Shortly before heading back to New Jersey this past Thursday for a few days, I started rounding up the latest reports of California’s myriad woes. Ready to survey the train wreck? First up, in the Wall Street Journal, Michael J. Boskin and John F. Cogan flip Thomas Friedman’s memorable headline in the New York Times last year on its head. “Can Greeks Become Germans?,” Friedman queried. Boskin and Cogan write that California has become America’s Greece:
The state’s progressive tax-and-spend experiment is broken, threatening basic services, from courts and parks to education and health care for its most vulnerable citizens. Mr. Brown’s tax initiative only exposes the state to an ever more dangerous roller-coaster ride.
No wonder many Silicon Valley CEOs say they won’t expand in California because of high taxes and burdensome regulation. And no wonder net migration has recently reversed, with hundreds of thousands of workers and their families leaving the state in search of better opportunities.
California still ranks first in technology, agriculture and entertainment among the 50 states. But it is near the bottom in business and tax climate and state bond ratings. It’s a complex picture, but at its core is the high-tax welfare state run amok.
Many Americans fear the federal fiscal train wreck will turn us into Greece. But, barring major change, they need look no further than California to see what this future portends. Relying on ever-higher taxes to fund payments to an outsized population of benefit recipients is a recipe for exporting prosperity. That is one California trend that other states emulate at their peril.
Part of California’s woes is that this once more-or-less Red State has devolved into a self-contained world of Blue and Bluer. So much so that, as Victor Davis Hanson asks at NRO, “In California, Whom Will They Blame?”
Here in California, students just marched on Sacramento in outrage that state-subsidized tuition at the UC and CSU campuses keeps climbing. It is true that per-unit tuition costs are rising, despite even greater exploitation of poorly paid part-time teachers and graduate-student TAs. But the protests are sort of surreal. The California legislature is overwhelmingly Democratic. The governor is a Democrat. The faculties and administrative classes are largely Democratic. Who then, in the students’ minds, have established these supposedly unfair budget priorities?
Sales, income, and gas taxes are still among the highest in the nation (and are proposed to rise even higher) — prompting one of the largest out-of-state exoduses of upper-income brackets in the nation. The state budget is pretty much entirely committed to K–12 education (whose state-by-state comparative test scores in math and science hover between 45th and 49th in the nation), prisons, social services, and public-employee salaries and pensions. Whom, then, can the students be angry at?
Are students angry at public-union salaries and pensions that are among the highest in the nation? Do they think the many highly compensated retired Highway patrol officers have shorted students at UC Davis? Are they mad at the 50,000 illegal aliens in the California prison system that might have siphoned off scholarship funds from CSU Monterey Bay? Or is the rub the influx of hundreds of thousands of children of illegal aliens who require all sorts of language remediation and extra instruction in the public schools, and so might in theory divert library funds from UC Santa Cruz?
Perhaps the students don’t want billions to be committed to high-speed rail that might rob Berkeley of needed funding, or environmental efforts to introduce salmon into the San Joaquin River, in which the $70 million spent so far in studies and surveys might have come from nearby CSU Fresno? Are they mad at state social services, whose medical expenses have skyrocketed to address the health-care needs of millions of illegal aliens, and thus in theory could curb the choice of classes at CSU Stanislaus? Are they angry that some $10–15 billion a year probably leaves the state as remittances to Mexico?
If one cannot blame the wealthy for “not paying their fair share” (the top 1 percent of Californians now pay about 37 percent of all income-tax revenue — and their numbers have decreased by one-third in recent years, as the state has come to rely on the income tax for half its revenue), or Republican majorities in government, who, then, is left to blame?
But then, that’s been the problem with the Occumutants from the start, and not just in California: they loathe Wall Street — which supported Obama in 2008 and formed his fiscal brain trust. They loathe their student loans — and yet the university system is as blue as it gets. And they themselves can’t or won’t protest President Obama, making themselves the first protest fighting for the establishment status quo.
