Most Californians live within miles of its majestic coastline – for good reason. The California coastline is blessed with arguably the most desirable climate on Earth, magnificent beaches, a backdrop of snow-capped mountains, and natural harbors in San Diego and San Francisco. The Golden State was aptly named. Its Gold Rush of 1849 was followed a century later by massive post-war growth.
There is no mystery why California’s population and economy boomed after the Second World War. Education in California became the envy of the world. California’s public school system led the nation in innovation with brand new schools and classrooms. The Community College system that fed its universities was free for its students. A college education at the UC and Cal State systems was inexpensive. UC-Berkeley, with its graduate schools, was arguably the greatest in the world while Stanford developed into the Harvard of the West. An efficient highway system moved California’s automobile driven commerce while fertile soil of the Central Valley became the fruit and vegetable basket of the world.
The next wave hit in the 80s as former orchards south of San Francisco morphed into the Silicon Valley. Intel and other chip manufacturers led the computer and software revolution bringing high tech jobs and immense new wealth to the Golden State. The dot-com revolution of the 90s brought more gold to California. Innovators like Google and Apple cashed in by nurturing the Internet era. The next decade heralded the greatest housing and mortgage boom in the nation’s history. Developers from Orange County, south of Los Angeles, invented creative financing vehicles that drove home sales, and profits, to record heights by 2006.
This success has created a problem: Californians, due to their golden history, live unreflective lives. The Tea Party movement generated a political tsunami that swept more than 60 incumbents from political office in 2010, but the wave petered out at California’s state line as Democrats take every elected office in the state.
The state budget, mandated to balance by law, has been billions in the red for ten straight years. Yet Californians re-elect the same politicians, year after year, who produce budgets with multi-billion dollar deficits. California voters rejected Meg Whitman, the billionaire founder of Ebay, in favor of Jerry Brown. California now has a $16 billion deficit which “assumes” that California voters will pass massive tax increases on themselves. If they do not, the 2013 deficit becomes a mind numbing $20 billion. Yet despite the red ink, Governor Brown signed into law a “high speed rail” bill that will spend $6 billion on a train between Fresno and Bakersfield – not LA and San Francisco as promised. Polls turned against the choo-choo, but there remain no outcry from California voters.
California voters rejected Carly Fiorina, who ran Hewlett Packard, for Barbara Boxer in the 2010 Senate race. To protect the endangered Delta Smelt, a fish known better as bait, water has been diverted from Central Valley farms to the Pacific Ocean. Orchards in the Central Valley were allowed to wither and die resulting in unemployment in the Central Valley as high as 40%. Imagine Californians on food stamps, living in what was the fruit basket of American.
California’s business climate now ranks dead last according to 650 CEOs measured by Chief Executive Magazine. Apple will take 3,600 jobs to its new $280,000,000 facility in Austin Texas – jobs that California would have had in the past. Texas ranked first in the same survey. California’s unemployment rate is consistently higher than 10% of its work force, and there are few jobs for college students who graduate with as much as $100,000 in student loans. Despite overwhelming evidence that bad public policy is chasing away jobs, the same state politicians are sent back to Sacramento every two years.
California’s public education system, once the envy of the world, now ranks 46th in the nation in per pupil spending and faces a $1.4 billion cut in the fall. In the last month, three California cities declared bankruptcy. More will follow. Take Poway for example. Its school board borrowed $100,000,000 (for 33,000 students) through a Capital Appreciation Bond. The politicians told the voters there would be no payments for 20 years. What they did not explain was the residents must pay back $1 billion dollars on their $100 million loan. Beginning in 2021, tiny Poway will be forced to pay $50 million per year in bond payments. Huge property tax assessments will be required if homes do not appreciate 400% by then, which is unlikely under foreseeable circumstances.
Rather than stare at themselves in the mirror, Californians should take a look at Michigan. In the 50s greater Detroit was the fourth-largest city in America with 2 million inhabitants and the world’s most dominant industry: the automobile.
