City Journal Spring 2014

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Wendell Cox
The Long Stall « Back to Story

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re: dan tynnan who said: "This article has been brought to you by Billionaires United Against Clean Air and Water, otherwise known as the Hertog/Simon Fund."

Dan, do some research. Failed states are the worst polluters, no clean water, urine and feces run down streets because the water treatment plant doesn't work or doesn't exist.

If you want to keep the good clean water, public health, you need an economy. Drive the wage earners and companies out of California and you will have the dirt, filth, sickness of a 3rd world country.

Utopia is a dream, but you can keep clean air and water, providing you make California a state where businesses are glad to operate. If you demonize and drive away the latter, you will loses the former.
to buy convert dvd to blackberry to take huge discount for more
This is a very well-researched and well-written article, but it incorrectly dates the slide in good-paying jobs to the 2000s.
Beginning in the late 1980s and growing steadily in the 1990s, Corporate 500 companies in California first began in-sourcing foreign labor to drive down wages for engineers, programmers and other high-tech jobs. When the H1-B program became too burdensome, these companies simply set up shop in India, etc. Much of California's loss in revenue is directly caused by the removal of these good-paying jobs, for which these skilled professionals paid taxes. The replacement jobs - for those who haven't moved out of state - pay far less, so there is correspondingly less in payroll and income taxes.
While California has definitely become anti-business, business has become increasingly hostile to paying skilled white-collar professionals in line with the costs of their education and experience. As long as the latter continues to be ignored, California's problems will continue to grow, as well as the documented costs of educating and supporting illegal immigrants, many of whom work in cash businesses and send money to their home countries. Big Business will continue to outsource and destroy skilled labor in this state - and since many large corporations pay no taxes at all - who do these arm-chair researchers and politicians expect to support our infrastructure?
May as well say it again - all that the Democrats do to bankrupt California is intentional since it drives away Republicans and solidifies their hold on power.

As long as Democrats control most of the media and therefore the flow of information, and how that information is perceived they will continue to get away with beggering the community.

Those who want to change this must understand that it starts with acquiring the means of communication. Maybe a conservative channel?
This article has been brought to you by Billionaires United Against Clean Air and Water, otherwise known as the Hertog/Simon Fund.

http://en.wikipedia.org/wiki/Roger_Hertog
We have been hemorging jobs since Clinton granted Favored Nation Status to China in 97 and declaired that America has change from a Agra/Manufacturing based economy to a serviced based economy. I am a Mold Maker, that is a tool making profession. Few intelectuals know how things are made and consider us skilled factory workers. Trust me even if you have a Phd. you can not do what I do, it takes 8-10 years of working 45-55 hour weeks to master this industral craft. It used to pay good too but we now have to compete with $5.00 a day workers. In Injection molding alone this State has gone bare and Mexico is not listed on the above charts and I know of at leasst 10 very large companies that have gone there. What is so attacvtive about a 3rd world country in near civil war to draw companies from here? Is it really just cheeper wages? We will never recover unless we regain a sembiance of balance in our economy and a big part of this is Investor Nation. What is good for the investor is not necissarrily good for the American worker and no I do not recomend protectionism but we must incentivize the State. The stock market is an indicator of a healthy economy not the driving force. Forget those that have moved it costs millions to move these companies but to retain what we have and attract start ups and expansion. Apple, Steve Jobs, had his product made out of country did he not. Got any idea how many injection molds are involved in the I-anything? I've heard some pundants claim that construction will save us. A construction project gets completed and all are out of work untill another starts up, that will not sustain an economy eventually we run out of land to develope and for homes you need a population that can afford to buy a house, so you should build for what your local economy can afford so you have sales not a batch of McMansions that sit empty. I've read that in Orange County the Big Corporations can not bring in entry level executives because they can not afford to pay them enopugh to live in Orange County. Yes this State is a mess but untill ALL the problems are recognized all we will do is run to fix one thing while 5 things go unnoticed. And Steve Greenhut should not say the GOP needs to rethink immagration objections, they are only concerned with ILlegal immagration and I do not understand why that is so horrible.
I have been a resident of California since 1973. I worked in the logging industry which was one of the first industries hit by the environmental frenzy. True, new regulations such as the one limiting clear cuts were needed.

The problem: one new regulation after another was piled on and the industry collapsed in the early 2000"s. Environmentalists wanted to live in wood houses, but didn't want them made from California trees.

It has always upset me that the aforementioned paragraph was true for all aspects of industry. They want it, but do not want it produced in their State. Water resources, farm production, meat producers, electricity and so on have all been destroyed and continue to be. And, all of the above products are still provided to them as they desire. The water supply is being stolen from the northern area of the State. The swimming pools are still being filled year around.

