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So more states will be Californicated.
Let's pray that California is not an indicator for the entire US economy.
http://www.forbes.com/2009/07/06/eco...alifornia.html
Right now California's economy is moribund, and the prospects for a quick turnaround are not good. Unable to pay its bills, the state is issuing IOUs; its once strong credit rating has collapsed.
The state that once boasted the seventh-largest gross domestic product in the world is looking less like a celebrated global innovator and more like a fiscal basket case along the lines of Argentina or Latvia.
It took some amazing incompetence to toss this best-endowed of places down into the dustbin of history. Yet conventional wisdom views the crisis largely as a legacy of Proposition 13, which in effect capped only taxes.
This lets too many malefactors off the hook. I covered the Proposition 13 campaign for the Washington Post and examined its aftermath up close. It passed because California was running huge surpluses at the time, even as soaring property taxes were driving people from their homes.
Admittedly it was a crude instrument, but by limiting those property taxes Proposition 13 managed to save people's houses. To the surprise of many prognosticators, the state government did not go out of business. It has continued to expand faster than either its income or population. Between 2003 and 2007, spending grew 31%, compared with a 5% population increase. Today the overall tax burden as percent of state income, according to the Tax Foundation, has risen to the sixth-highest in the nation.
The media and political pundits refuse to see this gap between the state's budget and its ability to pay as an essential issue. It is. (This is not to say structural reform is not needed. I would support, for example, reforming some of the unintended ill-effects of Proposition 13 that weakened local government and left control of the budget to Sacramento.)
But the fundamental problem remains. California's economy--once wondrously diverse with aerospace, high-tech, agriculture and international trade--has run aground. Burdened by taxes and ever-growing regulation, the state is routinely rated by executives as having among the worst business climates in the nation. No surprise, then, that California's jobs engine has sputtered, and it may be heading toward 15% unemployment.
So if we are to assign blame, let's not start with the poor, old anti-tax activist Howard Jarvis (who helped pass Proposition 13 and passed away over 20 years ago), but with the bigger culprits behind California's fall. Here are five contenders:
1. Arnold Schwarzenegger
The Terminator came to power with the support of much of the middle class and business community. But since taking office, he's resembled not the single-minded character for which he's famous but rather someone with multiple personalities.
First, he played the governator, a tough guy ready to blow up the dysfunctional structure of government. He picked a street fight against all the powerful liberal interest groups. But the meathead lacked his hero Ronald Reagan's communication skills and political focus. Defeated in a series of initiative battles, he was left bleeding the streets by those who he had once labeled "girlie men."
Next Arnold quickly discovered his feminine side, becoming a kinder, ultra-green terminator. He waxed poetic about California's special mission as the earth's guardian. While the housing bubble was filling the state coffers, he believed the delusions of his chief financial adviser, San Francisco investment banker David Crane, that California represented "ground zero for creative destruction."
Yet over the past few years there's been more destruction than creation. Employment in high-tech fields has stagnated (See related story, "Best Cities For Technology Jobs") while there have been huge setbacks in the construction, manufacturing, warehousing and agricultural sectors.
Driven away by strict regulations, businesses take their jobs outside California even in relatively good times. Indeed, according to a recent Milken Ins ute report, between 2000 and 2007 California lost nearly 400,000 manufacturing jobs. All that time, industrial employment was growing in major compe ive rivals like Texas and Arizona.
With the state reeling, Arnold has decided, once again, to try out a new part. Now he's posturing as the strong man who stands up to dominant liberal interests. But few on the left, few on the right or few in the middle take him seriously anymore. He may still earn acclaim from Manhattan media offices or Barack Obama's EPA, but in his home state he looks more an over-sized lame duck, quacking meaninglessly for the cameras.
2. The Public Sector
Who needs an economy when you have fat pensions and almost unlimited political power? That's the mentality of California's 356,000 workers and their unions, who make up the best-organized, best-funded and most powerful interest group in the state.
State government continued to expand in size even when anyone with a room-temperature IQ knew California was headed for a massive financial meltdown. Scattered layoffs and the short-term salary givebacks now being considered won't cure the core problem: an overgenerous retirement system. The unfunded liabilities for these employees' generous pensions are now estimated at over $200 billion.
The people who preside over these pensions represent the apex of this labor aristocracy. This year two of the biggest public pension funds, CalPERS and CalSTERS, handed out six-figure bonuses to its top executives even though they had lost workers billions of dollars.
Almost no one dares suggest trimming the pension funds, particularly Democrats who are often pawns of the public unions. Some reforms on the table, like gutting the two-thirds majority required to pass the budget, would effectively hand these unions keys to the treasury.
3. The Environment
Obama holds up California's environmental policy as a model for the nation. May God protect the rest of the country. California's environmental activists once did an enviable job protecting our coasts and mountains, expanding public lands and working to improve water and air resources. But now, like sailors who have taken possession of a distillery, they have gotten drunk on power and now rampage through every part of the economy.
