Thursday, September 8, 2011

Joel Kotkin on California's Forgotten Middle Class

We've been meaning to write about this thoroughly depressing Daily Beast article from Chapman University fellow Joel Kotkin all week. In order to explain why "California is no longer the Golden State," Kotkin points to the fact that the state is currently in the grip of "public-employee unions, green jihadis, and Democratic machine politicians." In the process, he puts his finger squarely on the heart of the state's problems.

Over time, organized labor and liberal politicians in California have evolved an ever more incestuous relationship, enriching themselves and advancing their own interests at others' expense. With time, this relationship has become increasingly difficult to pay for, and both taxpayers and businesses have been asked to pay the price while the state has pulled out all the stops to forestall sacrifices from unions. Back in 1999, the California Legislature made the fateful decision to award lucrative "3-50" pensions to most state workers, and they've never been asked to make concessions on them. And we just spent all spring hearing pleas for extending some of the highest (and by far the most regressive) taxes in the country in the face of a brutal economic recession. Even today, the state Senate was beating the drum for higher business taxes, and the Governor announced a tentative agreement to offset some tax cuts with $1 billion in corporate tax hikes. That is, with as much as a third of California out of work and a persistent 12% unemployment rate, the state's leadership wants to raise taxes and keep the good times rolling for their friends in organized labor. Meanwhile, Kotkin's "green jihadis" are moving on from their success in destroying agriculture in the western Central Valley to things like destroying wine cultivation in Sonoma County and groundwater supplies in places like Salinas. They've gotten a jobs-destroying cap and trade law passed, as well as a mandate to produce 33% of California's energy from renewable sources by 2020. These laws bear much of the responsibility for the state's disastrous efforts to will a green-technology economy to life via taxpayer subsidy. Environmental regulations are also a prominent reason why California's business climate is regarded as universally awful.

Taken together, the environmental lobby's push to rid the planet of the scourge of humanity and Sacramento's bottomless generosity toward organized labor group have crushed the state's middle class, a group that never really recovered from the deep recession brought on by the end of the Cold War. More to the point, middle class California has seldom appreciated how deeply antagonistic the state's elites are to its best interests. Yet the results are hard to argue with: thousands of farm jobs destroyed in the Central Valley by water restrictions, thousands of e-commerce businesses wiped out by the Amazon Tax, perpetual 12% unemployment, the home state of Silicon Valley being dead last in new business creation in 2010, and an unfunded public pension liability topping half a trillion dollars. These things aren't falling on the political class or organized labor, nor are they falling on the supremely well-connected environmentalists, or on a tiny number of extremely wealthy Californians in places like Palo Alto and Newport Beach; they fall on the vast number of Californians squeezed by high taxes, an exorbitant cost of living, and tenuous job prospects.

This state of affairs only offers middle-class Californians one real option: going Galt. And they have. According to Kotkin, "outmigration rates from places like Los Angeles and the Bay Area now rival those of such cities as Detroit." And you can hardly blame them. For the ambitious and mobile, places like Texas, North Carolina, and Colorado promise more opportunity. While people like Gavin Newsom point to the Golden State's startup-oriented technology economy, only a handful of people with highly specialized skills are coming to work at places like Facebook and Google, and Santa Clara County's unemployment rate still sits around 10%. And much of California, particularly its coast, is getting older; Kotkin notes that Marin County is one of the oldest urban county in the nation, with a median age of 44. Until the Golden State returns to being a place where one can hope to earn a decent living without political connections, its decline can only be expected to continue.

For a similar piece of gloom from Golden State Liberty, see here.

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