Are We Now the World's California?

Right-Wing Genius' Blog | Wednesday, August 17, 2011 | Right-wing_Genius

[Right-wing Genius]

I'm returning to Waco this week. Next Monday marks the beginning of the fall quarter at Baylor Law School, and needless to say, I won't be blogging nearly as much after then. Right now, I'm visiting my folks in Arlington, and later this week, I'll head back to my apartment.

On Sunday, I was watching 60 Minutes with my parents. Leslie Stahl was doing this segment on American corporations moving their headquarters overseas to avoid paying high U.S. taxes. While we were preparing supper, my Mom asked, rather disdainfully, "Why would anybody want to run a business in the United States?" My immediate answer was, "Good quality of life, I guess." That's when it hit me: the U.S. has become the California of the world.

It's no secret that California has one of the worst business climates in America. Its tax burden is also now on par with infamously high-taxing New York and New Jersey, and it has a lower bond rating than any other state. The Golden State has long believed that it can maintain this hostile atmosphere without discouraging people from living there because of what are known as "exploitable amentity asymmetries," which basically means that people will pay more to live in such a nice place. When you're in close proximity to some of the greatest natural splendor this country has to offer (not to mention the cultural meccas of San Francisco and Los Angeles), shouldn't there be some sort of premium on the cost of living?

For decades, the overwhelming answer was "yes." Ever since the Dust Bowl of the 1930s, California has been somewhat of an American "promised land," the last, best hope down-on-their-luck citizens have of finding the American dream. (You could go back even farther to the Comstock Lode and ensuing Gold Rush of the 19th Century.) Recently, though, it's become increasingly apparent that California's zenith may be behind her. I just mentioned its current financial woes, and population trends are reflecting it. For the first time since the 1920s, the Great Bear failed to gain a single congressional district following the U.S. Census, a result of slowing population growth.

Back to the analogy: I remember when Gov. Rick Perry appeared on The Daily Show last year. Eventually, the discussion came around to Texas's relatively pro-business climate and why businesses (and jobs) were migrating from the Midwest and Northeast to the Sun Belt. When Perry rattled off statistics indicating just how big the jobs boom has been in Texas over the past decade, Jon asked hmi, "Why do you think that is?" Perry mentioned our low taxes, "fair and predictable" regulatory climate, "a legal system that's fair and doesn't allow for over-suing," and "accountable" school system that produces skilled workers. This exchange followed:

STEWART: Couldn't you make the same argument, though, in terms of globalization, for companies going to India and China? If you are the pressure-valve release for companies in California, [then] who's t'say, would you criticize Texas companies --

[CROSSTALK]

PERRY: Seriously, you wanna live in India, or you wanna live in Texas?

STEWART: Are you -- For real?

[LAUGHTER/APPLAUSE]

It's an excellent point. The U.S. may not have the most favorable business climate, but we have a better quality of life than any other country. That has been our trump card against the growing number of business-friendly states on the global stage. Years ago, John Stossel did a 20/20 episode in which he visited India and Singapore and compared the ease/difficulty of opening a business in each country. In the latter, it took a few hours, much less than it would in the U.S. (and a lot less than in India). He was even able to set up a booth or something in a mall before the end of the day. Singapore also has no capital-gains tax, but on the other hand, you won't get caned for chewing gum in the United States (not by the government, anyway; I can't speak for all parents and boarding schools).

In this age of globalization, it's important for policymakers in D.C. to remain constantly aware that we are competing with countries all over the world, not just for investment, but for human capital as well. A tax code that, as Leslie Stahl put it, "all but forces companies to keep their money out of the country indefinitely" needs to be reformed. The president should send the pending trade agreements with South Korea, Colombia and Panama to Congress, and the Congress should act quickly to approve them, something the past two Congresses have pushed aside. We'll lose out on a small amount of revenue that would have come from tariffs, but it will pale in comparison to the capital that will flow into this country when we expand the market for U.S. goods. It may be too late to save California, but the entire U.S. does not have to suffer the same fate.

