gerrymandering or other means.

“We’ve had the most radical gerrymandering in American history,” MacLean told Capital & Main. “And they’re trying to destroy labor unions without actually saying that they don’t want working people to have a collective voice.”

“However much they may offer bromides to freedom or liberty in the abstract,” she added about the far right, “what they’re really talking about is freeing corporations, and the wealthiest taxpayers, who don’t support what the majority of their fellow citizens do.”

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“There’s no good ending to Trump’s presidency.”

Investigative journalist David Cay Johnston has been reporting on Donald Trump since 1988, and admits that he has long been fascinated with a figure he calls “the greatest con artist in the history of the world.” Johnston first met Trump while reporting on casinos for the Philadelphia Inquirer, and has since served as a one-man fact-checking operation on Trump’s claims. His new book, It’s Even Worse Than You Think: What the Trump Administration is Doing to America, tracks the first 250 days of the administration. Johnston spoke to Capital & Main about what he’s learned while on the Trump beat, and why the mainstream media, despite incessant coverage of Trump, still tends to miss the big story.

Gabriel Thompson:  The title of your new book is It’s Even Worse Than You Think. It seems pretty bad already — what are we missing?

David Cay Johnston:  Journalists have done a very good job of covering Donald’s tweets and the nutty things that have gone on —the palace intrigues. A lot of journalists are not equipped to cover the government, because to do that, you have to understand regulations, budgets and accounting. Most journalists have not trained in those things. They’ve trained in how to accurately tell you the official version of events, and the official criticisms of the official version of events. I’m in the unofficial business.

What’s an example of a story that is being missed or is not receiving the attention it deserves?

David Cay Johnston

Johnston:  Throughout the campaign, Trump talked about how he is all for the veterans. One of the most important things he did was use the word love. He would say to his audience, “We love you. We love our police. We love our veterans.” I think that was a very powerful motivating word. And yet, his first budget proposal sought to cut the benefits for many disabled veterans when they reach retirement age. You’re unable to work because you served your country and you paid a terrible physical price, and you’re currently getting about $35,000 a year. Trump proposed to cut that amount to $13,000. That tells you that he doesn’t care about the vets.

The only area that some Trump critics might give him some credit is on his knowledge of taxes. But you push back on this as well.

Johnston:  Donald testified under oath that he knows nothing about accounting. Well if you don’t know accounting, you cannot know taxes. That’s like saying I’m an expert in flying jet fighters, but I don’t know what lift is. I tried to give Donald tax advice in 1990—my purpose wasn’t to save him money, it was to find out if he really understood taxes. We had lunch in Trump’s Castle [a hotel and casino in Atlantic City], and he couldn’t follow my basic, simple advice. At the time, Donald was in deep financial trouble, and I was going over the terms of his ownership, but he didn’t even understand his own deal. When I say Donald doesn’t know anything, I literally mean that.

Of course, it’s not just taxes.

Johnston:  He’s appallingly ignorant. In my previous book, I tell the story of the primary debate, in December 2015, when Hugh Hewitt asked Trump about our nuclear triad and what his priorities would be if we had to make cuts for budgetary reasons. And Trump goes on about how he learned everything there is about nuclear energy from his Uncle John at MIT, a super genius. Hewitt asked again what his priority would be, and Trump mentioned how nuclear is so massive.

“Most journalists have trained in how to accurately tell you the official version of events, and the official criticisms of the official version of events. I’m in the unofficial business.”

Then the question goes to Senator Marco Rubio, not exactly known as a heavyweight. Rubio explained that the nuclear triad is the capacity to deliver nuclear bombs from jet airplanes, land-based missiles, or submarines. This story is important because four months earlier, on his radio show, Hewitt had asked Trump the exact same question. I ran into Hewitt, and I asked him about this, and he said, “Yeah, isn’t that something. He had four months to learn about this and obviously made no effort whatsoever.”

What stood out to you in his recent State of the Union address?

There were of course tons of factual errors and claims that don’t stand up. It was a pretty banal speech, and he applauded himself. Good God! But Donald has some skills. He’s the greatest con artist in the history of the world, and he knows how to craft a line to appeal to people. He knows, when he’s being interviewed, where to have the lighting and camera stationed. The man has significant skills in self-promotion and creating his image. But he’s a Potemkin president. There’s no substance there.

You write in the conclusion that Trump is a symptom of our country’s problems, not the cause. Looking at all the terrible things he’s done, what gives you hope?

Johnston:  There’s no good ending to Trump’s presidency. Whether he’s voted out or impeached, he will go around the country claiming he was robbed and will foment violence. Nothing will hold him back. But we will get through this. We got through the Civil War, through the burning of the capital in the War of 1812, through the Great Depression. Some of the damage we can fix, and some will cause lasting problems. They are approving judges left and right, many of whom are ideologues and marginally qualified. We’ll be dealing with that long after I am gone.

Here’s what gives me hope. The day after he took office, six million Americans turned out in the biggest demonstrations in the history of this country. If that energy can be translated into votes in November, and we can get people to realize that it is our government and we need to act like owners instead of like we’re powerless, then we can move our country in the direction of progress.

