We all know that political campaigns are not geared for dispensing accurate information, and yet the union claims that Wendy Greuel would raise wages to $15 an hour if elected were breathtaking in their audaciousness - not to mention their inaccuracy. What the $15 refers to is a very specific effort to raise the so-called living wage of unionized hotel workers near LAX from the current $12. The regular minimum wage of $8 an hour is not changing. My question is why not. The low-wage world is a world of haves and have-nots. Those workers lucky enough to earn the "living wage" of nearly $12 an hour are pulling in several thousand dollars a year more than those getting only $8. As I point out in this week's Business Update on KPCC, that $4 difference is serious money for many families. That's why wage inequality at the low end of the income scale is arguably a more compelling issue than the rich-poor disparities we often read about. Some businesses can afford 12 bucks an hour; others can't. But in most cases, an $8 minimum is scandalous. Also this week is a look at why so much of the immigration issue is really about economics.
Steve Julian: We've talked a lot about pending immigration legislation in Washington, but if those laws are changed what might that mean for the Southern California economy. Business analyst Mark Lacter, what do you think?
Mark Lacter: Don't expect too many changes in the short run, Steve, and that might be just as well, given the dynamics of Southern California. Look, it's well established that having such a large population of undocumented immigrants helps the L.A.-area economy big time, in that it provides a large labor pool willing to accept low-paying jobs that most other workers just don't want to do.
Julian: Picking fruits and vegetables, working in restaurant kitchens -
Lacter: - or as construction workers who get hired by the day. You reported on a USC study that estimates 2.6 million people are in California illegally - about 900,000 of those folks live in L.A. County. Many of these people have been in the country for at least 10 years, and they represent some of the biggest economic success stories - even without an easy path to citizenship. (By the way, six out of 10 undocumented immigrants in L.A. County have full-time jobs, which is only slightly lower than the percentage of U.S.-born workers.) The reality is that without this workforce, the economy would be upended - low-paid jobs would go begging, and wage levels would increase, perhaps by a lot. The more relevant question is how the reform proposals might affect future migration patterns.
Julian: Naturally, most people entering the U.S. (whether legally or illegally) are looking to make better money and enjoy a better quality of than wherever it is they're coming from.
Lacter: And a few years ago during the recession, the number of immigrants coming in from Mexico and other parts of Latin America nose-dived because there were so few jobs here. Recently, the pattern began to shift because more work is becoming available. No amount of border security is going to totally end that back-and-forth pattern - and even though there are plenty of reasons for wanting to become a U.S. citizen, it only makes a difference if the economic opportunities open up. And. we're not just talking about an opportunity to be a dish washer. We're talking about the chance to buy a house, to have your kids go to college - opportunities that only happen if the job market is a lot more robust than it is right now.
Delays, cost overruns, inconvenience - it's all on tap, thanks to the boneheaded notion that a subway extension to Westwood (not the beach) is the answer to our transit woes. Look at what's happening with SF's Central Subway project. Any large public works project is bound to cause trouble, but underground rail is an especially dubious enterprise. If you think the 405 widening is a disaster, just wait until major Westside boulevards are ripped up. From the WSJ:
Proponents have said it would be a boon for residents of congested Chinatown while opponents say the subway is poorly planned and the money would be better spent on more cost-efficient transportation projects. Cost remains one of the biggest issues. The $1.6 billion price tag is far above a $647 million estimate from 2001. Last month, the low bid to build the stations and tracks came in $90 million to $120 million higher than the MTA's estimate. At the same time, concerns emerged that a complicated plan to pull tunnel-boring machines out of the ground in North Beach could cost more than anticipated. It isn't unusual for large public works projects to go over budget. An oft-cited 2003 study by Oxford University professor Bent Flyvbjerg found that on average, rail projects went over budget by 45%, with bridge and tunnels over by 34%. And a 2009 Federal Transit Administration risk assessment calculated that the Central Subway had a 30% chance of coming in within the $1.6 billion budget.
Projects worth pursing already have an infrastructure of some sort, as with the Expo Line (already a success story) or the fledgling toll road effort on the 10 and 110 freeways. Rule of thumb: Stuff that you can accomplish in a few years as opposed to a few decades is probably a better bet. From Baruch Feigenbaum, a transportation policy analyst at Reason Foundation (via the Daily News):
Atlanta, Miami, Minneapolis, Northern Virginia, San Diego and Seattle have all converted car-pool lanes to toll lanes in recent years. And as drivers learned how to get the most value out of the lanes and save the most time, the lanes grew in popularity. Atlanta converted car-pool lanes to toll lanes last year and had a rough start. But since October 2011, the number of toll lane trips has grown 270 percent, from 160,000 to 440,000 trips as of March 2013. In Minneapolis, where car-pool lanes were converted to toll lanes in 2005, 76 percent of the public is satisfied with the toll lanes and 85 percent are satisfied with the traffic speed. On San Diego's Interstate 15 Express Lanes, similar to the 110 project, the number of vehicles in toll lanes increased 143 percent while travel times decreased by 20 minutes. Travel times also decreased slightly - by one to two minutes - in the general lanes.
