Previously published in CERF’s September 2016 Economic Forecast publication:
I have complained for years that California’s economy is not performing as it should, and it’s not working for a large part of the population, young people, minorities, less educated workers, even much of the middle class. Those who disagree with me point out that, measured by job growth and GDP growth, California is doing better than the United States. Therefore, California is doing great, and Bill Watkins is a cranky old hack.
Bill Watkins may be a cranky old hack, but that argument is ridiculous.
The argument that California is doing better than the U.S. and therefore doing well is based on the implicit assumption that the U.S. economy is doing well. It’s not.
We are almost a decade into America’s weakest post-war recovery, a recovery characterized by low investment, slow economic growth, slow productivity growth, slow job growth, a falling labor force participation rate, increasing welfare rolls, and persistent high poverty rates.
It’s not like its close. This recovery is dramatically weaker than previous recoveries.
Doing better than the weakest recovery in 70 years is not good enough for California.
At one time, the very name California was synonymous with prosperity and opportunity. The state attracted people from throughout the world. California was the model of the good life.
Today, California has the nation’s highest poverty rate, after consideration of housing costs. Net domestic migration is negative, as Californians move to places like Texas and Oklahoma to find the prosperity, opportunity, and life-style they can’t find in California. Businesses are leaving, and taking their jobs with them. College graduates must leave to find appropriate jobs, because California creates more college graduates than jobs. Home ownership is beyond the imagination of most young families.
California is not doing well because its policies have been hijacked by a coastal elite, which has molded policy to meet their utility functions, utility functions with no consideration for the well-being of California’s less fortunate.
California’s elite are really no different than our two presidential candidates. Trump was born into wealth. He was sent to the best schools. He had every advantage. Much of that advantage has been squandered as he followed his whims into gambling casinos, beauty pageants, reality shows, buildings, whatever attracted his attention at the time. In his wake, he’s left failed businesses and consequently destroyed lives. But, as they say, he’s a winner. He’s maximized his wealth without concern for the lives of the less fortunate he’s used to maximize that wealth.
Clinton didn’t start with Trump’s wealth, but she went to the best schools, and along with her husband, has risen to the heights of power and wealth. Like Trump, Clinton rose without concern for the lives of the less fortunate that she used to maximize her wealth and power. From Arkansas to Washington DC and beyond, she has left a landscape that is littered with broken lives.
So it is with California’s coastal elite who dominate policy. They have their homes and their lives in beautiful places with world-class weather and abundant amenities. Economic growth threatens their lifestyle. They don’t want factories or even other people’s homes marring their viewsheds. Their attitude is that if you can’t find a job or buy a home here, well you can probably do both in Texas or Arizona. Never mind that many people can’t afford the cost of the move. If you live in poverty, they tell you about California’s generous safety net, ignoring the devastating impacts of a life on the dole.
Of course, California’s coastal elite who dominate policy aren’t the majority. It seems to me that when policy is optimized for a fortunate few and actually detrimental to the interest of the majority of the population, something is seriously wrong. Somehow, we managed to lose our way with how we select policy makers and how we make policy.
It’s not a just a California problem. When I look at the presidential candidates and the political leaders of both parties in Congress, I see failure, failure to put competent leaders in important leadership positions. The problem is worse in California than most other states. Is there anywhere else in America where policy is optimized for so few at the cost to so many?
It’s difficult to believe that this is a sustainable situation. It seems that it must reach a crisis at some point. For California that crisis is likely to be financial, a fiscal crisis. California’s fiscal position is fragile and volatile. At some point, California’s under-achieving economy won’t generate the resources needed to meet California’s commitments.
California’s commitments were made based on the twin assumptions that California’s golden economy is everlasting, and there is nothing policy makers do can do to harm that economy. Those assumptions aren’t true. For many Californians, the state is already in crisis. That sounds extreme, but when you can’t find a job, you have a crisis.
We need to make California work for everyone. I’m not sure how to do that. I am sure that we won’t make California work for everyone until we admit we have a problem. Only then, we can start trying to find a way to choose policy makers and set up a policy infrastructure that works for everyone.