Saturday, September 26, 2009

The Iron Pyrite State

Today I've come upon two articles about California's self-inflicted woes, and both are so troubling because they ring so true. In the first we get a link to this report, by two CSU Sacramento (state-run school!) professors, which states that California's onerous taxes and regulations cost the state economy about $500 billion dollars per year--a third of the state's GDP and five times the state's general fund budget.

California currently has 12.2% unemployment, and its economy has almost fallen off a cliff over the last two years. A reduction of even half of the regulatory burden on businesses in California could create almost 2 million jobs and kick-start their economy. Instead, California — like the rest of the US — is focused on increasing taxes and regulation, the opposite of what the Golden State needs.

The second article gives several (political) reasons for California's decline, and offers a warning for the rest of the country:

And through a series of social, political, and economic experiments, California has acted as America's foremost laboratory of innovation, trying out ideas the country as a whole would go on to adopt. In the 1960s under Governor Pat Brown, the state offered a model of modernization, building the most advanced education and transportation infrastructures in the nation. Under Brown's successor, Ronald Reagan, it offered a model of conservative governance that would go on to transform American politics. Hollywood has made California a crucial part of America's cultural identity, and Silicon Valley has put it at the heart of our vision of the future. For many decades now, Americans have seen California as a harbinger of promising things to come.

Today, however, California has become a warning sign. Beset by economic disaster and political paralysis, the state is in the midst of a systemic crisis. And while the meltdown has certainly been accelerated by the recession of the past two years, its causes involve two decades of poor judgment, reckless mismanagement, and irresponsibility. How California got into this mess has a lot to teach the rest of the country; how it gets out will say a great deal about America's prospects...

There is little in President Obama's legislative agenda that hasn't already been tried in California. Need a model of runaway spending with no regard for growing debt? Look to California, whose bonds currently hover just above junk status. Want to insist on restrictive carbon-emission controls? Note the example of California's 2006 greenhouse-gas law, which is expected to reduce the state's economic output by 10% and destroy 1.1 million jobs. Want to put the government in charge of health care? Look at California's repeated legislative pushes for a single-payer system of health-insurance coverage, each of which ended in failure.

We will learn over the next decade whether California can manage to avoid disaster one more time. But even if the state's years of living large finally catch up with it, there is still an escape hatch: Sensible Californians can continue to flee to places like Arizona, Nevada, Colorado, Oregon, and Texas, where the respite from hostile government more than compensates for the social opprobrium that tends to meet California expatriates. But if the nation as a whole repeats California's mistakes, the consequences will be much more severe; an America beset by rigid bureaucracies, economic decline, and enervated spirit will not be able to preserve liberty at home or protect it abroad. Before we head down that path, we should look west to see how these ideas have fared — and absorb the lessons of how the Golden State lost its luster.

I hope the rest of the country is smart enough to learn from our mistakes, but I fear that enough in power are not.


Ellen K said...

Solid post Darren. These are the things I have been saying on various blogs since last spring. But the Democrat Party leadership is so deeply entrenched that they have forgotten the first rule of survival: When you are in a deep hole, stop digging.

Ellen K said...

PS. You may have to explain the title of your post to our less informed friends...I get it, but they may not.

PeggyU said...

Sensible Californians can continue to flee to places like Arizona, Nevada, Colorado, Oregon, and Texas, where the respite from hostile government more than compensates for the social opprobrium that tends to meet California expatriates.

Not so fast ... states like Oregon and Washington are becoming mini versions of California as a result of their bringing their failed visions with them. "Sensible" Californians are also accompanied by not-so-sensible ones. Even in Idaho, their influence is felt. And I have heard my sister-in-law complain about how liberal Colorado is becoming. At some point, there will be no place left to run. Better to stand your ground and try to fix the mess, I think.

Rose said...

Ever heard of the "use tax"? I hadn't until this past week when I got a letter from the state telling me I had to register with the state and calculate my use tax. That means looking back over the past 3 years of receipts to make sure that I paid full CA sales tax on anything bought out of state or online. If I paid less than 8.75 percent on anything, I have to pay the difference. 'Cause, you know, I don't pay enough taxes already.

Ellen K said...

This just presses for the idea that states like Texas will have to take action to sustain their sovereignty in the face of other states that would gladly plunder low tax states for their economic gains.

Pete said...

California Unemployment Situation in Heat Map form:
here is a map of California Unemployment in August 2009 (BLS data)

versus California Unemployment Levels 1 year ago