CFC White Paper: California’s Great Recession and the Costs of War

by Zack Kaldveer, Consumer Federation of California

California is on life support. Families are reeling from the most severe economic downturn since the Great Depression. The state’s social safety net – and the life sustaining services it provides – is needed now more than ever. Due to massive and ongoing budget deficits, rather than strengthening programs that are in such high demand ‘ from health care to education to assistance to the poor ‘ we are dismantling them.  

To adequately and humanely address the economic pain felt by too many Californians and prevent the recession from deepening, new revenues are desperately needed. One proposal that hasn’t received deserved attention, but critical to our long-term economic health, is ending the War in Afghanistan and bringing the troops, and the billions in military funding, home. (Click here to read shorter version of the ‘White Paper’ at the California Progress Report and watch the accompanying short film by Brave New Films – CFC’s partner on this project – at the end of this article, as well as the interview of CFC’s Zack Kaldveer by Nicole Sandler).

An Economy on Life Support  

The depth of the crisis faced by California screams out from the cold hard data. Over one in five Californians are unemployed, underemployed, or have simply given up searching for work. Nearly another one in five now lives in poverty.  

Low-income workers fortunate enough to have a job have seen their wages decline since 2006 ‘ with middle income worker salaries remaining stagnant. Adjusted for inflation, median household incomes fell by more than $2,000 between 2006 and 2008.  

8.2 million Californians – up from 6.4 million in 2007 – lack health coverage. That’s 1 in 4 living one hospital trip away from bankruptcy. For those with insurance, premiums continue to rise at three times that of inflation, recently punctuated by Anthem Blue Cross’s plan to hike rates by another 39 percent.

Doors will slam shut this year on as many as 35,000 applicants to the California State University system. UC Regents previously cut 2009 freshman enrollments by ten percent. Both university systems approved 20% tuition and fee hikes since the start of 2009 ‘ and UC Regents has just approved an additional 30% hike this year – ending too many students dreams of a higher education, and burdening too many more with high interest debt.

The news for educators is no better. More than 23,000 teachers recently received ‘pink slips’, unlikely to return to the classroom next fall.

California’s foreclosure crisis continues unabated. Over three-quarters of a million families were ousted from their homes in 2008 and 2009. The Center for Responsible Lending projects another 2 million foreclosures through 2012 – with nearby homes losing an average of over $50,000 in value.

California accounts for more than 30 percent of the nation’s Alt- A loans (e.g. predatory mortgages that don’t qualify as subprime) originated between 2000 and 2007. According to First American CoreLogic, a Santa Ana real estate data firm, 2.4 million California borrowers – 35 percent of all properties with a mortgage – are currently under water (e.g. owe more on their home than it’s currently worth). DeutscheBank estimates that by 2011, that number will increase to nearly 70 percent of California homeowners.

Slashing Services When They’re Needed Most

To avoid economic catastrophe, California families are depending on the state’s social safety net and core public programs in increasing numbers and need.

According to the California Budget Project, state residents receiving food stamps have increased by one million since 2007, a 43 percent increase; between May 2007 and May 2009, 471,000 Californians enrolled in Medi-Cal (e.g. which provides low income people with affordable health coverage) – a 7.2% increase; and the number of low income children enrolled in the Healthy Families Program increased by approximately 97,000 between July 2007 and July 2009.

Now, the worst of all worlds is being realized: Ongoing budget shortfalls are leading to draconian cuts to the same services that have functioned as a lifeline for millions and prevented a more pronounced economic collapse.

California currently faces a $19.9 billion budget deficit. In response to last year’s $59.5 billion shortfall the state enacted deep cuts in spending on core social programs and temporary tax increases ‘ evidenced by an $18 billion reduction in spending this year compared to just two years ago (a decrease of 18 percent). The public school system, higher education, health and human services, In-Home State Services (IHSS) for seniors and the disabled, and the lives of millions of Californians have been adversely affected.

While no final budget agreement has been reached this year, Governor Schwarzenegger’s proposed spending cuts are nonetheless instructive in understanding the severity of our current crisis.

The Governor has proposed cutting education by another $2.5 billion – equating to $2,500 per year less for every California student; state employee compensation by $1.6 billion; corrections spending by $1.2 billion; health coverage programs by $1.2 billion; in-home services by $1 billion; $792 million in health and human services programs; and another $4.8 billion in ‘alternative funding’ and other reductions.

