Daily Archives: November 18, 2010

Joel Kotkin has an excellent column in Forbes about the economic plight of California (thanks, RCP). The notion that the state embodies American enterprise and innovation at their most flourishing is seriously out of date. Broken government and a lagging economy have become mutually reinforcing, and the state seems to lack the capacity, or even the desire, to break the circle. As Kotkin says, California’s poverty and unemployment rates are two and three percentage points worse, respectively, than the national averages. Its income and sales taxes are very high–but not nearly high enough to cover the corresponding state-government outlays. A poll of more more than 600 CEOs ranked its business climate dead last in the US. People are moving out. Kotkin observes:

This state of crisis is likely to become the norm for the Golden State. In contrast to other hard-hit states like Pennsylvania, Ohio and Nevada, which all opted for pro-business, fiscally responsible candidates, California voters decisively handed virtually total power to a motley coalition of Democratic-machine politicians, public employee unions, green activists and rent-seeking special interests.

In the new year, the once and again Gov. Jerry Brown, who has some conservative fiscal instincts, will be hard-pressed to convince Democratic legislators who get much of their funding from public-sector unions to trim spending. Perhaps more troubling, Brown’s own extremism on climate change policy–backed by rent-seeking Silicon Valley investors with big bets on renewable fuels–virtually assures a further tightening of a regulatory regime that will slow an economic recovery in every industry from manufacturing and agriculture to home-building.

The state has placed a big bet on its “green jobs” strategy–a bet that voters endorsed on November 2 when they defeated Prop 23, which would have nullified California’s Global Warming Solutions Act. As a result, the state remains committed to a unilateral carbon abatement policy. This can have no perceptible impact on global emissions, of course. The case for the policy, aside from expressing solidarity with a cause voters believe to be right, is that the added regulatory burden on Californian businesses will stimulate the growth of new clean-energy businesses, and new green jobs. At least, this is what people tell me. A cruel delusion, says Kotkin:

Given the likely direction of the new GOP-dominated House of Representatives in Washington, massive federal subsidies for the solar and wind industries, as well as such boondoggles as high-speed rail, are likely to be scaled back significantly. Without subsidies, federal loans or draconian national regulations, many green-related ventures will cut as oppose to add jobs, as is already beginning to occur. The survivors, increasingly forced to compete on a market basis, will likely move to China, Arizona or even Texas, already the nation’s leader in wind energy production.

If California is an example of liberals living large, Texas–low taxes, friendliest business climate in the country, rapid middle-income job growth, net inward migration–is rather the opposite. They make for an arresting comparison.

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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