My County supervisor (Sue Frost) recently sent me a newsletter decrying Sacramento County's lack of reserves -- a clear shout out to the austerity crowd.
Here's our interaction, in part:
Ms Frost,
Thanks for the response. My replies are embedded below:
You say: It is a fact that Sacramento County only has 1.5% of money in reserves, when the next lowest in the entire state is 9.2%. Having such low reserves makes it so we cannot invest in major programs without borrowing even more money, which drives up the cost and ultimately results in less services in the long-run.
My reply: This thing you call "reserves" (i.e. money) is a social artifact. It is not a commodity (and hasn't been since 1971 when Nixon closed the gold window). It’s more like the score at the ball game than a lump of gold. How often have you heard a fan yell at the scorekeeper “Hey buddy! You’re running out of points!”?
Governments create money, and even governments who do not issue currency can create credit if they have a public bank. Banks do not lend the money they have on deposit...
You say: The County only saved 10% of the money we gained this year, the other 90% was spent on infrastructure and programs. Are you suggesting that we shouldn’t have even saved the 10%?
My response: I'm suggesting you're missing the point. Your "savings" is chump change compared to the money available that you're not counting.
Incidentally, the question omitted is whether we're getting our money's worth from public spending, not whether government is running out of money. Do roads that chew up tires and shock absorbers cost the population substantially more than good ones? (And do communities designed to require autos--i.e. Sprawl--amount to a regressive tax? And is sprawl sustainable? Respectively: Yes and no.)
Is treating the homeless by hassling them with police and taking them to emergency rooms really the most effective way to handle a social problem? Homeless advocates will tell you that the region could save 50-80% of what it spends on its current strategy if it followed the example of Salt Lake City and practiced "Housing First." Executive summary: Housing the homeless is not only more compassionate, it's cheaper.
I realize this flies in the face of the current, well-funded propaganda campaign to thwart effective public policy, AKA government “collectivism” (the Koch’s word). Margaret Thatcher even declared there is no such thing as society, only individuals and families--roughly the equivalent of saying you don’t have a body, only individual cells.
Despite those distractions, I’d suggest your job is an important one, and public policy, including public budgeting is important. So trying to minimize public spending while ignoring systemic costs incurred might get you some traction in some quarters. Not here.
I'm guessing you might respond: “Maybe what you say is true, Mark, but we’d need the up-front money to ramp up a program of street improvements or housing. We’d have to borrow even more to do that.”
My response: You make a good point. Either tax increases (very difficult!) or borrowing is exactly what would need to occur, but this borrowing could actually produce savings, not costs. And why are we borrowing from Wall Street, or the private financial sector? Why is there no public bank from which we could borrow? Wouldn’t a public bank be able to offer the County a line of credit so we would not need to short other programs to have a “prudent reserve”? (Hint: yes!)
The state of North Dakota has been doing public banking for nearly 100 years. When their fracking boom hit, they were able to handle the additional infrastructure demands without short-changing their school children--and South Dakota's taxes are lower than California's.
One might also observe that Montana had the same oil formation (the "Bakken") but no public bank. Montana suffered a significant economic downturn when the Great Recession hit while North Dakota did not. Meanwhile, North Dakota borrowed their public service money at rock-bottom rates, then handled the up-front requirements of their boom times and bad times, paying back the loans to be recycled in-state rather than sending the money to Wall Street.
Even without public banking, though, recent history demonstrates no money shortage exists locally, either. Did the Kings encounter a shortage of money when they needed a stadium subsidy? Did the City say "Eeek! Eeek! We're out of money!" Nope. The fell all over themselves to hurriedly give the plutocrats a quarter billion dollars to buy their playtoy (the Kings). Did that quarter billion appear as "reserves" on the City's books? Nope.
The Kings subsidy, incidentally, was underwritten by Goldman Sachs, so that repayment money is headed to Wall Street, not recycled into California or Sacramento infrastructure.
Public banking is a long-standing tradition in the U.S. and internationally. Herbert Hoover's Reconstruction Finance Corporation is what FDR used to build the Tennessee Valley Authority, and the first Bay Bridge. Eisenhower terminated the RFC, by the way. Like the Kings stadium subsidy, the second Bay Bridge was underwritten by Goldman Sachs. Bizarrely, California has an infrastructure bank, but their underwriting is so restrictive that they couldn't do the Bay Bridge, or something like the homeless savings projects.
