Last year, the medical technology firm Numira Biosciences packed its bags and left Irvine for Salt Lake City. When asked about the firm's departure, its chief executive praised Utah's quality of life but also blamed California's business environment for the move. "The tipping point was when someone from the Orange County tax [assessor] wanted to see our facility to tax every piece of equipment I had," Michael Beeuwsaert told the Orange County Register.
For years, California could rely on its temperate climate and a talented workforce to attract and keep businesses even as taxes and regulations increased. No more. In surveys, executives regularly express the view that California has one of the country's most toxic business environments, and they say it is one of the least likely places they would open or expand a company. Many firms headquartered here say they have forsaken expansion in the state. Meanwhile, California suffers from an unemployment rate some 2 percentage points higher than that of the nation as a whole.
The deep discontent of the business community is just one sign of larger problems in the California economy that predate the 2008 national financial crisis. A study by City Journal using the National Establishment Time Series Database, which has tracked national job creation and migration from 1992 through 2008 (the latest data available), suggests that California's economy started showing signs of sclerosis a decade ago. So even after a national recovery takes place, the Golden State may keep struggling — unless Sacramento moves to improve the business climate.
Economists usually see business start-ups as the most important long-term source of job growth, and California has long had a reputation for nurturing new companies. Indeed, from 1992 to 2000, California added 777,000 more jobs from start-ups than it lost to closures. But this dynamism vanished in the 2000s. Between 2000 and 2008, California lost 262,000 more jobs from closures than it gained from start-ups.
Between 2000 and 2008, some 80,000 more jobs left California for other states than came here from other states. The leading destination of the job migration was Texas, with Oregon and North Carolina running second and third. California managed to add jobs only through the expansion of existing businesses, and even that was at a considerably lower rate than a decade earlier.
Another dark sign has been that economic growth in California's major cities stalled after 2000. Los Angeles and the San Francisco Bay Area had been the engines of California's economic growth for at least a century. But between 2000 and 2008, California's two big metropolitan areas produced fewer than 70,000 new jobs — a nearly 95% drop from the 1990s and a mere 6% of job creation in the state. This was a collapse of historic proportions.
Equally troubling was that California's growth in the 2000s, such as it was, took place disproportionately in sectors that rode the housing bubble. In fact, 35% of the net new jobs in the state were created in construction and real estate. All those jobs have vaporized since 2008, according to Bureau of Labor Statistics data.
While there are many reasons for these troubling trends, the state cannot ignore the role its policies have played in the economic decline. For seven consecutive years, executives polled by Chief Executive magazine have ranked California as having the worst business environment in the country. In a 2011 survey of its members by CalRecovery, a California coalition of businesses and industries based in the state, 84% of about 400 executives and owners who responded said that if they weren't already here, they wouldn't consider starting up in the state, while 64% said that the main reason they stayed in California was that it was tough to relocate their particular kind of business. In a recent op-ed, Andrew Puzder, chief executive of Carpinteria-based CKE Restaurants, which manages 3,000 eateries around the country, called California "the most business-unfriendly state we operate in."
Another troubling sign: California is even losing the battle for green manufacturing jobs. Earlier this year, Bing Energy, a fuel-cell maker, announced that it would relocate from Chino in San Bernardino County to Tallahassee, Fla., where it expected to hire nearly 250 workers. "I just can't imagine any corporation in their right mind would decide to set up in California today," Dean Minardi, Bing's chief financial officer, said.
California's suffocating regulations have a lot to do with this discontent. A 2009 study by two California State University finance professors, Sanjay Varshney and Dennis Tootelian, estimated that regulation cost the state's businesses $493 billion annually, or nearly $135,000 per company. Additionally, dense and complex land-use regulations have driven up housing construction costs in the state, giving residents a double whammy: a stagnant economy and unaffordable home prices, even since the real estate bubble burst.
Taxes are another burden. According to the Tax Foundation, California imposes the nation's second-heaviest tax burden on businesses, and finance officers of major companies recently rated the state's overall tax environment the worst in the country, according to a poll in CFO magazine.
On top of taxes and regulation, the state can also claim what may be America's most expensive litigation environment for firms. The American Tort Reform Foundation recently named California one of the country's five worst "judicial hellholes," in part because state law allows trial lawyers to sue firms for minor violations of California's complex labor and environmental regulations.
Gov. Jerry Brown has declared that "California always comes back." But history shows that great states can decline. Some, like New York, which was the nation's economic engine before California, never regain their luster. The state's leaders need to acknowledge the message they are hearing from the local business community and consider ways to help the state regain its economic edge.
