EVEN during an economic meltdown of the proportions being suffered now, base politicking doesn’t stop in California.
When asked why Golden State finances have been doing so badly, officials are quick to point to the national recession, claiming it has slowed down local industry and decreased the amount of revenue brought in by taxes.
As Assemblywoman Noreen Evans recently explained, California’s fiscal crisis “was caused by an enormous and rapid drop in revenues.”
While it’s true that tax revenues have fallen, the California economy was in trouble well before the financial crisis took hold. State officials spouting that line fail to acknowledge how the government’s economic policies have handicapped business and squelched economic growth over the last few years.
The recession has simply highlighted how damaging those policies are.
A study by our organization, the Pacific Research Institute, examines the economic performance of all 50 states over the last five years across four broad categories: income, labor, entrepreneurship and migration. Comparing California’s results with those of bordering states illustrates the seriousness of our economic plight.
When it comes to overall economic growth, individual incomes and poverty reduction, California ranked 24th nationally, falling behind every state in the region except Arizona. That includes Nevada (2nd), Utah (14th), Washington (16th), and Oregon (21st). California’s private-sector employment growth ranked a dismal 33rd. The average unemployment rate was 43rd, and the average duration of unemployment was 38th in the nation. Simply put, California has been struggling to create private-sector jobs. Many of California’s workers have found themselves unemployed for far longer than they expected – or than is reasonable.
Given that California is home to both Silicon Valley and a prestigious university system, the state should be a national leader in entrepreneurship. Unfortunately, that’s not the case. California ranks just 16th in new business creation – barely in the top third of states.
The economies in several nearby states create businesses at a much faster clip. Nevada ranked first, Utah second, Arizona fifth, Oregon 14th, and Washington 18th.
With such a stagnant economy, it’s no wonder that people are migrating out of California in droves. About 1million more people left California than came in over the last five years. Only six states had worse migration patterns.
The national recession has certainly dealt the California economy a severe blow. But the state’s economic problems were also caused by misguided policies crafted by lawmakers in Sacramento. That’s why neighboring states, despite facing similar challenges, have markedly outperformed California over the last five years.
It’s time for a fundamental re-thinking of tax, spending and regulatory policies in California. The aim should be to improve long-term economic growth. Successful reform will lead to more and better jobs, increased dynamism, and the state’s return to its rightful place as the leader of the national economy.