Forget about what you've been reading the last few days. The prevailing narrative about Democratic-leaning tax investigators going after the Tea Party and other right-wing groups is not quite what's going on. The real, more intricate story is that political groups have been trying to claim a special tax status that would allow their donor pool to be kept secret - a status that they shouldn't be entitled to. The IRS's biggest sin is not that it went after these groups, but that it didn't do more, especially with the bigger political players. President Obama has been sucker-punched once again. LAT columnist Mike Hiltzik explains:
The organizations at issue are known as 501(c)4 groups (call them C4s for short) after the section of the tax code that applies to them. They're nonprofit "social welfare" organizations that by law must be devoted primarily to programs broadly serving their communities, not private groups. IRS forms reveal what the agency considers to be mainstream C4s: religious groups; cultural, educational and veterans organizations, homeowners associations, volunteer fire departments. In recent years, however, overtly political groups have been claiming C4 status, which allows them to keep their donor lists secret and to avoid paying taxes on certain income. Our lunatic campaign finance system is what turned the typical C4 from a volunteer fire department into a conduit of anonymous political cash. Big donors were given the green light to spend freely on elections by the Supreme Court's 2010 Citizens United decision. That wasn't good enough for some; they wanted to distribute their largess secretly.
Here's another myth: That only right-wing groups were targeted for extra scrutiny. In fact, they represented just a third of the 300 or so applications selected - too wide a net for what the tax agency was looking for. So the screen was adjusted to capture "political action type organizations involved in limiting/expanding government, educating on the constitution and bill of rights, [and] social economic reform/movement," according to the Inspector General's report that's been used to fuel the firestorm. More from Hiltzik:
Remember the mysterious $11-million donation to the campaign for California's anti-union Proposition 32 last November? When the state Fair Political Practices Commission punctured its anonymity, it found not one, but two 501(c)4 organizations behind it. The FPPC, which is still investigating, has already called this a case of "campaign money laundering." As of September last year, the center found, some $254 million, or 20%, of all outside spending came through C4s. The biggest C4 in the electoral arena was Crossroads GPS, an affiliate of American Crossroads, a campaign organization founded by Rove. The Obama camp's C4 was known as Priorities USA. The IRS was swamped by the wave. The number of groups seeking C4 status from the agency rose from 1,500 in 2010 to 3,400 last year. Meanwhile, the agency was being pulled in two directions. In February last year, seven Democratic senators complained that the IRS was too "permissive" with its rules, which judged a C4 not to be engaged "primarily" in electioneering as long as no more than 49% of its spending went to such activities. In August, 10 GOP senators warned the agency to deep-six any efforts to tighten the rules on C4s.
New Yorker writer Jeff Toobin is on a similar track:
It is certainly true that the I.R.S., and every other part of the government, should be evenhanded in how it applies the law, regarding liberal and conservative groups alike. If left-leaning organizations were disguising their true purposes to obtain 501(c)(4) status, the I.R.S. should have turned them down, too. And there will also be questions about how the Service, which is an independent agency, answered questions from Congress. But let's be clear on the real scandal here. The columnist Michael Kinsley has often observed that the scandal isn't what's illegal--it's what's legal. It's what society chooses not to punish that tells us most about the prevailing ethical standards of the time. Campaign finance operates by shaky, or even nonexistent, rules, and powerful players game the system with impunity. A handful of I.R.S. employees saw this and tried, in a small way, to impose some small sense of order. For that, they'll likely be ushered into bureaucratic oblivion.
Unfortunately, the parallel universe story - that Tea Party groups became the victims of a Washington witch hunt - is already out of the barn, and it's an easier story for much of the media to wrap their arms around. It just doesn't happen to be true.
That's a trick question, folks. When politicians have money to burn - as in next year's state budget surplus - the temptation is to resume spending the old-fashioned way: Recklessly and irrationally. But in laying out the latest budget plan. Gov. Brown is sticking to his old penny-pinching self. Matter of fact, he's proposing $1.3 billion less in general fund spending than what was first laid out in January. That means no new funding for most of the social service programs that took big cuts in previous budget years. "The money is not there," Brown said. "Anyone who thinks there is spare change around has not read the budget." If the governor has his way, much of the money will go to schools in poor communities. While the surplus is now running at about $4.5 billion, budget officials expect that number to drop to $2.8 billion by the end of June. Even so, Brown faces considerable pushback in the Democratic-controlled legislature, where lawmakers are looking to restore a wide array of safety-net programs. The sensible answer is to reexamine those programs to see how they could be run more efficiently (i.e. cheaper). But that takes time and would put too many noses out of joint. What's the political upside in doing that? From the LAT:
In announcing the revised blueprint, the governor focused on school funding, a central part of his plan. He wants to send more money to districts that serve large numbers of poor students and non-native English speakers than to wealthier areas, while giving all of them more flexibility in how they spend state dollars. "I think it's fair. I think it's just," Brown said. "I think it has great moral force." The governor's January plan, containing many of the same elements, stirred controversy immediately. But Brown has budged in only a few areas. For example, he still wants to make counties pay more for social welfare services, but he now says that change can be phased in over several years. And he will keep pushing to tie new state funding for universities to certain performance benchmarks, but he dropped a proposal to increase tuition for students who take excessive courses.