Most people had a good paying job. Its burgeoning middle class was the model of the world with excellent public schools and universities. Detroit in 2012 is a shadow of that once great metropolis. Its population has shrunk to 714,000. The average price of a home has fallen to $5,700. Unemployment stands at 28.9%. It has a $300,000,000 deficit. There are 200,000 abandoned buildings in the derelict city. Its public education system, in receivership, is a disgrace producing more inmates than graduates. In 2006, the teacher’s union forced the politicians to reject a $200,000,000 offer from a Detroit philanthropist to build 15 new charter schools. Jobs long ago abandoned Detroit for places like South Carolina and Alabama, with their “right to work” laws and low taxes.
Now Detroit’s Mayor has proposed razing 40 square miles of the 138 square miles of this once great American city returning 70,000 abandoned homes to farmland. Even such a draconian plan may not be enough to save the city. If a hurricane had hit Detroit, more of us would know of this tragedy in our midst, but this fate was man-made and not wrought by nature. Detroit has had one party rule for more than fifty years. Louis C. Miriani served from September 12, 1957 to January 2, 1962 as Detroit's last Republican mayor. Since that time the Democrats have ruled the Motor City. John Dingell has served region since 1956. His father was the Congressman from 1930 to 1956. Despite the disastrous decline of their city, Detroit voters send him back to Congress twenty-two times.
Like Detroit, California now has one party rule. The Democrats of California did not need a single Republican vote to pass their budget. Governor Brown’s plan is to address the nation’s largest deficit by raising taxes instead of cutting spending. If passed, the deficit would drop from $20 billion to a mere $16 billion. The budget does nothing to cure the systemic problems of a bloated bureaucracy. It does not eliminate one of California’s 519 state agencies.
Caltrans stopped building highways under Brown’s first term, but the people kept coming. Now 37 million Californians are locked in traffic jams each day. Brown was rewarded for such prescience with re-election as Governor. California’s egotistical politicians passed the Global Warming Solutions Act in 2006 (AB32) to “solve” climate change. Dan Sperling, an appointee to the California Air Resources Board (CARB) and a professor of engineering and environmental science at UC Davis, is the lead advocate on the board for a “low carbon fuel standard.” The powerful state agency charged with implementing AB 32 and other climate control measures, claims the low carbon fuel standard will “only” raise gasoline prices $.30 gallon in 2013. The California Political Review reported implementation of these the policies will raise prices by $1.00 per gallon.
Detroit was once the most prosperous manufacturing city in the world, a title later secured by California. Will California follow Detroit down a tragic path to ruin? In 1950, no one could imagine the Detroit of 2010. In 1970, when foreign imports started to make a foothold, the unions and their bought and paid for politicians resisted any change. In the 1990s as manufacturers fled to Alabama and South Carolina, the unions and their political minions held firm, even as good jobs slipped away. No one in Detroit envisioned their future.
Today, California is following Michigan’s path with exploding pension obligations, a declining tax base, and disastrous leadership. Housing prices have fallen 30 to 60% across the state, evaporating trillions of dollars of equity and wealth. Unemployment remains stubbornly high and under-employment is rife. Do our politicians need any more signs?
Governor Brown’s budget will first slash money to schools and raise tuition on its students while leaving all 519 state agencies intact. He apparently will protect political patronage at all costs. Jobs, and job creators, are fleeing the state. Intel, Apple, and Google are expanding out of the state. The best and brightest minds are leaving for Texas and North Carolina. The signs are everywhere. Meanwhile, the voters send the same cast of misfits back to Sacramento each year – just as Detroit did before them.
The beaches are still beautiful. The mountains are still snow capped and the climate is still the envy of the world. Detroit never had that. But will California’s physical attributes be enough? If the people of California want to glimpse their future, they need look no farther than once proud City of Detroit and the once wealthy state of Michigan.
It can happen here.
Robert J Cristiano PhD is the Real Estate Professional in Residence at Chapman University in Orange, CA, a Senior Fellow at the Pacific Research Institute in San Francisco, CA and President of the international investment firm, L88 Companies LLC in Denver – Newport Beach – Washington DC - Prague. He has been a successful real estate developer for more than thirty years.
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Needing a fact checker. Without a fact checker,all other assertions become doubtful. In 1950, the population of the CITY of Detroit was 1.8 million. Currently the City is is 700,000. The "greater" Detroit pop is currently about 5 -6 million. Try harder.