But if California doesn’t receive the $6.9 billion in federal funds owed our state ‘ which both our US Senators have said is not likely to happen – the Governor’s proposal calls for a trigger of an additional $4.5 billion of cuts, $3.5 billion of which are in health and human services.

The human devastation wrought by such a budget would be grim and sobering.

The Legislative Analyst’s Office estimates that when these additional reductions are included:

  • California’s welfare-to-work program (CalWORKS) ‘ which provides assistance to our state’s poorest citizens ‘ would be eliminated;
  • health coverage benefits for lower income Californians would be deeply cut and the number eligible for Medi-Cal reduced;
  • the IHSS program would be eliminated and 87 percent of the seniors and disabled currently enrolled would suffer deep reductions in care ‘ many of whom are incapable of performing even the most basic of daily tasks on their own; health coverage for all 880,000 lower income children would be eliminated (e.g. Healthy Families Program);
  • K-14 education would be slashed – resulting in overcrowded classrooms, fewer teachers and tens of thousands of additional youths denied college entrance and job training programs;
  • and hundreds of adult day healthcare centers would be closed down – eliminating services to 37,000 people ‘ many who suffer from diabetes, brain injuries, dementia and other chronic conditions.

The Urgent Demand for New Revenues

The status quo ‘ and the failed policies that it has engendered ‘ has brought California to the precipice of insolvency. Somewhere along the line we’ve forgotten that budgets are a reflection of our shared values. As a result, we now face a ‘perfect storm’ of economic and human misery that threatens to become a long term reality if new revenues aren’t identified.

No single proposal will dig us out of the current budget hole or adequately address the multi-pronged crisis our state faces, but a few that would help restore some semblance of fiscal sanity include:

  • Imposing a severance tax on big oil (Despite the fact that California’s four largest oil producers made $95 billion in profits in 2008 we remain the only major oil-producing state in the country that doesn’t tax the extraction of oil from our land);
  • Repealing the approximately $2 billion per year in new corporate tax cuts enacted by the legislature behind closed doors in September 2008 and February 2009;
  • Requiring big commercial property owners to pay their fair share of the state’s tax burden by reforming Proposition 13;
  • Reinstating the tax rates for upper income Californians to 1991 levels; and others.

Another substantial source of potential new revenue is ending the occupation of Afghanistan and bringing the troops home.

The High Costs of War

The Pentagon now accounts for half of the world’s military spending – burning up 19% of federal expenditures and at least 44% of tax revenues. During the Bush administration, the Iraq and Afghanistan wars ‘ funded by borrowing – cost each American family more than $25,000.  

America has spent over $250 billion on the war in Afghanistan since 2001 ‘ with California taxpayers picking up $37.9 billion of that tab.

The National Priorities Project – a nonpartisan non-profit that analyzes how our tax dollars are spent – estimates that once the additional 30,000 troops are included America will spend over $100 billion on the war this year alone. That’s nearly $2 billion a week, $274 million a day, $11.5 million an hour, and $190,258 a minute.

This $350 billion price tag for war – to be reached by the end of this year – equals the combined annual military spending of Great Britain, China, France, Japan, Germany, Russia, and Saudi Arabia.   

For eight long years ‘ twice the time it took for us to defeat the Axis Powers in World War II – this war has drained our nation’s resources at a time we have none to spare. Since 2004 annual spending on the war has increased from a low of $14.5 billion to an estimated $100 billion in 2010.

California has gone from contributing an annual low of $1.8 billion in 2004, to $7 billion last year, to an estimated $9.2 billion in 2010 ‘ enough to drastically reduce or offset currently proposed cuts to education, in-home services for the disabled, seniors and the blind, health coverage for lower income children, and more.

An undeniable reality must be accepted before it’s too late: this war is financially unsustainable. Occupying another country and policing its civil war is too costly a venture. It’s time to change our priorities. It’s time to choose life.

