First, some data points for those who don't understand (or acknowledge) how bad things are:
- The Golden State has an unemployment rate at 12.5%, and one of the nation's highest home foreclosure rates. A recent Business Week survey of best 25 cities for employment growth in 2010 had none in California. We are about $6 billion short on the current budget cycle, expect to be about $15 billion short for the year starting in July, and the Governator has unsuccessfully gone to Washington begging for the same treatment that Louisiana and Nebraska are receiving.
- As a result of budget squeezes in the last several years, California now ranks near the bottom of the pack in terms of quality of public education, and business climate. We have the lowest credit rating in the nation - about equal to Kazakhstan and Greece.
Not a pretty sight. But those are results; lets talk about the causes.
As for the state budget deficits, a root cause is the decline of the tax base. Reliance on the more volatile income and sales taxes rather than property taxes (due to Prop 13 limits) hurts revenues in down cycles, but the problem is more fundamental.
- With the closing of a joint GM/Toyota factory in March, we will lose the last auto assembly plant on the Left Coast and about 30,000 good jobs - there has been some mourning, but no introspection. With personal tax rates of up to 9.55%, there has been an exodus of hundreds of thousands of high income payers who can choose where to live and manage their businesses. Yet we have new mandates to increase "sustainable" (non-nuclear) power generation to 33% in 10 years, our own "cap and trade" system, and the country's first "green building code", all with no thought to the economic consequences of further increasing our country-leading utility rates. Out here, environmentalism still trumps jobs every time.
- Nationally, I would applaud the saving of the automotive segment of American manufacturing (to be privatized by a future conservative president), and President Obama's extension of President Bush's "No Child Left Behind" with his "Race to the Top" with its emphasis on accountability and parent choice. (Over union objections, the California legislature has decided to apply for the grants.) On the other hand, The EPA decisions to further restrict CO2 and ozone, and the impact of health care legislation on businesses look much like anti-business California. And while individuals cannot realistically emigrate, their money can, and funding by foreigners of our trillion dollar deficits will become increasingly expensive.
And as for California's political problems, the root cause is the insatiable appetite of government and the people.
- Virtually everyone agrees that California's governmental system is broken, and there is a growing call for a constitutional convention to start over. Much of the impetus from the Left is to make it easier to raise taxes - repeal Prop 13, and repeal the two-thirds legislative vote requirement to raise income and sales taxes. But the problem is bigger - as Pogo says, "we have met the enemy and it is us" - direct democracy in the form of the initiative. After 9/11 the public loved the police and firefighters, so we gave hugely generous pensions which bankrupted cities; we love nurses, so we voted in mandatory low nurse-patient ratios to no effect; in the worst of times we supported the first $10 billion installment on a fast train between the Bay Area and Los Angeles. (To put this amount into perspective, the voters will soon be asked to approve an $11 billion bond to resolve a decades-long survival dispute between cities, farmers, and salmon.) And on and on. In their wisdom, the Founding Fathers designed a Republic with responsible elected officials making decisions which required prioritization and connected the policy with the financing. In California, "we, the people" decide on what feels good at the moment.
- Insatiability is a national problem as well. Some improvements can be made by just being smarter - drastically reducing the prison population in California, for example - but in the end there have to be limits and trade-offs. This is sometimes described as a choice between the "nice to have's" and the "must have's". A better prism for the coming more difficult times is a choice between consumption (such as health care) or investment (such as education or infrastructure). This also becomes a generational question - the country will be much better off if it takes quality k-12 education over free health care for the Boomers.
Maybe the protesting students in Berkeley will eventually connect the dots.
This week's "bonus" is an excellent article from Britain's Mail in which several prominent scientists discuss the global cold period of up to 20 or 30 years which will result from deep ocean temperature patterns. Lets see how many grants they get to support their work.
And a brief mention of the election for "Ted Kennedy's seat" is in order. If you live in Massachusetts, please vote; if you have friends or relatives there, please contact them. The best discussion is in the reader comments to a blathering op-ed in the leftist Boston Globe - all favoring Scott Brown. (Forget the propaganda, click on the comments.)
bill bowen - 1/15/10