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Since Donald Trump took office once year ago, perhaps no American has called into question the legal and ethical behavior of the president with more persistence and authority than Erwin Chemerinsky. One of the country’s preeminent constitutional scholars, and the dean of the University of California, Berkeley’s law school, Chemerinsky has sounded the alarm from day one of Trump’s administration – most strenuously over the president’s alleged daily violation of the emoluments clause of the Constitution. Those provisions bar the president from receiving any form of payment from a foreign government, and also from receiving any payments beyond the salary of the chief executive. Last month, a federal court dismissed a lawsuit that Chemerinsky and other leading legal authorities had helped prepare seeking to stop the president from accepting any further payments – that decision is currently being appealed.

Capital & Main sat down with Chemerinsky at his UC Berkeley office to discuss Trump’s tumultuous first year, and what may lie ahead.

Capital & Main  How would you assess Trump’s first year in office?

Chemerinsky  It’s so much worse than I could have ever feared. I don’t think that we’ve ever had a president who has less respect for the Constitution. It’s reflected in what he expresses with regard to freedom of the press, it’s reflected in the fact that on a daily basis he’s violating the emoluments clause of the Constitution by receiving benefits from foreign governments, benefits from the United States government beyond his salary. It’s reflected in his immigration policies, his travel ban, his efforts against sanctuary cities. It’s very frightening to me.

What does it say about the rule of law in this country that we have a sitting president who, in your view, has been in violation of the Constitution every single day that he’s been in office?

Chemerinsky  Before taking office the president-elect said that he was going to take steps to try to comply with the emoluments clause. None of that ever happened. What’s troubling to me is Congress seems largely unconcerned about it and so far the courts haven’t stepped in.

Is there evidence that any of the president’s decisions have in fact been influenced by payments that his business interests have received?

Chemerinsky  China gave to President Trump some very valuable licenses on trademarks. He’d been trying to get them from China for years before being elected as president. He received them and then he changed his policy with regard to China. Maybe it was a coincidence, but certainly one followed the other.

Some critics observed that the countries that were selected for the immigrant and refugee travel ban did not include any countries where President Trump’s business organization had properties and interests.

Chemerinsky  It’s at least ironic that when you look at the seven countries initially listed in the travel ban, none had Trump interests there. Of course there was also no linkage between terrorists of any of those countries and yet the countries where you could link past terrorist acts to people from those nations, like Saudi Arabia or Indonesia, were not on the list, and those are places where Trump had investments. The travel ban has gone through two more iterations and that continues to be so — Trump doesn’t have any interests in North Korea or Chad, and they find themselves on the list, but the countries where Trump does have interests don’t find themselves on the list.

One other example that is just astounding: The Trump administration has allowed offshore drilling now in all states that have coastal areas except for one — Florida. Of course that’s where Trump has coastal property. Maybe it’s a coincidence, but doesn’t this show exactly the kind of self-dealing that the Constitution’s emoluments clauses were meant to prevent?

Is there a case to be made against President Trump on obstruction of justice?

Chemerinsky  I think that there is significant evidence that President Trump engaged in obstruction of justice. He told the Russians that he fired James Comey for purposes of trying to end the investigation with regard to Russia.

If anybody tries to interfere with an ongoing federal investigation, that’s obstruction of justice. The crime that Richard Nixon would have been impeached for, if he didn’t resign, was telling the FBI not to investigate Watergate because it was a CIA matter. Well, that’s exactly what President Trump apparently tried to do — keep the FBI from investigating.

We also have more evidence that President Trump tried to interfere with the investigation of Russian interference in the election. All of this is the basis for strong concern with regards to obstruction of justice. My prediction is what we’ll see next is the implication of Donald Trump Jr. and Jared Kushner. The question is, will it reach to the president? Will it reach to the vice president?

Do you believe that there is a credible case to be made for invoking the 25th Amendment based on concerns about Trump’s mental health?

Chemerinsky  I think that Donald Trump’s engaged in erratic behavior. I don’t think that he’s shown himself to be mentally ill or physically ill in a way that would justify the 25th Amendment to this point in time. There’s a thing called narcissistic personality disorder — maybe it’s that. But I don’t know if all politicians don’t fall into that to a greater or lesser extent.

Are there any other grounds for legal or constitutional concern about the president?

Chemerinsky  My greatest concern for the next three years of the Trump presidency is whether there’s going to be a moment where a court issues an order and Trump says, “We’re going to ignore it.” When the courts first enjoined the initial version of the travel ban, there were rumblings from Trump that maybe the administration would just ignore the court order. My worry is once the president takes that position, if he does, then there’s nothing to stop him from locking up you or me or anybody else. Once the president says I’m going to ignore a court order then there’s nothing left of the rule of law.

Does Trump’s pardon of former Arizona Sheriff Joe Arpaio lay the groundwork for him to pardon anyone who’s indicted and convicted as a result of the Mueller investigation?

Chemerinsky  The president is allowed to pardon anyone accused or convicted of a federal crime. I think the pardon of Joe Arpaio shows that President Trump has no shame, that he’s not hesitant to use it even in an instance where there was a violation of law. Joe Arpaio was ordered by a court to stop racial profiling. He ignores that court order and continues to engage in it. A judge finds him in criminal contempt, and before the judge even sentences, President Trump says, “I regard Joe Arpaio as a hero, I’m going to pardon him.” Will he do it with regard to the Mueller investigation? We don’t know.