In California today, everyone who makes a buck in the private sector--from developers and manufacturers to energy producers and farmers--cringes in fear of draconian regulations in the name of protecting the environment. The activists don't much care, since they get their money from trust-funders and their nonprofits. The losers are California's middle and working classes, the people who drive trucks, who work in factories and warehouses or who have white-collar jobs tied to these industries.
Historically, many of these environmentally unfriendly jobs have been sources of upward mobility for Latino immigrants. Latinos also make up the vast majority of workers in the rich Central Valley. Large swaths of this area are being de-developed back to desert--due less to a mild drought than to regulations designed to save obscure fish species in the state's delta. Over 450,000 acres have already been allowed to go fallow. Nearly 30,000 agriculture jobs--held mostly by Latinos--were lost in the month of May alone. Unemployment, which is at a 17% rate across the Valley, reaches upward of 40% in some towns such as Mendota.
4. The Business Community
This insanity has been enabled by a lack of strong opposition to it. One potential source--California's business leadership--has become progressively more feeble over the past generation. Some members of the business elite, like those who work in Hollywood and Silicon Valley, tend to be too self-referential and complacent to care about the bigger issues. Others have either given up or are afraid to oppose the dominant forces of the environmental activists and the public sector.
Theoretically, according to business consultant Larry Kosmont, business should be able to make a strong case, particularly with the growing Latino caucus in the legislature. "You have all these job losses in Latino districts represented by Latino legislators who don't realize what they are doing to their own people," he says. "They have forgotten there's an economy to think about."
But so far California's business executives have failed to adopt a strategy to make this case to the public. Nor can they count on the largely clueless Republicans for support, since GOP members are often too narrowly identified as anti-tax and anti-immigration zealots to make much of a case with the mainstream voter. "The business community is so afraid they are keeping their heads down," observes Ross DeVol, director of regional economics at the Milken Ins ute. "I feel they if they keep this up much longer, they won't have heads."
5. Californians
At some point Californians--the ones paying the bills and getting little in return--need to rouse themselves. The problem could be demographic. Over the past few years much of our middle class has fled the state, including a growing number to "dust bowl" states like Oklahoma, Texas and Arkansas from which so many Californians trace their roots.
The last hope lies with those of us still enamored with California. We have allowed ourselves to be ruled by a motley alliance of self-righteous zealots, fools and cowards; now we must do something. Some think the solution is reining in citizens' power by using the jury pool to staff a state convention, as proposed by the Bay Area Council, or finding ways to undermine the initiative system, which would remove critical checks on legislative power.
We should, however, be very cautious about handing more power to the state's leaders. With our acquiescence, they have led this most blessed state toward utter ruin. Structural reforms alone, however necessary, won't turn around the economy's fundamental problems and help California reclaim its role as a productive driver of the American dream.
So more states will be Californicated.
I think CA is a case study as to what can happen when you ins utionalize environmental fanatacism.
...and when you deregulate energy and costs suddenly go through the roof when the honest people at Enron decide to give "special pricings".
Strangely enough, CA is bankrupt, TX is not.
But not even this article reduces California's problems to such an extent. It's just one of several factors. So really, it's a case study for a confluence of events that has screwed them pretty badly. Environmentalists are not unilaterally bankrupting states, not even California.
Enron got what they deserved, but California didn't do themselves any favors there either. By not building any new power plants for something like 15 years they really set themselves up to be held hostage.
I don't think it's the ONLY thing that did them in, just a major factor.
So retail price caps are part of deregulation?
Strangely enough, California deregulated energy before Enron collapsed and Texas after.
Last edited by DMX7; 07-08-2009 at 12:24 AM.
What environmental fanaticism has been ins utionalized in California?
LOL, what party does Arnold Schwarzenegger belong to again?
You live there and you don't know?
Are you attempting to make a point? I don't care what letter comes after their name. If you're incompetent, you're incompetent -- period.
The only thing I've seen around here are tougher smog laws and ins utionalized recycle bins. Same thing you have in Texas.
California's state government is bankrupt, not its economy. Its economy is not is good shape, but that's true across the country.
Big banks will stop accepting California's IOUs starting Friday.
Those smog laws make everything you drive, buy, build or make in California more expensive. While not the entire cause of California's ills, they play a big part.
Another example of California's burdonsome regulations making life difficult, getting new neighborhoods approved, permitted and built now takes years and that helped create the housing bubble. New houses couldn't get built fast enough thus helping to push up prices of the existing ones.
A RINO governor + liberal policies == doom.
I haven't paid much attention to California's dilemma, but I was under the impression he was a fiscal conservative, but just couldn't get congress to play along. Didn't he use his executive powers to freeze government employee wages, and other cost savings things of that nature?
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