California
You want to know what's happened to CA? The same thing that is happening to the rest of the US. Reagan was governor in CA before he was president. He helped set the state on its present road. Throw in a little Prop 13 and you've got the wealthiest state in the Union on a fiscal starvation diet. And what do you Rs do........try to blame the Dems. What a joke!
Arnold
Say what you want about Arnold but while he was Govenor, their were 4 initiatives to transform California on the ballot during his first term.
The Government Unions in California spent a fortune against those initiatives and the California voters defeated every initiatve. Arnold did his job and the California voters screwed up big time. It may be a long time before we get a chance to correct that mistake.
California's also voted for the bullet train, even as California was recording massive budget deficits.
I wasn't crazy with Arnold's change of heart during his 2nd term but the problem lies with the control Government Unions have over elections and of course the California Voter also is to blame.
Government Unions are the Problem
Why is California cicling the drain, Government Unions. Not long ago most government union workers earned about 2% of their salary towards their pension. For example, work 25 years, get 50% of your final salary forever. During the dot com bubble the Government Unions and the politicians that approve pensions changed most pension forumlas from 2% to 3%, retroactive for ALL workers. Add to that generous medical benefits in which the government workers contribute little to nothing towards the cost. This is over the top and must be stopped. Not for future government workers but for ALL current government workers.
Next the Government Unions wanted to increase their members. How? Expand Government services to all; lower the qualifications bar for government assistance; and no acountability..hire a ton more unionized government workers to administer. California hands out 33% of all welfare in the country.
What about Gov. Pat Brown?
He gets no mention here, in the article or in any of the responses, yet he was probably the greatest governor California has ever had. He built and expanded the highways (and freeways), the water supply systems and encouraged growth of colleges and universities.
He did not spend money on questionable (at best) projects like California High Speed Rail.
Yet his son, Gov. Jerry Brown does not seem to have learned much from his Dad.
California bashing
Most of the comments I've read on here sound pretty hostile towards Californians. Such things as 'they got what they deserve'...really? you think so? Cause I don't think Californians deserve this dismal reality, anymore than any other place hurting right now. When times get tough the first thing people do is look for the black sheep. Nothing will get fixed by throwing insults at Californians. I know plenty of Californians that didn't vote the same a**holes back into office, btw. So mind what you say about 'all' Californians. We're not all 'soggy' in the mind. Thats a pretty ignorant point of view. And to generalize an entire populous such as Cali, is closed minded and stupid. Which by the way, makes us Californians quite unique. A beautiful state, fantastic weather, and people from all walks of life moved here by the droves, which maybe is why California is sterotypically 'liberal'. Perhaps with all the different cultures here, we appear so. Oh well. I'm not insulted. In fact it's a compliment, so thankyou :) There's a season for everything. What goes up must come down. But I know one day some day our country in a whole will bounce back from this. So how 'bout a little less hostility, and more productivity? And if you don't plan on running for office in California,and actually doing something to help out, except complain and throw insults then I suggest shutting your mouth about my state. :)
Hostile Comments to Californians yet Some Ca. Cities Want Growth
Yes I agree that many of the comments are hostile and fail to present specifics. Overall, the regulatory environment - both statewide and from local city councils - is too restrictive. However, there are some cities who want growth with small entrepreneurs, such as San Luis Obispo and Sebastopol. We should look at the economic development programs in these, and other California cities, for examples of how to bring back entrepreneurs to California.
Nevertheless, California as a state has many "trends" that are not generally found in neighboring states, such as Urban Growth Boundaries (optional, in California), that raise the cost of land. Local California cities could consider removing these potential impediments to economic growth. Very large lot zoning at the city limits can be another obstacle to growth.
Indeed, the strict urban growth boundary around San Luis Obispo raises the cost of living, making it difficult for entrepreneurs to move there, and take advantage of the City's economic development program, in conjunction with Cal-Poly. http://www.openforbusinessinslo.com/thrive/innovation-and-entrepreneursh...
In that scenario, California loses, since entrepreneurs go north to Reno where there are no UGB's in Washoe County, or even Bend, Oregon, yet Bend is also facing problems expanding its UGB.
