March 21, 2023

As California Bounces Back, Governor Calls For Lofty Goals

Grasping at California’s vision of itself as a land of opportunity and a model for the rest of the nation, Mr. Brown said the state was rebounding financially after a difficult period. In a speech citing sources as varied as the Bible, Montaigne and Yeats, Mr. Brown said the state’s budget was now sound, but he also warned of profligacy, a remark that seemed directed at the Democratic lawmakers listening to him in the State Capitol here.

“The message this year is clear: California has once again confounded our critics. We have wrought in just two years a solid and enduring budget,” Mr. Brown, a Democrat, said in his third State of the State address since returning to office in 2011. “Against those who take pleasure, singing of our demise, California did the impossible.”

Mr. Brown spoke of wanting to reform school financing by empowering local school districts, and of continuing to lead efforts to fight climate change, like the cap-and-trade system for carbon emissions that went into effect recently.

Recalling the big infrastructure projects in the state’s past, Mr. Brown also voiced strong support for two big-ticket items that have drawn strong opposition: a bullet train that would eventually link Los Angeles and the Bay Area, and two tunnels that would funnel water directly from Northern California to more populated areas in the south.

“The London Olympics lasted a short while and cost $14 billion, about the same cost as this project,” he said of the tunnels. “But this project will serve California for hundreds of years.”

Mr. Brown’s speech came at what many are describing as a turning point for California after years of economic turmoil. The state’s economy is continuing to show signs of strengthening, with job growth and a housing market revival.

Fiscally, after years of ballooning budget deficits, the state is now projecting a balanced budget. In November, Mr. Brown surprised many by winning a hard-fought campaign to pass Proposition 30, a temporary tax surcharge that will pour $6 billion a year into the state treasury for the next seven years.

Still, Mr. Brown has repeatedly warned about the need to control spending. With Democrats now having supermajorities in the Senate and the Assembly, they can pass tax increases unilaterally. As experts predict that Democratic legislators will face pressure to increase spending, many are now describing Mr. Brown, long known as “Governor Moonbeam” for his eccentricities, as the only adult in the room.

Citing the story of Genesis and Pharaoh’s dream of seven cows, he said: “The people have given us seven years of extra taxes. Let us follow the wisdom of Joseph, pay down our debts and store up reserves against the leaner times that will surely come.”

In interviews, Mr. Brown, who served two terms as governor from 1975 to 1983, has brushed aside talk of his legacy. But in recent months, Mr. Brown, 74, who was treated recently for prostate cancer, has spoken about his mortality, mentioning the death of a close friend.

“This is my 11th year in the job, and I have never been more excited,” he said.

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One Woman’s War on Debt Gains Steam After Years in the Making

“It’s so bad out there that there’s a question as to whether Washington can govern anymore,” Ms. MacGuineas said, sitting in the Capitol after briefing a group of legislators. “We want a deal to happen, and want it to happen in a bipartisan way, because otherwise it’s not going to stick.”

Ms. MacGuineas, a budget expert who has advised Republican and Democratic lawmakers, is the face of the Campaign to Fix the Debt, a nonpartisan phalanx of chief executives, politicians and economic experts with $43 million to spend on efforts to pressure lawmakers to broker a deal.

A wisecracking, self-deprecating, third-generation Washingtonian, Ms. MacGuineas has spent years issuing forceful warnings about threats to the solvency of Social Security and to the pristine bond rating of American debt, often using Washington dinner parties as her soap box.

“For some reason, in Washington, you can’t talk about the budget except over food,” quipped Alice Rivlin of the Brookings Institution, who is a part of the Fix the Debt campaign.

Ms. MacGuineas has worked in politics, advising Senator John McCain of Arizona on Social Security during his 2000 campaign for the presidency. But she describes herself as a political independent and has spent most of her career at Washington’s nonpartisan research houses, including Brookings, the New America Foundation and the Committee for a Responsible Federal Budget.

“For the longest time, nobody cared, nobody listened,” she said. “It was 15 years of irrelevancy.”

Two years ago, things changed. With the country adding more than a trillion dollars a year to its debt, more members of Congress became interested in budget data and advice, Ms. MacGuineas said. Corporate leaders and the American public also began tuning in to the looming debt problem.

The Campaign to Fix the Debt started to come together at a salon dinner held in the backyard of Senator Mark Warner, Democrat of Virginia, in the fall of 2011. An influential group of economic, political and business leaders — including the former Federal Reserve chairman Alan Greenspan and Mark Bertolini, the chief executive of the Aetna insurance company — huddled in a too-small tent in the pouring rain.

