Texas versus California

I have been trying to decide if Scott Lemieux covered this too completely, but I decided that there were a couple of useful points in this article.  Especially as relates to my California versus Texas discussion with Mark, where we discuss the relative merits of the two states. For example:

And despite all the gloating by Texas boosters about how the state attracts huge numbers of Americans fleeing California socialism, the numbers don’t bear out this narrative either. In 2012, 62,702 people moved from California to Texas, but 43,005 moved from Texas to California, for a net migration of just 19,697.

This really points out how marginal the population shift is.  It isn't zero, but it is also not a mass population shift driven by the hellish California region.

Even more telling:

Oh yes, I know what you’ve heard. And it’s true, as the state’s boosters like to brag, that Texas does not have an income tax. But Texas has sales and property taxes that make its overall burden of taxation on low-wage families much heavier than the national average, while the state also taxes the middle class at rates as high or higher than in California. For instance, non-elderly Californians with family income in the middle 20 percent of the income distribution pay combined state and local taxes amounting to 8.2 percent of their income, according to the Institute on Taxation and Economic Policy; by contrast, their counterparts in Texas pay 8.6 percent.

And unlike in California, middle-class families in Texas don’t get the advantage of having rich people share equally in the cost of providing government services. The top 1 percent in Texas have an effective tax rate of just 3.2 percent. That’s roughly two-fifths the rate that’s borne by the middle class, and just a quarter the rate paid by all those low-wage “takers” at the bottom 20 percent of the family income distribution. This Robin-Hood-in-reverse system gives Texas the fifth-most-regressive tax structure in the nation.  

That leads to some really interesting questions about he relation of tax rates to prosperity.  If most people in Texas pay more taxes than California, then maybe this is another data point on the scale of more money for government leading to a stronger and more prosperous state.  But these points really don't make the case that Texas is clearly better than California.  Now both states have a strong streak of pro-business advocates, and so I think that both could end up as engines of American prosperity.  But I think that the future for California is pretty optimistic once the actual facts are broadly considered. 

Felix Salmon is back: California pension edition

Felix has a very nice post on the new retirement program that California is considering.  I think it is a very good idea and the state running it is a major plus.  It's astounding but true that the very best instruments that I can find in the private sector (currently thinking Vanguard here) seem to run neck and neck with large retirement plans in terms of both fees and returns.

I am a little less thrilled by investment guarantees, unless they are really well adjusted for inflation.  But, conditional on that, this would also smooth out returns in a very nice way.  Sure, it has the government investing in the markets.  But the only other alternative is paygo, which has come under a lot of question as to the willingness of taxpayers to honor previous promises.

I agree that this is an exciting development.

Back on the higher ed beat

Paul Krugman weighs in on recent comments from GOP candidates on the subject of higher education:

About that hostility: Mr. Santorum made headlines by declaring that President Obama wants to expand college enrollment because colleges are “indoctrination mills” that destroy religious faith. But Mr. Romney’s response to a high school senior worried about college costs is arguably even more significant, because what he said points the way to actual policy choices that will further undermine American education.

Here’s what the candidate told the student: “Don’t just go to one that has the highest price. Go to one that has a little lower price where you can get a good education. And, hopefully, you’ll find that. And don’t expect the government to forgive the debt that you take on.”

Wow. So much for America’s tradition of providing student aid. And Mr. Romney’s remarks were even more callous and destructive than you may be aware, given what’s been happening lately to American higher education.

For the past couple of generations, choosing a less expensive school has generally meant going to a public university rather than a private university. But these days, public higher education is very much under siege, facing even harsher budget cuts than the rest of the public sector. Adjusted for inflation, state support for higher education has fallen 12 percent over the past five years, even as the number of students has continued to rise; in California, support is down by 20 percent.

The choice of California is sadly apt. The state's three-tiered UC/CS/community college system is, even after these devastating cuts, a remarkable achievement. Residents have access to an impressive spectrum of educational options, ranging from inexpensive schools designed to be friendly to disadvantaged and non-traditional students to some of the world's best public universities (with surprisingly reasonable tuition).

