Poverty In The Golden State

0:00:07.9 Trevor Burrus: Welcome to Free Thoughts. I’m Trevor Burrus. Joining me today is Michael Tanner, Senior Fellow at the Cato Institute. Welcome back to the show, Mike.

0:00:15.4 Michael Tanner: Well, thank you. It’s always a pleasure to be with you.

0:00:19.1 Trevor Burrus: Just on for background, what is the Cato California project?

0:00:25.5 Michael Tanner: Well, it’s a long, about a three-​year project that we’ve been working on, where we have been looking at the causes of poverty and of inequality in California. California is a strange state, after all. It is a state that has solid economic growth, it has pockets of vast wealth, one of the most extensive social safety nets in the nation, and yet, it also has the highest poverty rate of any of the 50 states. So clearly, things aren’t working according to plan out there. Something is going wrong, and I think the questions raises issues for both the left and the right, in terms of what they’re doing out there.

0:01:06.4 Trevor Burrus: When you say it’s the highest poverty rate, so that includes, I mean, the… More traditionally, people think of as traditionally poor states like Alabama or Mississippi, so it’s even higher. Is this compared to cost of living in California?

0:01:18.8 Michael Tanner: Yeah. This is using the, what’s called the alternative poverty measure, which takes into account both benefits that people receive and the cost of living in the area they live, so it’s considered the more accurate number. It’s not the sort of top line number that the Census Bureau puts out that you see in news reports, but it is considered by most interpreters to be the more accurate measure of this.

0:01:41.8 Trevor Burrus: So we think about that, it’s sort of like squeezing it from two sides, because if there are things that are causing people to, say, lose their job or not get gainful employment, but then there’s other things that are causing things to be more expensive in terms of things they… What they need to buy to live a fulfilling life.

0:01:57.7 Michael Tanner: Yeah. You can live a lot easier on $10,000 in the Mississippi Delta than you can in downtown LA, just for an example, so you’ve got to kind of figure that into whether or not people are really poor or not.

0:02:10.0 Trevor Burrus: So what is that number? What are we looking at in terms of the number of poverty, the poverty rate in California?

0:02:16.8 Michael Tanner: In the general vicinity of around 18%, if you take it all into account.

0:02:21.3 Trevor Burrus: That’s pretty stunning. And that is adjusted for families and individuals and households, and does it vary much between North and South, or is it pretty much consistent across the state?

0:02:33.8 Michael Tanner: It’s pretty much consistent across the state. You know, you have different types of poverty in different locales. Along the coast, really from San Diego up to San Francisco, that’s a very high cost of living area that you have people there who are employed and are living in poverty. It’s sort of an urban poverty. It’s very much the type of poverty you see in Washington DC or downtown Detroit or New York City and so on. You go out to the Central Valley and it’s more of an agricultural poverty. That’s where you have a lot of farm workers, a lot of temporary workers. And it’s sort of an agricultural poverty, which is a little different in terms of how it manifests itself, but in terms of the raw numbers, it’s pretty consistent across the board.

0:03:17.7 Trevor Burrus: Of course, conservatives really like to beat up on California, and if they’re listening to this, they’re probably thinking… The reason for this, and we’ll get into these different problems, but the reason for this generally is that it is governed by Democrat policies, that this is a state that’s a single-​party government state, and as they like to say on Fox News, that means that California is the worst, and they say about every hour. And so, is that the short answer to the story? That the Democratic party ruins economies and helps, and ruins, and raises unemployment rates and makes things more expensive as a general rule?

0:03:56.0 Michael Tanner: Well, the economy in California is actually fairly strong. They’ve had about 5% economic growth every year on average, so you could really look at it one way to say their economy is growing. Now, there are a host of bad policies that California has implemented out there, but I’m not sure that they break down neatly along the left-​right lines when you look at these bad policies. What you have is a very strange state in which people mouth progressive slogans, and then enact often very conservative policies when it comes to things like land use and zoning, or criminal justice, or education and so on. There’s a status quo bias in favor of blocking any change, no matter how beneficial that seems to cut across party lines out there.

0:04:43.0 Trevor Burrus: A recent New York Times video pointed this out in the context of why do these states that are governed pretty much exclusively by Democrats fail to put into place the policies that Democrats seem to want, and that includes places like Illinois, and places like California. Do you think that there is an inherent conservatism to people when the rubber meets the road and policies that can be changed that would affect them negatively, and so therefore they’re kind of stuck in there in the status quo?

