The New Normal is Not a Pretty Picture

I recently blogged that it was time to repeal Prop. 13 in California. I cherish the replies I receive from readers and one such reply encouraged me to expand on my position. Here is the original reply: “Instead of charging those of us who own commercial property more in taxes so schools can better educate our children, why don't you use the funds ALREADY voted on for schools and education... What a stupid idea... REMEMBER THE STATE LOTTERY WAS GOING TO DO THIS... Punish the business owners and property owners who are generating jobs and revenue in California by repealing Proposition 13? NON-SENSE...”

Reader, you have a good point. First, let me dispense with the notion that Prop. 13 funds were expected to replace property tax revenues as a source of funding for public education. That never was the goal. Instead, the funds have been used largely to supplement the high-cost technology needs of educational institutions to train future graduates in the technological skills needed to compete for jobs in an increasingly globalized economy. The amount we have have received over the years is a small drop in the bucket.

I, too, am a property owner and pay real estate taxes. I do believe California property owners have escaped for a long time the property tax increases that occur in virtually every other state as the appraised values of homes go up over a period of time. Out of fairness, we could end Prop. 13 as of a future date and even grandfather in property owners like you and me so that the rules don't change in the middle of the game. Such a policy might even spur a housing recovery in the depressed California real estate market as future home owners act now to fall under the current, restricted system of calculating property tax payments. We make these kinds of choices all the time and raising the retirement age to receive social security benefits is another example of how it can be phased in. So, my suggestion is that any Californian who buys property say as of January 1, 2012 would be subject to the post-Prop. 13-system. It would be a fair way of making the change in property tax philosophy and potentially raise a large amount of tax revenue for the state as property values (hopefully) recover. On the one hand, I don't like eliminating Prop. 13 because I know it's the incompetence of state legislators and their proliferate spending habits that have gotten us into the mess we are in. On the other hand, California, as in so many other areas, is a symbol of the new normal in US economics.

We have an aging, healthier population that will require economic support for a longer period of time thereby costing all of us more money. Remember that we, too, will be in that category one day. Unfortunately, we also have the double barrel effect of a new normal in the unemployment rate that will probably hover around 7-8% when all is said and done, about three percentage points higher than historical trends. The long-term unemployed will eventually run out of time to receive benefits thereby increasing the rolls of those dependent on welfare and other forms of state support. We also will experience increased displacement from the job market for high school and even college graduates who do not have the skills and/or desire to work hard to develop the abilities needed to be productive members of our new, increasingly globalized society. Our woeful education achievement scores when matched against other countries bears this out. We typically rank in the mid-20s in math and technical skill levels when compared to other industrialized countries.

The final issue is the outsourcing of jobs overseas. There is no doubt that millions of jobs that could have been filled by Americans here at home have gone to foreigners. This is a complicated problem and one that is, for the most part, driven by two factors. The first is the obvious -- cost savings. US companies save billions in lower labor costs and pay no health or retirement benefits to workers outside the US who perform the same services that our own citizens can perform. The second factor relates to the biggest challenge we now have as a society, which is the declining work ethic in this country. I have previously blogged about this issue. I've been teaching at the university level for almost 30 years and have witnessed a remarkable change in the culture of learning in today's college students. Most rather text, tweet, update their facebook page, or play around with other technology rather than put in the time to learn in a sustainable way. They are good at memorizing but retain little. They are good at arguing with teachers for a higher grade but do not realize they are developing habits that can hurt them in the workplace if they were to transfer those habits to job performance interviews. The desire to be visible to their peers -- to stand out from the crowd -- has driven the fifteen minutes of fame culture that infects all of society.

It's not a pretty picture but it is where we are after years of ignoring the real problem which is that a we live in a world where ethical behavior and doing good for its own sake has been replaced by egoism and self-gratification. I don't have the answers but I do know a recovery starts, like any other addiction, by first admitting we have a problem. Unfortunately, all too many in society don't see it that way in part because we no longer are tuned in to our ethical side. That inner voice called a conscience that once guided our behavior has long since been muted. Few, if any of us, make decisions on behavior only after considering the consequences of our actions on others including loved ones, those who are directly affected by our actions, society in general, and even our own best, long-term interests. Add to it today's popular cultural icon of celebrity and you have a recipe for disaster -- a sort of a tsunami effect that has engulfed what once was a nation of strong core ethical values that guided our behavior and sustained as the most admirable country in the world.

 Blog by Steven Mintz, aka Ethics Sage, May 20, 2011