My point is this: Whenever concrete, material benefits are proposed for the general population, we hear the Fiscal Responsibility™ mantra: "We're out of money!" But when the plutocrats need a bailout--as the Kings' owners did, as Wall Street's Ponzi capitalists did in 2007-8--No problem! Take as much money as you want!
If you wanted to find money for County projects, you could do so in a hurry, I've seen the plutocrats score too big, too often to believe otherwise (here's a little Business Journal editorial about, among other things, local governments subsidizing land speculation from 2003...it still applies). Setting us up for austerity by solemnly proclaiming "We're out of money!" is simply not credible.
Here are a few sources of far more money than your "missing" reserves, if you want them:
1. A public bank. Banks do "fractional reserve lending"--they lend more than they have on deposit, so create credit (i.e. money). There's no reason for austerity to produce reserves if you have a line of credit. If a public Sacramento Bank simply passed through money from the Fed, without creating any new credit, they could charge 2% interest and still make money. Note also that the Bank of North Dakota had higher earnings than even Goldman Sachs. Gosh, I wonder where Sacramento County’s pension fund could invest to make higher returns than Wall Street offers?
2. makeitfairca.com notes that Prop 13's commercial property loophole costs the state $5 billion a year. How about lobbying to correct that, to get more revenue?
3. As mentioned above,"Housing First" would save 50 - 80% of the $40 million the region spends on its current expensive, ineffective treatment of homelessness.
4. Incarceration, despite the protestations of District attorney Anne Marie Schubert, is a costly, ineffective treatment for criminal and addictive behavior. The U.S. incarcerates at five times the world average, per-capita rate, seven times more than the demographically-identical Canadians, with no significant difference produced between the U.S. and Canada in crime or addiction rates. Want more money? Cut back on incarceration and tell Ms. Schubert the damage done by our incarceration binge is orders of magnitude more than might be done by releasing prisoners.
Anyway...please accept my best wishes for your term as supervisor. You have a tough job, but please don’t think my sympathy extends to accepting the Fiscal Responsibility™ excuse. We’re not out of money any more than the scorekeeper at the ball game is out of points. Saying so does not make it so.
Here's our interaction, in part:
Ms Frost,
Thanks for the response. My replies are embedded below:
You say: It is a fact that Sacramento County only has 1.5% of money in reserves, when the next lowest in the entire state is 9.2%. Having such low reserves makes it so we cannot invest in major programs without borrowing even more money, which drives up the cost and ultimately results in less services in the long-run.
My reply: This thing you call "reserves" (i.e. money) is a social artifact. It is not a commodity (and hasn't been since 1971 when Nixon closed the gold window). It’s more like the score at the ball game than a lump of gold. How often have you heard a fan yell at the scorekeeper “Hey buddy! You’re running out of points!”?
Governments create money, and even governments who do not issue currency can create credit if they have a public bank. Banks do not lend the money they have on deposit...
You say: The County only saved 10% of the money we gained this year, the other 90% was spent on infrastructure and programs. Are you suggesting that we shouldn’t have even saved the 10%?
My response: I'm suggesting you're missing the point. Your "savings" is chump change compared to the money available that you're not counting.
Incidentally, the question omitted is whether we're getting our money's worth from public spending, not whether government is running out of money. Do roads that chew up tires and shock absorbers cost the population substantially more than good ones? (And do communities designed to require autos--i.e. Sprawl--amount to a regressive tax? And is sprawl sustainable? Respectively: Yes and no.)
Is treating the homeless by hassling them with police and taking them to emergency rooms really the most effective way to handle a social problem? Homeless advocates will tell you that the region could save 50-80% of what it spends on its current strategy if it followed the example of Salt Lake City and practiced "Housing First." Executive summary: Housing the homeless is not only more compassionate, it's cheaper.
I realize this flies in the face of the current, well-funded propaganda campaign to thwart effective public policy, AKA government “collectivism” (the Koch’s word). Margaret Thatcher even declared there is no such thing as society, only individuals and families--roughly the equivalent of saying you don’t have a body, only individual cells.
Despite those distractions, I’d suggest your job is an important one, and public policy, including public budgeting is important. So trying to minimize public spending while ignoring systemic costs incurred might get you some traction in some quarters. Not here.
