The Peoples' Republic of California

Anyone looking for reasons California is losing businesses and jobs to neighboring states, especially Texas, it's all here in this City Journal article..   Essentially the article confirms California as  "a state that has the highest corporate income-tax rate in the western U.S.; that the Tax Foundation ranks as 48th in the nation for its business tax climate; that the American Tort Reform Foundation ranks second from the top in its list of “judicial hellholes”; and that CEO Magazine has named for eight years running the worst state in the nation in which to do business".  Not exactly a calling card list of pluses for attracting job producing companies to  the state.  Bottom line, California has a dysfunctional political system at all levels; it has a corrupt and inept media; it has runaway public employee unions; it has a broken education system; and an inadequate infrastructure.  That's the short list.  It does have the best weather in the country and maybe the world.

California's budget dilemma

The State of California's controller, John Chiang, recently visited the Westlake Village area and gave a talk about the budget problems he faces and the future prospects for the state.  According to the local paper, Acorn, the controller talked about how the real estate crash of '07 caused a huge shortfall in revenues and an inability to meet the obligations of the state, predicting "It's going to be a rough couple of years", before things improve.  Chiang went on to discuss how the state's future depends on the skill set of the population (education system), financial capital and infrastructure, are the most important elements of the California economy and that all three of these components are now severely weakened by this crises.  He also talks about how Californians were living beyond their means before the crises and how the state will be in even greater trouble if commodity prices increase and consumer spending decreases.  Okay, all this analysis is interesting, at least to him, but what is the state doing to bring expenditures in line with revenues and what is it doing to address the outrageous stranglehold the public service unions exert over the economy, a condition that has been a growing issue for decades?  Not a peep!  Chiang offers no advice on getting the unions under control nor how to address the pension fund shortfall that represents a claim on taxpayers that for the present, at least, dwarfs everything else he talked about.  This City Journal piece suggests some of the issues Chiang and his cohorts should be talking about because they are immediate and if they don't get addressed there will be no money for any of the big picture issues he spent his time addressing.  What we're seeing here is a public official, in office as a choice of a governor who in turn is in office as a result of union financing and support.  Think these guys are going to get a handle on the really big problem?  It's pretty clear from Chiang's presentation they would rather talk about macro economic issues than address the union issue.

ADDED: This City Journal piece sets the record right with respect to exactly how much the 1.85 million state and local government employees are costing the rest of us.  There is no way this huge imbalance can or will continue.

California and the recession

Victor Davis Hanson is a practical, intellectual farmer, much like say Thomas Jefferson without the same political office holding aspirations. What's interesting about Hanson is his understanding of the macro economics of the micro economic environment in which he finds himself in Central California.  His comments on the "wealth" of the unemployed, their access to various government social safety net programs and not least their ability to operate in a vast cash economy in which they pay no taxes on part time work (yet remain the beneficiaries of these government programs) and finally their access to credit lines and vouchers for housing and food stamps.  Hanson contrasts the "affluence" of the unemployed poor with the working poor of his grandparents 1930's generation.  He also talks about the reasons why industry is not moving into this area to take advantage of this idle and presumably cheap source of labor singling  out the state taxes and regulatory environment as principal culprits.  All in all it's a dangerous brew of unemployment and government largesse that cannot continue since we now know the socialist politicians have finally run out of other peoples's money and the prospects for jobs remain weak. Hanson thinks we are living in "dangerous times" quite possibly leading to major social upheaval on the order of magnitude that brought on the horror of the Soviet Union.  Let's hope this draconian perspective is overstated and yet until the time when we return to a system that values work over handouts and freebies to big swaths of the population, he just may be right.  After all, if the government no longer has the ability to buy a lot of people's comfy lifestyle, those people are liable to get very angry sooner or later.  Hanson's article is here.

California in trouble

Victor Davis Hanson points out the obvious.  Yuk!

California vs Texas

There's much written these days about the rise of Texas and the fall of California, at least in terms of their respective economies.  California will always win the weather competition with any state in the union, hands down.  As my former business partner and true wit used to say, "There's only one reason to live in California, and that's the weather, but that's a very good reason".  He makes a good point when you consider California has about 330 good to perfect days per year and just enough rain to clean things up a couple of times each year.  However, and this is a big however, politically things have definitely gotten worse in California since we moved here in 1973.  At this point in time the state is being run by a dysfunctional bunch of corrupt and hack pols who are in the pocket of unions and the "greens".  It's been well documented that the unionized government workforce is bankrupting the state with its outsized pay and regulatory schemes.  Imagine a scenario where a state in big fiscal trouble rehires an old governor whose policies from 30 years ago led to the states present dilemma.  Without the strength of powerful unions allied with special interests this election would never happen.  California is truly in the hands of a thugocracy not at all unlike the one that ran the former Soviet Union into the ground in the 90's.  Things will only get worse in California, already at the bottom of the list of states with the worst business environment.  Look out below!

ADDED: 02/10/11: Victor Davis Hanson, a California farmer/philosopher/historian of note, has written perhaps the definitive piece on the California nightmare that is its present condition and dilemma.  If one thinks Jerry Brown, who contributed mightily to this nightmare, is capable of solving California's problems, then I suggest that must be the same person (s) who voted for Obama in '08.  Obama and Brown are birds of a feather, and neither of them have a clue how to solve the country/state's problems.