I think that California can recover, yet it begins with local City Councils who decide to recruit outside talent, and expand their urban growth boundaries. When California cities see that Apple is going to places with no UGB's such as Reno-Sparks, NV, then they'll start to realize the keys to maintaining their own property taxes are decisions made locally.
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The problem in California: liberalism
The truth? Yep, California did have a Republican governor through most of the early 2000's, but the 'R' following Arnold's name was just a forgotten letter. He was, and will always be, a liberal. He gave us a massive stem cell money pit that has produced nothing, he gave us the 'cap-and-trade' business killer, he gave us 'Harvey Milk Gay Day' in the public schools, and he raised income, sales and auto taxes.
But Democrats in California are not like Democrats anywhere else. They are rabid, anti-business hacks who only care about unions, illegals and gay activists. Taxpayers are ignored, property owners are demonized and churches are vilified. Just this week we learned that Hollywood is losing the core of its TV productions to other states - and it is due to California's high taxes and labor costs. But who does Hollywood support each election? The same anti-business liberals who created the mess.
Vallejo, Stockton, Mammoth Lakes and San Bernardino are all bankrupt - done - kaput. And Jerry Brown's answer? He wants us to vote to send billions more in taxes to Sacramento so he can spend more. It's interesting to see Romney/Ryan using California's demise as a campaign tactic. The people better listen or they just might end up like us!
Fiscal conservatism in a spend happy state
Unfortunately the strong California conservative segment (think Reagan republicans) has been outvoted by the spend happy and regulation loving democrats. Poway's future is likely bankruptcy - they can't simply raise property tax assessments because those are limited to 1% a year under Proposition 13, and any parcel tax would require a 2/3 vote of its residents. Californians are not in a mood to vote in any tax increases - legislators aren't responsible with the revenue and it would be throwing good money after bad. Although many problems in the state are self-inflicted, the water diversion in the central valley (in favor of the delta smelt) is the result of federal legislation and regulation. There have been numerous extensions and expansions of California highways (widening projects, tollways) since Brown's first term but not enough to keep up with the population growth that California experienced. Unfortunately the outflux of businesses but not discernible decrease in population does not portend a bright future for those of use left behind. I have no wish to leave my native state, but I can't be hopeful for its future.
As a "California Girl", you
As a "California Girl", you should know that CA has never been as fiscally conservative as, say, Alabama. You might also know that CA sent billions upon billions more to the fed govt than it's received back, propping up fiscally conservative red states like Alabama.
This post also fails to discuss the issue of massive low-skilled immig., despite the highly negative impact that's had on CA: increasing spending, decreasing income, driving middle class out, giving more power to the far-left, establishing a two-tiered society, and more.
Yet, for some odd reason, Robert J. Cristiano - like Kotkin - chooses to ignore that.
Since this site is sponsored by the "Praxis Strategy Group", it's worth asking if that company's clients have a financial interest in high immigration and low regulations.
Because, clearly, this site has no interest in discussing what's really gone wrong with CA.
Income Tax
Ah, the old "I don't understand the progressive income tax" argument. It is a function of the progressive income tax that higher income tax states send more to the Federal government than lower income states. Once that money is sent, it is up to the Federal government to spend it as they wish.
You should be arguing against the progressive income tax, but you won't. However, don't worry. As California continues to destroy its business climate and its agricultural resources, you can look forward to Alabama sending money to you. Great work.
Sorry, I'm siding with Adam
Sorry, I'm siding with Adam Smith (the Adam Smith) on this one: like the vast majority of Americans, he supported prog. taxation. While sociopaths will disagree, the great majority of Americans think those who are doing well should contribute more than those who are struggling to get by.
As for AL, it's economy is less than 10% of CA's. Other solid red states are in even worse shape. Turn your back on your fellow citizens in CA now, regret it later.
And, in case it wasn't clear, CA did OK for decades as a liberal state. Then, there was massive low-skilled immig., something that Kotkin et al refused to even mention despite the devastating impacts it's had on the state. While that mass immig. has politically helped the far-left (including those who frequently act like foreign agents), it couldn't have happened without the active or passive assistance of conservatives including supposed fiscal cons.
Now, those same people are blaming the victims of their policies.