And if they get their way and real Hopenchange doesn’t come to America this November, at Human Events, Roger Hedgecock warns, “If you were wondering what living in Obama’s second term would be like, wonder no longer. We in California are living there now”:
In California, we hate the evil, greedy rich (except the rich in Hollywood and in sports, and in drug dealing). But we love people who have broken into California to eat the bounty created by the productive rich.
Illegals get benefits from various generous welfare programs, free medical care, free schools for their kids, including meals, and of course, instate tuition rates and scholarships too. Governor Perry, California has a heart. Nothing’s too good for our guests.
To erase even a hint of criticism of illegal immigration, the California Legislature is considering a unilateral state amnesty. Democrat State Assemblyman Felipe Fuentes has proposed an initiative that would bar deportation of illegals from California.
Interesting dilemma for Obama there. If immigration is exclusively a federal matter, and Obama has sued four states for trying to enforce federal immigration laws he won’t enforce, what will the President do to a California law that exempts California from federal immigration law?
California is also near fulfilling the environmentalist dream of deindustrialization.
After driving out the old industrial base (auto and airplane assembly, for example), air and water regulators and tax policies are now driving out the high-tech, biotech and even Internet-based companies that were supposed to be California’s future.
The California cap-and-trade tax on business in the name of reducing CO2 makes our state the leader in wacky environmentalism and guarantees a further job exodus from the state.
Even green energy companies can’t do business in California. Solyndra went under, taking its taxpayer loan guarantee with it.
No job is too small to escape the regulators. The state has even banned weekend amateur gold miners from the historic gold mining streams in the Sierra Nevada Mountains.
In fact, more and more of California’s public land is off-limits to recreation by the people who paid for that land. Unless you’re illegal. Then you can clear the land, set up marijuana plantations at will, bring in fertilizers that legal farmers can no longer use, exploit illegal farm workers who live in hovels with no running water or sanitation, and protect your investment with armed illegals carrying guns no California citizen is allowed to own.
The rest of us only found out about these plantations when the workers’ open campfire started one of those devastating fires that have killed hundreds of people and burned out thousands of homes in California over the last decade.
But wait! There’s much more news of fresh disaster, right after the page break.
The San Francisco Chronicle (link safe; goes to Steve Bartin’s Newsalert blog) just can’t seem to figure out why its namesake metropolis continues, year after year, to have the lowest percentage of children of any major American city:
“This has been a personal issue for me for quite some time,” said Supervisor Mark Farrell, who called the hearing and said his two young children are losing lots of their friends to the suburbs – and that his own adult friends are increasingly moving.
“Keeping families in San Francisco is important for a diverse city,” he said. “Having children in our parks and our schools and strollers on our sidewalks is important to the vibrancy of our neighborhoods.”
Just 13.4 percent of San Francisco’s 805,235 residents are younger than 18, the smallest percentage of any major city in the country. By contrast, San Jose’s percentage of children is 24.8 percent, Oakland’s is 21.3 percent, Boston’s is 16.8 percent and Seattle’s is 15.4 percent, according to Brian Cheu, director of community development for the Mayor’s Office of Housing. Even Manhattan is composed of roughly 15 percent children, according to Dan Kelly, director of planning for San Francisco’s Human Services Agency.
In 1970, children made up 22 percent of San Francisco. In 1960, they constituted 25 percent.
By the way, this was a topic we first blogged about seven years ago; it persists to this day. The Chronicle reports that the cost of living in one of the bluest of blue enclaves is a factor for this declining trend line:
The high costs of housing and living in general seem to be the main culprits of family flight, according to city officials who testified Thursday. Households earning at least 80 percent of the city’s median income – pegged at $92,700 for a family of three – can easily afford to rent an apartment, Cheu said.
But buying a house is much more difficult because there are so few single-family, detached homes with multiple bedrooms. And the housing crash has actually left some families who used city programs to buy below-market-rate homes in the Bayview during the housing peak underwater now.
