California Initiatives Glide Past Economic Woes

Joe Rodota and Phil Romero
Joe Rodota, CEO of Forward Observer, and he served as Deputy Chief of Staff in the California governor’s office, and in the Reagan White House. Phil Romero, former Chief Economist for the California Governor’s Office of Planning and Research, is a professor of finance and former business dean at the University of Oregon.

According to the most recent Field Poll, nearly nine out of ten California voters say the state’s economy is a disaster, and two thirds of California voters expect the economy to remain stagnant or decline further in the year ahead.

One would think, therefore, the dismal economy would be front and center in this year’s crop of ballot initiatives.

But that’s not the case.

Of the 11 ballot initiatives this November, four have nothing to do with the economy. And out of the remaining seven initiatives, only one “yes” campaign (Proposition 39) hits economics in its main ballot argument, and only in passing. (Another two “yes” campaigns argued economic points only in rebuttals.)

For every “yes” campaign there is a “no” campaign, of course. And a majority of the no campaigns (30, 33, 37, 38 and 39) did indeed include economic arguments as part of their pitch to California voters.

But it’s not enough to merely mention the economy. To move a voter, economic points need to be made clearly and persuasively. And here’s where initiative committees come up short.

The most extensive (and arguably, most effective) use of economic arguments is the ballot argument against Proposition 38, the so-called “Munger Initiative” named after its rich funder, Los Angeles lawyer and heiress Molly Munger. This argument is successful in our view because it followed three simple rules:

1. Make it big: “$120 billion income tax hike on most Californians.” That number gets attention.

2. Quantify it for the individual voter: “If you earn $17,346 or more per year in taxable income, Prop. 38 raises your California personal income tax rate by as much as 21%, on top of what you pay the Federal government.” Most voters earn well above that, of course, but they can relate this sentence to their personal financial picture.

3. Tie it to the big picture: “Instead of creating jobs and improving the economy, Prop. 38 will force family businesses to cut jobs, move out of state, or even close.” “Damages small business and kills jobs.” These arguments focus on California’s economy as a whole.

An “honorable mention” goes to the arguments against Proposition 33, which would change auto insurance rate regulation and modify Proposition 103. In its argument against the measure and in its rebuttals, opponents representing consumers, nurses and seniors came up with 12 different ways to suggest that Proposition 33 would raise auto insurance rates or increase insurance company profits at the expense of consumers.

As for the economic arguments against other initiatives, they largely fell short. In general, ballot arguments against the major ballot initiatives are vaguely worded, lack quantified impacts, or reflect only the narrow interests of the sponsor.

A case in point is the ballot argument against Proposition 37, an initiative to mandate “Genetically Engineered” labeling on certain packaged foods. The economic points in the argument against Proposition 37 were:

1. Vague: “Prop 37 bans these perfectly safe foods unless they’re specially labeled with higher cost ingredients.” (Which “higher cost” ingredients? How much higher? Not clear.)

2. Unquantified: “Economic studies show this would increase food costs for the average family by hundreds of dollars annually, a HIDDEN FOOD TAX that would especially hurt seniors and low-income families who can least afford it.” Note the use of the vague phrases like “average family” and “hundreds of dollars annually” without any more detail.

3. Off-point: “It creates a new class of ‘headhunter lawsuits,’ allowing lawyers to sue family farmers and grocers without any proof of harm.” (Agriculture accounts for barely 2% of the California workforce. The impact of lawsuits, if any, should have been shown to affect either the consumer or the overall jobs climate.)

(Note: After the ballot pamphlet went to print, the campaign opposing Proposition 37 released two strong economic studies.)

The rest of America looks at California elections and shrugs its shoulders, relieved that our brand of direct democracy hasn’t spread more widely. But what happens in California won’t stay in California: many of these ballot initiatives are really test-drives for proposals aimed at other states and Washington, DC.

And judging from the California ballot pamphlet, some of the nation’s leading industries and business organizations haven’t come close to building the barricades needed for the fights ahead.

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