California — Still Crazy After All These Years
The California Legislature session has ended for the year, so there’s little it can wreck over the next few months. But enough damage was done since January to last beyond 2019 and deep into the Blue future.
It’s easy for the rest of the country to dismiss Sacramento’s lawmaking. After all, it’s just more left coast madness. But it’s truly a contagion. Despite the state’s growing flakiness, California remains a trendsetter. So don’t be surprised when variations of its lousy policies inevitably pop up in legislative chambers across the country, even in the hallowed halls of the U.S. Capitol.
H.L. Mencken once said “every decent man is ashamed of the government he lives under.” A disturbing lack of shame in California has created a permanent majority in Sacramento pushing the state down the unsustainable path it’s been on for more than 20 years. Some of the Legislature’s worst work was done by lawmakers under pressure as the session was closing out last week.
In particular is the late-breaking bill that will establish a statewide rent-control regime. Socialist economist Assar Lindbeck once said that “in many cases rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.” Though quite apt, the statement is not quoted as often as the Mencken proverb above. So maybe the majority of lawmakers in Sacramento have never heard it.
But surely they’re not unaware of that “a substantial body of economic research has warned about potential negative efficiency consequences to limiting rent increases below market rates, including over-consumption of housing by tenants of rent controlled apartments.” Yet they passed Assembly Bill 1482, which is sure to be signed by Gov. Gavin Newsom. After that, nothing more can be done but to sit back and watch it aggravate the state’s housing crunch.
In another end-of-session stumble, lawmakers broke up the gig economy. There are, or were, roughly 2 million independent contractors in California. They are free to make their own hours, work for as many different companies as they wish to at the same time and avoid rotten bosses. Full-time workers can make extra money on the side to cover life’s emergencies or to pay off a loan or two. The Bureau of Labor Statistics found that fewer than 10% of independent contractors prefer a traditional work arrangement over freelancing.
But Sacramento decided Californians had to be saved from all that freedom. So they approved Assembly Bill 5, which codifies a state Supreme Court ruling, meaning that freelancing will be in essence outlawed in California beginning next year, should Newsom sign the bill, which he will.
Some gig workers cheered when the bill passed. They’ll live to regret it. Many will miss the freedom they once had, and quite a few will lose their jobs entirely. Compliance costs could reach as much as $6.5 billion a year, according to the R Street Institute, so it’s unlikely companies that built their businesses on utilizing independent contractors will be able to afford to hire all of their gig workers.
The added costs also leave companies with fewer dollars available for growth and innovation, and will adversely affect their ability to attract capital, as well.
Consumers will feel the effects, too. With fewer drivers on the roads — Beacon Economics reckons that Lyft alone might have to get by with 300,000 fewer California drivers — service will fall and prices increase.
It’s also a good bet that the adoption of AB5 will inspire unions, lusting for a fresh stream of dues from hundreds of thousands of new members, will ram through similar legislation in states where they still have political clout.
While a host of stubborn issues, such as the state’s public employee pension crisis, an alarming business exodus, a shrinking middle class, and crumbling roads, grow worse, the Legislature also found time in this session to: ban the sale, trade, and manufacture of fur products (Assembly Bill 44); outlaw the use of circus animals unless they’re dogs, cats, or horses (Senate Bill 313); and protect children from the misfortunes of being educated by non-union teachers (Assembly Bill 1505).
But Sacramento did post one highlight: Senate Bill 206, the Fair Pay to Play Act. It will allow, beginning January 1, 2023, student-athletes at state colleges to earn money from their names, images, and likenesses.
In this single instance, the California Legislature is allowing free enterprise to flow. It’s a sharp departure from its habit of locking down markets whenever and wherever it’s able, and it’s tempting to think maybe the majority is awakening to the advantages of liberty. Yet bitter experience tells us that’s hoping for too much.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.