How do you assess Neil Gorsuch’s performance on the Supreme Court?

Chemerinsky  Since coming on to the court on April 6, 2017, Gorsuch has voted together with Clarence Thomas a hundred percent of the time. To put this in context, the last year Justice Scalia and Justice Thomas were on the court together, they voted together 87 percent of the time. Gorsuch so far has been at the farthest right part of the court. Maybe he’ll be different as months and years go by, but for the first nine months of his time on the court, no one has been more conservative.

Do you have concerns that the standards for what is legal and ethical behavior by a president have been damaged by this president in just one year?

Chemerinsky  It’s impossible to know what the long term consequences of that are going to be. Is Trump going to lose to a mainstream Democrat or Republican in 2020 and we’ll regard this as a blip? Or is this the start of something much more apocalyptic?

The United States form of government isn’t going to be here forever. Every form of government is here until it’s not. I believe that the institutions of government can withstand the Trump presidency, but I know many are afraid that this is the start of something that is very different than we’ve ever seen before.

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Reducing carbon emissions, raising low-wage workers’ incomes and increasing access to health insurance have not, as critics warned, led to job stagnation and lower GDP.

In a direct rebuke to anyone using the term “job-killing regulations,” a recent study shows that a group of progressive policies enacted since 2011 have had no negative impact on the California economy. If anything, the report, “California is Working: The Effects of California’s Public Policy on Jobs and the Economy since 2011,” shows that California has done better than several states that have lower taxes and fewer regulations.

The report’s author, University of California, Berkeley Labor Center researcher Ian Perry, examined 51 progressive policy measures – including environment, safety net, taxation, infrastructure and housing – that Perry coins the “California Policy Model,” or CPM. These policies include laws that provide a path to a higher minimum wage, expand Medicaid as part of the Affordable Care Act, raise taxes on corporations and promote California’s comprehensive and ambitious climate policy.

Perry chose 2011 as a starting point because that’s when Democrats captured majorities in the legislature as well as the governor’s office. Also that year, Proposition 25, which let Democrats approve a state budget with a simple majority vote rather than a two-thirds requirement, went into effect. That opened the floodgates to a wave of progressive policies that have been scorned by conservative politicians, pundits and think tanks.

Perry told Capital & Main that he set out to see whether critics of California’s progressive policies were correct — that, for example, California’s higher minimum wage would increase unemployment, or whether the state’s strict regulations on carbon would send businesses to other states in droves.

To do so, Perry compared wage growth and employment growth in California with statistics from 19 Republican-controlled states. But he also had to create a legitimate control group to weight factors like California’s tech boom, which might have skewed economic results, or a Republican-controlled state’s downturn, which may not have been due to conservative policies. To combat an apples-to-avocados comparison, Perry used a “synthetic control” method to weight data from Republican states to create an alternate California (or alt-California) in which CPM had not been enacted.

Perry found that California – the real California with its CPM – enjoyed higher total employment, private sector employment and GDP than the 19 Republican states and alt-California.

The study, by design, looked at the cumulative impact of policies instead of evaluating specific policies. “Still, one policy stood out to me,” Perry said. “My study found that the expansion of Medicaid through the ACA was one of the more pro-growth policies because it led to a greater demand in health care services and a growth in health industry jobs.”

The biggest takeaway from the study, Perry said, was that policies that make up the CPM – reducing carbon emissions, improving income for low-wage workers and helping more people access health insurance – have not, as critics warned, led to negative economic effects like job stagnation and lower GDP.

“There are warnings from conservatives that [progressive policies] will slow down economic growth, but California is a big piece of evidence that the fears are unwarranted,” Perry said.

Kansas, which went all in on supply side economics under Governor Sam Brownback, showed that the converse is true, that cutting taxes can sometimes kill growth, Perry said.

In a Washington Post op-ed, Jared Bernstein, chief economist to former Vice President Joe Biden, praised the study. He said that, while it didn’t convince him that there’s a direct line between progressive laws and job growth (a relationship Perry did not set out to prove), the study did, “in tandem with tons of other research, convince me that these progressive interventions do not hurt growth.”

The Berkeley study was released as Republicans on Capitol Hill pushed a tax bill heavily weighted to tax cuts for corporations and wealthy individuals, legislation that a majority of Americans are firmly against.

Despite the report’s generally rosy economic picture, Perry points out that some issues threaten California’s prosperity. First, progressive labor standards need to be enforced to combat rampant wage theft in California’s low-wage industries. Second, the effect of very high housing prices in much of the state could undermine some economic gains.

“High housing prices and lack of supply could force more people to live farther away from their jobs, which would increase carbon emissions and make it harder for [businesses] to attract workers,” he said.

And the possible repeal, or undermining of, the Affordable Care Act, could undo some of the economic benefits of the past seven years, Perry said. Another study from the UC Berkeley Labor Center earlier this year showed that California would have lost more than half a million jobs if the Graham-Cassidy repeal-and-replace legislation had passed.