Prices were the big story, with the April median price in Southern California jumping to $357,000, according to Dataquick, up 23.1 percent from a year earlier (L.A. County's median of $395,000 rose 27.4 percent from April 2012). Since last August, Socal prices have risen by double-digit percentages, although last month's median was still well below the peak of $505,000 in 2007. Nearly 30 percent of all sales went for more than $500,000, the highest since April 2008. It's still a case of too many buyers going after too few homes; properties that are priced right routinely receive multiple offers that are often well beyond asking. Many of those offers are all cash, which has created problems for potential buyers needing to finance. April home sales were also up from a year earlier. From press release:
"This is a market that is still re-balancing. Sales of deeply discounted properties in affordable neighborhoods are way down. Activity in middle and high-end communities is on its way up. Now it's catch-up time, with a healthier economy spurring more demand and rising prices tempting more people to put their homes up for sale," said John Walsh, DataQuick president.
APRIL HOME SALES (% change from April 2012)
Los Angeles 7,140 +9.7%
Orange 3,327 +13.9%
Riverside 3,760 +8.1%
San Bernardino 2,512 +9.6%
Ventura 884 +10.0%
APRIL MEDIAN PRICE (% change from April 2012)
Los Angeles $395,000 +27.4%
Orange $535,000 +27.4%
Riverside $248,000 +24.0%
San Bernardino $195,000 +24.8%
Ventura $420,000 +16.7%
Source: DataQuick, DQNews.com
The Vernon-based jeans maker, which has been talking about a possible sale since last fall, will be acquired by the private equity firm TowerBrook Capital Partners. Purchase price works out to $32 a share, which is a lukewarm 8.7 percent above True Religion's closing price on Thursday. Then again, the company has lost some of its shine from earlier years, what with operating margins narrowing to 16.7 percent last year from 33.2 percent in 2005. Still, the brand remains well known and so acquiring the company at a relatively cheap price might make sense. TowerBrook has a diverse portfolio that includes Rave Holdings, the movie theater chain, and the St. Louis Blues hockey franchise. From DealBook:
True Religion, which, like many of its competitors is based in Southern California, was among the fastest growing of these brands, fueling the demand for the perfect pair of frayed, ripped, or faded jeans. It justifies its premium prices by using high-quality denim and having workers hand finish the pants with unique stitching or patterns. The company was started in 2002 by Jeffrey Lubell, who as a teenager growing up in New York would bleach bell-bottoms and embellish his favorite pairs of jeans with leather and denim patches, according to its Web site. He says of the company's name: "There's only one real religion and that's people. And all the people in the world wear jeans."
Even by L.A. standards, this one is a jaw-dropper. With four bedrooms, eight bathrooms, and stunning views of pretty much everything, the 15th floor property is part of the 143-unit W Hollywood residences complex (other units range from a measly $800,000 to $3 million). Only two-thirds of the units have sold, which tells you that the condo-on-top-of-luxury-hotel craze hasn't been a huge hit with buyers. The $45 million penthouse seems like an especially tough sell. As reported by the WSJ:
It includes a ballroom that can fit 250 people, a wine room and wine vault, a screening room with LCD projection, a solarium, a gallery and a pub-style tap room. The nearly 4,000-square-foot master suite has a fireplace, entry foyer and oversize walk-in closet and dressing room designed to look like a Ralph Lauren store, says Richard Robertson III, the apartment's architect. The unit also includes a fitness center with an attached beauty parlor, a library, 17 valet parking spaces and a reception area with separate women's and men's powder rooms.
Maybe it's an outlier, maybe it just reflects a race that always seemed closer than what several of the polls indicated. The latest survey by the Pat Brown Institute of Public Affairs shows Controller Wendy Greuel with 46 percent of likely voters, Councilman Eric Garcetti with 45 percent, and nine percent undecided. Less than three weeks ago an LAT-USC poll had Garcetti up by 10 points. Raphael Sonenshein, executive director of the Pat Brown Institute, tells the LAT that the expected low voter turnout "makes the election volatile and hard to predict." Public polling has been sparse and that might help explain the divergent numbers. No doubt TV ads could be critical in the final days - Service Employees Local 721 is out with a spot that urges voters to make history by voting for Greuel. The ad will run for the next 10 days.