Commentary: It’s Jerry Brown’s Show, Can He Be The Anti-Governor Walker?

Brown-at-Bistro-33Governor Brown has made this week his deadline for reaching a budget deal – yes – March 8.  That deadline has been dealt a blow, as yesterday it was reported that Republican senators released for the first time a list of demands and declared an impasse.

“We accepted your invitation to bring you our ideas on important structural reforms and willingly took to heart your admonition ‘to get out of our comfort zone,’ ” the letter to the Democratic governor from key Republicans read. “Although it is clear that you engaged in our conversations seriously, it appears we have reached an impasse in our discussions about how to move the state forward.”

While the governor could certainly pass the budget with a majority vote and maybe even get a modified version of his tax plan on the ballot in June, he realistically needs at least two Republican votes in both houses of the legislature to achieve the two-thirds majority he seeks and which would make his ultimate goals much easier to accomplish.

There are a couple of points embedded in a weekend Sacramento Bee article and commentary, by Maureen Dowd about Governor Brown, which are interesting, particularly in light of the continuing conflagration in Wisconsin over Governor Walker’s proposal to limit, if not eliminate, collective bargaining for public employees.

First, I find the wording of the letter from Republican senators interesting because the Republicans acknowledge that he “engaged” in their conversations “seriously.”  That is important for future talks, as the Republicans did not apparently feel that he was merely giving their concerns lip service.

The Bee also quotes San Jose State political science professor, Larry Gerston.

“There’s no question about it, that the governor expended some political capital when he announced that he wanted agreement by that date,” said Professor Gerston.  “Is it a bit of a black eye? Perhaps, but you know, he has shown a great ability this time around to take a punch and get back up.”

That is perhaps the key to Governor Brown, he is not going to panic at missing a deadline.  He also appears quite willing to lose or not run in four years if this does not work.

Moreover, one has to wonder how many people care if he gets this done in March or even May.  Missing the deadline would still be a vast improvement over the past when budget statelemates dragged through the summer and relied on gimmicks to give the appearance of the funds balancing, when they did not.

The analysis that Maureen Dowd lays out, in her opinion piece this past weekend, really hits a lot of nails on the head in terms of the changes in Jerry Brown from the 1970s and why, if anyone is to succeed at this, it is likely to be him.

She writes, “In the old days, he tried to get people to accept their limits when they didn’t think there were limits; now that they’ve learned the hard way that there are, his gospel sells well.”

The funny thing about the Republican talking points during the election was that they tried to portray Jerry Brown as tax and spend, when in fact, Jerry Brown was notorious for being frugal, during a time of excess.  In that sense, Jerry Brown probably has changed less than the times. Also, Ms. Dowd quotes him as saying, “I thought I knew a lot, but obviously 30 years later, I know a hell of a lot more.”

Ms. Dowd continues, “If the legislators approve his plan, a mix of spending cuts and tax extensions, the big test will be a referendum on it in June.”

She notes, “If his plan passes, California could become the laboratory for how to do things right, the anti-Wisconsin. It is remarkable to watch the governors on two coasts, Brown and Andrew Cuomo, both sons of iconic liberal governors, boldly go against the grain to do what works today. They are eliminating or reforming many of their dads’ hallmark programs.”

There is a lot that needs to be accomplished here, and Jerry Brown is going to need concessions from the unions to enact the kind of pension reform he is seeking, but Ms. Dowd has an interesting point.  Jerry Brown has proposed huge cuts that the previous governor would never have gotten the Democrats to concede to.

Governor Walker of Wisconsin has virtually torn his state apart with his proposals.  Jerry Brown could achieve the same thing with minimal amounts of hand wringing.

There is of course a temptation to note that Jerry Brown has not achieved a single thing yet, and that would be true.  But then again, neither has Governor Walker, has he?  Other than tearing apart his state.

She writes, “Some of Brown’s ideas that seemed wacky in the ’70s have now gone mainstream.”

He responds, “I’m open and innovative and experimental, and sometimes that works and sometimes it doesn’t work.”

He says that in a world where politics is ever more scripted by “gnomes in the basement,” he simply tries to speak his mind.

“I am more confident,” he says. “When you’ve done something for decades, you know the drill.”

He calls himself  “an insider with an outsider’s mind.”

Ms. Dowd continues, “He was a precursor to the Tea Party, and he admits he tends to be a ‘tear-it-apart guy.’ ”

“But I feel I’m in a more constructive mode at this time of my life,” he said. “I understand hostility and alienation from the soulless bureaucratic state, but the Tea Party is a tear-it-apart group. We have to have continuity along with change if we’re going to hold the place together.”

One thing is clear, Governor Jerry Brown is no less interesting than he was in the late 1970s. 

I remarked last fall that if Jerry Brown cannot succeed in fixing the budget mess, I thought we needed to start again from scratch.  I maintain that position.  I am not suggesting that Governor Brown will succeed, but look at all of the delicate dynamics at work. 

There needs to be a Democrats’ governor willing to slash programs and departments and get the buy-in of unions and Democratic legislators.  If I am a casting director, I cannot think of a better person to play that role than Jerry Brown.

—David M. Greenwald reporting

Author

  • David Greenwald

    Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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Categories:

Budget/Fiscal

86 comments

  1. Get rid of the two thirds rule to raise taxes. Its like trying to run government under the articles of confederation where you needed 2/3 to get anything dine. It failed in the 1780’s and its failed California today.

  2. Note the very last point in this article. That is the primary problem and the one that Brown is not touching.

    [url]http://www.nytimes.com/interactive/2011/03/06/us/public-private-employees.html?scp=1&sq=Are State and Local Government Employees Paid Too Much?&st=cse[/url]

  3. Im fer majority rule! We need Jerry bad as well as an end to minority rule in California. Majority rule has worked pretty well throughout the world of democracy. We ought to give it a try here.