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Working Californians’ biggest hope during Trump Year One: Sacramento’s Democratic supermajorities:

With a Democrat as governor and a legislature controlled by true-blue supermajorities, it seemed only logical for Sacramento to spearhead the Trump resistance. State Senate President pro Tem Kevin de León (D-Los Angeles) and Assembly Speaker Anthony Rendon (D-Paramount) said as much the day after Donald Trump’s 2016 election, vowing to “set an example for other states to follow.” Twelve months later, a modest raft of new laws aimed at blunting the brazen bigotry of Trump immigration policies — including Senate Bill 54, de León’s hard-won sanctuary state bill — and checking the administration’s planet-killing orgy of climate deregulation.

Working Californians’ biggest disillusionment during Trump year one: Sacramento’s Democratic supermajorities:

The political journey between good intentions and the statute book was twisted even by Sacramento standards in 2017. Of the 2,980 bills introduced by state lawmakers, roughly 35 were drafted as “Trump resistance” measures. But by the time the dozen-plus resistance bills made it to the governor’s desk, they tended to be anodyne wisps of their original forms. Senate Bill 6, San Diego Democrat Ben Hueso’s effort to create a legal defense fund for undocumented workers scooped up in ICE raids, became so toothless that Hueso retitled his “Due Process for All Act” as the “Expanding Due Process Act.” A no-brainer by state senators Mike McGuire (D-Healdsburg) and Scott Wiener (D-San Francisco) designed to force Trump to release his tax returns before getting on the state’s 2020 ballot earned a Brown veto. Most controversially, perhaps, Rendon tabled SB 520, a sweeping Medicare for All-styled measure by state senators Ricardo Lara (D-Bell Gardens) and Toni Atkins (D-San Diego), before it even received a hearing.

2017’s wannest excuse for a sanctuary state act:

It once virtually banned all state and local law enforcement cooperation with ICE agents. But the bill signed into law by Jerry Brown, which had promised to be the sharpest state rebuke yet to Trump’s mass deportations, now looked strangely familiar. That’s because to get the governor’s signature, the California Values Act had to first pass muster with the powerful California Sheriffs’ Association. The compromise gives ICE full access to prisons and jails, allows police and sheriffs to share databases and to detain and transfer people to ICE if they have been convicted of any crime from a risibly broad list of 800 “hold offenses” recycled from 2014’s California Trust Act. Those include the very serious offenses of “intentionally processing a milk product that is required to be pasteurized without pasteurization, manufacturing a milk product in an unlicensed plant, providing milk product for manufacture or resale to an unlicensed person, or falsifying records required.”

2017’s most unsurprising (if most ignored) Rx for national and California Dems:

Just over 46 percent of California’s registered Democrats turned out for Bernie Sanders in the 2016 presidential primary. That’s nearly the same percentage that pre-election polling for the November vote indicated was motivated by anti-Hillary feelings — presumably disgust over four more years of the romance between Clinton-Obama “New Democrats” and Wall Street — rather than anything remotely pro-Trump. Unfortunately, that lesson was lost on state Democrats when they gathered in May and selected Los Angeles County Democratic chair Eric Bauman as state party leader — in spite of Bauman’s financial ties to Big Pharma. Progressive challenger Kimberly Ellis, who narrowly lost a vote plagued by irregularities, charged that a “clear conflict“ had developed among “those nestled in power.” That diagnosis was echoed in postmortems that urged the disentangling of Democrats — “ideologically and financially — from Wall Street, the military-industrial complex and other corporate interests that put profits ahead of public needs.”

California’s most badly bungled headline of 2017:

The news in November was all about the great Silicon Valley sigh of relief that blew down from Palo Alto like a laissez faire Santa Ana wind: California’s Department of Motor Vehicles had issued its long-delayed driverless vehicle testing regulations that would allow autonomous vehicles on California highways. A potential global market of at least $42 billion by 2025, panted the L.A. Times business pages. But for 3.1 million U.S. truckers (who represent represent two percent of total employment), there was little to cheer. In May, Goldman Sachs became the latest to predict that autonomous vehicle technology will disrupt trucking jobs — one of the last middle-class occupations that doesn’t require a high school diploma — into obsolescence at a rate of 25,000 a month, or 300,000 a year. A far more apropos headline would have been, “Just Say No.”

2017’s poster child for neoliberalism: Elon Musk. Again.

Everything that’s wrong with Silicon Valley’s virulently anti-communitarian, anti-regulatory ethos seems to eventually get uttered by California’s favorite South African-born billionaire bad boy, Elon Musk. And in 2017, Musk did not disappoint. In February, the entrepreneur announced the creation of a new tunnel boring company and its first for-profit venture — digging an express tunnel that will bypass L.A.’s legendarily impenetrable rush hour traffic by connecting Musk’s Bel-Air home with his Space X headquarters in Hawthorne. Those lucky enough to be Elon Musk could see their morning hour commute cut to six minutes. Lest there be any confusion about who the free market best serves, this month Musk tweeted his Marie Antoinette-esque distaste for public transit and its twin aims of affordability and accessibility.

Senator Corker’s defense was, “I didn’t know about the provision because I didn’t read the bill that I’m voting for.”