I am a middle class man and worked very hard my entire life. That was fine, and I am proud of it, but where are the jobs for the middle class going? I know what happened to them in this State. They went anywhere but here. But still the government spending increases, and the taxes rise to protect the lazy, and the public sector jobs which continue to grow.
California is a lesson to all the other states. Like Cuba, it is a museum of the failure of socialism.
I gave up Cali late in '08. I re-enlisted in the Army after a break in service because all the jobs have dried up and blown away. I'm one of those people who migrated out but haven't quiet changed my residency. Either way, Cali isn't going to improve for a long time. The fundamentals aren't simply there for a reversal.
Funny thing, decline of defense industry not mentioned. Downturn in 92' stopped flow of talent into CA. Outflow of talent from defense to small business was net plus before 2000. Without huge Federal Defense input to counter bad CA state policy small business ground to a halt.
I was born in the Bay Area and no longer live there. The entire area -- indeed, all the urban areas in California -- have become a giant cloaca, with the verdict-first-trial-later inmates running all the public institutions. Incomprehensibly endorsed by a majority of voters, this childish behavior will continue until reality intrudes, which it very shortly will. Walking on the ceiling has its attractions, but defies gravity.
Nothing any thinking person didn't already know about CA's governorship. The logic of anti-self-interest and anti-captalism ("The Age of Envy" as Ayn Rand calls it) comes home to rest.
What does the 26 cities with a population over 250K that has the greatest poverty rate in the USA have in common?

All are heavy unionized and all have been controlled by Democrats for many many years!

Does this fact and the Blue States bordering on Bankruptcy penetrate the mental fog surrounding. the Liberal mind of most Democrat voters?

Of Course NOT!

Never have so many been oblivious to the obvious.

They still think the Democrat Politicians are concerned about their Welfare.

The same party and polities that reduced the black population into welfare bondage and the most dependable Democrat voters will work just as well for the rest of the population.

Just reduced them to poverty and Depending on Welfare and you have a Democrat voter for life!
President Zero and the Democrats are pursuing the same polities and spreading poverty for the rest of the Nation that have turned those cities and blue States like Calif., Illinois, New York etc. into basket cases and made them dependable votes for the Democrats!

The more the Democrats can spread Poverty, Welfare and the Entitlement mentality the more Democrat voters they make and the closer they get to a Third World Socialist Paradise controlled Lock, Stock and Barrel by the Democrat party!
Mike

Its time to move-Colorado maybe !!
@Kent Deines: Yes, the entire nation is certainly in trouble. California's steep decline has been even more severe because it has taken place within terrible circumstances. The state's predicament accelerates, too, as its proportion of productive to needy residents continuously shrinks.

I suspect that the California politicians cannot be so stupid as not to see what's happening. Some probably secretly applaud the disaster, but most figure Washington will view their state as "too big to fail" and come to the rescue.

As for why Nevada isn't flourishing, remember that though it adjoins California and like the Golden State is practically run by powerful labor unions, its geography and economy are quite different.

All 50 states are suffering as the various federal and state vote-buying schemes crash and burn. However, you will find generally that the states which most restrict liberty, tax the highest, regulate the most, and most reward sloth and punish industry are the worst off: California, New Jersey, New York, and Illinois.

In my opinion, the people of those states have no gripe coming. They have consistently elected and re-elected people who did exactly what they promised to do once in office.

Note that New Jersey, New York, and Illinois all lost electoral votes after the 2000 census. California would have lost some had it not been for the enormous migration from Mexico.

The old industrial belt from Massachusetts through Iowa lost many electoral votes. States that gained: Texas, Florida, Georgia, South Carolina, Arizona, Utah, and . . . Nevada.
Thanks to public employee labor unions, enviro-fascists, and pandering to illegals, California now has the government it deserves:
Corrupt, unresponsive, massive, lazy, apathetic.

Mexico will soon surpass California.
as an environmental professional with a very large co., for 15 years ( 95-2010, apr 2010 my layoff date) we watched as dept began to fret and worry over money and very heavy regulatory burdens even during the halcyon 90's, we plotted our way out of Cali.

By 2005, no manufacturing was left, no R&D even, it all went to Oregon and Arizona. over 3500 jobs and another oh, 500-700 ancillary jobs as well, poof.
Hopefully states will pass laws that prevent the dumba$$ voters from California from moving into their states. Californian's are like locusts
I am so tired of bailouts, and we need not bailout California. They elected Jerry Brown (D) again to run the state, so lets let him run the state.
If it goes bankrupt, then so be it.
Why do I not care? I am tired of worrying about how a state will make it when they keep doing the WRONG things. The economy is the fault of the dems, and I really don't care anymore!
California's decline can be traced to the ascendance of the extreme left in it politics. In 2010 it had one last shot at turning things around with two moderate Republican businesswomen running for Governor and Senate, but it rejected both of them in favor of Gov Moonbeam, and one of the most worthless extreme left wing Senators in the U.S. Senate. That showed anybody interested that the corrupt deal between the public employee unions and the arrogant left wing Elites that control the state was in firm control of the state, and it would continue on it path to economic disaster. And it has! If you own a business or work for a living get out if you can. There are other states where hard working people are valued and not looked upon as sheep to be fleeced. And pray that in Nov 2012 our nation turns from following Obama down the same path!
Yes, but Jerry Brown has put forth a pension reform plan! It will go nowhere, by design, since Sacramento is owned and operated by government employees and their unions. Watch what they do not what they say or propose. This is no place to do business
Gov. Brown says recessions come and go, but this one was caused not by the vagaries of economics, but by bad policies, policies which will not be changed by this governor and the Democrat legislature. So don't look to see things change until Sacramento changes.
This is not just a California phenomenon. If you compare US job creation from 1950 until 2000 to what has happened since, we have yet to come close to recovering from the 2000 recession, much less the 2008 one and are about 25 million jobs, nearly 20%, short of what would have been if that pre-2000 job growth had continued.