“It’s a far better deal to go to Alameda, Marin, Contra Costa, San Mateo,” Cheu said.
Families that choose to stay tend to be whiter and wealthier than ever, several city officials said. Thirty percent of families with children in San Francisco now earn at least 150 percent of the city’s median income. Those families made up 20 percent of all families with children in the city in 1990.
Somewhat surprisingly, given the delicate sensibilities of the Chronicle’s readers and the paper’s efforts to keep them happy and cocooned, they do note another reason why families are leaving the city — “perceptions it is unsafe,” which is a polite way to skirt around the double-whammy of Frisco’s PC police department and (especially) the city’s enormous population of feral vagrants. Naturally of course, political correctness ensures that the Chronicle entirely avoids the issue of The Love That Dare Not Speak Its Name and its San Francisco-style public rituals, which might cause some less enlightened residents to put off having kids while they live there and some parents to flee the city. Click here for one of Zombie’s patented photomontages (NSFW needless to say, once you get past Zombie’s warning page) on an annual San Francisco event — but keep plenty of eye-bleach handy. You were warned.
Or perhaps potential Frisco parents merely took the advice of the Chronicle in 2008, which sagely suggested that too many kids are bad for Gaia and other living things.
In short, San Francisco can become a more family-friendly city — it just has to stop being San Francisco. Similarly, Sacramento can become a more business-friendly environment — it just needs to stop being Sacramento. In the L.A. Times, Bradley R. Schiller writes, “In its most recent annual ranking of ‘business friendly’ states, Forbes magazine had some blunt advice for investors: ‘Utah and Colorado have maintained strong business climates. Forget about California'”:
So what is it that makes California unfriendly to business? For starters, it’s very expensive to do business in the state. Corporate taxes are high, as are energy and labor costs, according toMoody’sAnalytics and the Tax Foundation. In the Forbes rankings, the state also comes in at No. 40 in the category of regulatory environment. To compute the state’s regulatory score, Forbes looks at the Pollina Corporate Real Estate Index, Pacific Research Foundation’s Tort Liability Index, PRI’s Economic Freedom Index,Moody’sbond ratings, transportation infrastructure and right-to-work laws. Thank goodness it didn’t also look at the Los Angeles City Council’s proposed new regulation of the porn industry’s safe-sex practices — a proposal that increases both regulation and costs in an economically important industry in the state. California also ranks a disappointing No. 32 in the “labor supply” category, based largely on its low high school and college graduation rates. This ranking represents a precipitous decline from the days when California’s colleges were ranked among the best in the world.
Forbes is not the only naysayer about California’s business climate. The Canadian-based Fraser Institute compiles a similar ranking for the 50 states and the 10 Canadian provinces. Fraser’s ranking is based on 10 statistical indicators that more narrowly focus on business concerns (tax rates, minimum-wage levels, unionization rates, public-sector employment and the like). The Fraser rankings came out in January. In that ranking, California scores even worse — a dismal No. 44 among the 50 U.S. states. South Dakota, Delaware and Texas top the Fraser list, while Vermont, New York and Alaska reside at the bottom.
California’s dismal showing in the Fraser rankings of business climate stem primarily from the state’s relatively high income tax rates, high minimum-wage thresholds at both the state and local levels, and a high rate of unionization among public-sector employees. The state also scores poorly on its high ratios of public-sector spending and income transfers because of such things as its workers’ compensation system, unemployment insurance costs and fat public pensions.
Even the bio under Schiller’s article isn’t immune to the trend he’s describing, along with all of the above articles: “Bradley R. Schiller is a native Californian who now teaches economics at the University of Nevada, Reno.”
Incidentally, a handy translation guide is available for Californians departing for more business-friendly regions, and who wish to acquire the native lingo.
Update: “‘You can check out any time you like,’ the Eagles said of California, ‘but you can never leave.’ Somebody forgot to tell businesses. They keep leaving the Golden State in growing numbers.”