Thursday, January 28, 2021

How to Californicate America

When Donald Trump declared that he would make America great again, the naysayers sprung into action. By their dim lights America never was great; it was always a vast criminal conspiracy conducted by white people against people of color. Therefore, they granted themselves the license to ensure that America would never be great again. They would not allow it to be great again during a Trump administration.

Now, Joe Biden does not want to make America great again. His base would rise up in righteous anger if he ever suggested such a thing. No, as Joel Kotkin tells us, Biden wants to make America into California. He wants to take the failed policies that have destroyed California and apply them to America as a whole. How better to prepare for the incoming Kamala Harris administration.

Don’t laugh. The notion that Joe Biden is going to survive four years of the presidency is wildly unrealistic. 

Anyway, Kotkin is an especially reliable reporter. Not only is he a serious scholar, but he is, if memory serves, a Democrat. Therefore we cannot tax him with bias. He is reporting the facts on the ground, in California.

He opens by explaining that California excels-- in the production of mass poverty and in increasing the gulf between middle and upper-middle income earners. As for minorities, they do worse in California than anywhere in the country. Then again, the state’s political leadership is against poverty and inequality, and it’s the intentions that count-- don’t you think.

Kotkin writes:

[California] suffers the nation’s highest poverty rate and presents the widest gap between middle- and upper-middle income earners of any state. Minorities—notably African-Americans and Latinos—do worse in California’s metros than elsewhere in the country, according to a recent study that we conducted at the Urban Reform Institute. In Atlanta, African-American median incomes, adjusted for costs, are almost double those in San Francisco and Los Angeles; Latinos earn $20,000 more in midwestern and southern cities than in the enlightened metros along the California coast.

The California economy is no longer innovative. It is merely living off of what Kotkin calls “information cartels” whose leaders function like feudal lords-- we, the rest, being their serfs. 

Rather than the dazzlingly innovative and diverse economy of its heroic past, the California economy is now dominated by giant information cartels that seem happy, like feudal lords, to divide the vast digital domain among themselves. This top-down model was embraced recently by Governor Gavin Newsom, who boasts that a new round of initial public offerings demonstrate that the state’s growing billionaire class is “doing pretty damn well.”

Of course, none of this wealth has really trickled down. Members of the middle and working classes have become more impoverished. The rich are getting richer and everyone else is getting poorer:

Incomes for California’s middle and working classes have been heading downward for a decade, and the poor, despite an elaborate welfare state celebrated by Tyson and Mendonca, have seen their incomes tumble, even before the pandemic. Only the top 5 percent of taxpayers have done well, while the middle quintiles, and especially the bottom quarter, have suffered negative income growth. These results, the state budget admits, are worse than in the rest of the country.

This means that the very rich pay most of the taxes-- it reminds us of New York City. If enough of these people leave the state, the loss in tax revenue will be calamitous:

… according to Franchise Tax Board data, 46 percent of all personal income taxes are paid by individuals in the top 1 percent, with the top 5 percent paying two-thirds of all personal income taxes. Capital-gains collections have grown five-fold since 2010, while income taxes, which made up barely one-third of the state budget in 1980, now constitute two-thirds.

Like medieval states, California is divided between the rich and the rest. The middle class has largely disappeared. If it has not entirely disappeared, it is well on the way. To his credit, Kotkin blames business-crushing regulatory policies, the kind that the new Biden administration is now implementing:

Meantime, the old middle class continues to fade, and a new one is, for now, largely stillborn. California’s regulatory policies, shaped largely by climate concerns, have pushed housing prices so high that the state, according to a recent AEI survey, is home to six of the nation’s worst markets for first-time homebuyers. The state accounts for four of the nation’s six largest metros with the lowest homeownership rates and, according to a recent study by economist John Husing, unionized construction workers can’t afford any median-priced homes in any coastal California county. There is less construction going on in California—and even if you build it, you can’t afford it.