In case you think I'm exaggerating, check out this post from Joseph:

From the Academic rankings of world universities:

1. Harvard University (private)

2. Stanford University (private)

3. Massachusetts Institute of Technology (MIT) (private)

4. University of California, Berkeley (public)

5. University of Cambridge (British)

6. California Institute of Technology (private)

7. Princeton University (private)

8. Columbia University (private)

9. University of Chicago (private)

10. University of Oxford (British)

11. Yale University (private)

12. University of California, Los Angeles (public)

13. Cornell University (private)

14. University of Pennsylvania (private)

15. University of California, San Diego (public)

16. University of Washington (public)

17. University of California, San Francisco (public)

18. The Johns Hopkins University (private)

19. University of Wisconsin - Madison (public)

20. University College London (British)

Some interesting patterns immediately jump out. Of the top 20 schools, 17 are American, which is pretty impressive given the share of the world population held by the United States. Of the 17 American schools, six of them are public (which is amazing given how many resources the private schools have). Of the public schools, 4 of them are in California.

If you check out the rest of the list you'll find all of the UC schools have respectable rankings. Given their caliber, they are also quite affordable. I took a grad course in Bayesian networks a couple of years ago at UC Riverside. It cost me eight hundred dollars and was an extraordinary bargain.

It should be noted that some pundits don't think much of California's commitment to great universities. Here's Kevin Carey:

If Berkeley’s star professors are lured away to Stanford, it’s bad for the university but not necessarily bad for America, particularly if (as is frequently the case) those professors teach few if any undergraduates. They’ll be the same people doing the same thing at another university an hour away.

Of course, Carey also believes Rick Perry Is a Higher-Education Visionary.

California has good universities!

From the Academic rankings of world universities:

1. Harvard University (private)

2. Stanford University (private)

3. Massachusetts Institute of Technology (MIT) (private)

4. University of California, Berkeley (public)

5. University of Cambridge (British)

6. California Institute of Technology (private)

7. Princeton University (private)

8. Columbia University (private)

9. University of Chicago (private)

10. University of Oxford (British)

11. Yale University (private)

12. University of California, Los Angeles (public)

13. Cornell University (private)

14. University of Pennsylvania (private)

15. University of California, San Diego (public)

16. University of Washington (public)

17. University of California, San Francisco (public)

18. The Johns Hopkins University (private)

19. University of Wisconsin - Madison (public)

20. University College London (British)

Some interesting patterns immediately jump out.  Of the top 20 schools,  17 are American, which is pretty impressive given the share of the world population held by the United States.  Of the 17 American schools, six of them are public (which is amazing given how many resources the private schools have).  Of the public schools, 4 of them are in California.

So why are we discussing the need to privatize California higher education, which combines extremely high quality with relatively low tuition?  I mean seriously, is there no other public university system in the nation that we can focus on?  Or is it merely that reformers want to destroy the example of well done public education?

The whole argument strikes me as insane.

Peak Life Expectancy

I am often skeptical of these claims that we will see the next generation have a shorter life expectancy as these claims require models. These models may be incorrect for a variety of reasons: misspecification, noise, shifting patterns of disease, unexpected technological improvements, and so forth.

But what was fascinating was the map in the article. The places in the United States where life expectancy is dropping are focused mainly in the Southeast. Now that distribution is, itself, interesting as the southeast has long had health issues: think of the classic stroke belt. Furthermore, it is an area of high inequality that has a climate that is very compatible with a sedentary lifestyle.

Contrast this with the California coast (and especially Los Angeles) where life expectancies are actually rising, or even New York city. Could it be that an urban lifestyle is actually life enhancing (both in terms of quantity and quality)?

So perhaps, instead, what we have is an ecological experiment to really try and understand these phenomena.

California Pension Reform

I have always had a fascination with California politics and we've talked a lot about personal finance. So I read this reform proposed by Jerry Brown with interest:

To deal with what have been widely seen as abuses of the retirement system, Mr. Brown said the pensions of all new employees should be based solely on their regular salaries, not taking into account any overtime or bonuses. For existing employees, he said the retirement benefits should be based on an average of the last three years’ salary.

I was always surprised that it was any other way. After all, employee base salary is a reasonably predictable variable for actuaries. Furthermore, base salary is likely to be more representative of the income that actually needs to be replaced in retirement and inflating that number can lead to very high liabilities. Finally, it creates the potential for unfairness as the ability to get overtime in one's final three years may depend on the discretion of the supervisor.

I am completely against the current assault on pensions but that doesn't mean that we shouldn't look for places where intelligent reforms can happen.

All in all, it seems like a much saner approach. We'll see if it manages to gain any traction!