As the House and Senate moved toward approving the final version of the GOP tax bill, the International Business Times (IBT) revealed in an explosive story Friday that a loophole slipped into the bill in the final minutes will directly enrich President Donald Trump and his son-in-law Jared Kushner, as well as wealthy senators and key members of Congress, including the provision’s writers.

Controversy swirled around the timing of the measure and the fact that deficit hawk Senator Bob Corker of Tennessee abruptly switched his vote in favor of the bill, whose tax cuts the Congressional Budget Office estimated will add $1.4 trillion to the deficit by 2027. Corker had been the lone Republican holdout in the Senate and had previously voted with Democrats against the bill. He has millions of dollars invested in real estate-related limited liability companies (LLCs) that could see a $1.1 million payday from the loophole. David Sirota’s IBT reporting quickly went viral as Corker’s apparent cushy accommodation was splashed across social media under the hashtag #CorkerKickback.

Capital & Main spoke to Sirota for a blow-by-blow account of the developing story, its implications and its consequences.

IBT had been closely following the debate over how the tax measure would treat income passed through a tax shelter known as an LLC, a “pass-through” tax entity because profits pass through to its owners who report them on their personal tax returns. The Senate version had limited tax cuts to pass through LLCs that actually employ people — the “job creators.” The House version has been far broader.

“We took a look at the key tax writers on committees that oversaw the bill as well as leadership,” Sirota said. “And we got a list of their real estate-related LLCs, and a day before the final bill came out, we put together this story about who could benefit. We found that between the conference committee, the Ways and Means Committee, the Finance Committee and the two leaders of the House and Senate, there were 13 members of Congress who owned and were earning income from real estate or from real estate-related LLCs. And depending on whether the final tax bill adopts the House version or the Senate version, they would stand to make a lot of money.”

IBT reported that the members of Congress — including House Speaker Paul Ryan — have between $36 million and $163 million invested in real estate-related LLCs. Between $2.6 million and $16 million in “pass through” income from those investments would benefit from the new provision.

Which version of the pass through would end up in the final tax bill would be determined by the joint House and Senate conference committee. At 5:30 p.m. on Friday, the committee released a final version that appeared to follow the Senate approach, the more rational version, according to tax experts Sirota spoke to.

“At 5:45 we were sort of like, ‘Okay, I don’t think there’s much to really write,’” Sirota said. “‘It looks like they kind of got it out.’ But I said, ‘I’ll talk to a couple of tax lawyers who have been following this.’ And what do you know? One of them comes back to me at 6:15 and is like, ‘You know, they added this one extra line that’s not in either of the bills. It talks about depreciable assets. This is the loophole.’ He said something along the lines of, ‘It’s narrow enough that it shows intent for a specific kind of investment vehicle.’”

Senator “John Cornyn on his Twitter feed is promoting a lobbyist’s talking points to defend this bill.”

The original House tax cut on pass-throughs, Sirota explained, was broad enough to argue that it was merely an ideological, across-the-board tax cut rather than something that picked specific winners and losers. But the additional line was included with one intent in mind. That line carved out a particular tax windfall for owners of rental-income generators like apartment buildings or commercial office complexes, depreciable property with few or no employees.

“That’s when we realized this is an absolutely enormous story,” Sirota said.

The real estate-specific windfall immediately raised the question of whether the LLC pass-through had been part of a deal aimed at influencing Corker to switch. When asked to comment on the pass-through for a followup story, Corker didn’t seem to be familiar with it, Sirota said.

“He called it ‘ridiculous,’” Sirota said. “But then he called back — he must have talked to somebody — and he said, ‘You know, I’m not sure I want to criticize it that way. You know, I need more information. I haven’t really read it. I’ve only read a summary of the bill. I haven’t read the bill.’ Which is, of course, another story: You’re the key vote on a $1.5 trillion [deficit] bill, and you’re announcing your support for it, admitting that you didn’t even read it. So your defense is, ‘I didn’t know about the provision because I didn’t read the bill that I’m voting for.’ That became another sort of huge story about how [Republicans] are rushing the bill through without even the pivotal vote having read it.”

What followed Sirota’s story was a firestorm of public outrage on social media. Under mounting pressure, Corker wrote a letter to Utah Republican Orin Hatch, the head of the Senate’s tax-writing committee, supporting the narrative that he didn’t know anything about the pass-through by asking for clarification of the provision, where it came from and how it got in the bill. To take the heat off Corker, Hatch replied on Monday, insisting that he had authored the loophole. Hatch added that Corker and his staff never contacted the tax-writing committee about the bill, in effect publicly admitting that a key swing vote on the tax bill wasn’t even communicating with the staff or the members of the panel writing it.

However, the Hatch alibi could not withstand new reporting that revealed Corker’s chief of staff, Todd Womack, had been investing heavily in a real estate LLC in the run-up to the bill and also stood to profit from the provision. Worse, Texas Republican Senator John Cornyn, in a Sunday appearance on ABC’s This Week, admitted that the decision to include the pass-through came from an effort to “cobble together the votes we need to get this bill passed.” With Cornyn suddenly under attack himself, his office aggressively tried to backpedal.