This says that it is a nation wide issue. Also, if the issue is taxes and regulation, why isn't Nevada, with no income tax and few regulations, growing faster than Texas. Why does it have the highest unemployment rate in the nation? There is something else going on.
CA DOES have a business development plan. The only problem is that it's for Texas and AZ
I took my family to San Francisco for years until about 2006. We spent about 5-7k per visit. I couldn't take the Left Wing garbage from your State anymore and decided to stop giving you my money. I vacation elsewhere now and I am not the only one. I have two friends from San Jose who moved their companies to Texas and Utah respectively-and about 143 jobs. They are thrilled.
This gorgeous state is being killed, as it has for now two decades, too many illegals putting pressure on health, education, public safety. Then there are the welfare mentalities and socialist leftists in NOCAL who keep putting in liberal Dems as leaders in Sac. and the Leg. They keep spending , taxing, regulating to kill off capitalism, to scam voters but keep their unions(CTA), minorities, and varied whackjob enviros, communists, and non-thinking youth who want free things such as education. With huge taxes and regs hitting business, why should they stay in Ca.??? It is time for voters in Ca. to simply throw out all the lib-socialists, be hurt for a bit by cutting spending, taxes and regs and stop giving all things free to their Dem BASE who think that Ca. is Eldorado. Enough.
The State Franchise Tax Board has been hassling small businesses for use tax incessantly and even demanding invoices for three years.
The Employment Development Dept has now required quarterly reporting of SDI and UI amounts which were formerly on a DE7 Annual Reconciliation and now required on a DE9 and DE9C.
This cost me personally $200 just to get new payroll software to calculate the wage bases etc on a quarterly basis instead of annual.

Then there are the sleazeball trial lawyer extortionists who have closed multiple small businesses including cafes and bookstores for infractions of the idiotic ADA requirements.
Some businesses have also had to close their bathrooms as it is economically not possible to create handicapped facilities in old buildings with small spaces.

Of course then there are pension spiking public servants such as the 50 y/o police captain retired on 180,000 a year plus benefits and the nonsense of every Marin County firefighter apply for disability retirement after their last promotion for "stress"

Add that to the hordes of illegal aliens and their anchor baby children requiring health and education benefits, California cannot possible be a First World state.
California the Golden state, Obama and the Democrats model for American future, is fast becoming the poster child for an bankrupt third world State!

An unholy alliance of Socialist Democrat politicians, Unions, and Illegal Aliens supporters are feasting at the trough of tax payers paid benefits while taxing & regulating business and the tax paying public into poverty.

The pandering of Left Wing Democrat Politicians to their constituency of Unions, Illegal Aliens and open border supporters, are driving business and citizens to other states & countries, while leaving the parasites & welfare leeches in an increasing bankrupt, crime ridden, dysfunctional state!

For years California has ignored economics 101 and imported Criminals, Uneducated Parasites, and poverty from Mexico, which increased Medical, Welfare, Crime, Prison, etc. & adding a estimated 22 billion per year to Calif. State expense to support the invading horde of Illegal Aliens while exporting business and educated tax payers.

Like all Socialist countries the results have been a astronomical increase in social welfare, schooling, prison cost etc. and a lowing of Living standards, Heath care, Education standards, Tax receipts & finally Bankruptcy.

The policies of Obama and Wash. DC Democrats are intent on following Calif. policies and Pro-Illegal Aliens, Pro-Unions and Anti-tax paying citizens and are endorsing the same socialist process of rewarding the Corrupt, Stupid, Foolish, Lazy, Greedy & Criminal while punishing the responsible, honest, law abiding & hard working citizens of American.

Failure to abide by our Constitution against invasion & enforce our Immigration laws and constraints on wages and benefits for public employees will result in turning the Golden State into MexiCalif and the end of the Calif. Dream and the beginning of the MexiCalif. Nightmare!

Amnesty & Citizenship as a reward for their invasion of the USA, with chain immigration will result in the rest of the USA turned into a Spanish speaking third world cesspool and follow California into a polluted, over populated, Spanish speaking, third world Nation of Crime, Corruption, Poverty, Cruelly & Misery modeled on Mexico!