Response to Comments

Comments from Trevor:

I agree that the logic of this argument is very strong, and it seems to me that the same argument applies to the morality of punishment.

and the link posted by Stuart Buck seemed to share a common theme. In the link, the authors argue that:

According to data provided by the California Department of Corrections and Rehabilitation, in 1977, parolees who were returned to prison or convicted of new crimes accounted for just 10% of California’s prison population. The percentage topped 20 only once prior to 1980. In 2009, however, the number was an alarming 77%, having held firm between the high 60s and low 80s since 1986.

I think that there is a real point here: vindictiveness is expensive. The previous focus in California prisons on rehabilitation and returning prisoners to society was based around minimizing losses of social capital. This is not to excuse the crimes (as most criminal activity is either selfish, mean or petty), but to point out that a focus on punishment is expensive and not especially good for the prisoners themselves. Clearly something was going right if only 10% of prisoners were coming back into prison. A return rate of 77% might actually indicate that we are simultaneously less safe and making life worse for the imprisoned.

Now, we can always find single examples of people who should never be released. Serial killers with psychiatric issues come immediately to mind. But we should not let the extreme example determine the policy for the median prisoner. Similarly, we have a 100% chance that at least one person on parole will re-offend. That would be true even if the crime rate in the parolees was less than that in the general population.

This is a hard issue. I have strong and irrational feelings of fear about many convicts. But the focus on punishment over rehabilitation may well have been a mistake.

Micheal Lewis on California Government

Interesting view:

In 2010, for instance, the state spent $6 billion on fewer than 30,000 guards and other prison-system employees. A prison guard who started his career at the age of 45 could retire after five years with a pension that very nearly equaled his former salary. The head parole psychiatrist for the California prison system was the state’s highest-paid public employee; in 2010 he’d made $838,706. The same fiscal year that the state spent $6 billion on prisons, it had invested just $4.7 billion in its higher education—that is, 33 campuses with 670,000 students. Over the past 30 years the state’s share of the budget for the University of California has fallen from 30 percent to 11 percent, and it is about to fall a lot more. In 1980 a Cal student paid $776 a year in tuition; in 2011 he pays $13,218.

I wonder how many times we need to see these statistics before we wonder if the education for prisons trade-off was really all that effective. Why do people in California have such an obsession with spending on corrections? Is the link to public safety with increased correctional spending really this strong?

In other news, how long until the University of California is not a state school anymore? With support dropping like that, one wonders . . .

California Education

Janet D. Stemwedel quotes Jerry Brown

I have reviewed the Mercer compensation study and have reflected on its market premises, which provide the justification for your proposed salary boost of more than $100,000. The assumption is that you cannot find a qualified man or woman to lead the university unless paid twice that of the Chief Justice of the United States. I reject this notion.

This is a very odd American idea: that without a huge salary, no competent person can ever be found. I am not sure that this idea passes the "laugh test" as seen by Governor Brown's comments. It also has some very pernicious effects on things like income inequality and the perception of fairness (this has not been the best time for California universities from a fiscal point of view).

I am happy to discuss these matters from first principles but the idea that qualified people cannot be found for less than absurd amounts of money is just berserk.

Online Retailers and Sales Tax

I am actually pretty sympathetic to the argument that not requiring online retailers to collect Sales Tax in all states is bad policy. But I had not thought of it as a social justice issue:

Whatever scheme we can come up with to collect lost sales tax is one more step towards a level playing field for brick and mortar retailers, and a re-funding of our cities, counties and states. It's not an enormous amount of money, but it's a step in the right direction. Online retailers got a free pass in the early days, a kind of nod for fledgling e-commerce. Unfortunately, monsters were created and none is bigger than Amazon, destroyer of worlds and loser of a billion dollars of their own capital. But hey, it's an Internet company, we're willing to look the other way for a decade or so while the new world order manifests. It's time to level the playing field and make everyone play by the same rules.

The article as a whole is worth reading.

I know a lot of people argue that the loss of physical book stores is not a tragedy. But it is not clear to me thast we should be subsidizing their competition, either. Nor is it a great idea to reduce government revenue at a time where margins are tight.

So maybe I am on California's side in this discussion.

This is a big deal

California is considering a single payer health care system. Unlike Vermont, which is a small market, a successful single payer system in California would be strong evidence that the plan is viable in a broader US context.

