Skip to comments.Land of Inequality: Government of elites, by elites, for elites.
Posted on 02/24/2014 6:49:39 AM PST by SeekAndFind
From the end of World War II until the 1990s, California possessed a magnetism unique among the 50 states. It was according to a mythology that was probably overwrought even in those halcyon days an American Eden, a place where ambition and unfettered imagination combined to make even the most exotic dreams seem feasible.
One of the reasons that image was so enduring was that the state consistently delivered on the outsized expectations. It came to be the center of American entertainment, with Hollywood becoming a metonym for the entire industry. It fostered the digital revolution that would eventually flower in Silicon Valley. It constructed one of the nations most extensive freeway systems, built a sophisticated infrastructure for delivering water, and developed one of the most impressive networks of universities in the country.
That California was synonymous with opportunity. It was a beacon to the middle class, a place where it was believed that you could author the future on your own terms.
The California that once beckoned residents from every corner of the nation has been demagnetized over the past quarter century. As an important 2012 Manhattan Institute study by Tom Gray and Robert Scardamalia noted, California led the nation in domestic out-migration in the 20-year period from 1990 to 2010, seeing an exodus of nearly 3.4 million residents that eliminated approximately 80 percent of the gains the state had made in domestic migration in the three decades prior. When those numbers are considered as a percentage of overall population, the Golden State stands alongside the nations biggest exporters of citizens: public-sector basket cases like New York, Michigan, Illinois, and New Jersey. In 2010, for the first time in the states history, California failed to gain any new seats in congressional redistricting.
Around the time this trend became widely acknowledged, a notion began to take hold that Californias regime of high taxes, oppressive regulation, and rampant litigation was scaring away the business class that brought firms and jobs to the state. There is plenty of truth to this criticism. For nearly a decade straight, CEO magazine has ranked California as the worst state in the nation in which to do business. From 1994 to 2008, California lost 124,000 more jobs to other places than it gained. And a Bloomberg analysis of Bureau of Labor Statistics data found that the Golden State saw its number of businesses drop by 5.2 percent in 2012 (a figure that includes both closures and relocations), easily outpacing every other state in the nation.
While the plight of the business sector is all too real, it tends to obscure the story of the migration numbers. An analysis conducted last year by the Hoover Institutions Carson Bruno revealed that the group making up the largest share of the California diaspora is the middle class. These are not titans of industry looking to maximize profits in Texas or Florida; these are everyday citizens whove found themselves priced out of what was once called the California dream.
What accounts for the disproportionate impact on the middle class? In political terms, the explanation is rather simple: California is a state that owes its regnant liberalism to a political alliance between the super-rich and the super-poor.
While its fashionable to decry the states yawning wealth gap the liberal Center on Budget and Policy Priorities ranked the Golden State as having had the third-worst income inequality in the nation from 2008 to 2010 a Whats the Matter with Kansas?style analysis, blaming the lower class for not voting in their own economic interests, cant pass the laugh test in California.
In Los Angeles County the states most populous Democrats command majorities in tony precincts like Beverly Hills and Malibu as readily as in downtrodden areas like Inglewood and Compton. Barely one-fifth of L.A. County voters are registered Republicans. The situation is much the same in northern California. In Silicon Valleys affluent Santa Clara County the regions largest registered Democrats outnumber registered Republicans more than two to one. Yet Democrats also dominate in poor farming communities like Salinas and hotbeds of urban crime like Oakland.
Its not that Republicans are entirely dead in California. Many of the states inland counties have the political disposition of red states, and Orange County stands defiantly as perhaps the last redoubt of conservatism on the Pacific. Their numbers, however, pale in comparison with those of the dominant coastal majority. While California may be famed for the cultural antagonisms between north and south, the political battle is largely east vs. west those who bronze on the beaches against those who toil under the hot inland sun.
This trend doesnt explain the hollowing out of the states middle class so much as establish the precondition for it. While the rich and the poor may come together at the ballot box, it is indisputably (and unsurprisingly) the former who end up manning the states levers of power. This has given rise to a class of what my Orange County Register colleague (and self-identified Truman Democrat) Joel Kotkin refers to as gentry liberals, a left-wing governing caste whose public-policy predilections owe more to considerations of taste than of economic necessity.
The unhappy reality of life under the gentry is that the sorts of measures needed to foster economic growth not to mention affordable middle-class lifestyles are regarded as gauche in Sacramento. The California of the governing classs dreams is a place where white-collar workers take public transit through densely packed urban centers, leaving nary a carbon footprint to be found in their wake. That is, a California where rank-and-file citizens have adopted the tastes of the states elites despite the fact that they dont have the resources to afford them. What it most certainly is not is a California like the one that once beguiled the nation one with abundant, affordable suburban housing, open roads, middle-class jobs aplenty, and good schools.
Its harmless enough, of course, for the California cognoscenti to evangelize in behalf of their artisanal lifestyles. Its another matter entirely to insist that such tastes drive lawmaking. That, however, is precisely whats happened in the Golden State and thats the trend thats increasingly driving Californias middle class across state lines.
