San Bernardino, California Private Enterprise Zone - Follow Up

Thu, Oct 31, 2013 - 11:36am
Detroit is in the news again, and those poor retired folks just took one on the chin, almost certainly getting only $0.16 on the dollar for their “constitutionally guaranteed” pensions.
With that being the case, I wanted to revisit a post from awhile back, about an alternative idea to the broken “tax-the-productive” revenue scheme of the bankrupt cities across America.
Recall, that Cities raise revenues from taxes on businesses, property, and sales taxes from consumption. This is in essence a taking from the productive, for redistribution to the government or its favorite groups, whether public union members, or their dependent constituent classes who receive public benefits, welfare, housing subsistence, etc., all of which creates nothing, produces nothing of value, and instead is strictly a user of other’s resources that have been taken by force or the threat of force. This is not an essay about limited government, or government in general, but is instead a realization that government is here to stay, for the foreseeable future, and that it is best that we realign the incentive structures if we hope to have any chance of normalcy for our future generations.
So, this is really about a vision of what should be, based on where we are right now, with a blueprint of exactly how to do it, and why it would work, under the current system, using the current rules, provided there was political courage to implement it. I can foresee no legal, moral, or other practical impediment standing in the way to at least giving this plan a try. Maybe I am wrong, and I missed a major point, or failed to consider something which proves fatal from the outset. Fine, then point it out, and off I go to the drawing board to rethink this whole concept.
But for now, I want to revisit it, and try to open up the dialog again, now that current events have brought once again the concept of government ineptness, corruption, lying and deceit to the forefront, all of which proves beyond a doubt that the current system in broken in dire need of total overhaul. What we need are not band aids anymore. We need structural reform. We need new ideas, concepts, radical change from the status quo, but we need to placate all of the piglets at the trough. Without addressing the stake holders in the status quo, nothing will get fixed. So, here we go, let’s dig in.
The original post was here:
I read through all of the comments, noted the many gracious compliments, and some not so gracious ad hominem attacks. The primary reason I posted the whole idea, was mostly because I firmly believe it to be a radical departure from the conventional thinking; such thinking is precisely what is called for under the circumstances we find ourselves in at the moment (TEOTGKE). I wanted to elicit all rational, reasonable criticisms that every one of the critical thinkers here could muster, so that I could address the incentive structure of the idea to counteract the anticipated, emotional responses from the electorate as this idea gets rolled out. Elections are coming in one year, and I would sure like to have this idea vetted by then. My goal is to have this plan, as amended, refined or what not, into the public conversation for San Bernardino in time for the election. I want to make the election about new ideas, not just which puppet candidate can make the most empty promises.
For those that attacked my idea, again, I wanted to express my sincere thanks. Not only did I want to hear praise at the concept of the PEZ, and for that I am most humbly thankful, I was also hoping to have all of you brilliant thinkers attack the idea, too, so that I could refine it and incorporate improvements to address the shortfalls. I have spent literally the better part of a year trying to coalesce my thoughts into a cogent blueprint to address the immediate problem that is San Bernardino governance.
Someone on the past thread suggested criticized me for suggesting that the public officials were corrupt. This is incorrect, and demonstrates an emotional response from someone who dislikes me personally, as opposed to someone who has found a flaw with my idea. Nothing personal, but I care not what some anonymous poster thinks of me. Quite frankly, even if I knew the names of the attackers I would still care not one bit. Still, I want to put that silly argument to rest.
Here is sample demonstrating, beyond dispute, the reality of the corruption problem in San Bernardino, all of which information is readily available to anyone with an internet connection, a browser, and rudimentary intelligence. Here is the recent stuff:
Here is more corruption, from pending criminal cases:
And, the corruption of public officials is not limited to San Bernardino City, but is a feature in and among politics of city and county governance. In short, corruption is rampant, pervasive, and impossible to stamp out under the current system because the current incentive structure is hopelessly flawed:
Corruption in Bell, California:
I am not the only one who seems to have taken an interest in the problem, and tried to offer solutions. Here is an expert’s perspective, from this article here:
“David O. Friedrichs , a University of Scranton, Pa., professor who has studied corruption, believes local cultures often provide the structure for corruption -- a sense of that's just the way things operate. Similar problems have surfaced in northeastern Pennsylvania, he said, leading to indictments and convictions of political figures, including former National Football League lineman Greg Skrepenak, who was sentenced recently to up to 41 months in prison on corruption charges.
"People often see the answer as a kind of greed and personal lack of integrity, but that's a one-dimensional answer," said Friedrichs. "When it's this pervasive and persistent, you have to look beyond the motivation factor into the factors that in effect create the whole structure, or the culture, that not only encourages this kind of activity but in many cases make it so ingrained that it almost becomes the natural thing."
Friedrichs argued that corruption has been part of American culture from the beginning, and that fear of prosecution obviously has not been an effective deterrent. Greater citizen involvement, including formation of oversight committees on such issues as pay levels, could help, he said, by casting more eyes on the process.
"It's a very difficult problem to address," Friedrichs said. "It requires active, independent citizens groups that can provide truly independent oversight."
So, with this backdrop, and with the above information fully part of the public’s open and apparent collective knowledge, despite some loathsome poster who had misguidedly tried to malign me with ad hominem attacks, I would once again ask for input on the PEZ concept. Let us try to collectively refine the ideas into a workable solution.
Let’s address this in the comments below, and I will reply tomorrow morning as part of the dialog. Anyone who posted before, is welcome to repost their comment from before here again, and I will address each one as soon as I can, hopefully in real time to keep the conversation alive and meaningful.
Let’s tighten up this idea. I will try to get it in front of some people that matter, and who knows?