This will result in a population depending on Welfare and the Democrat party, thus assuring the lock on power for the Socialist Democrat party of the United States of Mexico!
So long as every graph in this article divides the 16 years of data by including the year '2000' twice--as part of the first 8 years and also as part of the second 8 years--then how is the article reliable?
Every time a california politician talks about improving the busness climate they seem to believe adding another govt. employee to point businessmen to the proper rathole down which to throw their money is the needed solution. The smart ones want to make the rathole deposit slot larger.None of them want to get rid of the ratholes, and so it goes.
California voters have chosen what matters most to them: high taxes but lots of budget and debt spent on social programs and union member entitlements. All of the surrounding states are also quite happy to enjoy the tax generating businesses and good paying jobs migrating to our states. California voters, this is a win-win situation for all of us. Thanks for sharing.
Unfortunately, the lessons of California have not been learned in NY. Recent economic development councils in NY have not addressed reducing high taxes and onerous regulations, but instead have proposed government "partnerships" with business that business does not want. The move of CA jobs to TX and NC, too welcoming states, shows that jobs go with the flow.
Love all those enlightened Libs!!
I moved to California in 1985. The state where Ronald Reagan was from, that is where I wanted to be. 10yr later, I started a high tech company and peaked my Cal employment in 2006. Since then, the taxes and regulations have gotten the best of me. I've cut my Cal workforce by about 70%, hiring in other states. My other states are growing their business, my Cal office is still shrinking. They are too expensive.

I finally got over denial and admitted that California is no longer the state I moved to, so I personally moved recently to Texas. WOW! What a difference. I should have moved years ago. It is a great place for a business owner and to raise a family.

The reasons for we entrepreneurs and high income people leaving the state are exactly as Cox said. California clearly does not want people like us there. So we are leaving. And yes, as one commenter said referring to gun laws, personal freedoms are a part of it. California is sinking and its Socialist political environment makes it a one way trip. Get out while you still can.
A friend is building a home in Carmel for one of his children, and a home in Minneapolis for another. In Minneapolis, the permitting process took several weeks at a cost of several thousand dollars. In Carmel, it is two years and $200,000, and not done yet.

Californians get what you deserve.
Well-written, well documented article. I am grieved to see this once great state decline to a marxist state. It's like we've been living Occupy Wall Street for the last 10 years and it is destroying the state. People of California, it's time to rise up and throw out the democrats who have ruined what was once an amazing economic powerhouse that benefited everyone who wanted to work.
Reggie: Yes, apply protectionist tariffs. And when an undershirt costs $50 and a BIC pen $15, lots more Americans will have jobs.
if the state would lower its taxes, it could rectify itself. my husband and i would love to live in california. but we can't justify the 10.3% tax rate.

so california gets what it wants: people who don't care about high tax rates -- people who don't make enough to pay it.

and that's how businesses work, too. governments don't get more money by taxing more. that just makes people and businesses who would be hit by those taxes go elsewhere.
Unfortunately, the words illegal aliens never appear in your article. I live in LA; been here since 1964. I'm stuck here because I'm older, a lawyer and can't move my practice to some better place to live. There are many others in my boat and for differing reasons. I've no loyalty to this state as it's really a latinized place. Too many unintelligent, uneducated, uninteresting and uninterested aliens who have ruined the quality of life as well as diminishing wages for entry level citizens. The state is run by foreigners, for foeigners and, thus, can't respond as it used to. It will continue its move into the cesspool of the third world mini-nation.
Brin: LOL - aren't you missing Sponge Bob ?
How you could have missed adding illegals to the list of California's problems is beyond me.
The jobs went to China and India. The solution to this problem is to tax offshorers for each job they or their business partners move to Asia at the rate they would have paid an American to do the job. Same with H1Bs in America. Hire and H1B, then you get taxed for that job to make up the wage differential.
California is deserving what it gets. I was there two months ago, and the roads are in terrible shape compared to the early 2000s. I say let them stew in their liberalism.
Jerry Brown: “I’ve seen recessions. They come, they go. California always comes back.” Translation: "It doesn't really matter what you do or how much you spend or whose ox you gore. The economy will always rebound simply on its own according to universal laws, and everything will soon be fine. So go ahead and keep buying those votes."

No, it doesn't matter that the actuaries are predicting that you will soon hit the point where you can't possibly make good on the promises that you and your predecessors made. No sweat. The sun always rises, doesn't it?

Unfortunately, this absurd notion dominates the thinking in Washington, too. Both Bush and Obama operated on the principle of "What the heck? The past few Presidents spent like drunken sailors, and we're still here despite the dire predictions. I'm going to party, too."

Very few politicians realize how badly the nation has deteriorated over the past few decades. We now stand on the precipice and are leaning toward the abyss. All the signs point to catastrophe, and sooner rather than later. Not just in California.

fsilber: I left New Jersey a few years ago partly because of its gun laws, which are worse than California's, if that's possible. California is a patchwork of contradictions with regard to guns. In some (mostly rural) counties, the sheriffs issue CCW permits readily, while in the coastal counties, permits are practically impossible to obtain. Because a permit is good throughout the state, a rural resident visiting a coastal city might very well carry legally while a resident of that city cannot do so.