  4. Jeff, regarding the NY Times story you linked to: I would bet those national numbers, which show how much more expensive public employees are compared with their private counterparts, would be far more dramatic if you isolated a state like California. Moreover, I suspect you would find a clear distinction between states like California and others in which the majority of incumbent legislators were heavily financed for office by PEUs and those other states where that has not been the case over time. If I am right that this distinction is pronounced, it suggests two things:

    1. PEUs clearly benefit by corrupting legislators; and
    2. Legislators in states like California are clearly corrupt.

  5. By the way, I think the same sorts of distinctions could be made comparing states where business interests or farmers or so-called private contractors who do all of their business with government finance the campaigns of the majority of incumbent legislators over time. I don’t mean to suggest in my post above that the only corruptors are the PEUs and the only corruptees are those taking PEU money. It has been well documented how many states, for example, especially those in the South, have been corrupted by wealthy trial lawyers, resulting in extremely generous payoffs for civil tort damages in those staes.

  6. [i]I suspect you would find a clear distinction between states like California and others in which the majority of incumbent legislators were heavily financed for office by PEUs and those other states where that has not been the case over time.[/i]

    Do you know of researched numbers that support your assertion?

  7. “Im fer majority rule! We need Jerry bad as well as an end to minority rule in California. Majority rule has worked pretty well throughout the world of democracy. We ought to give it a try here.”

    So am I, that’s why those 14 cowardly Democrats need to come back to Wisconsin so the majority can pass the law.

  8. Rich: It is that same “follow the money” rule. I think you are probably correct in this. Compensation is higher where unions are involved and higher again when unions combine with politicians. I’m a root cause guy. It would be great if people would participate with the bigger picture in mind instead of pursuing their own selfish interests at the expense of our childrens’ standard of living. If we could all embrace a shared-goal of creating balanced budgets that pay down our debt over a period of time and then live within our means, I would be all for negotiating our way through this mess. However, I don’t hold out hope for that… and even if we could move the needle that way, it would take far too much effort and it would not move it enough. I think it is clear that the problems we are facing can only be solved by shrinking the size and scope of services provided by the government… and completley overhauling what is left… those things that are essential services.

    Walker is taking these steps. So is Daniels. Is Brown?

  9. [i]”Do you know of researched numbers that support your assertion?”[/i]

    No. I did not know before I saw the NY Times page that Jeff Boone linked to that this data had been assembled on a national basis. Surely the underlying data could be extracted out.

    However, I did hear a discussion verly closely related to this on the PBS NewsHour recently, and there it was noted how much higher the incomes of public employees were in some states compared with the rest of the nation. Those with the highest paid PEUs were (paraphrasing) “the New England states, not including New Hampshire, New Jersey, Maryland, Michigan, Wisconsin, Illinois, Hawaii, Oregon, Washington and California.” That collection of states would seem to correspond with what I guess in my post above.

  10. [i]”Majority rule has worked pretty well throughout the world of democracy”[/i]

    The framers of our form of government were as fearful of pure democracy as they were of monarchy and dictatorship. Historically, the tyranny of the majority has proven as disastrous as the tyranny of one.

  11. Number of state employees per 10,000:
    [url]http://www.census.gov/compendia/statab/2007/ranks/rank23.htm[/url]

    Rank:
    Hawaii: 1
    Alaska: 2
    Wisconsin: 43
    Texas: 44
    Ohio: 45
    Arizona: 46
    California: 47
    Nevada: 48
    Florida: 49
    Illinois: 50

  12. Jeff B: [i]Historically, the tyranny of the majority has proven as disastrous as the tyranny of one.[/i]

    Would this include Prop 8 as an example?

  13. Pro-8? I suppose you could include that as an example. However, I think voting things for yourself is a bit different that voting to prevent social change you disagree with. There is no monetary benefit going to the people that voted for prop-8. In fact, it was the oposite as the militant gay rights groups destroyed the career of several people in support of traditional marriage. If it really is a natural right, then the courts can work it out.

  14. dmg: “While the governor could certainly pass the budget with a majority vote and maybe even get a modified version of his tax plan on the ballot in June, he realistically needs at least two Republican votes in both houses of the legislature to achieve the two-thirds majority he seeks and which would make his ultimate goals much easier to accomplish.”

    The political cover Brown seeks by achieving the two-thirds majority he seeks, makes his ultimate goals easier to accomplish – without the necessity of having to take responsiblity for his actions. If things don’t work out, the first thing Brown will do is point fingers elsewhere at Republicans and voters and say “But they signed onto my plan too so are just as much to blame for this fiasco!” If Brown truly had the courage of his convictions, he would act like a leader and do what needs to be done, w/o trying to obtain political cover from voters, Republicans, whoever, before he makes any move whatsoever.

    dmg: “There is a lot that needs to be accomplished here, and Jerry Brown is going to need concessions from the unions to enact the kind of pension reform he is seeking, but Ms. Dowd has an interesting point. Jerry Brown has proposed huge cuts that the previous governor would never have gotten the Democrats to concede to.”

    And how many concessions has Brown been able to get from the PEUs? How much has Brown done on the issue of pension reform? I’ve heard a lot of talk, but not a lot of “do”.

    dmg: “There needs to be a Democrats’ governor willing to slash programs and departments and get the buy-in of unions and Democratic legislators. If I am a casting director, I cannot think of a better person to play that role than Jerry Brown.”

    I know you want so hard to “believe”, just as Obama supporters wanted to hard to “believe”. Talk is cheap. What a person does is far more important than what he says. Let’s see if Brown puts his political capital where his mouth is…

  15. [i]Let’s see if Brown puts his political capital where his mouth is… [/i]

    He already has. What we have here is a group of Republicans shaking in their boots at the mere thought of allowing the people a vote on the package.

  16. “There needs to be a Democrats’ governor willing to slash programs and departments and get the buy-in of unions and Democratic legislators.”

