I had to do a double take at the frontpage story in the Wall Street Journal a couple days ago with the headline “California’s Boom Masks State’s Uneven Recovery.” Boom??? What boom? What “recovery”? What are they smoking at the headline desk of the Journal? The story is deeply confused, saying in the lede that “California added jobs faster than the rest of the nation over the past year,” but then including the following chart that shows California gaining jobs “at a more sluggish pace” than the rest of the nation.
It is easy to be confused about California. The coastal regions, where I have lately relocated after a decade in Washington DC, appear to be doing fine—on the surface at least. Yes, home prices in Palo Alto and west LA seem to be strong, but I notice that the glossy local real estate mags for the central coast are notably thinner than usual, and prices appear soft, as though sellers have gotten discouraged. And here in my tourist coastal village of Cambria, although the tourist trade looks busy as usual, there are lots more empty commercial, office, and retail spaces than I can ever remember. If this is “recovery,” I’d hate to see what a downturn looks like. People here just seem to be hanging on, waiting for real growth to resume.
Dickens needs to be updated: it’s a tale of two states. As Victor Davis Hansen writes, there is no California any more: “Driving across California is like going from Mississippi to Massachusetts without ever crossing a state line.” But even the coastal enclaves show signs of weakness. The Journal notes that even Silicon Valley is showing weaknesses. There have been considerable layoffs in the old-line semiconductor industry. True, Apple is about to open a new facility with 3,600 jobs—in Texas. Jerry Brown is was counting on the Facebook IPO to provide a fillip to the state’s coffers through capital gains taxes like the good old days of the Internet bubble of the 1990s, but with the Facebook faceplant, that is proving to be another wistful dream. So instead Jerry hopes to raise income taxes on—wait for it—just the rich, in a ballot initiative this November. He’ll pitch it as the only way to avoid deep cuts to schools, public safety, and so forth, and I hope the opponents of the measure will have the wit to show renderings of the high-speed rail to nowhere that the state’s voters have turned against as a sign of Brown’s real tax and spend priorities.
Robert J. Cristino points out at NewGeography.com that California is rapidly becoming “the new Detroit,” with this important parallel:
Like Detroit, California now has one party rule. The Democrats of California did not need a single Republican vote to pass their budget. Governor Brown’s plan is to address the nation’s largest deficit by raising taxes instead of cutting spending. If passed, the deficit would drop from $20 billion to a mere $16 billion. The budget does nothing to cure the systemic problems of a bloated bureaucracy. It does not eliminate one of California’s 519 state agencies.
So why in the world would any sensible person come back to this dysfunctional place? Well, California still has what economists call “exploitable asymmetries,” that is, its climate and beauty mean the rapacious state can extract higher costs from people willing to pay a premium to live here, than, say, Arkansas or Michigan. You can make it just fine here if you have an occupation (like writing and blogging for Power Line) that doesn’t require a permit from state or local government. But California long ago passed the point of equilibrium, and as long as it remains determined to have a Mediterranean fiscal policy to match its Mediterranean climate, it will continue to slide past Greece to becoming Detroit with sunshine.
And now, off to lunch at Big Sur with another California ex-pat, Michael Anton.