0:05:14.7 Michael Tanner: Yeah, I think people are happy to have change as long as it’s some place besides near them, and the sort of Nimbyism might as well be California’s state motto. You also have the problem when you have a one-​party state, the factions tend to break off in terms of various special interests, so labor is very powerful in California, or the environmentalists, and the two are often at odds, and you tend to have those fights, those intramural fights, rather than getting any fresh new ideas from outside the family camp. It doesn’t really matter whether it’s Democrat or Republican, it’s that sort of one party, no effective opposition problem that you have, I think, in a lot of states.

0:05:55.8 Trevor Burrus: So let’s get into some of the more specific things. One of the things that people think a lot about when they, if they’ve been to California recently, and is discussed quite a bit, is homelessness. Is the rates of homelessness, have they… First of all, is it higher than the rest of the country? And secondly, has it gone up in recent years?

0:06:14.5 Michael Tanner: It’s almost higher than the rest of the country combined.

0:06:17.5 Trevor Burrus: Oh, really?

0:06:18.6 Michael Tanner: About half of all the unhoused homeless people in the United States live in California or reside in California, so it’s a huge problem out there, but then, it has been rising fairly regularly for about the last 20 years, so this is a big problem, and people see a lot of this in a place like downtown San Francisco where there’s this huge visible homeless problem, camps in every public park, people living on the street, the problems of health that go with that. There’s also just sanitation problems and stuff like that. But this is an equally large, hidden homeless problem of people who are living in their cars or people who are bunking out on different beds every night because they can’t afford housing in the state.

0:07:04.7 Trevor Burrus: Are this traditional view of homelessness that it’s a lot of mental health issues, substance abuse issues, is the character of California’s homeless like that? Or is there more of a supply side issue going on in terms of getting a house?

0:07:19.8 Trevor Burrus: Yes, it’s really mixed out there. I mean, clearly that a lot of the people have substance abuse and mental illness problems. Now, of course, there’s a certain chicken and egg problem to that. I mean, were they fine when they hit the street and then they developed substance abuse to sort of self-​medicate because, frankly, living on the street is lousy, or did that force them into mental health problems or make their mental health problems worse. So there’s a certain amount of that that goes with that.

0:07:45.3 Michael Tanner: But there’s also a large number of people in California who simply fell to the street because there’s no affordable housing. If you’re into something that you can barely afford to live in and then you run into a problem, you lose your job, you get sick, you have a criminal justice issue, any one of a variety of things that could happen, someone in your family, there’s a problem. And you lose that apartment, it’s not like there’s another affordable apartment you can transition to. You basically fall to the street. And what we find is that people who are employed, there’s government workers, teachers, I talked to one emergency room nurse who was living in a car somewhere on the streets of San Francisco, simply because there was no available affordable housing for them.

0:08:32.9 Trevor Burrus: So let’s talk about some of those policies on the supply of housing. How bad is the shortfall?

0:08:40.3 Michael Tanner: It’s estimated that California right now is about three and a half million units short of what it needs for its current population. And as that population continues to grow, or if that population continues to grow, it’s only going to get worse. It wasn’t that long ago, maybe 20 years ago, California was building more houses than the rest of the nation, it was building more houses than its population growth. And they thought everything was just fine, they could go on that way forever.

0:09:09.3 Michael Tanner: The problem is it’s now switched over, the population is growing faster than the supply of new housing, and this is sort of economics 101, if you have a demand… And let’s face it, California is a nice place to live. People want to go out there and live on the coast out there. So you have a demand for housing and then you don’t provide the supply, well, that’s going to lead you to very high prices. And that’s exactly what’s happened. It’s sort of artificially induced, however, because the supply is being kept down artificially by a lot of laws and regulations and costs that California has imposed.

0:09:45.2 Trevor Burrus: Did you figure out… ‘Cause we talk about a few of them in your paper, and you mentioned Nimbyism, Not In My Backyardism, but were you able to identify the main cost or is it just a collection… The main barrier to more housing, or is just a collection of little small little things that are punching holes in the armor until you can’t build a house anywhere in San Francisco.

0:10:07.8 Michael Tanner: Yeah, I think it’s more the latter, sort of a collection. People argue over there about which law is the worst when it comes to building housing. Clearly they have a lot of exclusionary zoning practices. Until last year, there was actually about 60% to 80% of the state was zoned exclusively for single family housing, you couldn’t build so much as a duplex on your property out there, which certainly contracts the supply. They did pass a housing reform last year that allows people to build duplexes on their land and actually split their property into two parts, so you could build housing in both parts of it.