    This is quite an amazing statement. If a Republican governor tries this, there is an outcry about “the children” and the “needy elderly” and the “gutting of education”. But there needs to be a “Democrats’ governor” to do this, for some reason. It’s almost like the Democrats are your team, like the Giants, and you cheer them on each season because you always have. Even when your logic nags at you.

    The Democrats in Washington are proposing a cut for the entire Federal government that is smaller than what California alone needs to cut in its state budget. The chances of a Democratic governor making enough cuts to turn around the state’s fiscal crisis are negligible. And the Republicans will never have the majority in this state again, given the demographics and the rising dependency classes. I don’t see any path out of the hole we’ve dug ourselves into.

  17. “Majority rule has worked pretty well throughout the world of democracy.” Actually, it hasn’t worked out well at all. That’s why we have a constitutional democracy in the U.S., not a majority rule democracy. I’m always amazed when I hear fellow citizens falsely assert that we have majority rule here.

  18. Brown has been very clear about the budget. From the KQED blog:
    “Brown wants an election on tax extensions, Republicans don’t.
    If he gets his tax extensions, ‘only’ 12 billion in cuts will be enacted. If he doesn’t, then roughly double those cuts to get to a balanced budget.
    His threat: He will only agree to whatever combination of cuts and taxes will make the numbers balance. He won’t agree to finagle the books via much-maligned ‘gimmicks.'”
    This makes him unique among our last 4 – 5 governors. All the others have resorted to accounting tricks and one-time solutions.
    There will be an outcry, as well there should be, due to the impact on “children” and “needy elderly.” California’s safety net is going to be harmed. Counties are going to be cutting the programs that help the neediest, regardless of whether it is 12 billion or 25 billion. Ask the Yolo County supervisors how things are going in their budget process.

  19. [i]”California’s safety net is going to be harmed. Counties are going to be cutting the programs that help the neediest, regardless of whether it is 12 billion or 25 billion. Ask the Yolo County supervisors how things are going in their budget process.”[/i]

    According to the Sacramento Bee–a Democratic newspaper–the problems in Yolo County are in large part due to the fiscal irresponsibility of the Democrats on the Board of Supervisors. The Bee editorial singled out Thomson, Yamada and McGowan: [quote] Budget-strapped Yolo County approved the most generous retirement enhancements of any jurisdiction locally, almost doubling benefits for sheriff’s deputies in 2008 and giving non-safety workers a 25 percent pension boost. And those benefits were approved retroactively, meaning that the new, richer formulas were applied to employees’ prior years worked, not just future years – an extraordinary windfall for those workers near retirement age.

    Three of five Yolo supervisors – Mike McGowan, Mariko Yamada and Helen Thomson – approved the benefits in 2007. Only Duane Chamberlain voted “no” on the enhancements both times, in 2007 and 2008. In that latter year, Yolo County faced a budget crisis that forced them to furlough workers. [/quote] It’s fallacious to think that the problems local governments and the state are now facing are due to revenue shortfalls. The problem has been caused by people like McGowan, Yamada and Thomson (and their equivalents elsewhere) never preparing for an economic downturn and by giving away the store during the bubble years to the unionized employees who funded their campaigns. If these so-called liberals had spent taxpayer money like it was their own, there would be no need to break the backs of the poor. Instead, our liberal legislators up and down the state, desirous of pleasing the unions which paid for their elections, busily gave away insane perks like union bank hours, 14.5 paid holidays for all employees, outrageously expensive medical plans, unaffordable pensions and on and on.

  20. Same old game, the democrats now have control of everything in California and controlled the State House and Senate for the last 14 years but somehow they still want to blame it all on the Republicans.

  21. rusty49: “Same old game, the democrats now have control of everything in California and controlled the State House and Senate for the last 14 years but somehow they still want to blame it all on the Republicans.”

    Amen! When are the Democrats in CA going to step up to the plate, own their own plan, approve it, and take whatever fallout comes from it?

    Don Shor: “If he gets his tax extensions, ‘only’ 12 billion in cuts will be enacted. If he doesn’t, then roughly double those cuts to get to a balanced budget.
    His threat: He will only agree to whatever combination of cuts and taxes will make the numbers balance. He won’t agree to finagle the books via much-maligned ‘gimmicks.'”

    Watch:
    If Brown doesn’t get his tax extensions and “has to” double the cuts – its the Republicans’ and voters’ fault.

    If Brown gets the tax extensions but has to still make cuts – its the Republicans’ fault.

    Either way, Brown will spin it as he and Democrats have singlehandedly somehow “solved” CA’s budget crisis.

    Meanwhile, RDAs will have desolved; cities, counties and schools will not get significant additional funding from the now defunct RDAs; infrastructure for economic development will be nonexistent; the quality of education will not improve in CA; safety net services for the frail and disabled will be nonexistent; but the public safety unions will continue to flourish w fat salaries; and next year’s state budget will be in just a bad a shape as this year’s bc of more layoffs coming…

  22. [i]If Brown doesn’t get his tax extensions and “has to” double the cuts – its the Republicans’ and voters’ fault. [/i]

    If the voters reject the sales tax extensions, then they have chosen deeper cuts. I would like the opportunity to vote on it.

  23. [i]”If the voters reject the sales tax extensions, then they have chosen deeper cuts.”[/i]

    That’s one way to spin it. The alternative is the voters are saying, “We gave you plenty of money and instead of spending it wisely, managing salary and benefit costs and instead of managing wisely how much you inflated the entire cost of government during the bubble, you were irresponsible and profligate and spent yourself into a crisis the moment the bubble burst and therefore there is no good reason to keep giving you more money, not just because you actually have enough, but also because history suggests you folks will misspend any extra dollars you get ahold of, giving most of it to the people who finance your campaigns.”