Maybe it was the fact that the 60 guests were mashed together, Mr. Warner said. Maybe it was the generous pours of wine. But the dinner took on the impassioned feeling of a “tent revival,” he said.

“It was Democrats and Republicans, members of the House and Senate, saying, ‘I’m ready to do what it takes,’ ” Mr. Warner said. Indra Nooyi, the chief executive of PepsiCo, at one point announced that America needed to “get its swagger back.”

After the dinner, Ms. MacGuineas felt primed for action and set out to raise $3 million for a nonpartisan campaign to push Congress to get a deal done, once and for all. She has ended up with 14 times that amount and is now helping to run the campaign — which is intended to fold in a year or two, if Congress makes progress — out of space in the New America Foundation’s offices.

She also ended up with an all-star cast. Erskine B. Bowles and Alan K. Simpson, who led the president’s debt commission, are cited as co-founders. The chief executives of JPMorgan, BlackRock, Boeing, Cisco, Honeywell, General Electric and other companies have signed on.

In recent months, Fix the Debt has pressed White House officials and members of Congress in face-to-face meetings. Its policy team has responded to questions from reporters and legislative staffs. It has opened 17 state-level operations and undertaken a public-relations campaign, including national television advertisements.

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Safety of Monster Energy Drinks Questioned

In a letter sent late Wednesday to Monster Beverage, the city attorney of San Francisco, Dennis J. Herrera, told the company to substantiate its claim that large daily quantities of Monster Energy were safe for adolescents and adults.

Mr. Herrera also told Monster, a publicly traded company, to produce support for its promotional slogans, like one that claims that consumers of Monster Energy “can never get too much of a good thing!”

In taking the action, Mr. Herrera cited a section of a California state law that makes it illegal for a company to make false or misleading advertising claims that purport to be based on fact or clinical data.

In a statement, Monster Beverage said: “The company can document the legal basis by which its products are properly labeled dietary supplements, and third party scientific documentation substantiates their safety.”

The energy drink industry and Monster Beverage in particular has come under intensifying scrutiny since last week after disclosures that the Food and Drug Administration had received reports that the deaths of five people since 2009 may be linked to Monster Energy drinks.

The company has repeatedly disputed any suggestion that its drinks pose a risk. The F.D.A., which said it was looking into the episodes, added that the receipt of a death or injury filing associated with a product did not mean that it was responsible.

Last week, two Democratic lawmakers, Senator Richard J. Durbin of Illinois and Senator Richard Blumenthal of Connecticut, sent the latest of several letters to the F.D.A. commissioner, Margaret Hamburg, urging the agency to take action on energy drinks.

The agency has taken the stance that there is insufficient data to take additional action on energy drinks. Both Democratic lawmakers have been critical of that position.

The New York State attorney general is investigating the practices of several producers.

In his letter Wednesday, Mr. Herrera asserted that Monster Beverage, through its advertising and marketing claims, had encouraged “unsafe and irresponsible consumption of its products.”

Monster Energy drinks do not disclose caffeine levels. But product labels advise against drinking more than three of the 16-ounce cans or two of the 24-ounce cans daily, amounts that each contain a total of 480 milligrams of caffeine.

The F.D.A. has suggested that 400 milligrams of caffeine a day from all sources is safe for adults, although many medical experts believe that adults can safely consume more. There is far less data about safe caffeine levels for teenagers.

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Shares Decline as Wall Street Waits for Washington

Republican and Democratic lawmakers have offered competing proposals to avoid a catastrophic default on the government’s debt. If an agreement is not reached by Aug. 2, the American government won’t have enough cash to pay all its bills.

Paul Zemsky, chief investment officer of multi-asset strategies at ING Investment Management, said a default could cause Americans to lose confidence in the economy, causing them to put off major purchases such as buying cars and homes.

“Anything that shakes confidence right now is just bad for the economy,” Mr. Zemsky said. “And this is just a big confidence-shaker.”

The Dow Jones industrial average fell 91.50 points, or 0.73 percent, to 12,501.30, its third straight day of losses. The Standard Poor’s 500-stock index fell 5.49 points, or0.41 percent, to 1,331.94.

The Nasdaq composite edged down 2.84 points, or 0.10 percent, to 2,839.96. But technology companies generally rose after Broadcom raised its revenue forecast for the third quarter on improving demand for its chips. Broadcom rose 10 percent, and its rivals Advanced Micro Devices and Texas Instruments each edged up about 1 percent.

Strong earnings from Apple, Microsoft and other major technology companies have made those stocks the market’s best performers since the market hit a low in mid-June. The Nasdaq is up about 8 percent since June 15, while the Dow and the S.P. 500 are up about 5 percent.