0:10:48.6 Michael Tanner: The problem is, there’s still a lot of other restrictions in terms of zoning. You still have to meet minimum lot sizes, you still have to have a set back a certain distance from the road, you still have to have so many parking spaces for every unit of housing you create. So the zoning still restricts how many houses can be built, and communities are resisting this new law in very creative ways. There is one wealthy community out there that just declared itself to be a mountain lion habitat for the entire community. And therefore, because they were now environmentally protected, they couldn’t build any more housing at all inside the city limits.

0:11:24.3 Trevor Burrus: So that gets to the kind of conservatism that we brought up before, that it would be difficult for someone to back a policy that might greatly diminish the value of their house.

0:11:37.8 Michael Tanner: Well, that’s right. I mean, there’s no doubt about it. Well, I should say there is doubt, there is studies out there that show that dense housing actually raises property values because the Whole Foods moves in downstairs in the apartment complex, and you get a bunch of little shops in the neighborhood and the Starbucks pops up and all these sort of things kind of make for more home buyers in the long run. But people do worry that their view of the ocean will be obstructed and things of that nature or that… And particularly that the wrong type of people move into their neighborhood, which goes back to zoning’s sort of abysmal racist history. But still, you still have a lot of that going on. But there’s no doubt of the fact that California’s restrictive zoning adds enormous amounts to the cost of housing. By some estimates, Glazer out of Harvard suggests that it could add a half, 50%, to the cost of housing prices out there.

0:12:31.5 Trevor Burrus: Does that make sense, though? Libertarians like to be against zoning, but zoning on some level can make sense, at least for two reasons that I can see. One, is that people do have a valid interest in how their neighborhood looks and some… I mean, they moved there for that purpose, and they don’t want to be living next to a McDonald’s or a high rise apartment complex, or maybe even some architectural things, and whether the houses are row houses, how much parking there is. So that seems like a valid concern. And the second one is the reliance concern, that if we do take away something from someone who bought a house thinking it would continue to be this way, do we owe them something, maybe, compensation if we take away that restriction?

0:13:17.4 Michael Tanner: Well, I think on the first one, there’s a basic property rights issue here, and the fact is if it’s my lot, my house or my property, I should be able to build on it, whatever I want. We’re not forcing people to give up single-​family houses, nobody’s going to say you can’t have a single-​family house in this neighborhood. What you’re saying is, you can’t tell me what I can have on my lot, assuming there’s not a nuisance, basic nuisance law would handle the fact you can’t put a hog farm next to the person’s house or something like that, you have basic nuisance law to deal with that.

0:13:48.0 Michael Tanner: The second question is, I think, a more tricky question on whether or not there’s some sort of reliance on some sort of taking that’s going on here, and to some degree, the question is whether or not people really believe that their property would go up in value forever. We sort of assume that because housing prices have been a good investment…

0:14:09.5 Trevor Burrus: I think a lot of people do believe that, yes.

0:14:11.9 Michael Tanner: But there’s no guarantee of that. And what about other things that take down people’s value of their houses, that happens all the time, and people don’t have a cause of action on that. It’s certainly something we should be sensitive to, but I don’t… But given the enormous damage that zoning laws have done, I don’t think it’s something that’s positive.

0:14:31.2 Trevor Burrus: So, given that you’ve been following all this stuff in California for about three years now, Nimbyism, do you have any examples of how that works in practice? What eventually happens? I mean, there’s a bunch of people who clearly don’t want something in their backyard, but how can they utilize various government processes to make their wishes reality?

0:14:53.1 Michael Tanner: Oh, yeah, this is, I mean, it’s clearly a case of concentrated benefits and diffuse contributions here. Whenever you have the zoning board or in this case the Planning Commission or the Regional Commissions meet to determine whether or not you’re going to allow this new apartment complex to be built, the opponents turn out in mass numbers, and the average person doesn’t bother to show up for that sort of meeting, they’re not going to spend hours there waiting around listening to this, so this sort of thing goes on forever. So you certainly have that, that goes on in the actual hearing process.

0:15:27.7 Michael Tanner: Beyond that, you have an enormous number of lawsuits, you could file lawsuits under all sorts of almost anything. One of the laws that’s most abused in California is what’s called the California Environmental Quality Act or CEQA, which is often weaponized and used to block these things. In fact, it was just, they just had to pass an emergency law because the courts upheld a lawsuit that would have forced Berkeley to cut 3000 students from its student body because they couldn’t house them in the state. Those sort of CEQA lawsuits are pretty common.

0:15:58.3 Michael Tanner: In a couple of very famous incidents, Robert Reich attempted to block the development of an apartment complex because it would have cast a shadow on a community garden in his neighborhood. You also had in San Francisco, one of my favorites is a Russian spa sued because they liked to sunbathe nude on the roof, and the apartment complex next door would have interfered with that, so they sued and got a settlement from the apartment builders. It was in the area of $100,000 per member of the club, the spa, to allow their building.