Alternatives to War Spending  

Imagine if the $37.9 billion California contributed to the war had been spent on expanding health care, improving education, or increasing our energy independence? According to NPP – for one year ‘ we could have provided funding for any one of the following:

‘    15.6 million people with health care;
‘    5.7 million scholarships and 7 million Pell Grants for university students;
‘    4.5 million Head Start placements for children;
‘    500,000 new elementary school teachers;
‘    676,649 Public Safety Officers;
‘    535,058 Music and Arts Teachers;
‘    113,373 Affordable Housing Units;
‘    And 67.4 million homes with renewable electricity.

Consider these stark examples of misplaced priorities:

  • The cost of 1 soldier for 1 year in Afghanistan is $1 million; while the cost of college tuition at a California State University is $9,285.
  • The cost of a single anti-tank missile in Afghanistan is $85,000; while the cost of providing 1 year of college books and supplies is $1,608 (average fees).
  • And the cost of 1 predator drone in Afghanistan is $4.5 million; while 1 full Pell Grant for a college student in California is $5,350.

Every California city tells its own unique story of misused taxpayer dollars. San Francisco has contributed $1 billion to the war in Afghanistan ‘ enough to provide 3,023 affordable housing units and 8,042 public safety officers. Los Angeles contributed $3.2 billion – enough to provide 1.2 million children with health care.  

Type in the name of your locality, and the costs of this war to you, your family, and your community, will suddenly hit close to home.

While no one can be exactly sure how much of the money California has sent to Afghanistan would come back to our state if there was no occupation, the fact remains, if war costs were eliminated from the equation, both the size of our budget deficit and the severity of cuts to public programs would be significantly reduced.

But instead of embracing fiscal sanity, we are doubling down on fiscal madness. According to a Congressional Budget Office estimate, over the next ten year the cost of the Iraq and Afghanistan wars could total $2.4 trillion, or nearly $8,000 per American man, woman and child.

Changing Priorities, Choosing Life

Financial considerations aren’t the only reason to support bringing the troops home. Namely, this war doesn’t make us safer. For every bomb we drop and every innocent civilian killed insurgent forces and terrorist networks gain new recruits weary of an American occupation.

According to government estimates, less than 100 Al Qaeda members even reside in Afghanistan. If the purpose of the war was to avenge 9/11 and root out ‘the terrorists’ ‘ as advertised – then our mission has been accomplished.

And what of the tragic loss of life and unimaginable human tragedy that inevitably accompanies war? American casualties doubled in 2009, with the total killed in Afghanistan approaching 1000. 541 Californians have been wounded or killed there – the next closest state is Texas at 462.

Thousands more Americans have been physically maimed, dismembered, and disabled, with even more suffering permanent psychological and emotional scars, only to return home to a country with a weakened and underfunded social safety net facing annual budget assaults.

According to the United Nations, the number of civilians killed surpassed 2,400, the most lethal year yet. Untold more Afghans continue to suffer physical and emotional torment matched only by the severity of the perpetual economic hardship and warfare that has become their daily reality.

But if there is a single, compelling argument for ending the war that all Californians should be able to rally around it’s that we simply can’t afford it. It’s time to spend what little resources we have on alleviating human suffering here at home, rather than perpetuating it in Afghanistan.

End the War and Invest in California

How we utilize our limited resources in times of economic despair remains one of the most fundamental and daunting challenges of our time. Our excessive funding of one war after another to the detriment of improving the quality of life of our own people has been a tragic constant for decades.

Warnings from past American icons are worth reconsidering. The late Five-Star General, and Republican President, Dwight D. Eisenhower forewarned, "Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed. The world in arms is not spending money alone. It is spending the sweat of laborers, the genius of its scientists, the hopes of its children…"

Just a few years later, a young minister and Nobel Peace Prize winning human rights champion, Dr. Martin Luther King Jr., implored, ‘A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.’  

We would do well to heed their words today. Foreclosing on our future to fund an endless occupation on the other side of the world shouldn’t be confused with national ‘defense’. It’s time to end the war, bring the troops home, and invest those resources on the health and well being of the citizens of California.

Paying For War, Not For College, By Brave New Films

Now listen to CFC’s Zack Kaldveer’s interview with Radio Or Not’s Nicole Sandler on the project. He comes on around the 38 minute mark.

Watch CFC’s Zack Kaldveer Speak about the Costs of War at a campaign event for congressional candidate Marcy Winograd

Part 2 of Speech