More than half of the Dow’s decline on Tuesday came from 3M. The stock fell 5.3 percent, the most of the 30 companies that make up the Dow average. The industrial giant, which makes Scotch tape, medical equipment and many other products, said the disaster in Japan and sinking demand for LCD televisions hurt its results. The company makes a kind of film that is used in producing the flat-screen TVs.

Since it makes so many kinds of products, investors often see 3M’s results as an indicator of how the whole American manufacturing industry is doing.

UPS, the world’s largest package delivery company, fell 4 percent after warning that the “uneven economic environment” could affect its results. Its main competitor, FedEx, fell 1 percent.

United States Steel also said it was seeing uneven economic conditions. The stock fell 9 percent after the company predicted that its earnings could fall in the third quarter.

AK Steel Holding fell 17 percent, the most of any company in the Standard Poor’s 500 index, after the company said it expects shipments to decline in the third quarter because of higher costs for raw materials.

Netflix fell 6 percent. The DVD rental and video streaming company’s sales missed analysts’ expectations late Monday. The company also said recent price changes could discourage some potential customers from subscribing.

Bond yields fell slightly, pushing prices higher. The yield on the 10-year Treasury note fell to 2.96 percent from 3.00 percent late Monday. The dollar fell broadly, while gold stayed near a record high.

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States Want More in Pension Contributions

So far this year, eight states, including Wisconsin and Florida, have decided to require government employees to contribute more, sometimes far more, to their pensions. Governors and legislators in 10 other states, including California and Illinois, are proposing their own pension changes as they grapple with budget deficits and underfunded pension plans.

Government employees’ unions are not accepting these changes without a fight, complaining that the increased pension contributions often amount to a significant cut in take-home pay.

A burst of labor opposition in New Jersey is threatening a tentative deal between the Republican governor, Chris Christie, and Democratic legislative leaders that would require government employees to contribute at least one percentage point more of their pay toward their pensions. One powerful union warned Democratic lawmakers not to join Mr. Christie’s “war on the middle class.”

But even many of labor’s traditional allies are demanding pension changes. Last week, New York’s governor, Andrew M. Cuomo, a Democrat, proposed that all future state and New York City employees pay 6 percent of their salary toward their pensions, double the current 3 percent. Oregon’s Democratic governor is pushing state and local employees to contribute as much as 6 percent of pay, up from zero at present. Twelve states, including Arizona, Michigan, Minnesota and Virginia, imposed higher employee contributions in 2010. That leaves just a handful of states where employees do not contribute toward their pensions.

“You can call this an exponential increase in activity to have state employees contribute more,” said Ronald Snell, a pension expert with the National Conference of State Legislatures. “Before 2010, this hardly ever happened.”

States are demanding the higher contributions as they reach for new ways to cut budget deficits. The easy savings, like furlough days, have been achieved, and now lawmakers are tackling more complicated cost issues like the long-term shortfalls in their pension funds.

The Pew Center on the States estimates there is a more than $1 trillion funding gap for government workers’ retirement benefits in the 50 states. At the same time, many voters resent that public employee pensions are generally better than their own.

“States have less revenues coming in and higher bills for their pensions, and it’s really focused their attention,” said Susan K. Urahn, managing director of the Pew center, a nonpartisan research group.

Alabama, Arizona, Kansas, Maryland, Mississippi and Oklahoma have all acted this year to require employees to pay more.

In one of the most extreme proposals, a legislative committee in Illinois, daunted by the state’s estimated $80 billion pension shortfall, voted to have state workers either contribute 17 percent of their pay toward their pensions or accept less generous pension benefits.

According to the Pew Center, actuarial reports say the 50 states should have contributed $117 billion in 2009 toward their pension plans to help bring them to full funding, two and a half times more than they contributed a decade ago and well over the $73 billion they actually contributed in 2009.

Requiring employees to divert 3 to 6 percent of their paychecks toward funding their pensions will help, though it will not come close to solving the short-term budget problems in most states, Ms. Urahn said. But every bit helps. In Wisconsin, for example, Gov. Scott Walker said the state government would save $226 million a year from state employees’ paying a 5.8 percent contribution previously paid by the state.

Over time, the budgetary savings can be substantial. Because of New York’s constitutional limits on changing current workers’ pensions for the worse, Mr. Cuomo is proposing increased pension contributions for new employees only. But even so, his office says this change would save New York State and public employers outside New York City $50 billion over 30 years.

“The pension system as we know it is unsustainable,” Mr. Cuomo said last week. He added that his proposal would “bring government benefits more in line with the private sector while still serving our employees and protecting our retirees.”

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