0:16:42.4 Trevor Burrus: What does the law actually say? It doesn’t say that you can sue for anything that you think is environmentally harmful, does it?

0:16:51.1 Michael Tanner: Pretty much. It includes and allows aesthetic environmentalism as well, so it’s pretty wide open. It also says you don’t have to live anywhere near what you’re suing about. A person in San Diego can actually file a lawsuit against a building being built in San Francisco under the law. Nor do you have to prove personal harm involved in it, if you’re sort of proving this large-​scale environmental damage or whatever. So this is often used by various groups to demand certain concessions. Labor unions use it a lot to demand certain levels of wages in order to allow a building to go forward.

0:17:29.8 Trevor Burrus: So how do you avoid that? Aside from bending the law, how do you show… It seems on some interpretation, if you build anything, you have altered the environment. And if someone can just say, I don’t like it, then you could then, if you applied it to the letter of the law, possibly, you could stop anything.

0:17:48.2 Michael Tanner: Pretty close, and that’s why usually there’s a settlement involved and there’s some sort of pay-​off to the people filing the suit. That’s why we’ve proposed some changes, for example, to the law that suggests that you have to live within 100 miles of what you’re suing about, you can’t file a bunch of frivolous suits across the state just to see what you can do, and that you might have to be a recognized 501C3 for at least a year to file the suit or something, which would require, would mean only legitimate environmental organizations are going to file suit, that this is not something that any group could use against sort of as a weaponized blackmail proposal.

0:18:33.2 Trevor Burrus: On that, this is a general question that will apply to a bunch of these policies, but given the nature of California’s political climate and the residents themselves, it seems that it would be very difficult to reform something like the California Environmental Quality Act. When you’ve gone there and proposed this stuff, do you get a ton of pushback just on a face that this would be a disaster for the environment, or are people sort of receptive to this idea, even reforming environmental laws?

0:19:06.2 Michael Tanner: Well, it’s sort of that they’re receptive to the idea of reforming environment policies and terrified of the interest groups that would attack them if they did. In fact, I don’t think we found a single politician from the city council level up to the governor’s office that didn’t agree with us that CEQA had to be reformed. In fact, often it was the first thing they suggested when we started talking about the need for more housing, they said, Oh, well, you need to have a CEQA reform as part of that. When we then suggested that maybe they’d like to take up this issue and propose legislation for that, they all said, Oh, no. We’ll be happy if someone else did. Perhaps if you could find someone to reform it, we’d be happy to go along with that, but we’re certainly not going to take the heat for doing this.

0:19:52.9 Michael Tanner: Now, that is beginning to change, we’re beginning to see the first cracks in the CEQA wall, the fact that there’s been so much done to block affordable housing, housing for the homeless, the Berkeley lawsuit, there’s been so many abuses recently that we’re beginning for the first time to see some legislators just cautiously say, “Maybe we should have some conversations about how CEQA’s being used,” but I think we’re probably a couple of years away from any serious legislation on that.

0:20:24.5 Trevor Burrus: In terms of criminal justice reform, it’s always struck me as fairly odd that, given sort of progressive values, California is a pretty remarkably punitive state when it comes to criminal justice issues. And even though they’ve gotten better, as you point out in your paper, some things have improved, but there are certain things like the three-​strikes law that seems almost immune to change. So where do you see as the low-​hanging fruit for reforming some of California’s sort of strangely punitive criminal justice policies?

0:20:55.0 Michael Tanner: Yeah, this is one where California really is a split personality. They have made some changes lately, but right now, crime is becoming a very [0:21:04.7] ____ political issue again out there. We’re starting to see Republicans to see if they can make some headway by criticizing progressive district attorneys like Gascón in LA and Boudin in San Francisco who… So we’re seeing some attempts to sort of undermine some of the criminal justice reforms that they’ve done.

0:21:29.9 Michael Tanner: It’s based on an exaggerated notion of how much crime has increased. There’s been some famous video on Fox News of some mass shop lifting things, there’s been a couple of flash mob things, groups that robbed some stores, often not actually in LA or San Francisco, but in suburbs, and then it gets attributed to the district attorney in the inner city that worked on these things. But I do think it’s going to be tougher to get criminal justice reforms through there. That said, the legislature just turned down an attempt that would build… That would have eliminated what’s called Proposition 47 out there, which was the initiative that lowered, or that raised the threshold for a misdemeanor to a felony, increased the dollar amount that someone had to steal before it became a felony.