In the long run, containing health care costs is a major issue. While I am sure that there are alternatives to the US and Canadian systems, it is hard to argue with the better outcomes and lower costs of a single payer system. I suspect that they are even more attractive to a state like California which has a long history of budget issues.

California's Choice

Steve Lopez writing for the LA Times:

In 1990, Linscheid said, the Cal State budget and the state prison budget were roughly the same. Today, the state prison budget is only about 10% less than the Cal State, UC and community college budgets combined. Meanwhile, the number of inmates has shot up from 25,000 to 175,000 over the last 20 years, thanks largely to law-and-order initiatives backed by the prison guards union. The union bankrolls politicians like Gov. Jerry Brown, too, and reaps huge benefits, but they come at the expense of school funding.

UCLA Chancellor Gene Block recently wrote in The Times that of the 42 Republicans in our state Legislature, 29 are products of California's public system of higher education. They got a great bargain, but not a single one of them has supported a Brown proposal — balance the budget half with cuts and half with a temporary extension of existing tax increases — that would maintain a barely acceptable level of quality in the Cal State system and help students avoid crippling tuition hikes.

I can vouch for the bargain part. A couple of years ago I took a grad course at a UC school to get caught up on the latest developments in Bayesian networks. The course was excellent, the paperwork was reasonable, the cost was still remarkably cheap for what you got.

Of course, my isolated experience doesn't mean much but it is consistent with pretty much any system of college rankings you can find. By almost any measure, California has arguably the world's best university system (according to the ARWU rankings, four of the world's top twenty universities are in the UC system).

But California also has a sentencing system that can give you 25 to life for cheating on a driving test and a legislative system that makes it easier to amend the constitution than to pass a budget. We can certainly keep one of these three systems, we might even manage two but at least one will have to go.

If you made this an explicit choice, few Californians would choose to sacrifice our universities, but in the implicit choice we've been given, that's exactly what we've decided to do.

p.s. If you're not depressed enough, check this story from NPR.

TPM: still clueless in CA

Talking Points Memo has been doing a superb job covering the races in Kentucky and Pennsylvania. Josh Marshall's posts on Rand Paul have been particularly insightful. You really ought to take a look.

That has nothing to do with the main point of this post but I feel guilty hammering away at TPM and I'm afraid it's time to pick up the old nine-pounder again and start swinging at this:

Whitman's support has fallen in large part due to Democratic attacks over her connections to Goldman Sachs -- the Dems would prefer to face Poizner in the fall. There may also have been a backlash against her big personal spending on the race, which has reached $68 million so far, and a tightly controlled media operation in which she has avoided directly answering questions from reporters about the issues -- a fact that is frequently noted in media reports.

As statisticians, we are constantly being asked why something happened. We don't like the question (the subject of causality makes us nervous) but it's not something we can avoid so we approach it as rationally as we can. We look at correlations, of course, but we also look at timing, magnitudes, precedents. We consider the implications of the different hypotheses (for example, if bad weather caused a shift in behavior, that shift should be limited to certain regions). We seek out the opinions of informed sources while taking pains not to get sucked into conventional wisdom. We survey the situation on the ground and use that most important of statistical tools, common sense.

I'd like to say that the final step is testing the hypothesis, but that's not usually the way it works. When it comes to questions of causality, the final answer is usually just an educated guess. Fortunately, most of us have gotten to be pretty good guessers.

How does the Goldman Sachs hypothesis stand up to this (admittedly unscientific) approach?

For starters, the timing is all wrong.


(I'm assuming these are mostly likely-voter polls)

The Goldman Sachs-Whitman connection came out in February. The Abacus scandal hit big in mid-April. Poizner's Vulture ad was released at the end of April. Which of these would you associate with an inflection point in Whitman's support?

By comparison, the news for much of April had been dominated by Arizona's immigration law (which passed their house on April 13th) and since March, Poizner had been running ads attacking Whitman as being soft on immigration.



How about magnitude and precedent? Whitman took a fifty point lead down into the single digits. Immigration and RINOism are huge issues for the California GOP. Either could easily kill a campaign. The Goldman Sachs story, on the other hand, is abstract, relatively minor, and only tangentially related to the issues California conservatives care about.

And has anyone EVER burned off forty-plus points of lead because of this kind of business deal?