“They were upset that anybody viewed it that way,” Sirota noted, “but you can read the transcript. It was very clear that’s exactly what he said. It’s incredible: Cornyn is now defending the provision on his Twitter feed — I swear to god, you cannot make this up — by sending out an article written by a bank lobbyist who is lobbying on this provision. So John Cornyn on his Twitter feed is promoting a lobbyist’s talking points to defend this bill.”

But Sirota noted that the neither self-enrichment nor massive, deficit-hiking tax giveaways to corporations and the richest Americans are new. Republicans have been redistributing the country’s wealth upwards since the days of Ronald Reagan. What actually is precedent-setting about this tax bill, he said, is how explicit it is.

“There’s no pretense in this bill,” Sirota said. “There was a thing the Republicans put out in their summary when the bill came out. I tweeted out the graphic. It was sort of in a section about trying to prevent people from using their LLCs to put their wage income into their LLCs. They called it ‘safeguards’ — and I’m paraphrasing here — ‘We have put safeguards in to make sure that the business income taxes not go to wage earners.’ They are very crystal-clear that this is a tax bill not for workers. This is a tax bill for corporations and business owners. That is the ideology. They’re actually open about that. They want the public to know.”

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State Senator Holly Mitchell (All photos by Joanne Kim)

Holly Mitchell, the state Senator who represents Los Angeles’ heavily blue-collar 30th District, has been called by one colleague the “social conscience of the entire Senate.” A personable policy wonk whose career included a stint as chief executive of Crystal Stairs, a child development nonprofit, Mitchell chairs the Senate Budget Committee — the first African-American woman to do so. She recently sat down in Pico-Fairfax with Capital & Main at the Paper and Plastik Cafe to talk about the possible effects of the Republican tax bill on California’s poor.

Capital & Main: Taking the temperature between now and New Year’s, what’s your prognosis for the House and Senate tax bills?

Senator Mitchell: The GOP tax plan is a redistribution of wealth from the poor to the rich or semi-rich. It gambles away the health care of poor people and this is unacceptable.

I’m so disappointed with the work of the [U.S.] Senate Budget Committee. I can’t imagine being a legislator, getting a report from the Congressional Budget Office that says the things it says about these bills — and voting to pass it. Did they ignore it? Did they not care?

One Senator, when interviewed, expressed concern about the bill’s potential to make the deficit skyrocket. When asked if that was enough to make him not vote for it he said, “I’m not sure. I’m still working on it.”

Senator Mitchell: The whole point of having the support of fiscal analysts and the Congressional Budget Office, with their independent status, is to provide you with critical data to help you make a decision. How can you say, “Oh yeah, that’s bad, but I’m not sure if I’m going to go forward on this or not”? Politics is continuing to trump — lowercase T—what’s best.

Is Sacramento concerned?

Senator Mitchell: Am I concerned? Yes! But I think what I’m more concerned about now is the Healthy Families Program.

This is the entitlement for California families who aren’t poor enough for Medi-Cal — but don’t earn enough to have private insurance.

Senator Mitchell: It provides care for about two million kids [and] requires federal reauthorization. And [Congress] has not reauthorized it. That could have immediate impacts on California’s budget. It’s a separate process [from the federal tax bills] but they have already missed the deadline.

It’s also been said that the tax proposals could undermine affordable housing construction in California because they would affect the credits and tax breaks that developers receive.

Senator Mitchell: Yes, which are critical for developments to pencil out. Given how far behind we are in terms of our housing-unit need, it would be devastating. L.A. County has done amazing things — voters have said yes to Prop M, yes to Prop HHH. All of that could be compromised — this delicate balance where developers can come in, get these credits to build affordable units. We’re already behind the eight ball in terms of our need. This would be yet another blow.

Defenders of the tax bill say everybody will get their taxes cut initially. Then by 2027, according to the Congressional Budget Office, middle- and low-income people will experience a net loss.

Senator Mitchell: They claim that they’re protecting “the middle class” — folks who make $100,000 and over. But that’s not how we define the middle class in California—here the salary threshold is much lower. What they claim is good news, I think, masks the bad news. And they’re rushing it through the process.

What steps are needed to analyze and create a response for a new federal tax plan’s effect on California?

Senator Mitchell: It will be a process. Unlike [the U.S. Senate], I will rely on our Department of Finance, the Legislative Analyst’s Office, the Senate Budget Committee staff to have discussions, to have a full budget hearing.

What’s your sense of the tax proposals’ potential effect on the state’s economic health?

Senator Mitchell: How we earn income as a state government could be severely impacted. We are socking money away into rainy-day funds to try to prepare for the time at which our recovery will slow down — [but] we couldn’t save enough to prepare for these [federal] proposals and the kind of hole they could blow in the state’s general fund.

What’s your plan if California does take a financial hit?

Senator Mitchell: As budget chair, I would be forced, as painful as that would be, to go back to the days of cutting. We may not be able to use a scalpel. It may be sledgehammer time — it would be devastating. In terms of the trend we’ve experienced with investments in K through 12, early education, the investments we have made in the last couple of years in the University of California and Cal State University systems — all these investments that we’ve made to expand access to services, would be impacted.