About the Author


Oct 31, 2013 - 2:56am



Oct 31, 2013 - 3:16am

Just what I was looking for!

A CaliLaw post to round out the day.

My main concerns were regarding:

- the potential conflict with State and Federal laws that would have to be addressed/waived at those respective levels (which seems a daunting task)

- if PEZ is a success, and proves to be a model that threatens the 'established paradigm' of governance, it will be snuffed out by the existing 'model'. The question is, would they ever allow the seed to even germinate.

All that said, your idea of introducing such an experiment in locales where government has already, objectively and indisputably failed is perfect targeting. Perhaps Turdites in Detroit and other failing cities could try to find local support for such a platform as well.

Howard Roark
Oct 31, 2013 - 4:58am


One reads this (and KDenninger´s articles) and can only say: woooww it´s that bad?!


Check ZHedge vid on Europe´s future (by punk economics) and it´s full circle. Damn!

Keep strong,


Oct 31, 2013 - 6:28am

when u do not have to make a 'real' profit

to stay in business [the govmint] then u will be corrupt.

until we have a true participatory electorate and a process that not depend on raising BIG amounts of donated money..............we will have poor to corrupt government............but with a very few notable exceptions.

Oct 31, 2013 - 7:06am

So Cal

Oh how my heart aches, grew up in a little town, just south of LA. Use to be called the ALL-American town. Wife and I left there around, 2000. We took a cross country motorcycle ride, in 2011 to see our home towns. All I can say is what have we done !!?? What have we let happen to OUR country? What Cal law, talks about is true ! We could not believe our eyes, bars on windows, trash, towns in decline.Roads with giant pot holes So Sad, Often times we could not read the advertisement signs along the road, because we did't speak the language. God help us,



Oct 31, 2013 - 8:27am

mysteries of the world

I just can't believe that Gary Gensler and Bart Chilton are not seriously scared for their lives.

Oct 31, 2013 - 8:58am

Cal Lawyer

Thank you so much for the information that you provide to this site. Your posts give me a perspective of what is going on in other parts of the country and what I can expect in my own backyard down the road. I look forward to your posts every week.

Oct 31, 2013 - 9:16am

Since you asked for

Since you asked for it....

I've read through your proposal and I like how you're thinking. What follows is some critique that is meant in the spirit of making it better!


What you propose is very much a starting over.

It seems like within the PEZ the enterprise is also the state. A dictatorship if you will. With the allowance that citizens may leave to rejoin the rest of the USA without the hassle of immigration. What if they are in prison or otherwise encumbered (eg fines or debts owing) within the PEZ?

On the plus side the design is rich with personal and direct accountability both for the state and the enterprise. On the minus side those persons will be incredibly burdened with decision-making. As it scales up delegation is likely to increase and may become problematic (eg corruption).

At some place the PEZ (Director?) will have to work with California or the Federal Gov’t regarding legal/regulatory issues. Not sure how you will free the PEZ from some level of outside oversight or insurance concerns (What if a building collapses? What if there is an oil spill? What about damages due to plain old earthquakes?)

Some items need addressing such as pollution which can easily extend and affect areas outside the PEZ or leave in the ground nastiness that remains long after the PEZ is moved or reclaimed.

I note that an individual can only own one license at a time. What prevents my ‘family’ from owning several licenses? We might then collude over Christmas dinner.

About currency. It seems the Director has to pay fees in the currency of the land (US fiat?) and the value of the license depends on valuing the economic output. So there must be a relationship between the currencies. Obviously the city would like a favourable one, which would favour the workers as well I assume. Somehow I can imagine that the currency is highly valued when fees are due the city, and loses value when workers are exchanging. Perhaps this is why silver or gold are mentioned, although the city might balk given the way those prices are managed.

It sounds like if you can’t find a job that suits you then you can’t stay unless someone else pays your way. This will by its nature act as a sieve which leaves non-workers outside as a burden on the State while inside the PEZ there will be radically lower unemployment. Of course that’s a good thing inside the PEZ however not so good for the state.

I can see some problems with being state within a state. Do the citizens of PEZ renounce their USA citizenship? If not how do they participate in Federal or State processes (eg election, social security etc).


CALawyer you've done a really good job of laying out an alternative model. Accomplishing a reinvention of 'the way things are' using a thought out process is far better than a chaotic makeover.

Oct 31, 2013 - 9:18am

Silver breaking out ?

Silver this time :-p

Have just drawn a few lines on the silver spot chart. Looks like silver is successfully breaking out from this steep downtrend. Has to be a positive sign I'd say. Although as we saw when the price broke free from a lower parallel last year, doesn't mean the downtrend is definately over.

sierra skier
Oct 31, 2013 - 9:33am

Pension Irresponsibility

We can't be surprised at the way our leaders have failed us. While we have spent our lives working away in an attempt to provide for a comfortable retirement by paying into SS, medi-care, pensions. 401Ks, IRAs and savings our leaders have been busy pulling the carpet out from under our plans.

They have been steeling the funds, short funding and spending our retirement and our children's futures to buy votes from the do nothing entitlement crowd. They have failed us miserably.

Detroit is more than likely just a starting example of what is to come on a wide spread basis countrywide.

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

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Key Economic Events Week of 10/21

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10/24 10:00 ET New home sales
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Key Economic Events Week of 10/14

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Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
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Key Economic Events Week of 9/30

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Key Economic Events Week of 9/23

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9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
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Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
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Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
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Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
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9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
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9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
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Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
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8/22 9:45 ET Markit Manu and Svc PMIs
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