Somebody Has to Pay the Bills

Joel Kotkin has just published the best piece yet written on California and its diminished economic prospects.  Better yet, he used our data to support his work.  It is a relatively long article, but well worth the investment.  Indeed, it should be required reading for voters and policy makers everywhere.  As always, Joel has his own unique way of making a point.  Here’s an example:

‘What went so wrong? The answer lies in a change in the nature of progressive politics in California. During the second half of the twentieth century, the state shifted from an older progressivism, which emphasized infrastructure investment and business growth, to a newer version, which views the private sector much the way the Huns viewed a city—as something to be sacked and plundered. The result is two separate California realities: a lucrative one for the wealthy and for government workers, who are largely insulated from economic decline; and a grim one for the private-sector middle and working classes, who are fleeing the state.”

There is a lot in that paragraph.  The image of Huns at the gates of a city is a striking way of illustrating a fact that Californians, and increasingly residents of other states, often forget: it’s possible to regulate, tax, and harass business too much.  At some point, business heads for the door, taking the prosperity it brings.  When business is gone, prosperity is gone.  No goose; no golden egg.

The private-sector middle and working classes are leaving California, driven away by lack of opportunity and high costs.  Net, domestic migration, people migrating to or from California to other states has been negative for most of the past two decades.  That is, more people are leaving California for other states than are coming in from other states.  This is in stark contrast to most of California’s history.

California’s business and the middle class joint migration is leaving a very strange society.  On the one hand, there is the wealthy, whose income and wealth are largely independent of California’s economy.  On the other hand there is a large, very poor, agricultural sector and a growing sector providing services to the permanent and visiting wealthy.   Consequently, California is likely to see inequality that is unprecedented in  a modern democracy.  It won’t be pretty.