Can More Money Help Solve California’s Major Public Policy Problems?

David Kersten
David Kersten is president of the Kersten Institute for Governance and Public Policy (www.kersteninstitute.org). Kersten is also an adjunct professor of public finance and economics at the University of San Francisco.

A quick review of the Governor’s January budget proposal illustrates that one common thread is spending more money, in many cases a lot more money, that is intended to address a variety of major public policy problems such as early childhood education, homelessness, and lack of affordable health care and housing.

The new Governor Gavin Newsom (D) should be commended for raising these important issues and proposing to address them in a substantive way, but it also must be noted that most of the state’s major public policy problems where not created by a shortage of public money and government intervention.

In fact, several of the state’s key public policy problems such as homelessness and lack of affordable housing and health care, have been caused or exacerbated by flawed or ineffective government policies.

Thus, any attempt to address a public policy problem should be done in a wholistic and realistic way of which additional public money is only one potential consideration where in fact merited.

To illustrate, few people in the state will contest additional money to shelter and treat the homeless and public subsidies for low-income housing. But public money cannot be the only answer, because the deficiency of public money is not what caused the problem.

Unfortunately, there is not enough extra money in the $200 billion plus annual budget purse in California to even put a modest sized dent the homelessness and affordable housing crisis in this state, among other problems.

Furthermore, the best social insurance policy is job creation and a healthy and thriving business climate that will produce enough good paying jobs that are available and accessible to all Californians.

In short, a lot of Democrats in this state are accustomed to completely turning their head when they hear buzz words such as “market-based solutions,” “deregulation,” and “lower taxes and fees.”

Fortunately, as a small businessman and very capable public policy expert, I do not believe Governor Newsom to be among these types of Democrats. In his first few days and acts as Governor, Newsom has demonstrated his audacity and courage for a change, something promised in the campaign, but at that time was likely something that left a number of people (myself included) scratching their heads wondering what all that really meant.

Newsom has demonstrated that he is clearly not Jerry Brown and does not approach many of the state’s problems in a more piecemeal, methodological and less aggressive manner.

Newsom is direct, bold, and a visionary who has demonstrated the courage to address at least some of the state’s major public policy problems head on.

The truth is that is exactly what this state needs at this point in time to bring real change, but perhaps the most important consideration is that Newsom must deliberately pursue the right mix of public policies to address each policy issue. The Governor cannot side exclusively with the special interests that have created and exacerbated many of these problems over the years.

For example, it has been proven that the building trades unions and environmental lobby is opposed to any real substantive revision of the California Environmental Quality Act to make it easier and less expensive to build housing in this state. Furthermore, the state’s public employee unions don’t want to even consider a limitation on the exorbitant fees and taxes that are levied on the new construction in this state that are without parallel in most other states.

Furthermore, public subsidies and direct public money will not address the homeless crisis in this state, as Gavin has in fact honestly admitted during the campaign.

The real question is why are so many people increasingly becoming homeless and what can be done to prevent this from happening in the first place? Affordable housing is a major consideration, but again public housing subsidies pale in comparison to market-based solutions to housing.

Demanding that local governments build more housing or miss out on public funds is another method of government command and control, as opposed to finding solutions that address how markets actually work and better get at the roots of the underlying problem—namely overtaxed and overregulated housing markets.

Thus, it is my firm belief that most of California’s major public policy problems will continue to linger and even get worse, potentially a lot worse, unless the right public policy solutions are pursued in a truly courageous manner as opposed to just the popular solutions that have already been blessed by key powerful political constituencies.

The most successful politicians in our era such as Presidents John Kennedy and Bill Clinton were historic figures largely because they cut across established boundaries and party lines to pursue pragmatic public policies that got the job done, as opposed to only pursuing the most popular solutions that were not necessarily as effective.

JFK did this on tax cuts, and Clinton did this on welfare reform. Both are historic examples—anomalies–of the great progress that can be made if public figures are willing set aside ideology and traditional boundaries to pursue pragmatic solutions that address public policy problems head on.

Gavin Newsom could be similarly remembered in the history books as being a very historic figure, both in California as well as on the national stage, but it will require the development of both a successful governing style as well as the deliberate pursuit of the right policy solutions to address the state’s most pressing policy problems.

 

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