  24. The voters could have any number of reasons for voting against the tax extensions, including a perception that previous administrations have been fiscally irresponsible. Brown has, IMO, made an effort to demonstrate that — at least with regard to the portion of taxpayer money he is directly responsible for — he is frugal with our dollars. The voters might have other reasons for voting against the tax extensions, ranging from personal financial difficulties, philosophical objections to taxation, or simple cussedness. And some of us might have reasons for voting in favor of them. In any case, I would like the opportunity to vote on it.

  25. Another reason/factor voters might vote against the tax extensions is because they don’t have a calculator. Perhaps they fail to realize or simply dn’t care that two plus two must equal four, i.e. services come with a cost that has to be paid for.

  26. As Warren Buffett who happens to be one of America’s richest citizen so aptly put it during an interview with economist Ben Stein:
    [quote]“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”[/quote]

  27. According to an article in the Bloomberg Businessweek Feb 28-Mar 6 issue, General Electric spent $4.18 million in 2010 lobbying for special corporate tax breaks. The $4 million was considered just the tip of the iceberg because disclosure laws exclude many ways companies can influence policy. All this lobbying has helped GE lower it’s effective tax rate which was a paltry 11.6% for the period of 2005-09, and also included state , local, and foriegn taxes. (GE had $150 billion in revenue for last year.)

    But I guess it’s the PEUs, and their unethical lobbying that is the [u]REAL[/u] problem that is sinking budgets across the land!!

  28. Genentech spent $1.5 million to help defeat Prop 24 in 2010. Had Prop 24 passed and modified corporate tax rates, the state would have $1.3 billion more in 2012, according to the LAO.

  29. 1) Ben Stein an economist? I thought he was a comedian.

    2) What’s wrong with Genentech or GE spending money like you or I on lobbyist and political ads? They’re “persons” afterall. In fact, I think one of their kids goes to school with my 6 year old.

    3)JB, so now you’re Buffet’s therapist?

  30. DTB: [i]Ben Stein an economist? I thought he was a comedian.[/i]

    Also actor (Ferris Bueller’s Day Off), game show host (Win Ben Stein’s Money), and a speech writer for Richard Nixon.

  31. Jeff… I may be very wrong on this, but I heard that corporations can “write off” their ‘business expenses’ which may include lobbying (and therefore are not taxed on those expenditures)… I do know that members of unions (or any employee, for that matter) pay their marginal tax rate on any pay increases, whether the employee is public or private.
    In your world should every employee be paid minimum wage without benefits, unless they can individually convince you they are worth more?

  32. [i]”1) Ben Stein an economist? I thought he was a comedian.”[/i]

    I remember having the same response when I learned about the real Ben Stein. However, after seeing this I am not so much a fan of Ben Stein the economist: [url]http://www.youtube.com/watch?v=RYX1AgEV0vo[/url]

    [i]”3)JB, so now you’re Buffet’s therapist?”[/i]

    Either something is wrong with the blog, or I never wrote anything about buffet? However, yes, I counsel Buffet even when he doesn’t pay me for my time.

    Rich: Buffet has an addition with the game of Bridge like a lot of big wigs that play the market. He is a gambler… just one of the better ones. Read the “House of Cards” book on the collapse of Bear Sterns… all those dudes played bridge too.

  33. hpierce: Corporations cannot write off contributions to lobbying or lawmaking organizations or political groups or candidates for public office. I’m sure some find ways to book some political contributions as advertising expense or other deductable service expense. I’m not 100% sure about the tax rules for this, but I think one way corporations can legally write off some investment in political influence is through trade associations that pay for a lobbyist. These corporations would pay dues and event attendance fees to the trade association that could be written off (I think). However, the lobbyist would be supporting the entire industry and not just a single company.

    [i] In your world should every employee be paid minimum wage without benefits, unless they can individually convince you they are worth more?[/i]

    They do not have to convince me personally unless I am the hiring manager.

    It is really not sinister or mean or difficult. Go to http://www.salary.com and see what you are generally worth in the job market. Add or subtract value based on your own objective and/or subjective assessment of your educations, skills and experience… and then go find someone willing to pay you what you think you are worth.

    I am always more impressed with a candidate that knows his/her value. I ask during the job interview “what do you think you are worth in terms of compensation and why?” I like to do is start the employee at low-mid so he/she has salary growth capacity in his/her job. I want qualified people who are confident enough to prove themselves to me. If the new employee meets or beats the performance expectation, I might bump his/her compensation after 6 months or a year. I would keep doing this as the employee demonstrated commensurate value to me and the organization… up to the point where the compensation would be out of whack with market if it was increased. If the employee feels like I am not paying enough attention to his/her performance and felt deserving of a raise, he/she could come see me about it and make their case. I sometimes, but thankfully rarely, miss recognizing someone that has advanced to a new level of value to the organization. If any employee is unhappy with their compensation, I cannot or will not increase it, they can strive to move on to another role/job or leave for another job at a different company.

    Ironically, given they have much greater job security, I think public sector employees work with a greater feeling of powerlessness over their career and job, and this causes them to demand artificial job security. It also causes them to not understand the difference in the private-sector. It is a very good feeling knowing that you are in demand and not over compensated, so if your boss does not treat you right you can leave and find another equal job.

  34. Rifkin: [i]the Sacramento Bee–a Democratic newspaper[/i]

    Oh c’mon Rich, their editorial pages are usually objective. But (paraphrasing Severaid) ‘objective is NOT neutral’.

  35. Jeff… your last post was well written and informative. I have new respect for you. You point out one of the disadvantages of the public sector (unionized or not) compared to the private sector. On the public side, unless you have a new employee ‘on probation’, it is difficult to either reward very high performing individuals, or to weed out the marginal employee. That is one of the reasons I oppose public employee unions, in general. With unions the tendency is that everyone’s boat has to “float” if anyone’s does.