0:22:18.6 Michael Tanner: That would have been repealed, but the Judiciary Committee, I think it’s called the Public Safety Committee in California, voted 5:2 to kill that proposal. So that’s still out there.

0:22:30.8 Trevor Burrus: So that’s an important one. This was the one that, again, conservatives have been complaining about that you can now steal up to $999 and not have a felony.

0:22:42.3 Michael Tanner: Yeah, that’s exactly right. And actually, about 12 states, I think, actually have lower thresholds than California or higher thresholds for what constitutes a felony than California. One of which is Texas, so deep red, true conservative Texas actually has a higher threshold when it comes to what constitutes a felony, so I’m not sure that you can really trace this recent shoplifting wave to Prop 47, that doesn’t seem to be meshed with that.

0:23:19.0 Trevor Burrus: What other reforms on the criminal justice side, if we try to get people out of prison for, at least especially out of prison for a really long time, but you also talk about something called restorative justice, increasing the amount of restorative justice. How does that work?

0:23:34.5 Michael Tanner: Yeah, that’s the idea they’re putting someone in jail for a crime isn’t always the best answer. It may be an education process, it may be community service, it may be forcing them to do restitution of some kind. The answer that we just need to lock people up no matter what their crime is, doesn’t necessarily prepare them, they’re going to get out some day, and they’re not necessarily better prepared for being in society, and in fact, they’re probably worse off ’cause now they’re carrying around a criminal record. About 20% of Californians actually have a criminal record, and even though California is a ban the box state, so the employers can’t directly ask if you have a conviction, it still can block you from a job, it could block you from a scholarship, from getting into college, from renting an apartment, even, landlords can ask.

0:24:18.7 Michael Tanner: So this criminal record is a big problem. In fact, we’ve been working with Senator Sidney Kamlager from LA on legislation that would create an automatic expungement of criminal records after a certain length of time. If you keep your nose clean, basically stay out of trouble, after a certain period of time, your criminal record will simply be sealed automatically.

0:24:43.0 Trevor Burrus: Would you expect crime to go up from these policy, from these reforms? It seems that on one view, if crime is dissuaded by being locked up, if it’s dissuaded by punishment, then one of the things we might have to just inevitably say, “Yes, crime could go up, but better things could happen instead,” as a trade-​off.

0:25:05.5 Michael Tanner: Well, I don’t think crime would actually go up. The evidence suggests that crime in California was declining for some period of time, despite the reforms that they made. We have seen an uptick. We’ve seen uptick in shootings, and we’ve seen an uptick in this sort of petty shoplifting type of crime, smash and grabs out of cars, things of that nature. But the scholars tend to debate whether what the cause of that is, there seems to be a lot of evidence to suggest that it’s sort of pandemic-​related, that everybody was just kinda locked up in their house for two years and now they’re out. And a lot of crime is being committed for that… For those reasons, as much as anything else.

0:25:49.0 Trevor Burrus: Now, moving to the human capital side, you have a whole essay on workplace and education. Does California have a effective or at least a small school choice program that we know can work?

0:26:04.3 Michael Tanner: None whatsoever that we know of out there. I mean, they do have a modest charter school system out there, but it’s one that’s always under assault, there’s legislation frequently to try to limit the number of charter schools. The funding formula that’s used out there actually penalizes charter schools compared to public schools for taking at-​risk students, which is exactly the type of students they are more likely to take. There’s a higher degree of minority students and a higher degree of at-​risk students in the charter schools in California as a percentage than in the public schools.

0:26:41.4 Michael Tanner: And yet, when you take these at-​risk students, the bonus you receive for having an at-​risk student is higher in the public schools than it is in the charter schools, so there’s sort of this bias against it. In terms of larger school choices, there’s nothing like that in California at the moment.

0:26:58.0 Trevor Burrus: What do we know, though, about the charter schools as the ones that exist, are they… Do they do better or worse than the non-​charter schools?

0:27:05.6 Michael Tanner: Yeah, California charter schools and charter schools generally outperform public schools when you take into account the level of students that they have. And as I say, they tend to have more at-​risk students, they have more lower income students, they have more minority students, students of color, than do public schools. When you take all that into account, they tend to outperform.

0:27:25.1 Michael Tanner: Now, of course, that’s not true of every charter school in every locale in California. It’s not true of every state in the union, there are states that don’t do as well as charter schools as others, but California, it’s a clear outperforming state.

0:27:40.2 Trevor Burrus: And you write about this a lot in the… I mean, throughout the whole paper, but in the education context, this is of course quite divided along racial lines in terms of who are the performing and under-​performing students, and we would presume that hopefully a school choice system would help rectify that.