Of course the criminals, of which California has many, couldn't care less about the gun laws.
No surprise. Democratically controlled since Reagan. Evidence again that socialism does not work, particularly when alternative economic models are available to turn to nearby,

Sad, I live here and experience it every day. But not for long. I'm taking my high income to another place. Governor Moonbeam 2.0 is gonna have to get his taxes from someone else. This place is toast.
It's not a long stall. It's an aggressive anti-business agenda.
One other factor driving conservatives out of the state -- the insultingly offensive gun laws based on the premise that ordinary private citizens have no need to protect themselves from robbers on the street. Some self-employed types have been motivated to relocate for that reason alone. (I have no reason to believe this is more than a minor factor, but have you ever heard anyone say that they were glad to finally get to California so they could escape their previous state's permissive gun laws?)
Brin, Why would you even read an article requiring some thought and education? Spouting slogans found on Occupy trash sites doesn't mean they are true. We still have millions of employees who earn far more and live better than nearly any other country. What do neo-conservatives have to do with someone owning a business which relocates? And why do they relocate? I presume they want to remain in business and if they don't move where they can produce their product at a lower cost, someone else will. Are you suggesting that you personally ignore prices when you shop and only buy products made in the USA by legal residents? Most states are no longer business friendly. Poor people hire no one. Read Economics In One Easy Lesson by Hazlitt and you'll maybe not make such uninformed illogical arguments
My daughter has somehow made it through 7 years of owning a retail children's store in Santa Monica and then moving to a lesser cost lease in Brentwood. Her share of the absurd expensive real estate taxes forced her out of Santa Monica. The regulations are difficult to comply with. After the move to a smaller place she had to go from 11 employees to 4. Everybody loses in California. If she can find a greater fool, she'll be out of California. The unions own the place and now they get to assess the few remaining tax paying citizens well over $100 Billion for a railroad to nowhere save union bosses and excessively highly paid members. Almost anything is doable EXCEPT a state run by the greed of unions and Democrats.
I guess I am the last one to know this, but this "publication" is right wing propaganda not honest journalism.
We should just close our borders to any products not made in California. That would stop you creeps.
Utter drivel. Neo-Conservative free trade policies are TOTALLY RESPONSIBLE for California's downturn. The wealthy moved manufacturing to Mexico because they don't have to pay people and they can still sell their crap in California. What we need is tariffs for all imported goods high enough to restore manufacturing as viable in America. Screw free trade: All it does is make rich people richer and poor people poorer. The guy who wrote this is a liar.
Too bad they don't show California's Ag industry as a comparison through the same period.
Make your life time easier take the loan and everything you require.
Correction: I said "Republican employees" when I meant Republican appointees. Guess I had employee - the decline of which is a symptom of California's economic problems - because of the context of the story.
Agree that high taxes and a downright hostility to business is causal to the California economic decline. Top of the list is its strangulation of businesses that physically produce anything in the name of environmental protection. But its environment is not particularly litigation friendly - the judiciary, from the supreme court on down - has been dominated by Republican employees for decades, and court made law reflects it. Also, Democrat legislatures have been extremely friendly to insurance companies and the health care industry - as evidenced by California's strict by any standard medical malpractice laws (MICRA) and windfalls provided to defendants' insurers where there is third party recovery.
If the jobs bubble shown in the data from 1990 to 2000 is from the Dotcom Bubble then that would only validate Mr. Cox's findings all the more. Then the interpretation of the data should say that the jobs stall has been for 20 years but masked the first ten years by the Dotcom Bubble.

The big shift from large and medium corporations de-investing in California and the growth of small one-person sole proprietorship businesses requires an interpretation too. Are business persons not forming small businesses and remaining one-person shops because of the regulatory and tax burden?
Rep. Ron Dellums toured our fighter production line with a scowl on his face, then announced that he felt aerospace did not belong in California. Hundreds of well paying manufacturing jobs. The jobs are going away.

Dellums got his wish.
I wonder if the number would change if you picked a different year than 2000 to start and end the time sets.
got an email the other day with a young girl describing how much welfare $$ she got + so much per kid$$ + daycare per kid$$ + + + +, and on and on. then she said everybody watched everybody else's kid and just pocketed the $$. her final comment i remember was 'why would anyone want to work? its easier to just play the system. cali wouldn't meet all these handout goals they prize so much if they didn't "borrow" ten of billion$ from the fed (read: the rest of us); and, they ain't alone in the stealin'.
Jerry' Brown's comment is his excuse to support Cap + Trade, other environmental jihad actions and high speed rail, in that CA will always survive and rebound from the stupidity of the political class.

Well, no. This story has been played out in a lot of different places, but Brown thinks the rules, the stituation he reigns over, is different. It is, only that Brown and a new group are repeating the failures of the last group of smarties who themselves immune from failure due to the creativity and grit of others.
Wonder what has happened over these periods to government jobs relative to private-sector jobs and public debt. In my opinion, one new government job equals the loss of two private-sector jobs.
The left loves to scold the rest of us on the topic of sustainability, yet they reject the very basis for a sustainable economy: property rights and the rule of law.
"Since World War II, the L.A. metropolitan area, which includes Orange County, has added more people than all but two states (apart from California): Florida and Texas."