And finally, do any of the major players, the ones with access to internal polling, actually believe this hypothesis? Poizner clearly doesn't or he'd be making more than passing references to Goldman Sachs. Meg clearly doesn't or she wouldn't be spending her time insisting that she supports neither amnesty nor Senator Boxer. Hell, even the CDP doesn't or they wouldn't pick Peter Coyote to pitch their case. (I'm not saying that the CDP ads are ineffective; I'm saying they are targeted at the general election.)

To make this even less scientific, here's my good ol' boy take on what happened. It's the old story of an out-of-towner walking into a bar, hearing a couple of locals bragging and believing every word. ("You mean you really took down a $70 million dollar campaign?" "Yep, and we did it with just one little website.")

I suppose there's no harm in a little boasting (and it's not something that Democratic operatives get to do that often in California). I just hope that the people at TPM are a bit more worldly the next time the situation comes around.

And to close out the subject of nine pound hammers (and get our minds on something more pleasant than politics), here's a mental health break from a friend of mine:



Update: Ed Kilgore has a good analysis of the race here. I think he gives too much weight to the Goldman Sachs story but I may still just be stuck in argument mode as a reaction to TPM.

Does Talking Points Memo know what it's talking about?

When it comes to California, apparently not. TPM (along with TNR) is one of my two favorite political sites but like many news organizations they tend to be NY/DC-centric and their quality tends to drop as they get further from home.

Here's the opening sentence from today's story:

Last week, California Republican gubernatorial candidate Meg Whitman released an ad that called Republican opponent Steve Poizner that dreaded "L" word -- liberal.

My first thought was that TPM was under the impression that Whitman just started calling Poizner a liberal; my second thought was that my first thought couldn't be right so I checked previous TPM stories on the race. Here's how they described the ad on May 11th:

Whitman Ad: My Conservative Opponent Is A Liberal!

California gubernatorial candidate Meg Whitman has a word she'd like you to associate with her GOP primary opponent: liberal.

In a new Whitman ad aimed at state Insurance Commissioner Steve Poizner, a narrator ominously asks, "How liberal is Steve Poizner?" before rattling off a long list -- He supported Al Gore! He supported higher sales taxes! -- before the narrator declares:

"Liberal on taxes. Liberal on spending. Just another liberal Sacramento politician."

As we reported earlier, a new poll shows Whitman's lead over Poizner in California's June 8 Republican gubernatorial primary at a very thin 39% to 37%.

How badly out of the loop was TPM here? For over a month, Meg Whitman has been running, in mind-numbingly heavy rotation, an attack ad with the tag line "Way more liberal than he says he is." As for that "long list," it wasn't very long, particularly considering that it is the exact same list that Whitman has been running (and running and running) in every single attack since February.

The TPM story suggests that these charges were a reaction to the race getting close despite the fact that they started when (according to TPM's own poll tracker) Whitman had a lead of over forty points and she pulling out further ahead.

It would have taken less than fifteen minutes of research to catch these problems. This is not the kind of reporting we expect from Talking Points Memo.

CA election update -- the ad Meg Whitman didn't want to run

It's been almost a week since my last post on the subject and things have been moving along at a nice clip.

Goldman Sachs continues to show up in the discussion though mainly among Democrats. It has the makings of a potent issue in the general election but it's still a minor one in the primary.

The big issue for Republicans at the moment is the very one Whitman wanted to avoid: immigration. This is not a great issue for Poizner (he'd also like to hold onto the Latino vote), but it represents his best chance for a primary victory and he's hammering away at it and forcing Whitman into the never desirable "am not" mode of campaigning.

This weekend I was in a shop in Southern California where I heard the following ad over the radio:

Announcer: Meg Whitman on illegal immigration.

Meg Whitman: Don't be fooled by misleading ads, my position on immigration is crystal clear. Illegal immigrants are just that, illegal. I am 100 percent against amnesty for illegal immigrants. Period. As Governor, I will crack down on so-called sanctuary cities like San Francisco who thumb their nose at our laws. Illegal immigrants should not expect benefits from the state of California. No driver's license and no admission to state-funded institutions of higher education. And I'll create an economic fence to crack down on employers who break the law by using illegal labor.

Pete Wilson: This is former Governor Pete Wilson. I know how important it is to stop illegal immigration and I know Meg Whitman. Meg will be tough as nails on illegal immigration. She'll fight to secure our border and go after sanctuary cities. Please join me in supporting Meg Whitman for Governor.

Announcer: Paid for by Meg Whitman for Governor 2010. Meg2010.com.

The clientèle was largely Hispanic.