  36. Ben Stein graduated from Columbia University in 1966 with honors in economics. He graduated from Yale Law School in 1970 as valedictorian of his class by election of his classmates. He also studied in the graduate school of economics at Yale. He has worked as an economist at The Department of Commerce, a poverty lawyer in New Haven and Washington, D.C., a trial lawyer in the field of trade regulation at the Federal Trade Commission in Washington, D.C., a university adjunct at American University in Washington, D.C., at the University of California at Santa Cruz, and at Pepperdine University in Malibu, CA

    In 1973 and 1974, he was a speech writer and lawyer for Richard Nixon at The White House and then for Gerald Ford. He has been a columnist and editorial writer for The Wall Street Journal, a syndicated columnist for The Los Angeles Herald Examiner (R.I.P.) and King Features Syndicate, and a frequent contributor to Barrons, where his articles about the ethics of management buyouts and issues of fraud in the Milken Drexel junk bond scheme drew major national attention. He has been a regular columnist for Los Angeles Magazine, New York Magazine, E! Online, and most of all, has written a lengthy diary for twenty years for The American Spectator.

  37. hpierce: Thanks. Agreed.

    DT: I thought so. But it does surpirse some people when they learn that the guy that said “Bueller, Bueller, Bueller” in his uninspiring drab monotone, is a brilliant economist.

  38. [i]”Rich: Buffet has an addition with the game of Bridge like a lot of big wigs that play the market. He is a gambler… just one of the better ones.”[/i]

    I had a long post about Buffett, but apparently Don Shor removed it from this site. I won’t bother to make my same points, other than to say:

    1. Buffett has never made his living gambling;
    2. Buffett (by way of Berkshire Hathaway) is probably the best “identifier” of his generation, if not all time;
    3. Buffett (again by way of BH) is a manager, perhaps the best of his generation.

    As it happens, I used to be a very serious bridge player. (I gave it up for poker.) Contract bridge is a game of skill*. If you put a lot of money on it, it still is a game of skill. It’s not gambling. People who don’t understand skill card games confuse them with gambling.

    *That is not to say there is not some luck involved in contract bridge. You cannot control how your opponents play their cards; and it is possible in a tournament your opponents will play their cards better or worse against you than the opponents of other teams play those same cards against them. What you need to know about contract bridge is that everyone sitting N-S plays the same exact cards as everyone else siting in those positions; and likewise all teams sitting E-W play the same cards as others sitting E-W.

    Like bridge, poker is a game of skill. (I don’t know if all poker games are based on skill, but the common games like Texas Hold’em and 7-stud are.) But for skill to win out, you have to wash out the luck factor, which is extremely high in the short term, but non-existent in the long run. In other words, if you and I play 25,000 hands of NLHE, we will get essentially the same number of each type of hand possible. If I make a lot more money than you, it is entirely due to my skill at that game. If you make more money than I do over that period, the reverse is true. … As such, it is not a matter of luck that the great players, like a Phil Ivey, win so much money over time. I saw Ivey lose a $1.2 million hand*. He was very unlucky. But over time that guy wins. His lifetime earnings are approaching $100 million.

    *Ivey had A-2 in the pocket; Tom Dwan had 6-7 suited. The flop came A-4-5, producing no flush draws. Dwan bet out his 4-5-6-7; Ivey called with his pair of Aces. The turn was a Queen, which helped no one. Dwan continued with a semi-bluff on his straight draw; and Ivey called behind. The river card came a 3, giving Ivey the wheel, A-2-3-4-5 and Dwan a 7-6-5-4-3 straight. Dwan bet out about 80% of the large pot. Ivey had to think his straight was good or that Dwan had the same A-2 in the pocket for a split. The only hands beating him at that point were 2-6 and 6-7, neither of which seemed very likely. So Ivey raised; and Dwan responded by pushing all in; and Ivey called; and Dwan won the $1.2 million.

    Was that gambling? Yes. But not because poker in the long run is gambling. It’s not. It’s because poker (much like stock investing) is gambling in the short run. If Ivey plays A-2 over 25,000 times, he will make a profit. If he plays it one time, he can get coolered like anyone else.

  39. Don: I received the emails for the posts Rich is referring to. One I posted, and then Rich followed up. However, neither of those posted to the blog. I think there must have been a technical glitch.

  40. It looks to me like someone removed about 5 or 6 posts which were on this blog last night. To make my cogent points about Buffett, I had to go deep into my library to find all of my various Michael E. Porter books.

  41. Missing Comment from me:

    “There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

    Mr. Buffett made his billions gambling, and he is afflicted with massive guilt over it.

    I do agree partially with one left-view… that too many US manufacturing jobs were shipped overseas. CEOs are no different than most people wanting to impress their peers. They are also chronically worried about the dreaded red ink. Not only do losses generally result in their eventual firing, but they are damn embarrassing to a CEO. So, CEOs tend to follow management trends that their competition is using to fight for market share and stay profitable. In this way they are a bit like lemmings. When outsourcing became the rage, they outsourced.

    The part I do not agree with the left on is the impact of union labor on the employment rate. Unions create a situation where labor costs become inflated and inelastic. When a CEO sees a cheaper way to do the job, unions should come to the table with a value proposition that justifies their higher compensation… or they should make concessions in recognition of the market pressures. Instead, they become defensive and dig in their heels. This then makes outsourcing more attractive to the CEO.

    I wish more CEOs were motivated to keep more Americans working for them, and I wish more unions operated at a market value mindset instead of the old solidarity wage extortion method.

  42. Missing Comment from Rich:

    [i]”Mr. Buffett made his billions gambling, and he is afflicted with massive guilt over it.” [/i]

    That is not true. In fact, if he had been a gambler and he did as well as he did, then he would have had to be a Madoff-type criminal, because there is no way you can win as often as Buffett did by simply “gambling.”

    The way Buffett made his money was twofold: 1) identifying bad management; and 2) installing much better management. That’s not in the least bit a gamble.