I grew up in California and lived there until 1994. Long before that year, people were warning that California's hyper-regulatory state would eventually end up driving jobs and people away -- but the politicians pooh-poohed the news by insisting that no matter what burdens they placed on taxpayers and job-creators California was an economic paradise and no one would ever want to leave.

What can't go on forever, won't. This may well be the first census in my lifetime that didn't see California gain seats in Congress.
There doesn't seem to be any push by the state government to address these problems except by increasing taxes and more government. I'm curious how Illinois compares to this study. They are already borrowing from private business by paying their bill months late.
I'm troubled by the time intervals chosen for this analysis. By comparing 1992-2000 with 2000-2008 the author puts all of the jobs created during the .com bubble in the first interval and all of the job losses from the subsequent implosion in the second.

Having lived through it I know that the late nineties were an incredibly surreal period for hiring managers. Mediocre engineers would accept an offer at one startup and never show up to work because they received a better offer from a hotter startup in the interval. I had mediocre release engineers with aging skills and spotty employment records turning down offers of 90K/year because they knew they could do better.

In retrospect, most of the jobs created during the .com bubble should not have been created in the first place. Without deducting these worthless jobs from jobs creation totals in both periods, it is difficult to say whether or not California's stall is due to recession, unfriendly business climate, or other factors.

Excellent post by Samuel Davis. California won't reform, because the worse things get, the better the Democrats will fare at the polls, because Republican voters are leaving the state.
One thing California has begun to do is use tax policy to discriminate against businesses it doesn't want. The state increases taxes and regulatory burdens on business in general and then provides selective relief from those burdens for favored businesses. Solyndra and Tesla Motors, (and about 31 other companies) for example, have been given huge breaks from state sales taxes to purchase equipment. Other businesses don't get these breaks. If your business is in line with the political agenda of the party running the state, you get breaks. If it isn't, you get driven out of the state.

Even Twitter was given special tax breaks that other companies don't get in order to stay in San Francisco.

So what we have is, in effect, a two tiered tax system where the politically connected and/or "correct" pay different taxes than everyone else.
2010 Census showed CA NOT GAINING HOUSE SEATS for the first time - ever and the census showed a population INCREASE.

Want to guess where these immigrants are coming from?? Hint - not from the US.
Thank you Richard for your post. I can't help wonder if CA goes bankrupt (like Greece), will the rest of the country take a hit because of it??
For Democrats there is no problem in California to solve. The statistics on who leaves the State never mention the political party of those leaving. It is safe to assume that many if not most of those who leave are Republicans, those who remain as well as the the majority of immigrants, are Democrats. Those who are left are comfortable with high taxes, and a heavy burden of regulations.

As a result, the California economy can only go in one direction - down, so that it is inevitable that California will be a drain on those around it.

Or to put it more simply - the Democratic economic model is one that embraces poverty sine that leads to Democratic voters - if that were not the case, then the cities where Democrats are and have been most in control would be screaming economic success stories, instead of unpublicized poor, crime ridden sectors of misery.

People need to wake up to the fact that what Democrats are doing is intentional - that economic ruin is the goal for Democrats, or at the very least economic success is not a priority. Take my city of Newark, New Jersey. Democrats have been in charge for generations. Back in 1967 the city was devastated by the riots. Since then, despite millions if not billions of dollars spent, the city is basically a basket case - the school system taken over by the state, the last two mayors jailed for corruption, the last one, Sharpe James, only when he left office, since he was too powerful to take down when he was mayor.

Despite a close to 50 year track record of failure in turning the city around, Democrats are still firmly in charge in Newark, and there is no sign of that ever changing. Like many other cities, Newark is a one party town. In fact, like another big city mayor - Marion Barry, Sharp James is talking about a return to politics once he is out of prison.

And, of course, what possible incentive to Democrats have to make things better? Democrats get 100% of the vote now, so for the Party there is no need to change a thing.

Accordingly, as California turns more and more blue, it is no surprise that at the same time it is sinking economically. Blue and dismal economic conditions go hand in hand - what people need to realize is that the one is a cause of the other.

Sound bitter? Yes - I have seen what this one political party has done to a once beautiful city, and is doing to a once beautiful country. And the time for believing that this "povertization" is anything other than intentional is over.

And for those who say that Republicans have not done anything for Newark, the response is that the problems in Newark are as a result of what government has done "for" the people. In other words, it would have been far better for people to have rejected the poison offered by Democrats, which (as warned by Daniel Patrick Moynihan, an old style Democrat) led to the destruction of the family, and all of the consequences of that, including criminalization of the community, zero will for education, the glamorization of substance abuse by the Democratic media, as well as the overall glamorization of failure, and the entitlement mentality.