Consider the states employment situation. In the aftermath of the Great Recession, California has consistently been one of the nations leaders in joblessness. Indeed, its a testament to how low expectations have fallen that the 8.3 percent unemployment rate the state posted in December fifth-worst in the nation was considered something of a triumph. Unemployment had stayed at or above 12 percent from September 2009 to February 2011.
Of course, plenty of states were hit hard by the downturn, and California was one of those most deeply affected by the housing bubble. Those factors cant be ignored, but neither can the fact that the Golden State seems stubbornly resistant to a vigorous recovery.
This brings us back to the fiscal, legal, and regulatory environment for businesses. The ranks of the wealthy departing California may be considerably smaller than those of the middle class, but the impact is outsized given the jobs that theyre taking with them. Major firms in particular which are the most likely to have the resources to pick up and move once government harassment becomes intolerable are increasingly viewing California in the rearview mirror. As demographer Wendell Cox has reported, the state suffered a net loss of nearly 450,000 jobs from firms with 500 employees or more from 2000 to 2008 before the financial crisis even began.
Things arent much better for the companies that stay behind. While theres a lack of reliable data on the cost of regulation to California business, a number of prominent executives in the state have gone public with their exasperation. One of the most vocal is Andy Puzder, CEO of Carls Jr., the iconic fast-food chain that started in Orange County. In a Wall Street Journal interview last year, Puzder noted that he could get a building permit for a new restaurant within 125 days of signing a lease in Novosibirsk, Russia, but that it would take 285 days in Los Angeles. I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California, he noted archly (Karcher being the eponymous Carl).
Puzders insight underscores an important facet of Californias economic entropy: The problem is just as much jobs that are never created in the first place as those that are eliminated. Carls Jr., for instance, is aggressively expanding in Texas, but wont be building new restaurants in California because of the regulatory costs. Energy production one of the historical drivers of Californias growth and a reliable boon for blue-collar workers is another casualty of the gentry class. The Monterey shale formation, located in the states San Joaquin Valley, is estimated to hold over 15 billion barrels worth of oil, which would represent nearly two-thirds of shale reserves in the nation. A recent study by the University of Southern California estimated that harnessing the Montereys resources could create 2.8 million jobs in the state by 2020. Dont hold your breath, however. The environmental lobby which regards opposition to fracking as a moral imperative blanches at the notion of Californias becoming the nations leading oil producer (as it was at the beginning of the 20th century). And it has sufficient political power to make extraction of the states shale resources prohibitively expensive, if not impossible.
Members of the middle class who are fortunate enough to find gainful employment in California are immediately faced with another challenge: finding affordable housing. In San Francisco, for example a city that has actually seen fairly robust job growth of late only 4,000 housing units have been added over the past three years, a period during which the city has added roughly 10,000 new households. According to Jed Kolko, chief economist for the real-estate firm Trulia, only 14 percent of homes in the San Francisco metro area are within reach of someone making the median income for the area. As one might suspect, the quality of homes that fall into that category is often sufficiently low to repel many buyers.
Renting isnt a particularly enticing option either. As of last summer, the average rent for an apartment in Orange County was $1,671 a month. If one applies the (conservative) rule that housing costs should amount to no more than 25 percent of your annual income, that means that an income of over $80,000 a year is required to comfortably rent in Orange County.
Not all of the blame for this can be laid on public policy, of course. Housing costs are always going to be higher in desirable areas, of which California has no shortage. The no-growth predilections of the governing class, however, greatly exacerbate the problem.
California is a national leader in so-called smart growth, imposing draconian regulations on property development. The 2010 Demographia Residential Land & Regulation Cost Index a study intended to unearth the effect of land-use policies on housing costs sampled eleven metro areas throughout the country to find how regulation had added to their real-estate prices. Areas like Atlanta and Dallas, which had seen costs from regulation adhere to their historical norm, received a value of 1. Minneapolis received a 2.4, indicating that the added cost from land-use restrictions was 2.4 times the historical norm. San Diego, the sole California area included in the study, received a 13.2. Land-use restrictions were estimated to have added an average of $220,000 to the cost of a San Diego home.
As a result of the inflated costs, members of the middle class who decide to stick it out in California often find themselves living in less fashionable communities, far away from work. Thats the story of the Inland Empire, the enormous yet nationally anonymous region on the far-eastern periphery of the greater Los Angeles area, where nearly 40 percent of the population commutes to work in Los Angeles, Orange, or San Diego County. The Inland Empire is not the iconic California of which the rest of the nation dreams. Its hot, dry, dusty, and plagued by smog that the prevailing winds carry in from the coast. Its also a sort of cultural piñata for coastal elites. Mention of the Inland Empire in Los Angeles or Orange County will inevitably inspire condescending references to the dirt people or 909ers (after one of the regions area codes).
What it is, however, is cheap at least as a relative matter. Housing prices in the Inland Empire are at least 40 percent lower than those in Los Angeles or Orange County. The surge of homebuyers to the region was one of the reasons it was hit so spectacularly hard by the popping of the housing bubble. The home of a higher percentage of subprime loans than anywhere else in the nation, the Inland Empire saw its housing prices decline by 53 percent from the markets high point in 2006 to its trough in 2009.