0:27:57.9 Michael Tanner: Well, that’s right, which is why groups like the San Diego NAACP have supported school choice programs out there. And this has grown worse as a result of the pandemic. When the schools in California were closed for a long time, the public schools in particular were closed for a long time out there. A lot of students of color and poor students did not have access the same way to virtual online learning. They didn’t have the broadband, they didn’t have the laptops, it was much more difficult, their parents weren’t home with them. So what was already a great gulf between students of color and white students became even worse as a result of the pandemic.

0:28:41.9 Trevor Burrus: It seems that there are two… Going back to our last section, talking about criminal justice reform, there are two big problems standing in the way here. One are teachers’ unions, which are quite powerful, I assume, in California, and on the criminal justice side, prison guard unions, which are also quite powerful. Do you at any point sort of advocate reducing, either reducing unionization or putting more impediments to their power in order to try and get some of the stuff done, because I don’t see as we… In 2009, when California wanted to decriminalize or legalize marijuana, the biggest opponent was the Prison Guards Union, which is pretty monstrous, if you think about the drug war as a jobs program, and I’m sure the public school teachers do not want to encourage or spread even the small charter system that they have. So with those standing in the way, it makes me pretty pessimistic that we can get past them.

0:29:41.7 Michael Tanner: Yeah, that’s exactly correct. I don’t advocate in our proposals for California reform, that’s sort of a tangential benefit that you get, we talk directly to those proposals that affect low-​income Californians. But there’s no doubt that the biggest problems are going to be the public employees unions, and groups like the California, the LA Sheriffs’ Association, for example, which is one of the most retrograde organizations out there. It continues to fight all these sort of reforms. There was an initiative on the ballot to repeal a couple of the reforms, I guess it was two years ago, and they were largely funded and backed by the various sheriffs’ organizations and, as you say, the correction officers, which are among the most powerful union, probably after the teachers’ union, the powerful union in the state.

0:30:36.0 Trevor Burrus: Well, that seems to be a theme of so many of your proposals as I was trying to say, well, that could this happen? And we talked about property values, but individual property owners have a very concentrated benefit. Well, we could talk about licensing reform, but we know how that ends up working if you start going after some sort of profession that licenses itself, and so it’s all of these, they’re not special interests, they become interests because of the law itself, and now they want to maintain it, and so getting through them is kind of half of the game here, if not the whole game, and all these different people that you want to take away some privilege that they have.

0:31:15.3 Michael Tanner: Yeah, that’s a huge problem. As I said, the status quo bias, that is huge out there because there’s a lot of people who are benefiting it from it, and if you’re connected, if you have some money, if you live in a good community, you really don’t want to see a whole lot of change. And the fact is that communities of color, low-​income communities, they are not well-​organized politically, and often they get left behind when it comes time to vote. So I think that that’s a big difference.

0:31:47.4 Michael Tanner: Now, I will say there’s been some signs of change. We saw the, as I say, with SB9 and 10 last on the housing front, we saw the first tiny baby steps towards zoning reform. It took six years, I think it was, for Senator Wiener, who introduced this, to get it through, had to keep coming back and coming back and coming back. But it finally got a bipartisan vote in favor of it. The fact that criminal justice reform has survived attempts to repeal it, that we are liable to see on the ballot this fall an initiative to create some sort of school choice program, very likely to get on the ballot this fall. There are moves, cracks in the ice out there that maybe things have gotten so bad, they’re even willing to listen to people like me.

0:32:40.6 Trevor Burrus: On welfare, it’s interesting, ’cause you don’t… As you have for your work for forever, you don’t take the libertarian side of, Well, you know, just take away welfare, it’s not okay, it’s bad policies, but you do think that there are probably some good reforms that could happen in California. But the first question is, is why not just take away welfare, have that be your kind of lead argument in your paper.

0:33:08.6 Michael Tanner: Well, after the cities stop burning and we’ve stepped over the bodies of the people starving, maybe we could build some reform. No, the fact is you can’t just do it on one side of the equation. I yield to no-​one in my belief that welfare is counterproductive. Most welfare programs, while they do a pretty good job of making sure that no-​one starves to death, they do a terrible job of enabling people to get out of poverty, and to become self-​sufficient and to support themselves. I think most of these programs are very wrong-​headed.

0:33:38.0 Michael Tanner: That said, you can’t just take away the support and tell people to pull themselves up by their bootstraps if they don’t have any bootstraps, and as long as you have a lousy education system, a discriminatory criminal justice system, occupational barriers to prevent people from getting jobs or starting businesses, all of these are things you can’t just say, Well, we’ll just pull the rug out from under folks, I think you’ve got to do these things in tandem.