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DETROIT????? california has turned into eastern europe..... the state is run by the communist party....they changed their name to environmentalist .... but they run the state like the iron curtain..... california is just like ukraine and russia...because they know the stupid california brain....can not do the math....
the stupid californian brain is marinated with medical marijuana and has know clue what is going on..... "stupid californian brain"
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Eastern Europe?
Ukraine, I'm from Detroit and have lived in California for 32 years.
I'm afraid to say, your comment is most accurate.
Californians are stupified with dope and leftist thinking. You're right, Eastern Europe is closer than Detroit.
California as next Detroit
Dingell does not represent Detroit in Congress, but rather Dearborn and other suburbs that do much better than Detroit.
At any rate, it's local government that has the most to do with the health of a locality rather than its congressional representative, who can do no more than bring home the federal pork, for which Dingell is famous (or infamous).
California rejected Carly Fiorina, who took a once-proud company, Hewlett-Packard, and drove it into the ditch by, among other things, an ill-conceived, ill-executed takeover of Compaq.
Politicians and voters
Unlike the succession of Democratic politicians who have driven California into the ground. Oh wait,... Those politicians were elected by the voters who have gotten exactly the government they deserve.
Detroit has 912,000 residemts???
The author must be quite IG'-nernt if he believes that the population of Detroit is 912,000.
The 2010 Census pegged its population at 714,000, and Detroit lost nearly 1/4 million residents from 2000 to 2010. At an estimated drop in population of 2000 per month over the past dozen years, the estimated Detroit population now is likely 654,000 (714,000 - 60,000). Quite a difference from what the author said...
Detroit population
The population of Detroit? Who would be able to know? How many are taxpayers, one in eight? It's like getting data on the environment from China.
California = Michigan?
Robert is absolutely correct on most counts.
The difference being that California's financial wounds are entirely self-inflicted, due to electoral ignorance by voters and legislative malpractice by [mostly Democratic] public officials, and their Public Employee Union masters.
You have to go back to 1988 for the last time California cast its Electoral Votes for a Republican... and THAT was close (Bush over Dukakis). That's why Michigan has a cumulative Political Inclination Quotient of PIQ-47. Just look at the voting history:
http://piqscore.com/california/
To some degree, Michigan's woes have some basis in external causes: namely, brutal competition from carmakers based in Japan, Germany, and other foreign competitors. Granted, UAW concessions and other Big Labor agreements add burgeoning costs to Detroit products (and force GM, Chrysler, and Ford to "cheapen" their cars vis a vis comparable imports) but Detroit is still salvagable: they just need labor unions to figure out that $50/hr is better than $0/hr.
Plus Michigan is SLIGHTLY more conservative than California; even though they share California's love for liberal Presidents, Michigan gets a PIQ-49 over the past eight Presidential elections.
http://piqscore.com/michigan/
Michigan has been getting a reality kick in the teeth every year for the past two decades. But California can't get with reality however its presented.
Good article, Robert.
Just more lame California bashing from a Republican hack
We can't take Robert Cristiano seriously.
A couple of years ago, he posted a rant about his anger over having to pay taxes on his multi-million dollar income, and threatened to leave California, stomping off like a spoiled four-year-old.
And now he's here again to rant about Democrats. Newsflash to Robert: Barbara Boxer doesn't set policies for the state of Calfornia. Another newsflash: California has had Republican governors for most of the past three decades. To lay all of the blame on Democrats is just hogwash.
Taking a look at the map he's posted, I can't help but wonder: If Republican leaders are so wonderful for a state's economy, then how do you explain Mississippi and Florida? The two states have been dominated by Republicans for many years. The answer is more complicated than Robert is either willing or able to recognize.
California
California is the Progressive petri-dish. The Nation will watch what Cap and Trade, the Dream Act, and what increasing taxes does to your economy. Good luck.
California Urban Growth Boundaries and Economic Vitality
A few observations ...
1. Very few areas of California are doing well. Marin County, for example, despite its urban growth boundaries, has the state's lowest unemployment, at about 6%, since people work in San Francisco in government, engineering, and international business. However, most California counties are much higher; many in the double digits as construction has stalled due to growth management. Cities in the Central Valley are within commute distance to the somewhat prosperous bay area. However, some of these cities also have UGB's, and the majority of the population does not benefit from Bay Area six figure salaries (unlike residents of Marin County, who can even take a bus to work from the charming bedroom communities of Mill Valley, Fairfax, San Rafael, etc.).