Cheaper rents, however, come at a cost. The deplorable quality of traffic in California means that commuters often end up paying out in time what they save in money. Theres a reason that Californians refer to distance in terms of time on the road rather than mileage. For years, I commuted from my home in the South Bay area of Los Angeles County to an office in downtown Los Angeles. At 35 miles each way, it was not an especially daunting prospect on paper. With normal workday traffic flows, however, the trip rarely clocked in at under 90 minutes each way. Any similarly situated Californian (and they are legion) is spending the equivalent of more than 30 days a year in traffic. Forget trying to make your kids soccer game, establishing a side business out of your home, or working on a degree in the evening. And thats before factoring in the price of gas (in part because of special regulations, California consistently has some of the highest fuel prices in the nation).
Why is the middle class leaving California? Because California has left the middle class. As the economy faltered, the state raised taxes and continued to let regulation and litigation run riot. As the freeways clogged and housing prices climbed to astronomical levels, environmental activists called for high-speed rail and sustainable communities. As the states schools saw their performance plummet to national lows, the California Teachers Association the states dominant teachers union and foremost opponent of education reform remained the single biggest financial player in state politics.
Though their interests may be diverse, the impulses of every powerful constituency in California politics converge on the same point: more government. As a result, California has become a place of government of the elites, by the elites, and for the elites. It should be no surprise then that the elites are increasingly the only ones left who can afford it.
Troy Senik, a former speechwriter for George W. Bush, is the senior editor of Ricochet, a columnist for and member of the editorial board of the Orange County Register, a senior fellow at the Center for Individual Freedom, and the host of a series of podcasts for the Hoover Institution at Stanford University.
And as the “Immigration” took over conservative government evaporated in a cloud of freebies for the illegals to secure their support. Republicans face the same fate in every state if they are stupid enough to legitimize illegal immigration. Cuidado!!!
So where do the poor live? If the middle class can’t afford to own and renting is expensive, what about the poor? How do they cope with housing and the long commutes mentioned in the article? Are vast numbers of them living in an underground economy or what? I’d love to know.
One of the smartest moves I’ve seen by a corporation was the decision made by Hughes Aircraft to move from California to Arizona. What was particularly smart was the timing.
A senior manager told me that HAC had their senior strategic planners do a study of the business climate in CA. They concluded that CA was going into the toilet and that HAC should sell all/most of their holdings and leave the state. This decision was made about 30 years ago in 1982.
And Occidental Petroleum recently announced they’re moving from Los Angeles to Houston.
Multiple families per household is one possibility.
If you want to understand the reason the big money business donors to political parties want more immigrants, the above article is all you need to read. If you are an elite in the business community of Silicon Valley or other part of Calif, you desperately need educated immigrants from India, China, and other countries who will come to your company and work for half or less of what a native Californian needs for living expenses. It is a step up for the immigrant and a big lowering of costs for the employer. The people who suffer are those Americans who have been here for more than 15 years and know how expensive it is to actually live and support a family in California.
I recently watched a talk from an Obama-admin official speaking at Stanford and telling the non-citizen students they should get an automatic green card with their diploma. Of course, they will work for peanuts as single engineers and tech specialists. However, once they marry and try to buy a home, they realize they can’t afford life on their meager salaries. The situation is exploitative of new immigrants and abusive of American citizens.
This needs to be widely understood and then public opinion will press those who are causing this massive problem.
Here is an example you have not read about. A typical university or college has to hire a few new teachers every year to replace retirements or teachers who leave. That happens at every employer. However, the new teachers at a university in a deeply troubled blue state (aren’t they all) will get a job at a very low salary. It is a dream job for an immigrant from Asia but pays about half what it would cost to hire a US citizen with a solid track record. The result is that US citizens are rare among applicants and new hires. The hiring office at most universities now have a staffer who specializes in visa and immigration laws. This situation would be similar at private-sector employers.
If you look at the administrative staff, in contrast, they are from a very different labor pool.
Take note that an immigrant who grows up in a gov’t-controlled society and enters US society after college is never exposed to American culture or the relationships between freedom, individuality, and opportunities for success. Everything is about government in their view.
This is no problem that can’t be solved by giving amnesty to all of the currently “undocumented immigrants”.
“This trend doesnt explain the hollowing out of the states middle class so much as establish the precondition for it. While the rich and the poor may come together at the ballot box, it is indisputably (and unsurprisingly) the former who end up manning the states levers of power. This has given rise to a class of what my Orange County Register colleague (and self-identified Truman Democrat) Joel Kotkin refers to as gentry liberals, a left-wing governing caste whose public-policy predilections owe more to considerations of taste than of economic necessity.”
The view reminds me of what the main character in the story/movie “The Time Machine” finds at the future-most point of his journey - a society of totally healthy, well fed, need nothing, fully-cared-for-in-every-way idiots who knowing nothing of and live separate from the vultures that actually rule over everything.