0:34:07.6 Trevor Burrus: What sort of reforms then would be good for welfare, because the ones that always strike me as quite bizarre because they come from often weird conglomerations of public policies colliding into each other, are welfare cliffs, or moments where someone loses a significant amount of benefits if they earn $2000 more a year. These seem like such a bad idea that no-​one would ever propose them, but they exist throughout our… Both our state codes and our federal code.

0:34:37.1 Michael Tanner: Yeah, the highest marginal tax rate that anybody faces is when they leave welfare for work. They start paying at least the payroll tax in the first dollar they earn, they start losing their benefits that they were receiving almost immediately, and then they incur all the expenses of going to work. So financially, they can end up worse off if they take a job than if they remain on welfare, that’s sort of the wrong incentive that we want to set up. Very hard to deal with that in terms of income, but one of the things we should be looking at is in terms of assets.

0:35:06.2 Michael Tanner: California is one of many states that has very strict asset tests for many of these rules, that says that if you spend all your welfare check, that we’re fine with, if at the end of the week, you’ve got your welfare check, you don’t spend it all, if you take what’s left over, run down the store and buy those new running shoes, that we’re cool with. But if you put some of that money away in like a 527 account, so that your kids could go to a better school some day, we’ll take away your welfare check. If you buy a car so that you can go look for work, we’ll take away your welfare check.

0:35:40.9 Trevor Burrus: So what was the reasoning behind this? I’m trying to think of who proposed this initially and why they thought this was a good idea.

0:35:47.1 Michael Tanner: Well, I guess is the idea is they don’t want people who don’t work, so don’t earn any income, but have a whole lot of money, and they’re going to collect… Go out and collect welfare. The one that’s the example that’s always pointed out to me by legislators is, What about somebody who wins the lottery and then they quit their job and they go on food stamps. Are they really? And if you do have one person who does that, I guess I don’t care.

0:36:12.8 Trevor Burrus: That’s a huge problem. Oh, my God, neither do I. I don’t think that’s a huge problem, no. What do we know about states’ variation and states on whether or not they do penalize this sort of asset acquisition in their welfare versus ones that don’t?

0:36:26.5 Michael Tanner: Yeah, it’s all over the lot whether states do or not, and we do know there’s some evidence to suggest that simply verifying the assets that people have is more costly than the money you save by having an asset test. Trying to go out and find out, does this person actually have a car, whose name is it registered in, oh, it’s their spouse’s, or it’s their kid’s, or they’re using it, how much is it worth? Doing all that sort of stuff is hugely expensive and intrusive, and at the end of the day, they don’t catch a whole lot of people, there isn’t a lot of those lottery winners out there that you’re cutting off. So it’s a very marginal gain for not much benefit, and it varies a lot from program to program, state to state, how much they have, but it’s certainly something that California could move on fairly quickly.

0:37:18.6 Trevor Burrus: One thing you write about that was new to me, partially because I don’t do welfare policy generally, is welfare diversion programs. This is the state spending money to get people off of welfare, is that job training or is that one version of that?

0:37:32.4 Michael Tanner: Well, it’s more keeping them off of welfare in the first place. A lot of times where people show up at the welfare office is ’cause they’re facing an emergency that they can’t take care of right now, they can’t pay their rent this month, and they’re going to be evicted if they don’t get some money, their car broke down and they can’t get to their job anymore and they’re going to be fired if they can’t get it fixed. They ran into a health problem that they’ve got to take care of, something like that. So a small amount of money might be to fix them.

0:38:00.7 Michael Tanner: Under traditional welfare programs, all we say is sign up for welfare and we’ll send you a check in a couple of weeks, which might be too late for you, but then you’re in the welfare system with all the problems we just talked about, the welfare cliff, the asset testing, marriage penalties, all the things that go with it. Under these diversion programs, what you can do is get a lump sum up front in exchange for forgoing eligibility for traditional welfare. So maybe you come in and say, I need this, I have this problem, I’ve got to fix it.

0:38:28.3 Michael Tanner: And they say, We’ll give you $1000 so that you can pay your rent, but you can’t apply for welfare for six months after this. So then now you’ve got to use that money for what you said you’re going to use it for, but if you could fix that problem and get through the next month, maybe you’ll never end up on welfare in the first place. California has a diversion program, but the most counties don’t use it. Most… And largely ’cause the incentives just aren’t there. You actually get rewarded if somebody gets on welfare, and then you get them off. But if you keep them from going on in the first place, nobody ever even knows about it, so you don’t get any of the bonuses that your county or your state can do. At the federal level, the bonus is set up the same way.