We fund Opti-Cal and Dental-Cal [for eye and dental care] — those are the kinds of core, basic human services that we could potentially have to roll back again. Medi-Cal funding helps undergird and support our overall health-care delivery system. If that went away, everything would be compromised.

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Changing the mortgage-interest deduction is not the only land mine in the House bill that would directly impact Californians.

No crowds of outraged demonstrators descended on Capitol Hill chanting, “Cut Corporate Taxes! Cut Corporate Taxes!” And scathing nonpartisan analyses uniformly showed that the biggest cuts in the GOP tax plan go to the wealthy and to corporations, while many middle- and lower-income families will face increases.

Nonetheless, the U.S. House version, giving Californians with incomes in the top one percent more than 50 percent of the cuts by 2027, passed 227-205, on a mostly party line vote with 13 Republicans opposing it.

The Senate’s version of the tax cuts is wending its way through that chamber, and the House bill will no doubt be changed substantially when a conference committee meets to reconcile the two versions if and when the Senate bill passes.

As matters now stand, the House version is the only one before the public, and it contains a bit of possibly welcome news for some taxpayers. It doubles the standard deduction from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples. The theory behind that change is that more taxpayers would likely take the standard deduction if it is higher than itemized deductions like mortgage interest. But mortgage interest is a deduction many Californians have come to depend on. And changing it is not the only land mine in the House bill that would directly impact Californians.

“Students would be taxed on income they literally don’t have. They will be even deeper in debt, or won’t be able to go to school.”

U.S. taxpayers can now deduct interest paid on mortgage loans up to $1 million for one or more homes. The House bill and the Senate’s current version slashes the cap to $500,000, and eliminates the deduction for second homes. That provision would disproportionately hit residents of states with high real estate values, like California, where finding a home under $500,000 in most urban markets is very difficult.

National Mortgage News estimates that five of the top 12 real estate markets that would be hardest hit by slashing the mortgage-interest deduction are in California.

The House bill also caps property tax deductions at $10,000 while the Senate is considering eliminating the deduction altogether.

Real estate organizations like the National Association of Home Builders have come out strongly against slashing the mortgage interest deduction, saying it would diminish incentives for buying a home.

The lowest income Americans now have some help with affording housing through a federal low income housing tax credit funded by tax-exempt private activity bonds issued by state or local governments. Those bonds are loaned to private companies to finance projects like affordable multifamily housing and for infrastructure projects, like roads and bridges.

If the final tax overhaul keeps the House’s removal of that exemption, money from investors, mostly banks, will dry up, according to Diane Yentel, president and CEO of the National Low Income Housing Coalition.

Only three of 14 members of California’s Republican delegation voted against
the House’s tax overhaul.

However, Yentel said she doesn’t have an issue with cutting the mortgage interest deduction but with how the savings will be used. “The problem is the House bill would use the savings from slashing the [deduction], which would be $95 billion over 10 years, not to support low-income renters, but to give tax cuts to the wealthiest Americans.”

Housing inequality is a huge problem in California, she said. “For every 100 extremely low-income renters that need housing in California, only 21 units are available. In Los Angeles, it’s 16 for every 100.”

Yentel’s organization has proposed federal renters tax credits and more funding for the National Housing Trust Fund.

Jonathan Kaplan, a senior analyst at the California Budget and Policy Center, agreed with Yentel that the mortgage-interest deduction needs reform and that any reform should generate funds to lessen housing inequality in California.

“Not only are the benefits of cutting the [deduction] going to corporations and the very wealthy, it would raise taxes on many homebuyers, and create disincentives for moving in an already difficult market,” Kaplan said. “That in itself will also exacerbate California’s housing affordability crisis.”

In a cost-sharing arrangement between the state and federal governments, individuals can now deduct state and local property taxes, and either state and local income taxes or sales taxes. The House GOP tax overhaul eliminates state and local tax deductions for all Americans.

More than five million California households claim state and local tax deductions on their federal returns, according to the California Budget and Policy Center. Someone with a gross income of $60,000 who owes $5,000 in California tax, now would pay federal taxes only on $55,000. Under the GOP plan, that individual would pay federal taxes on the entire $60,000, essentially being double taxed.

The House GOP tax bill eliminates the $7,500 federal tax credit for people who buy a hybrid or battery electric vehicle.

The center estimates that eliminating state and local tax deductions would not only raise taxes on millions of Californians, but would put a burden on local governments to fund services like schools and public safety.

“State and local governments will no longer be able to say, ‘We need to raise taxes in order to pay for schools, but don’t worry because you can take a portion of that off your federal taxes,’” Kaplan said.

The House bill affects higher education in three ways. It eliminates the student loan deduction that reduces taxable interest on loans for up to $2,500. It also eliminates a $2,000 lifetime learning credit.

Possibly the biggest hit to students is that tuition waivers would be considered taxable income. This would affect many graduate students who receive reduced or free tuition in addition to a small stipend.

“These are significant tax increases on students,” said Kaplan. “These students would be taxed on income they literally don’t have. They will be even deeper in debt, or won’t be able to go to school.”

Just over a million Californians file tax returns with a student loan interest deduction, amounting to $1 billion, Kaplan said.

