As Jerry Brown Touts California In China, Its Citizens Pack Their Bags (Forbes.com) April 11, 2013Posted by daviddavenport in Op/Eds.
While Governor Jerry Brown is in China touting the state’s rebound and recovery, many Californians are busy packing their bags for a move to Texas, Nevada or Arizona. Why? Because it appears that the once-Golden State may finally be overpriced, underperforming and ungovernable.
Is it possible that one state has managed to top every 50-state category on the following shameful list?
* Highest taxes (gasoline, sales and top bracket of income taxes)
* Lowest bond rating
* Highest poverty rate (at 23.5%, the home of 1/3 of those in poverty in U.S.)
* Highest unemployment rate (tied with Mississippi and Nevada at 9.6%)
* Highest energy costs
* Worst state to do business (as judged by Chief Executive magazine 8 years running)
* Most cities going bankrupt
* Prison system so poorly run it has been taken over by a federal judge
And California has managed to do this during its rebound, its good years, according to Jerry Brown who, if not Governor Moonbeam in his second coming as the state’s leader, is clearly not in touch with life on Planet California.
Although there is argument about this, there shouldn’t be: people are leaving the state. The data shows that there has been a net out-migration from California to other states since 1990, balanced for awhile by immigration from other countries. But by 2005 that had eroded, too, with birth rates in the state also dropping at an incredible rate. Over the past two decades, a net 3.4 million people have left the state. And this is before the 2013 increase in income tax rates which prompted even liberal TV talker Bill Maher to complain that “it’s outrageous what we (millionaires) are paying” in taxes, “over 50%,” warning “liberals, you could actually lose me.”
Looking more deeply at the out-migration and its message, one big issue is clearly jobs. So far, it has been primarily middle and lower income people who are leaving, and it is surely no coincidence that their departure tracks the loss of jobs in California. Even when companies do not leave the state altogether, they often open new manufacturing jobs elsewhere because it’s so difficult to get permits in California. It’s also no coincidence that immigration from Mexico has slowed dramatically since even Mexico’s unemployment rate is now lower than California’s. Housing in California is 2.7 times more expensive than in Texas and, with home prices picking up, that will only get worse.
But if jobs and housing launched Phase I of “California, There We Go,” taxes are at the forefront of Phase II which is only now picking up steam. Since California’s increase in income taxes only kicked in during January of this year, no data is yet available, but everyone in contact with business owners and wealthy Californians knows someone who is moving to Texas, Florida, Arizona and elsewhere. And even if the numbers are not large, the loss of every one of these wealthy Californians really hurts because they pay so much of the freight. In 2010, 1% of Californians paid over 50% of the state income taxes, and that will grow significantly under the new tax regime. Foolishly California continues to live off a highly volatile income and sales tax system, with the legislature adding spending in good times, but then through welfare also in bad times. It’s a formula for an annual state budget crisis, which California has endured for years.
Which brings us to politics and governance, an underlying contributor to most of the state’s problems. The legislature, with an “improved” 34% approval rating, is able to accomplish almost nothing, even though one party has dominated it for 40 years (both houses have been ruled by Democrats for all but 2 of those years and they now have a 2/3 majority). Californians have resorted to budgeting at the ballot box, passing initiatives that mandate how precious dollars must be spent. Two unions, the teachers and prison guards, exert overwhelming political power in their own interest. Even while Governor Brown brags of a balanced budget, he ignores the off-budget pension fund deficit which threatens loss of government services and closure of parks and libraries, prompts municipal bankruptcies, and keeps the state deeply in debt. As former legislator Joe Nation puts it, we’ve only seen “the tip of the iceberg” on this problem.
Former president Jimmy Carter once said, “Whatever starts in California unfortunately has an inclination to spread.” And that is being encouraged by Jerry Brown and others. Incredibly columnist Paul Krugman recently pointed to California as a blue state governance success. Do you really want this to spread to your state? I think not. The more powerful message is where people are going when they leave states like California and New York, two states ranked among the “least free” in a recent study by the Mercatus Institute. They are going to red states where, according to Mercatus, there is greater individual freedom, less government regulation and lower taxes. Earth to Jerry Brown: California, you have a problem.
Please click on the link to view the op/ed on Forbes.com: http://www.forbes.com/sites/daviddavenport/2013/04/11/as-jerry-brown-touts-california-in-china-its-citizens-pack-their-bags/