0:39:17.1 Trevor Burrus: So you’ve been going out there for a couple… Few years now as this project has been going and talking to people. Is there anything that’s sort of surprised you the most about the reception or at least what people are willing to talk about, and has that changed over the course of the three years you’ve been doing this?

0:39:36.7 Michael Tanner: Yeah, one of the things I’ve found was how willing people were to listen to our message once we talked to them. So often libertarians sort of refuse to talk to the left. There’s been this sort of de facto alliance with the right. I don’t understand it, but it’s been there. And there’s been a reluctance to even sit down and talk to someone on the left. But I’ve found going out there that some of the people who were some of the most liberal democrats, people who belong to Democratic Socialists of America, I could sit down and talk to them and say, “Look, this is what we want to talk about on housing. This is what we want to talk about on criminal justice reform. Yeah, you don’t agree with us on what the maximum tax should be in California. Yeah, you don’t want to deregulate this or that. Fine, we won’t talk about that. Let’s talk about housing and criminal justice reform or education reform.” And we were surprised at what a positive reception we got.

0:40:30.9 Trevor Burrus: Are you… Is it… Are things trending… Aside from COVID, which got some things, of course, to go negative, but is this sort of a… Things are to start maybe trending in your estimation in a positive direction because the state is almost hitting rock bottom, so you have to hit rock bottom before you put the bottle down kind of situation, and that’s why this presents an opportunity?

0:40:53.7 Michael Tanner: It really does. I mean, I think things have gotten really bad out there. And the traditional ideas of just throwing more money at it, let’s have another program, I think there’s a recognition that that’s not working. And even some people who are pretty dyed in the wool liberals out there were willing to say, “Yeah, we’ve spent X billions of dollars on homelessness over the last five years, homelessness has gone up, maybe we should be looking at some other options that are out there. Or at least, in combination with spending the money, we should be looking at the other options out there.” So I’m beginning to see cracks, as I said earlier, in the ice out there.

0:41:35.2 Trevor Burrus: And the other problem, though, could be that some of the people who are leaving, which it’s had at least a few years of negative population of people, of more people leaving than going to California, that you’ll need… The people who will remain will be the ones who are maybe less willing to reform than the ones who just decided to leave.

0:41:55.3 Michael Tanner: Well, yeah, two parts to that. One is, it’s an interesting situation, conservatives often paint it as people fleeing California. It’s not actually… The outflow from California is about where it’s always been. It’s not that people are leaving California, it’s that people are not moving into California the same way. And what’s particularly happening is the middle class is not moving into California. You’re essentially getting a very feudal society out there, where you have the wealthy in their gated communities in Palo Alto or Beverly Hills or wherever. And then you have sort of the servant class down below that provides the services, that are low-​income people and kept pacified with a certain amount of welfare.

0:42:35.5 Michael Tanner: The middle class, which is sort of the heart of economic growth, that seems to be fading in California. So that’s a potential concern and we should be keeping an eye on. And of course, you then have sort of political powerlessness matched with people who have a vested interest in the status quo, and that’s not a recipe for change.

0:43:00.1 Trevor Burrus: Is there anything coming in the near term that maybe has some changes that could make a big, big deal in terms of conversations you’ve been having with lawmakers or you see something coming that provides reason for optimism?

0:43:14.3 Michael Tanner: Well, this is a year of political change. About 25% of the California legislature is running for higher office. They have term limits out there, and they can’t actually bear to go back to the private sectors. But it does mean there’ll be a significant turnover in the legislature, which is an opportunity to bring some new blood in and maybe to educate some new people out there on these issues. You also have ballot initiatives. There’s going to be a number of positive ballot initiatives that are going to go on… Come in the fall out there.

0:43:46.1 Michael Tanner: And Governor Newsom is going to get re-​elected, because Republicans don’t have a real party out there. But there are some competitive races in some of the lower office races for Attorney General, for example, or Secretary of State. And I believe it’s the State Auditor’s position or the State Treasurer’s position, whichever one is elected, I can’t remember which of the two it is, that you have some competitive races out there. So you could see some new blood, which would be a good start.

[music]

0:44:32.2 Aaron Powell: Thanks for listening. If you enjoy Free Thoughts, make sure to rate and review us in Apple Podcasts or in your favorite podcast app. Free Thoughts is produced by Landry Ayres. If you’d like to learn more about libertarianism, visit us on the web at lib​er​tar​i​an​ism​.org.