    Buffett’s holding company has bought out the shares of (mostly) publicly held companies which were selling cheap because he believed (and had very good reason to believe in most cases) that those companies were not run well and if run well would make much better profits. As such, Buffett has been in his active time in the capital markets an unusually good [b]identifier[/b]. (That’s the term Michael E. Porter placed on people like Buffett. There are and have been many others who have been great identifiers. Carl Icahn is a good example. However, no one has been as good at that as Berkshire Hathaway for as long a period and as consistently.)

    Buffett has then changed the managers of the companies he has bought, and using basic tools he has been as good as anyone else at the art of the turnaround.

    In some cases, Berkshire Hathaway has made its profits simply by holding the companies they acquired and running them well. In other cases, Buffett has brought the companies up to value and sold them for a much higher price than he bought them for. And there are also companies which Berkshire never captured a majority of the stock, but used its influence on the Boards of Directors to install new management to raise the stock value. In those third types of cases, BH has often maintained a minority position and used that to influence the Boards of Directors.

    All that said, Buffett has on occassion diverted into commodities purchases. They have never represented a large share of BH’s assets. He once went big on silver, when he thought it was cheap–he was wrong–and then sold his position for a very small gain. But at his peak purchase of silver, it was a tiny percentage of BH’s assets.

    You can argue that commodity trading is gambling, because you really have no control of what happens to the price. However, if you have data which suggests that the price of something is, say, irrationally low and it will reach a higher equilibrium, then you at least can think that the odds are in your favor, unlike, say, playing the ponies at the race track.

    George Soros, who is nearly as rich as Buffett, is much more of a gambler. However, he is betting on things which, based on his data set, tell him in advance he is getting a very good price. Soros mostly is a currency trader, buying notes which he thinks are underpriced and selling those he thinks are priced too high. Because Soros has such a great record of identifying which national currencies are about to collapse and profitting from his ability to identify them, it’s hard to say his long-run profits come from gambling. Rather, it’s more correct to say that his profits come from identifying, basing that on serious research.

  43. Thanks for re-posting my lost post, Jeff.

    I should say one more thing about stock investing, which is probably obvious but bears saying: Most of us, resources aside, could never make money over time investing the way pros like Buffett do it and we should never try. Buffett doesn’t buy the companies he does on a hunch. He has dozens, maybe hundreds of people working for him researching and investigating and analyzing the books and the management techniques of hundreds of companies in a diverse array of businesses. BH uses that information to decide which companies are ripe to buy and to turnaround. Instead of purchasing individual stocks, it makes far more sense for the individual investor to buy a broad-market portfolio (usually through unmanaged mutual funds), so you earn over time a market rate of return. Your goal should not be to find the next Google or to buy Apple low and sell high. Your goal should be to own a broad array of tech stocks, financials, health care companies, transports, retailers, etc, etc. If you dollar-cost-average, you will wash out the luck of trying to time the market.

  44. Rich: I got your point on Bridge. I think there are significant elements of skill in most card games where wagering in involved. Blackjack/21 may be the exception unless you can count cards.

    Maybe gambler is not the most appropriate label for Buffet. There is something in the game of Bridge that seems to match the satisfaction these guys get from playing the investments game.

    I also agree that Buffett plays the game differently than others on Wall Street.

    However, in terms of his politics, I am not so sure he has the full perspective of what free-market capitalism should be about. That was my initial point… people that make their living trading securities are not really producing a product or service… they are feeding off others that do this. Certainly Buffett’s valuation and management intervention of companies, and buying and selling of company equity, has an overall benefit to the market economy. However, it puts him in a king’s position without having been a knight.

    His comment that the wealthy are causing class warfare is an indication that he harbors some disdain for those that have wealth. Maybe it is a bit of self-loathing driving that opinion. However, what is missing from his commentary is any indication that he believes all Americans have the ability and opportunity to earn wealth… and then hear follow up suggests for real solutions for how lower income folk can grow their prosperity. Instead we hear his divisive commentary. Gates, for example, puts his money and commentary into real solutions. Gates built a real company that produced real products and sold them. Buffet did not… he made his wealth exploiting opportunities in the giant card game of stock trading. That contrast better explains my initial point.

  45. FWIW, Gates and Buffett are bridge partners.

    Also, FWIW, there is a computer science professor at UCD named Chip Martel who has won multiple world championships in contract bridge ([url]http://www.cs.ucdavis.edu/~martel/main/[/url]).

  46. Let’s not forget that a good portion of Buffett’s success comes from purchasing stakes at less than the then current market price. He is generally able to negotiate sweetners that the average investor can only dream of, the Goldman Sachs stake is a classic example. That’s one of the unfortunate facets of our financial markets, the players get one price, the general public another. It’s akin to the dealer giving some select card players better odds than all of the other players. But I digress from the general theme of this thread.

  47. Wow. Just watching the NPR meltdown. Maybe they should go private and merge with the Huffington Post/AOL.

    It seems this is the new game… actors getting damaging quotes from political operatives like Governor Walker and NPR. Now we need someone to disguise themselves as a teleprompter or golf bag and catch Obama quoting Marx. Sorry, I couldn’t resist…

    On the serious side though… how can we trust media when even the keepers of Big Bird cannot keep their ideological bias stored away from their journalistic integrity?

    Looks like NPR will kiss away their hundred of millions in government funding. Maybe they can become the new Fox News of the left!

  48. [i]how can we trust media when even the keepers of Big Bird cannot keep their ideological bias stored away from their journalistic integrity?[/i]

    NPR is not the “keeper of Big Bird”, and in fact has nothing to do with Big Bird.

  49. Private consultants cost Wisconsin more than public employees

    [url]http://www.thedailypage.com/daily/article.php?article=32675&sid=7b9771dbcbfed6739ec5e114a9f1cd89[/url]

    This reminds me of the troubling stories of Defense Department outsourcing in the Iraq War — Haliburton, Blackwater, etc.

