A Must Read: The Long Stall

Russ Steele

I have written many times about the business smothering regulations that are killing California jobs in the local newspaper and on blogs. Now Wendell Cox writing at The City Journal has the depressing numbers.

California’s jobs engine broke down well before the financial crisis.

Everybody knows that California’s economy has struggled mightily since the 2008 financial crisis and subsequent recession. The state’s current unemployment rate, 12.1 percent, is a full 3 percentage points above the national rate. Liberal pundits and politicians tend to blame this dismal performance entirely on the Great Recession; as Jerry Brown put it while campaigning (successfully) for governor last year, “I’ve seen recessions. They come, they go. California always comes back.”

But a study commissioned by City Journal using the National Establishment Time Series database, which has tracked job creation and migration from 1992 through 2008 (so far) in a way that government statistics can’t, reveals the disturbing truth. California’s economy during the second half of that period—2000 through 2008—was far less vibrant and diverse than it had been during the first. Well before the crisis struck, then, the Golden State was setting itself up for a big fall.

One of the starkest signs of California’s malaise during the first decade of the twenty-first century was its changing job dynamics. Even before the downturn, California had stopped attracting new business investment, whether from within the state or from without. 

To under stand the scope of our problem, you need to read the whole report and study the excellent graphics, they tell a very important story, we are living in a economic disaster area that we created by allowing Sacramento to regulate our economy in to a liberal democratic black hole. Yes, we are at fault, and we are the only one’s that fix the problem by voting all the useful idiots out of office. Wendell concludes with my emphasis:

What is behind California’s shocking decline—its snuffed-out start-ups, unproductive big cities, poorer jobs, and tinier, weaker, or fleeing companies—during the 2000–2008 period? Steven Malanga’s “Cali to Business: Get Out!” identifies the major villains: suffocating regulations, inflated business taxes and fees, a lawsuit-friendly legal environment, and a political class uninterested in business concerns, if not downright hostile to them. One could add to this list the state’s extraordinarily high cost of living, with housing prices particularly onerous, having skyrocketed in the major metropolitan areas before the downturn—thanks, the research suggests, to overzealous land-use regulation.

One thing is for sure: California will never regain its previous prosperity if it leaves these problems unaddressed. Its profound economic woes aren’t just the result of the Great Recession.

It is going to be up to the voters of California to address these problems at the ballot box. Are you ready? Let’s start by killing AB-32. Yes, I know we muffed out first opportunity, but there are more options to be explored.

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About Russ Steele
Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.

3 Responses to A Must Read: The Long Stall

  1. Russ says:

    The state is $1.275 billion behind in revenues for the first four months of the fiscal year, or 5.1 percent.

    • Sean says:

      Hasn’t it also spent $1.5 billion dollars more than budgeted?

      California was a real mess prior to the financial meltdown and prior to AB32. I suspect only much more bleeding will actually change things. Other charts in the linked article showed that people are making less money. Manufacturing (which is the best pay for the middle class) lost the most jobs but construction and real estate were still showing gains as of 2008. I would guess if they went to 2010 these would not look very good either. The only big growth in companies was in sole proprietor very small ones with 2-9 people. Those are often not stable.

      One thing I wonder though, does this survey just capture legal entities? Have the regulation and taxation gotten to the point where an underground economy has taken hold and most business is done in cash with few traceable records. I recall reading something on a blog in the OC Register a couple of years ago where some of the bloggers had gotten so disgusted with the cost of doing business in the state they shut down their official entity but kept doing the same thing informally. I think this is what really brought Greece to it knees financially.

  2. Russ says:

    This story is high lighted in a Los Angles Times OpEd: California — toxic for business

    Last year, the medical technology firm Numira Biosciences packed its bags and left Irvine for Salt Lake City. When asked about the firm’s departure, its chief executive praised Utah’s quality of life but also blamed California’s business environment for the move. “The tipping point was when someone from the Orange County tax [assessor] wanted to see our facility to tax every piece of equipment I had,” Michael Beeuwsaert told the Orange County Register.

    For years, California could rely on its temperate climate and a talented workforce to attract and keep businesses even as taxes and regulations increased. No more. In surveys, executives regularly express the view that California has one of the country’s most toxic business environments, and they say it is one of the least likely places they would open or expand a company. Many firms headquartered here say they have forsaken expansion in the state. Meanwhile, California suffers from an unemployment rate some 2 percentage points higher than that of the nation as a whole.

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