The House GOP tax bill also eliminates the $7,500 federal tax credit for people who buy a hybrid or battery electric vehicle. A recent study by the non-profit environmental organization Next 10 showed that five percent of new car sales in California are electric, and a survey by CleanTechnica showed that California accounted for nearly half of all electric vehicles sold in the U.S. between 2011 and 2016.

Given the hits to Californians in the House tax overhaul, it might be surprising that only three of 14 members of California’s Republican delegation — Darrell Issa of Vista, Tom McClintock of Elk Grove and Dana Rohrabacher of Costa Mesa —voted against it.

Upon passage of the House bill Minority Leader Nancy Pelosi (D-CA) sent a message to California Republicans:

“After their deafening silence, any California Republican who votes for the GOP tax scam will be forced to answer why they care so little for their constituents.”

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On November 11, shortly after he began his speech at the United Nations Climate Change Conference in Bonn, Germany, California Governor Jerry Brown encountered jeers and chants from Native American and climate justice activists who denounced fracking and the state’s market-based solutions to greenhouse gas emissions by yelling, “Keep it in the ground.”

A visibly rattled Brown snapped at the protesters, saying “Let’s put you in the ground so we can get on with the show here,” before he softened and thanked them for “bringing the diversity of dissent.”

Brown has been hailed as a climate hero for signing the ambitious California Senate Bill 32, which mandates the statewide reduction of greenhouse gas emissions, as well as his public opposition to the regressive climate policies of the Trump administration. But he’s also drawn scorn for his lack of opposition to fracking, his refusal to close the Aliso Canyon gas storage facility, and for his ardent support of cap-and-trade, which some environmentalists say shouldn’t be the lynchpin of progressive climate policy.

In an email, Jean Su, associate conservation director at the Center for Biological Diversity, one of the groups organizing the Bonn protest, countered Brown’s assertion that cutting oil demand is more urgent than cutting oil supply. “California can’t be a model of climate leadership while oil companies continue to produce millions of barrels per year of some of the dirtiest crude on the planet,” Su said.

Coinciding with the Bonn protest comes a new study examining cap-and-trade, Brown’s signature greenhouse gas trading program. In a report released the day before the Bonn speech, the nonprofit think tank Near Zero found cap-and-trade, a key strategy for achieving reductions in greenhouse gas emissions under Assembly Bill 32, the California Global Warming Solutions Act, has fallen short of its promise.

Cap-and-trade is a market-based program that allows companies to buy and sell credits to emit a certain amount of pollution, based on a state-imposed cap on emissions across an industry. The theory is, companies would want to save money by cutting down on greenhouse gas emissions. Brown has said the program will reduce climate-changing gases by requiring covered facilities to factor the cost of carbon into their business operations. The Near Zero study found that California greenhouse emissions have been cut – by five percent in 2016 alone – but through changes in the mix of sources generating electricity, including hydropower and solar, rather than cap-and-trade.

The study’s lead author Danny Cullenward said research found that the current limits on pollution set by cap-and-trade are far above actual emissions. The result is an oversupply of allowances that keep the price of carbon cheap and, critics contend, give companies little incentive to slash emissions. That build up of unused allowances enables companies “to maintain their emissions farther into the future than post-2020 program caps might nominally suggest,” he wrote in the report’s summary.

Cullenward told Capital & Main cap-and-trade needs to be tweaked in order to meet California’s goal of reducing emissions by 40 percent below 1990 levels by the year 2030. “Emissions have fallen pretty quickly and that’s good news. But a lot of people are saying, ‘See, the cap and trade program is working,’ and our analysis shows that it’s too soon to say that.”

Cullenward added that the promise of cap-and-trade is real, but that there is “more work to do” to make it effective. “The state is pursuing an ambitious 2030 climate target, and regulators expect cap-and-trade to play the single biggest role in reducing emissions.”

Earlier this year, California extended cap-and-trade through 2030.

In an email, Stanley Young, a spokesman for the California Air Resources Board (CARB), disputed Near Zero’s findings that the state’s cap-and-trade program is not driving observed reductions.

Young cited the Los Angeles Dept. of Water and Power as an example that cap-and-trade can directly lower carbon emissions. “From 2013 to 2016, overall CO2 emissions from LADWP’s portfolio of generating resources decreased 26 percent (3.6 million metric tons) due to the increase in renewable energy and use of the carbon cost adder. This represents a 42 percent reduction from 1990 levels, which exceeds Los Angeles’ 2030 goal,” Young explained.

Liza Tucker, a consumer advocate with Consumer Watchdog, said that cap-and-trade is a bust because the “approach is too lax.”

Tucker also criticized the law extending the program because it directs CARB to regulate refineries only through cap-and-trade and prevents local air quality boards from more aggressively regulating industry. “But [the law] bans CARB and other agencies from imposing new greenhouse gas emission reduction obligations.”
The Near Zero report is not the first study showing the limited impact of cap-and-trade. Last year, researchers from the University of Southern California and the University of California at Berkeley found that California’s cap and trade program had not cut greenhouse gasses. Preliminary evidence suggested that cap-and-trade had, in fact, led to an increase in greenhouse gas emissions in several industries.

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