Los Angeles Twenty Years After the Rodney King Riots
As an eternal optimist, permit me to state some facts. Crime is down in center city Los Angeles. More people are walking and using public transit. The City is investing in public transit and this will stimulate "new urbanism" along these transit corridors. While Wendal Cox and and Joel Kotkin may not use these commute modes, there will be other people who will benefit from them. It is no accident that USC is flourishing right now. I bet that home prices are much higher in real terms in Center City LA than they were 20 years ago. This is the market test of progress. Demand to live there is rising. There is plenty of downtown LA that still needs rehabbing. Downtown Los Angeles does still have a rundown look in many parts as you get close to City Hall. Manhattan does not have such sections. In Manhattan such property would be purchased, torn down and renovated but in Los Angeles these decaying buildings persist. Why?
The ongoing challenges? Future employment growth? It will likely be in the service sector. Manufacturing jobs will not make a come back in LA. The Los Angeles public schools aren't good. Perhaps in the name of preserving public sector jobs, few tough decisions have been made to introduce more competition and to challenge the teacher's unions to be willing to implement more innovative ways of improving K-12 education. When we know "that we don't know" how to educate young people, we must experiment and scale up those ideas that appear to work. Schools need more flexibility over hiring and firing and promotion of teachers and union rules inhibit such flexibility. The same issues arise at LADWP and its provision of water and power for the metropolitan area. This era of capitalism requires flexibility to adapt and public employers face work rules that inhibit such flexibility. There are also tough issues of public sector pensions. When the City of Los Angeles negotiates with public sector unions over compensation, nobody at the table has a strong incentive to take into account that more generous retirement pension and health benefits will be paid by future generations. These future generations are not currently voters and the current voters have little incentive to sit down and become outraged at the generous defined benefit plans that only become more generous as life expectancy increases and future health bills increase. Public sector union negotiators know this and this gives them a bargaining advantage. In this age of big deficits, everyone seems to have forgotten that budgets must eventually balance. Neither the Chinese nor future economic growth will bail us out. At some point, somebody's taxes will rise to pay back the large state and national IOUs.
One tax that needs to be revised is California's Proposition 13. Given the value of California real estate, it is imperative to tax it uniformly regardless of when a person purchased it. A fair approach would be to have all property owners pay an annual payment of 1.5% of the current assessed value of a property. This would generate a lot of revenue but this should be tied to public sector reform. If old people can't afford this flow payment then they can sell a percentage of their home to a buyer who would finance this flow payment and the buyer would have a claim on future price appreciation. That's how asset markets work!