The only companies that can afford to comply are the big tech firms. At the least, regulation has eliminated the competition. More importantly, the state is now among the nation’s leaders-- in unemployment:

By contrast, many well-capitalized, larger tech and service businesses that can afford to comply with the mandated restrictions have thrived, but overall, the state in 2020 suffered among the nation’s highest unemployment rates, outdone only by tourism-dominated Hawaii, Nevada, and New Jersey. Particularly hard-hit has been Southern California, which lacks the vast tech economy of the Bay Area and has been buffeted by the shuttering of tourist facilities—over 25,000 jobs have been lost in Anaheim, for instance, home to Disneyland.

Obviously, small business has suffered-- as it has in New York State:

One quarter of California’s small businesses, according to Opportunity Insights, an economic indicators tracker based at Harvard University, have closed since January 2020. Given the recent surge in Covid cases and intensifying lockdowns, many more are likely to disappear. The pandemic has been far kinder to the wealthy, who, according to the leftist blog The Bellows, have seen their revenues and profits soar, boosting their wealth by an estimated $1 trillion since March. Alphabet, Apple, Facebook, along with Puget Sound-based Amazon and Microsoft, now make up 20 percent of the stock market’s total worth.

Major companies like Tesla and Charles Schwab are relocating out of the state. Other large companies are considering it. After all, if your employees cannot enjoy a decent standard of living, you will be thinking of moving where they can:

This may explain their relative indifference as companies have moved out, a blasé attitude that may persist even as other iconic firms—Disney, Visa, Chevron, Uber, and Levi Strauss—consider major relocations.

The state’s Democratic leaders-- there are basically no Republicans left in the state-- have the right opinions. They are all for the green new deal and social justice. That their policies destroy the lives of the citizenry, they do not care. The state’s Democrats do not have any political competition. Besides, the people who are suffering for having bought the leftist snake oil voted for politicians who promised them everything and blamed all failures on Trump:

Simply put, California’s performance economically, particularly for its middle and working classes, hardly constitutes a model of social justice or green accomplishment. In actual reductions of greenhouse gases, California is not the environmental icon that it pretends to be. If the largely preventable wildfires are included, the state has increased its emissions; the smoldering fires, as one environmental analyst puts it, “dwarf the state’s fossil fuel emissions.”

And now, given that the states are, as the old saying goes, the laboratories for democracy, the Biden administration is bringing them to the nation. Kotkin expresses his dismay:

The apparent decision of the Biden administration to model its policies on California, particularly in terms of regulation, augurs, if anything, far worse for the rest of the country. The assault on fossil fuels—starting with the announced end of the Keystone XL Pipeline—will destroy a large number of generally well-paying union construction jobs. The banning of fracking, already endorsed by Vice President Harris, would devastate economies in less climactically blessed states like Texas, Pennsylvania, or Ohio. Similarly, California-style regulation already makes it difficult for industrial firms to reshore to the Golden State; imposing similar strictures would slow and even end the gradual shift of industry to the Midwest and other parts of the Heartland.

If California has not yet fallen into the Pacific Ocean, the reason lies with the tech companies. If they were to leave, or if they were to lose their monopoly status, the state would find itself in deep trouble. As for the Biden administration effort to Californicate America....

In the end, the California model works only for the few—but if enough of these super-wealthy few stay put, then the Golden State might yet pretend that it can survive the effects of its policies. It’s doubtful that the rest of the country could enjoy that luxury.


whitney said...

Everyone loves to compare the current state of affairs to feudalism but this is not feudalism. Feudalism was divided up into three classes, a warrior class a praying class and a worker class. Can you picture these rich fighting? Please. They will cower like rodents under their chairs just like the ones of the capitol.

Anonymous said...

Noblesse oblige these days consists of doing good with someone else's money.

370H55V said...

Although I am a fan of Kotkin's, he undermines his case by taking gratuitous shots at Donald Trump every chance he gets, even though Trump stood for just about everything Kotkin always advocated. I guess Kotkin is hedging his bets by trying to maintain his "creative class" bona fides just in case the situation requires them again.