  50. [i]Maybe they can become the new Fox News of the left![/i]

    NPR makes far more effort to be objective and neutral (following the philosophy, “We report, you decide”) than does Fox News.

  51. JB.

    ” what is missing from his commentary is any indication that he believes that all Americans have the ability and opportunity to earn wealth”.
    Perhaps the indication is missing because he knows that it is not true.

    In 1984, I was an intern in an ICU unit in Fresno when an 18 year old girl was brought in comatose from the field where she had been working in the fields without access to water or shade. She never regained consciousness and died three days later of multiple organ failure. According to her younger sisters she wanted to go to college but was working the summer to help support her younger siblings. She was an American citizen. It would seem that the owners and supervisors of the fields felt that it would detract too much from their bottom line to provide water and shade since after all, there were many others who would be ” happy to get the work”.
    An isolated case? Hardly. Every year there is serious injury or death in the central valley fields because peoples’ lives are felt expendable for the profit to be made. Latest case of which I am aware, 2008, Maria Isavel Vasquez Jimenez. Penalty for the farm supervisors who knowingly
    Failed to follow safety regulations ? Probation, community service and a $ 370.00 fine. So, no JB, I am aware from direct experience that not everyone has the ability and opportunity to succeed in this country. Some die trying. The ” market place “does provide opportunity for many, but it does have a very dark underside and I would certainly consider death by indifference or negligence a much more sinister form of the “class warfare” you frequently site than verbal disparaging of the wealthy. I see many posts about protecting the lifestyle and future of our children. I am wondering who will stand for the protection of the children who are already at risk when we have thoroughly decimated the social safety net for the most vulnerable of our society.

  52. “NPR makes far more effort to be objective and neutral (following the philosophy, “We report, you decide”) than does Fox News.”

    wdf1, that’s not much of a standard for objective and neutral reporting. What makes you think Fox News is making any effort at all to be objective and neutral?

  53. [i]What makes you think Fox News is making any effort at all to be objective and neutral?[/i]

    Apart from prominantly claiming “we report, you decide”, I don’t think they are.

    FOX NEWS INSIDER: “Stuff Is Just Made Up”

    [url]http://www.readersupportednews.org/off-site-opinion-section/71-71/4921-fox-news-insider-qstuff-is-just-made-upq[/url]

  54. [i]”Private consultants cost Wisconsin more than public employees”[/i]

    It must be frustrating to have all those high cost union employees and still have to hire private contractors to get anything done.

    I find NPR’s bias much more troubling than the bias coming from Fox News. Fox’s “We Report and You Decide” tagline, their format and their hosts are part of an obvious design to appeal to a more conservative audience. There is no argument from Fox that this is the case.

    NPR however delivers the worst type of bias because it is delivered under the guise of being intellectually and morally superior.

    I like some of NPR, but my ideology-radar is constantly lit up on the left side when I listen. It is the stories they chose, the tone, the plot and the style of the reporting that gives them away. If you are biased, at least be honest about it. Juan Williams agrees.

  55. medwoman: you provide a heartfelt story of one girl and no statistics to convince me the problems you cite are anything more than one girl. I can be sad for the circumstances of this one girl without letting my bleeding heart overreact with new regulations to punish the majority of good operators.

    But I COMPLETELY disagree with your premise that abundant opportunities do not exist and so we need to take care of people to save them from circumstances you feel are not up to some standard. This girl could work and save money, she could attend inexpensive community college classes. She could get financial aid to transfer to a four year school. She could get progressively better jobs if she gained skills and experience working after she graduated. She could start her own business. She died tragically not because of the lack of these opportunities, but because she didn’t have the knowledge, sense or self confidence to tell her employer she was entitled to water and breaks by law.

    You want to blame some institution for this… then blame her parents or her public schools for failing to teach her the rights of a farm worker.

    Your mindset is completely at odds with billions of people that want to migrate to this country. They want the same opportunities that you seem to take for granted or do not value.

  56. JB

    No, you misunderstand my position.
    1)First, not one girl, two, separated in time by over 20 years to illustrate that the conditions these workers face persist despite the existence of
    Regulations that are well known to valley farmers. They were known when I was there, in the early ’80″s and they are known now. Some
    growers just find it more convenient not to comply.
    2) no, I am not blaming the institution. I am blaming an individual,just as you are. Just a different individual. I put the responsibility for providing
    Adequate resources to perform a job on the employer. It has long been established in the valley that employers have the responsibility to
    Provide water and shade for their workers. In the 2008 case, the supervisors involved were aware that they were not in compliance.
    I find this to be nothing short of callous disregard for the well being of their workers.
    3) no where in my post did I suggest I felt new regulations were called for. And you will also note that my post says nothing about punishment.
    4) My premise was not ” that abundant opportunities” do not exist. IAs stated in my post ” the market place does provide opportunities for
    many” . The market place was providing an opportunity for this girl, I am not demonizing the “market place” but rather the greed of the
    individuals who knowingly put their workers at risk.
    5) If you have never participated in field work, perhaps you do not know what happens to field workers who question their working conditions.
    They lose their jobs. Unless unionized, they lose the job. No assessment of productivity, no job review, no due process. Just don’t come
    back tomorrow.
    6) Again we are in agreement about one point, and that is individual responsibility. You seem to feel that the individual should be responsible
    For enforcing their working conditions, while I feel that compliance with the provision of a safe working environment is the responsibility of
    the employer. In the case of field workers ( and yes, I have been one) the playing field is so distorted in favor of the employer, who usually
    can get away with dismissal without cause as to make the workers right to ask for her “entitlements” meaningless.
    7) these girls were attempting to do exactly what you said, working for money. What you do not appear to understand is that they were working
    Subsistence jobs so that they and their families could eat. Community colleges are not “inexpensive” if it takes all you earn to feed and
    house your family.
    8) I doubt that my mindset is at odds with anyone who desires the opportunities available in this country. I think those same billions would probably agree with me that in order to take advantage of those opportunities, you have to be first able to feed yourself and have working conditions that do not turn out to be fatal.

