For a Preview of Obama's America 2016, Look at the Crack-Up of California

 

These results assure that California will serve as the prime testing ground for President Obama’s form of post-economic liberalism. Every dream program that the Administration embraces — cap and trade, massive taxes on the rich, high-speed rail — is either in place or on the drawing boards. In Sacramento, blue staters don’t even have to worry about over-reach because the Republicans here have dried into a withered husk. They have about as much influence on what happens here as our family’s dog Roxy, and she’s much cuter.

 

California now stands as blue America’s end point, but contrary to the media celebration, it presents not such a pretty picture. Even amidst our decennial tech bubble, the state’s unemployment is among the highest in the country, and is trending down very slowly. Over the past decade, California has slowed as a source of fast-growth companies, as a recent Kauffman Foundation study shows, while other states such as Washington, Virginia, Texas and Utah have gained ground.

 

Old-style liberals might point out that California’s progressive policies have not done much for the working- or middle-class folks often trumpeted as its beneficiaries. Instead income inequality has grown far more than the national average. True, the fortunate sliver of dot-com geniuses make billions, but the ranks of the poor have swollen to the point that the state, with 12% of the nation’s population, account for one third of its welfare cases. Large parts of the state, notably in the interior regions, suffer unemployment in the 15% range and higher.

 

Demographics may be working to the Democratic Party’s favor, but not so much for the state. As California loses its allure as a place of opportunity for all but a few — the best connected, educated and affluent — the state is losing its magnetic appeal to migrants from both inside and outside the state. Domestic migration has been negative for 18 of the past 20 years; immigration from abroad is at the lowest point in the past two decades. In terms of growth in college-educated residents, only San Diego managed to add more than the national average from 2000 to 2010; both the Bay Area and Los Angeles were considerably below. (See “The U.S. Cities Getting Smarter The Fastest“)

 

The growing diversity, a good thing in itself, masks a demographic stagnation. California, remarkable for its population growth over the past century, now is heading toward “zero population growth,” notes economist Bill Watkins; the state now barely grows 1% a year. Los Angeles, the state’s largest urban area, grew less, in total numbers, in the last decade than at any time in the last 100 years.

 

Although this might elicit hosanas among greens, who generally would like to see fewer people, the emerging reality is sobering. Increasingly the state bifurcates between a generally older, predominately white and Asian coast, and an interior increasingly populated by generally less affluent Hispanics and African-Americans. California now ranks near the bottom in science skills, and while its population over 65 is the fifth largest in the nation, the number of those under 35 is only 23rd. And the future looks even bleaker: California’s eighth graders rank a pathetic 47th in terms of science test scores.

 

So how did the ladder of opportunity crack in a state that has massive natural and human resources, not to mention a kind climate and spectacular scenery?

 

To some extent, California is suffering the aftereffects of a century of success. Over that period, a large coastal affluent class, now increasingly elderly, enjoyed a spectacular run of rising real estate prices and in some places, like Silicon Valley, a progression of stock windfalls. Once split among liberals and conservatives, this group is now almost uniformly deep blue, as epitomized by Marin County, which voted almost three to one for Obama.

 

Blacks, Hispanics and young people may be the new core of the Democratic Party, but  aging affluents may be the most important constituency. Unlike minorities or young people, they have increasingly little reason to support growth. After all, they have theirs and more people simply means more traffic, congestion and crowded schools. Increasingly many affluents also don’t have children — the liberal heartland of San Francisco has among the lowest fertility rates on the continent — the need to create jobs and opportunities for the next generation is not a pressing priority. Feeling “good” about themselves, by voting for the progressive agenda, is good enough for themselves.

 

Perhaps the most shocking impact of California’s shift to one-party rule has been the complicity of the once powerful business community. In recent years, California’s business community has accommodated itself to the state’s ever higher taxes and regulations. They acquiesced meekly to the state’s climate change regulations, making the development of anything than largely undesired dense housing developments all but impossible. Industries that use energy — including oil refineries but also chip-makers and server farms — simply go elsewhere, either to another country or across the border to less relentlessly regulated states.

 

In the battle over the Proposition 30 tax hike, notes small business advocate Joel Fox, Governor Brown and his legislative allies prevented business leaders from opposing the tax hike. “It was a lot of support the Governor — or else,” he says. Some business organizations, like the establishmentarian Bay Area Council, even actively promoted the income tax increase, which makes the state’s rate the highest in the continental United States. For this, they get praise from progressive mouthpieces like The San Francisco Chronicle as “brave business leaders.”

 

To me, this “bravery” looks like a lot more like “Stockholm syndrome,” where a hostage, as famously happened with Patty Hearst, begins to identify with their captors. Once world-beaters and fierce political competitors, California’s business leaders know that if they oppose the Governor or the legislative leadership’s tax or regulatory agenda, he can threaten them with measures specifically targeted at their industry. So the magnates meekly accept an impossible business climate, knowing, like much of the state’s middle class, that they will be welcomed elsewhere.

 

In this sense California business has devolved into something analogous to Mexican enterprise under the old PRI regime. If you want to survive, you bow, curtsey and pay up — or else. Business demanded little in return, for example, insisting that education funds be conditional on comprehensive reform. After the election some business types belatedly have started to express concerns about the new Democratic supermajority and what they will do with those new tax revenues. But their inevitable fallback strategy will likely be falling on one knee to beg Governor Brown to save them from an ever more invigorated progressive majority.

 

This cringing and economically counterproductive approach to governance will soon make its appearance in a Washington. In the next few months, business lobbyists will wear out their knee pads trying to appease the increasingly all powerful regulatory clerisy. Some of the new players may also be the very people who have been killing California. There’s already widespread talk of bringing LA’s term-limited Mayor Antonio Villaraigosa to Washington for a big cabinet posting, perhaps as Transportation Secretary. All this rewards an empty suit who has presided over Los Angeles’ economic and demographic decline, leading that great city to the brink of bankruptcy, and a political system rife with cronyism.

 

But in Barack Obama’s America, failure can often pave the road to success. In this age, incompetence is no barrier to promotion, and failed states like California and Illinois are taken not as examples to avoid but as models to emulate. So if you want to get an advanced look at what America could look like in 2016, don’t go to the movies. Just hop a plane to California; after all, the Golden State is a wonderful place to visit in winter. And , as things are going, we will need the cash.

 

-cw

 

 

 

 

CityWatch

Vol 10 Issue 92

Pub: Nov 16, 2012