California is on a slippery slope, and one thing that is not in its future is prosperity. The impoverishment of its people will be blamed on everything but the real cause: the new Democratic Party and its one way economic plan. It's perfect society is lots of poor, a well funded bureaucracy, and a few wealthy. Just like the third world country that is in California's future!
Unfortunately, we have a left-wing president who is shoveling piles of federal money to the blue welfare states. The prudent are paying for the profligate.

One wouldn't be surprised by Obama pushing for a Government Motors plant in California. The disastrous economics of such a decision wouldn't matter to our economically illiterate president.
I have lived in CA my entire life and have been self employed in the timber industry for over 25 years so I know just how bad this state is tax and regulation-wise.
But I can't help wondering is, what effect does picking the year 1992, as we were coming out of a recession, as the starting point of the first half of the analysis and 2000, the peak of the tech boom, as the starting point for the second half have on the figures?
It should be noted that my fact sheet does not include what is still to come in CA -- notably AB32, the global warming madness -- including cap and trade costs no one is thinking about.

Nor does it consider the massive state and local government unfunded liabilities -- especially pension and healthcare obligations. SOMEONE is going to get that bill, and businesses probably are not keen on being the recipients.
I left CA in 1999. Best move I ever made. I have been consistently self employed making ~$200k each year. My home is down at most 10% now.
Breaking Bad: California vs. the Other States
by Richard Rider, Chairman, San Diego Tax Fighters
Version 1.786 Revised: 30 October, 2011
Updated version online at: www.RiderBlog.NotLong.com
Email: RRider@san.rr.com Phone: 858-530-3027
Facebook blog page: www.Facebook.com/Richard.Rider

Here’s a depressing but documented comparison of California taxes and economic climate with the rest of the states. The news is breaking bad, and getting worse (twice a month, I update crucial data on this fact sheet):

California has the 3rd worst state income tax in the nation. 9.3% tax bracket starts at $46,766 for people filing as individuals. 10.3% tax starts at $1,000,000. http://www.taxfoundation.org/files/bp59_es.pdf

Highest state sales tax rate in the nation. 7.25% (as of 1 July – does not include local sales taxes)
http://www.taxfoundation.org/files/bp60.pdf Table #15

California corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska. http://www.taxfoundation.org/files/bp59.pdf Table #8 – we are 8th highest nationwide.

California’s 2011 Business Tax Climate ranks 2nd worst in the nation – close behind New York state.
http://www.taxfoundation.org/news/show/26806.html

Fourth highest capital gains tax 9.3% http://www.thereibrain.com/realestate-blog/capital-gains-tax-rates-state-by-state/109/

In virtual tie with CN and NY for highest gasoline tax (averaging 67.5 cents/gallon) in the nation, (July, 2011).
http://www.api.org/statistics/fueltaxes/ (also CA has the highest diesel tax – 76.9 cents/gallon)

California is ranked 14th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But CA property taxes per owner-occupied home were the 10th highest in the nation in 2009.
http://www.taxfoundation.org/taxdata/show/251.html and http://www.taxfoundation.org/taxdata/show/1913.html

CA has now instituted the highest “cap and trade” tax in the nation – indeed, the ONLY such U.S. tax. One study estimates cost at $3,857 per household. Even proponents concede that it will have zero impact on global warming.
http://WSJ-CA-cap-and-trade.notlong.com

California’s 2011 “Tax Freedom Day” (the day the average taxpayer stops working for government and starts working for himself) is the 6th worst date in the nation – up from 28th worst in 1994, but down from 4th worst in 2009. CA “improved” only because of our state’s soaring unemployment rate – the new tax dodge!
http://www.taxfoundation.org/research/show/387.html

CA has the 2nd highest state unemployment rate. (September, 2011) – 11.9%. National unemployment rate 9.1%. National unemployment rate not including CA is only 8.72%, making the CA unemployment rate 36.5% higher than the other 49 states. http://www.bls.gov/lau/

CA needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155. The average for the states is 92. http://cssrc.us/publications.aspx?id=7707

For the 2007-08 school year, the Los Angeles Unified School District spent $29,780 per student. The district also has the country’s second lowest graduation rate of 40.6%. http://www.calwatchdog.com/2010/08/20/lausd-spends-30k-per-student/

CA public school teachers the highest paid in the nation. CA students rank 48th in math achievement, 49th in reading.
http://www.lao.ca.gov/reports/2011/calfacts/calfacts_010511.aspx page 36

1 in 5 in Los Angeles County receiving public aid. http://www.latimes.com/news/local/la-me-welfare22-2009feb22,0,4377048.story

California has 12% of the nation’s population, but 36% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined. Unlike other states, this “temporary” assistance becomes much more permanent in CA. http://weblog.signonsandiego.com/weblogs/afb/archives/034662.html

California prison guards highest paid in the nation. http://www.caltax.org/caltaxletter/2008/101708_fraud1.htm

For every dollar California pays to D.C., we get back 78 cents. We rank 7th worst. http://www.taxfoundation.org/research/show/266.html


California is the worst ranked state for tax administration – another anti-business factor.
http://www.sacbee.com/static/weblogs/capitolalertlatest/2010/03/cal-rated-worst.html

