We Have Seen the Future, and it is California—and it ain’t Pretty

Joel Kotkin explains:

Karl Marx wrote, “History repeats … first as tragedy, then as farce.” Nothing better describes how California, with its unmatched natural and human riches, has begun to morph into what the premier California historian Kevin Starr has called “a failed state” – a term more usually applied to African kleptocracies than a place as blessed as the Golden State.

The tragedy begins with the collapse of a governance system once widely hailed as a leader in efficiency and foresight but which now perpetually teeters at the brink of insolvency and suffers among the worst credit ratings of all the states. Only 20 years ago, the state’s fiscal debt per capita was just below the national average; now it ranks consistently toward the bottom No surprise, then, that California routinely ranked as the “worst governed” state in America.

This poor performance has consequences, particularly in terms of business. Today, CEOs rank California as just about the worst place to do business in the country, and have for a remarkable eight years in a row.

Kotkin spends some time dividing blame between the parties—indeed Republican governors like Pete Wilson and Arnold Schwarzenegger share some of the responsibility—before getting down to the root cause of California’s dry rot:

In the immediate future, we should expect more of the same from our one-party government. Flush from the passage of Prop. 30, tax increases backed by public sector unions, there is little to restrain them beyond occasional resistance from Gov. Brown. Having made California’s income taxes the highest in the U.S., legislators and local officials are already busily concocting new taxes, fees and another spate of bond issues to prop up the nation’s most-cosseted public sector, and, of course, fund its rich pensions at the expense of mostly middle-class taxpayers.

Indeed the emphasis on income taxes, representing now close to half of state revenue, creates perverse economic outcomes. With their funds hidden in overseas accounts and other dodges, Hollywood moguls and their Silicon Valley counterparts may hang around, mouthing progressive shibboleths while dining exquisitely. But there is clearly erosion among the less-glamorous entrepreneurial class. The number of households earning above $300,000 dropped by 45,000 from 2006-09, according to the Department of Finance, while those earning under $100,000 has grown by more than 180,000. It’s likely that Prop. 30 will accelerate this trend.

But it’s not only taxes that will depress growth. Our Mad Hatter one-
party, public-sector-dominated state seems keen to press its regulatory assault on employers and job creators. With climate change-related legislation certain to boost already high energy costs, we also can expect industries, from food processing to semiconductors and aerospace, to continue heading to friendlier locales.

Unless these policies are challenged, California will continue to underperform well below its potential. Even worse, a state that created the modern American Dream of upward mobility will continue to devolve toward a kind of neofeudalism dominated by a few rich, with many poor and a well-fed, tenured government caste. The only way to halt this continuing farce in Sacramento is for Californians of all backgrounds to recognize that government that so earnestly claims to serve “the people” is doing anything but that.

He’s not hopeful. California has devolved to its precarious position because a majority of its electorate preferred it to. That sounds like our nation as a whole, which is why I print these jeremiads by Kotkin. As California goes down the crapper, so goes the nation.

1 Comment »

  1. Buck O'Fama said,

    January 8, 2013 @ 7:31 pm

    History tells us Argentina was once one of the 10 most prosperous economies in the world but nowadays goes from riches to rags to another Falklands war, thanks to “progressive” governance. California may become the US’s Argentina. The moral here is that you can spend your time resenting people who have more than you or you can make the most of what you are and be satisfied with that, but not both. We get to pick and have to live with our choices.

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