What's the Matter with California? Everything

By David Malcolm
Thursday, March 01, 2012

National attention has again been focused on California. President Obama was recently in Los Angeles fundraising with celebrities and movie stars. This past weekend, those same movie stars celebrated the recession and their cultural contributions by throwing lavish parties and exchanging golden statues at the Oscars. Outside of Hollywood, however, there is not much to celebrate.

The film industry thrives on the suspension of disbelief. The same is true of Democratic governance of California. Democratic political leaders claim the state is on the rebound, but the facts are otherwise. The state’s true unemployment rate is between 14% - 18%. According to UCLA’s Anderson School of Management, California’s “official” unemployment rate of 12% is forecasted to remain constant in 2012. Said UCLA senior economist David Shulman, “You could make a reasonable argument that we never had a recovery and we're, in fact, in one long slump.” And this stagnation persists even though, as the Orange County Register reports, California distributed around $1.3 billion in unemployment benefits in December of 2011.

Businesses are leaving in droves, Governor Jerry Brown pleads for yet another “temporary” tax increase, and the state boasts the nation’s highest deficit. The state is literally dying economically. Yet Los Angeles leaders found time recently to ban Frisbees and footballs on public beaches. No joke. And if President Obama has his way, and four more years, the nation will soon share California’s fate because California’s ills mirror Obama’s priorities: increased regulation, progressive pipe dreams, and union hegemony.

First, California’s regulatory climate has effected a business migration from California that rivals John Steinbeck’s dustbowl migrations. The American Enterprise Institute has noted that in 2011, an average of 5.4 companies left California per week, up from 1.0 in 2009. Ask local business leaders what’s driving them away and they’ll quickly blame the alphabet soup from hell: CARB, CEQA, CPUC, EDD, EPA, Cal-OSHA, etc. Navigating this bureaucratic morass is challenging enough for large businesses like Amazon (which has relocated thousands of jobs), but is especially so for small businesses, which even President Obama believes drive job growth.

Second, California’s “progressive” initiatives have failed, squandering billions in the process. Tax credits and other “investments” in green energy required by the Global Warming Final Solutions Act have helped bankrupt the state and kill off entire industries like manufacturing and oil and gas production. Unaffordable public transportation projects (high speed rail) have proven unfeasible, and the legal system fosters a victim culture hostile to employers and economic growth, e.g. the state’s anti-business employment and discrimination laws, judicial indulgence of bogus ADA (Americans with Disabilities Act) suits that ravage small businesses, and growing hostility to cost-friendly, efficient arbitration agreements.

Finally, all powerful union interests control the legislature and stymie any reform efforts. Outlandish and unrealistic pension benefits are pegged to unrealistic growth assumptions, benefits for public sector workers (teachers, prison guards, lifeguards) exceed those in the private sector who create wealth, and union employees cannot be terminated or forced to contribute to their health care or retirement. Think Wisconsin before 2010.

The result is a California where only Prius driving, green loving, high earners (limousine liberals, tech titans, and Democratic politicians) and those on the dole (state employees, immigrants, food stamp/EBT recipients), will survive long-term. Everyone else is leaving as fast as their polluting SUVs can take them, to Arizona, Texas and Nevada.

Ultimately, California’s collapse reveals an increasing cultural disconnect between the producers (who are leaving) and the statist remnant. The liberal, redistributionist remnant supports policies that appease its conscience but wreak havoc on the economy. Conversely, the producer ex-pats see only legislative, bureaucratic, and legal roadblocks not worth the fight, and a California increasingly not worth fighting for. If the nation truly goes the way of California, God help us all, including the Frisbee industry.