I'm guessing you might respond: “Maybe what you say is true, Mark, but we’d need the up-front money to ramp up a program of street improvements or housing. We’d have to borrow even more to do that.”
My response: You make a good point. Either tax increases (very difficult!) or borrowing is exactly what would need to occur, but this borrowing could actually produce savings, not costs. And why are we borrowing from Wall Street, or the private financial sector? Why is there no public bank from which we could borrow? Wouldn’t a public bank be able to offer the County a line of credit so we would not need to short other programs to have a “prudent reserve”? (Hint: yes!)
The state of North Dakota has been doing public banking for nearly 100 years. When their fracking boom hit, they were able to handle the additional infrastructure demands without short-changing their school children--and South Dakota's taxes are lower than California's.
One might also observe that Montana had the same oil formation (the "Bakken") but no public bank. Montana suffered a significant economic downturn when the Great Recession hit while North Dakota did not. Meanwhile, North Dakota borrowed their public service money at rock-bottom rates, then handled the up-front requirements of their boom times and bad times, paying back the loans to be recycled in-state rather than sending the money to Wall Street.
Even without public banking, though, recent history demonstrates no money shortage exists locally, either. Did the Kings encounter a shortage of money when they needed a stadium subsidy? Did the City say "Eeek! Eeek! We're out of money!" Nope. The fell all over themselves to hurriedly give the plutocrats a quarter billion dollars to buy their playtoy (the Kings). Did that quarter billion appear as "reserves" on the City's books? Nope.
The Kings subsidy, incidentally, was underwritten by Goldman Sachs, so that repayment money is headed to Wall Street, not recycled into California or Sacramento infrastructure.
Public banking is a long-standing tradition in the U.S. and internationally. Herbert Hoover's Reconstruction Finance Corporation is what FDR used to build the Tennessee Valley Authority, and the first Bay Bridge. Eisenhower terminated the RFC, by the way. Like the Kings stadium subsidy, the second Bay Bridge was underwritten by Goldman Sachs. Bizarrely, California has an infrastructure bank, but their underwriting is so restrictive that they couldn't do the Bay Bridge, or something like the homeless savings projects.
My point is this: Whenever concrete, material benefits are proposed for the general population, we hear the Fiscal Responsibility™ mantra: "We're out of money!" But when the plutocrats need a bailout--as the Kings' owners did, as Wall Street's Ponzi capitalists did in 2007-8--No problem! Take as much money as you want!
If you wanted to find money for County projects, you could do so in a hurry, I've seen the plutocrats score too big, too often to believe otherwise (here's a little Business Journal editorial about, among other things, local governments subsidizing land speculation from 2003...it still applies). Setting us up for austerity by solemnly proclaiming "We're out of money!" is simply not credible.
Here are a few sources of far more money than your "missing" reserves, if you want them:
1. A public bank. Banks do "fractional reserve lending"--they lend more than they have on deposit, so create credit (i.e. money). There's no reason for austerity to produce reserves if you have a line of credit. If a public Sacramento Bank simply passed through money from the Fed, without creating any new credit, they could charge 2% interest and still make money. Note also that the Bank of North Dakota had higher earnings than even Goldman Sachs. Gosh, I wonder where Sacramento County’s pension fund could invest to make higher returns than Wall Street offers?
2. makeitfairca.com notes that Prop 13's commercial property loophole costs the state $5 billion a year. How about lobbying to correct that, to get more revenue?
3. As mentioned above,"Housing First" would save 50 - 80% of the $40 million the region spends on its current expensive, ineffective treatment of homelessness.
4. Incarceration, despite the protestations of District attorney Anne Marie Schubert, is a costly, ineffective treatment for criminal and addictive behavior. The U.S. incarcerates at five times the world average, per-capita rate, seven times more than the demographically-identical Canadians, with no significant difference produced between the U.S. and Canada in crime or addiction rates. Want more money? Cut back on incarceration and tell Ms. Schubert the damage done by our incarceration binge is orders of magnitude more than might be done by releasing prisoners.
Anyway...please accept my best wishes for your term as supervisor. You have a tough job, but please don’t think my sympathy extends to accepting the Fiscal Responsibility™ excuse. We’re not out of money any more than the scorekeeper at the ball game is out of points. Saying so does not make it so.
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