2. The Smart Growth Greenhouse Gas law(s) will make things worse, since utilities for infill housing are more expensive, among other reasons.
3. It is possible to make a living in California as a telecommuter or with an organic farm, in places such as Sebastopol, the Russian River valley, and San Luis Obispo, where local governments encourage entrepreneurs and hobby industries. However, these charming cities and their creative people have become the exception, whereas decades ago they used to be the rule, in the once very creative, entrepreneurial state of California. Indeed, Mill Valley and related charming suburbs of Marin and Sonoma Counties, are now havens for the very rich and elite, commuting to six figure jobs across the Golden Gate Bridge.
4. Earthquakes could bankrupt the state, since federal aid may not be there due to the national economic crisis.
5. Apple is also moving to the greater Reno area in Nevada, who gave them a significant tax break, resulting in hundreds of new jobs for the Reno area, soon.
6. Many California cities have strict urban growth boundaries, increasing land costs for businesses. The new climate change laws will further increase land costs. Companies that exit California have to find areas with cheaper land, generally in states that do not have mandatory smart growth and urban growth boundaries (such as Nevada and Texas). However, business expansion in Nevada is limited, due to the inappropriate and excessive ownership of BLM (Bureau of Land Management) lands around Reno, Sparks, Carson City, and Las Vegas, NV.
7. You mentioned California ranking at #50 on Chief Executive Magazine's "Best/Worst States for Business 2012," at: http://chiefexecutive.net/best-worst-states-for-business-2012
This web site is interesting, since states with heavy growth management score very low for 2012, such as Washington, Oregon, and California, who all have urban growth boundaries.
Some states without urban growth boundaries score very high. For example, last time I checked, Utah and Texas have no UGB's, while Arizona has no UGB's except for Flagstaff, Colorado has no UGB's except Metro Denver-Boulder, and Nevada has no UGB's.
I don't study land use east of the Rockies so I don't know about North Carolina and Florida, except that Florida just cancelled its statewide system of UGB's. This list is consistent with Dr. William Fruth's 2012 Policom Economic Vitality rankings, where Oregon and coastal California cities perform poorly, and cities in Texas and Utah do well.
organic farms, and other creative entrepreneurs
the only thing that keeps these silly businesses alive is the soggy california thought process that deems virtually all output from current technology is just not hip (apple products excluded). go for the green stuff, until you run out of it - won't be long now.
Wind, Solar, and Organic Vineyards
On Green Products,
There is lots of money to be made in installing wind energy systems, solar panels, and organic vineyards. However, those who can pay for these systems are NOT those of us in the middle class.
Instead, they are mostly baby boomer retirees who can buy 5 acres near Auburn or Placerville, CA and install their million dollar retirement home off the grid.
In my view, the mistake in public policy has been to spend millions in Federal money (i.e. Money from China) on large solar panel projects in the middle of the desert, yet this is costly and risky given that it's foreign money.
And, it's too expensive of an electricity source for those of us in the middle class to afford.
Whereas baby boomer retirees can move near Grass Valley, CA or some other California region rapidly accumulating retirees, where they can afford to put up a custom home off the grid on 10 acres.
I think that green energy changes will occur gradually and through the private sector. If I could buy a 125 watt solar panel for $200, I would do so, since that's not expensive. 95% of the time, that would power everything here, from 6A-745P M-Sun. However, I think that the time for giant solar and wind farms is not here due to the expense.
I mentioned Sebastopol and San Luis Obispo, CA in two comments above. These are places where both baby boomer retirees and also young people 20-50 are buying property, and going off the grid with organic farms.
There are definitely pockets of innovation in the state, however, state policies and an over-reliance on "urban growth boundaries" have escalated the cost of land, making it unaffordable for newcomers from elsewhere. One could even cross the California border and travel 10 miles into Ashland, Oregon and find that the Bureau of Land Management owns about 90% of the farmland in Jackson county (caveat, depending on your definition of farmland, rangeland, etc.).
So, these land use issues are not unique to California.