[Responsibility2nd]

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[mojito]

Welcome to FR.

Your first post is both a vanity and a blog-pimp?

Not the most auspicious debut, Mr. Genius.

[rstrahan]

We have the chance to reverse the trend in the upcoming election, but it’s gonna take action. Moderation is not the way to go.

As to companies moving overseas, its the top corporate structure, usually about 15-20 people, moving to Switzerland, etc, with the operations still staying here. Even if the immediate tax structure changes, I don’t see a quick migration back since the tax structure can go the other way just as fast.

[gaijin]

Did Stewart mean that his answer would be India, or Texas?

Because if it’s Stewart, then I have to say I honestly do not know.

[Beaten Valve]

I’ve got 25 employees and I’d move from Commie-fornia to Switzerland in a minute.

But then who’s gonna do all the work??

[ilovesarah2012]

Nothing wrong with a well-written informative article even if it is from someone’s blog.

[SteveH]

The president should send the pending trade agreements with South Korea, Colombia and Panama to Congress, and the Congress should act quickly to approve them, something the past two Congresses have pushed aside. We'll lose out on a small amount of revenue that would have come from tariffs, but it will pale in comparison to the capital that will flow into this country when we expand the market for U.S. goods. It may be too late to save California, but the entire U.S. does not have to suffer the same fate.

The writer neglects to mention that the trade agreements that have been put on hold are free trade agreements, versus tariffs. If it were not for tariffs, there would be no US government, and without a US government there would be no USA. The writer does not pretend to make more than what amounts to an emotional appeal into a logical argument.

Seriously, is the writer-- for real??

[Marie]

There’s some good points here, but I think that quality of life is the end game for the decision to set up a business. No, what business owners will do is have the companies overseas, then retire or live in a nicer place that more suits them.

There are many factors to consider when it comes to set up a business, but I don’t think that the well-being of the workers is a major consideration.

In addition, if the business climate is so poor that the company can’t thrive, then it can be the most beautiful place in the world with the most culture and still go belly-up. (Like California.)

[ßuddaßudd]

git r done

[RobbyS]

Boeing chose to set up its headquarters in Chicago rather than in Dallas because of the “cultural opportunites:”in Chicago. I wonder how the execs feel now after the latest tricks of the Illinois government? To be in the hands of kleptomanics is not the best thing.

[Excellence]

Thanks for posting the whole thing. I don’t click through to blogs because I’ve recovered from one blue screen of death and don’t intend to do another.

[SaraJohnson]

You don’t have to donate as a requirement to be here. Welcome. Ignore the peanut gallery.

[SaraJohnson]

CEO’s tend to be limo-socialists. As elitist citzens of the world, they despise the riff raff of the country - Americans. If they are leaving the country because we tax too much, they are the ones who put the Democrats in power to “spread the wealth.” Taxation is an excuse.

I think they know the economy is going to crash and I think they put the dems in to shake down the treasury on the way down. They are afraid of the violence that will ensue when the welfare checks and food stamps don’t go out on time.

Wait until China’s economy crashes and the chi-coms blame it on the US. All their “headquarters” are going to be Chinese property and they could easily end up arrested and worse. Everything is happy in Utopian China until it’s not.

[RobbyS]

They will live here so long as the standard of living remains high.

[riri]

Wait until China’s economy crashes and the chi-coms blame it on the US. All their “headquarters” are going to be Chinese property and they could easily end up arrested and worse. Everything is happy in Utopian China until it’s not.

What many people don't realize -- China has had multinational companies on their soil in the past and then reverted back to harder core communism and ousted the companies. The foreigners were lucky, they got to go home. The Chinese who worked for the foreign companies-- not so lucky. They were "running dogs of the imperialists" and paid a heavy price for it as did their families.