    You asked me about my background in a previous post,specifically about whether I had belonged to a union. So,I will make an inquiry in return. Did you ever have the experience of having a parent have to hunt after their 40 hour work week in order to feed their family?
    Have you ever worked in fruit picking to supplement your parents income? Have you worked two jobs and gone to school at the same time in order to take advantage of the opportunities presented? If so, then we have have had similar experiences and come to different conclusions.
    If not, then I believe I have been exposed to two sides of a system of which you seem to be aware of only the strengths but not the weaknesses. I believe that both exist.

    7) My mindset, which you perhaps have misinterpreted, is not against opportunity which I know exists from direct experience. What I also know
    from direct experience, is that not all employers are the fair, compliant

  57. To all.
    Sorry about the difficult to read post. My skills with my keyboard don’t match those with my scalpel.
    JB probably won’t hire me, but that’s ok.

  58. I agree DT, it’s some of the best journalism around. I especially like their investigative reporting wing that has done some really good work including discovered that the forensic pathologist that Yolo used was not qualified to do autopsies.

  59. “FOX NEWS INSIDER: “Stuff Is Just Made Up” “

    What a joke of an article, first of all it’s from Media Matters which is as far left and unfair as you can get, secondly they never name their source. I wouldn’t be surprised if it was totally made up.

  60. The difference between Fox and NPR is Fox leans right but doesn’t get gov’t funding. Now on the other hand NPR tries to portray itself as neutral but any fair minded person knows they lean left, National Palestinian Radio ha ha, but they take federal money under the guise of being fair. Their federal funds must be taken away.

  61. JB: “His comment that the wealthy are causing class warfare is an indication that he harbors some disdain for those that have wealth. Maybe it is a bit of self-loathing driving that opinion. However, what is missing from his commentary is any indication that he believes all Americans have the ability and opportunity to earn wealth… and then hear follow up suggests for real solutions for how lower income folk can grow their prosperity. Instead we hear his divisive commentary. Gates, for example, puts his money and commentary into real solutions. Gates built a real company that produced real products and sold them. Buffet did not… he made his wealth exploiting opportunities in the giant card game of stock trading. That contrast better explains my initial point.”

    This is sort of my problem w Buffett. He has all sorts of advantages the rest of us do not; yet inserts himself into the politcal scene as if he is some financial/political guru; but offers nothing in the way of solutions to encourage people on how to achieve the American dream of a decent job at a decent wage, home ownership, and freedom from too much gov’t intervention.

    Inre NPR. I am not a particular fan of NPR, and do not think they should be getting any public funding. That said, I do not like the “gotcha” politics that is going on. I actually think what was said by NPR CEO Shiller (the man) was said “in private”. People are entitled to their bigotted private opinions, even CEOs of companies. The bigger fault w NPR was Shiller (I think that is the correct name – and I am referring to the woman) was her firing of Juan Williams for his statement about his personal feelings. Just too much “gotcha” politics going on, making everyone afraid to say anything to anyone – so you never get at the truth…

  62. [i]What a joke of an article, first of all it’s from Media Matters which is as far left and unfair as you can get, secondly they never name their source.[/i]

    A valid point that the claim isn’t very strong if we can’t identify the source. But if Fox News/News Corp. requires non-disclosure agreements, then this might be the best we get.

  63. Elaine: I agree that there is too much gotcha politics going on.

    However, NPR receives only $3 million or so in direct federal money, and they receive another $60 million or so indirectly through the Corporation for Public Broadcasting. In total, that is about 41% of their entire operating budget. If we the people are paying for 41% of any organization, then that organization better damn well stay politically neutral. And this bit about “private opinion” is bunk if you are an executive leader. Every C-suite leader has to watch what he/she says in all circumstances because words can help or hurt their organization and stockholders. In this case the conversation was actually about the business of NPR, so this wasn’t just idle chit chat with beer drinkin’ buddies.

  64. Jeff,

    In addition to what you said the two NPR executives were saying all these things in a meeting with who they thought were two representitves from the Muslim Brotherhood. The one exec laughed at the reference to NPR standing for National Palestinian Radio. I understand that exec is now on leave. Like you stated, not just idle chit chat, it said a whole lot about what NPR now is.

  65. “A valid point that the claim isn’t very strong if we can’t identify the source. But if Fox News/News Corp. requires non-disclosure agreements, then this might be the best we get.”

    Also it’s a valid copout for Media Matters to use to just make up lies.

  66. [i]Also it’s a valid copout for Media Matters to use to just make up lies.[/i]

    Then could you point out where Media Matters has verifiably lied?

  67. “Then could you point out where Media Matters has verifiably lied?”

    That’s my point, when you don’t name a source there isn’t anyone to disclaim a statement so who knows for sure whether there was ever a source or not.

  68. To Jeff Boone and Rusty49: Notice I said NPR should NOT be receiving public funding. If they do not receive public funding, they are free to have any views they want!

  69. Elaine: You Becha. NPR can sell their brand and product, and pay their taxes, and then earn the right to be the mouthpiece for the left. We the people should not pay for any media organization in my opinion.

  70. [i]To Jeff Boone and Rusty49: Notice I said NPR should NOT be receiving public funding. If they do not receive public funding, they are free to have any views they want![/i]

    Typical analyses have said that NPR would mostly do okay in large markets without federal funds. A number of more rural stations would have to shut down. The problem is that those stations are often the only (or one of the few) that are capable of doing local reporting in the event of natural disasters – fire, floods, earthquakes, tsunamis.

  71. So there’s more to the story. Apparently the NPR video was edited in less than honest ways.

    [url]http://finance.yahoo.com/news/Analysts-NPR-Video-edit-of-apf-1098666649.html?x=0&.v=1[/url]

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