California now has the lowest bond ratings of any state, edging out Louisiana. http://tinyurl.com/CA-worst-bond-rating

California has the 6th highest (worst) state per capita debt. Not counted is local government debt. http://www.huffingtonpost.com/2011/10/24/states-debt-combined-may-exceed-4-trillion_n_1029162.html
The American Tort Reform Association ranks CA the worst state “judicial hellhole” – extremely anti-business.
http://tinyurl.com/CA-worst-judicial-state

California is tied with 3 other states (Hawaii, Texas(!) and Florida) for having by far the least competitive property & casualty insurance markets. http://heartland.org/policy-documents/heartland-institute-releases-new-property-casualty-insurance-report-card

California has a nasty $800 minimum corporate income tax, even if no profit is earned, and even for many nonprofits. Next highest state is Oregon at $150. A few others under $100, with most at zero. http://tinyurl.com/CA-800-tax

America’s top 500 CEO’s rank California “the worst state in which to do business” for the 7th straight year (May, 2011).
http://chiefexecutive.net/best-worst-states-for-business (It’s worth reading the short article, and especially the part about California.)

California, a destitute state, still gives away college education at fire sale prices. Our community college tuition is the lowest in the nation. How low? Nationwide, the average community college tuition is about three times higher than California CC’s. http://www.hecb.wa.gov/research/issues/documents/TuitionandFees2009-10Report-Final.pdf Chart 5 on page 8
This ridiculously low tuition devalues education to students – resulting in a 30+% drop rate for class completion. In addition, 2/3 of California CC students pay no tuition at all – filling out a simple unverified “hardship” form that exempts them from any tuition payment, or receiving grants and tax credits for their full tuition. http://tinyurl.com/ygqz9ls

On top of that, California offers thousands of absolutely free adult continuing education classes – a sop to the upper middle class. In San Diego, over 1,400 classes for everything from baking pastries to ballroom dancing are offered totally at taxpayer expense. http://www.sdce.edu

Protests about increased UC student fees too often ignore one crucial point -- all poor and most middle class students don't pay the “fees” (our state’s euphemism for tuition). There are no fees for California families with under $80K income. Moreover, Pell Grants and federal tuition tax credits covered the total 2009-10 fee increases for nearly 3/4 of all undergraduates with household incomes below $180K.
http://www.universityofcalifornia.edu/blueandgold/ and http://www.universityofcalifornia.edu/news/article/22415

California residential electricity costs an average of 32.4% more than the national average (far higher in San Diego County). For industrial use, CA electricity is 70.8% higher than the national average (May, 2011).
http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_a.html

It costs 38% more to build solar panels in California than in Tennessee – which is why European corporations have invested $2.3 billion in two Tennessee manufacturing plants to build solar panels for our state. http://tinyurl.com/llussb

California is now ranked as the 2nd worst state to retire in. Only basket-case Illinois is worse. We “beat” NY, RI and NJ.
http://www.topretirements.com/blog/great-towns/our-worst-states-to-retire-list.html/

Consider California’s net domestic migration (migration between states). From April, 2000 through June, 2008 (8 years, 2 months) California has lost a NET 1.4 million people. The cumulative net annual income lost from this 8 year out-migration comes to about $26 billion. Net departures slowed in 2008 only because people couldn’t sell their homes. In 2010 we lost “only” 72,000 net people to domestic migration. Again, note that this is NET loss.
http://www.mdp.state.md.us/msdc/Pop_estimate/Estimate_08/table5.pdf and http://tinyurl.com/2010-CA-lost-72000 and http://interactive.taxfoundation.org/migration/
These are not welfare kings and queens departing. They are the young, the educated, the productive, the ambitious, the wealthy (such as Tiger Woods) – and retirees seeking to make their pensions provide more bang for the buck. Some of these departing seniors are retired state and local government employees fleeing the state that provides them with their opulent pensions – in order to avoid the high taxes that these same employees pushed so hard through their unions. And once they move out of California, our state can no longer tax their California-paid pensions.

As taxes rise and jobs disappear, we lose our tax base, continuing California’s state and local fiscal death spiral. This downward spiral must stop NOW.

NOTE: To see the latest version of this “Breaking Bad” column, plus other taxpayer items of interest, go to my blog at www.RiderBlog.NotLong.com, or my Facebook page at www.Facebook.com/Richard.Rider. This fact sheet also is available free upon request as a 2 page Word file for printing.
Washington Insider November 14, 2011 at 9:53 AM
California's business climate may indeed have ruined the State's economy. The State's constitutional obstacles to responsible fiscal management also played a part. But Mr. Cox's analysis does not document either problem. The former is simply tagged on. Mr. Cox also ignores Dot.com bubble in the 1990s and its collapse in 2000. This topic needs a more complex research design.
I can't argue with Mr Cox on any of his points. I lived in the Valley and left when my $2,300 month rent for a 1 bedroom, half bath went to $2,800. At the time, 2001, I could do better back in Manhattan.