Wendell Cox is the principal of Demographia, a public policy consulting firm. Steven Malanga is senior editor of City Journal, from whose fall issue this article is adapted.
Thoughts of Tech Benny
All thoughts technical, geeky, or wonkish.
Monday, November 28, 2011
Daniel Hannan: Euro now on death watch
Zone Out the Euro
November 28, 2011 9:23 A.M.
Never mind Spain or Italy or even Belgium; the euro crisis has spread to Germany, which is struggling to sell its bonds. The Corner’s Mark Steyn likes to say that, if you take a quart of ice cream and a quart of dog feces and mix ’em together, the result will generally taste more like the latter than the former. It’s true of international organizations (the context Mark uses) and it’s true of what’s happening in the euro zone.
EU leaders have spent the past year issuing sententious bromides about “avoiding contagion.” It’s an odd metaphor, since the usual defense against contagion is quarantine. Eurocrats, however, have insisted on taking Italy and Greece’s problems and making them everyone else’s. Result? The only economic havens in Europe are those outside the single currency: Switzerland, Scandinavia, and (oddly, when you consider that our deficit is higher than Portugal’s and almost as high as Greece’s) the United Kingdom.
From the beginning, the Brussels elites made it clear that, to adapt Abraham Lincoln, their paramount object was to save the Union. Never mind if that meant imposing epochal poverty and emigration on the southern members, and unprecedented tax rises on the northern. Never mind if it meant toppling the elected prime ministers of Italy and Greece and replacing them with Eurocrats (respectively a former European Commissioner and a former vice president of the European Central Bank — two perfect specimens of the people who caused the crisis in the first place). They were prepared to pay any price to keep the euro together — or, more precisely, to expect their peoples to pay, since EU employees are generally exempt from national taxation.
The alternative policy — an orderly unbundling of the euro — has never been seriously considered. Had it happened two years ago, a great deal of pain might have been avoided. If it happens now, there will be a cost, but it is still patently the least bad option.
Germany and its satellites could leave the euro tomorrow, establish a hard currency and bequeath the legal carcass of the euro to the Mediterranean states. The peripheral countries would thus devalue, price themselves into the market and receive an immediate stimulus. Their devaluation would probably be accompanied by a partial default (although not necessarily in Italy). Each state would then be free to adopt a monetary policy that suited its own conditions and, while the recovery would be painstaking, at least there would be a recovery.
Eurocrats, though, won’t countenance any challenge to their project. They remind me of the nomenklatura at the end of the 1980s. Even as the revolution overwhelms them, they carry on trotting out the old slogans — European economic government, fiscal federalism, eurobonds. Not in the hope of convincing anyone; not even in the hope of convincing themselves; but simply because they don’t know what else to do.
“Something must be done,” the economics editors of the world intone. By “something,” they mean “sufficient fiscal transfers from Germany to preserve the euro.” This, though, is to beg the question. The euro is the problem, not the solution. It is a recessionary device, whose maintenance threatens to topple large parts of the world back into recession. The quicker it is dismantled, the better for everyone.
— Daniel Hannan is author of The New Road to Serfdom: A Letter of Warning to America
Monday, November 21, 2011
Daniel Hannan: Germany no longer needs Europe
A speech given by Daniel Hannan on how patriotism in Germany is a good thing, and how it is about time that German citizens stand up for their sovereign right to refuse further bailouts of their eastern European neighbors. "Fortunately, the German people have seen through the racket."
Given May 17, 2011 at an Intelligence Squared debate.
Hannan builds on E.L. Jones' theory that decentralization made Europe rise from squabbling tribes 500 years ago to the central cultural force in the past 200 years.
Given May 17, 2011 at an Intelligence Squared debate.
Hannan builds on E.L. Jones' theory that decentralization made Europe rise from squabbling tribes 500 years ago to the central cultural force in the past 200 years.
Daniel Hannan: The devalued Prime Minister of a devalued Government
A verbal tongue-lashing delivered by conservative Daniel Hannan to British prime minister Gordon Brown.
Nigel Farage unleashes the fury on Euro technocrats
Wow. Just... wow.
Transcript:
"Here we are on the edge of a financial and social disaster and in the room today we have the four men who are supposed to be responsible. And yet we have listened to the dullest most, technocratic speeches I've ever heard.
You are all in denial. By any objective measure the euro is a failure. And who exactly is responsible, who is in charge out of all you lot? The answer is none of you because none of you have been elected; none of you have any democratic legitimacy for the roles you currently hold within this crisis.
And into this vacuum, albeit reluctantly, has stepped Angela Merkel. And we are now living in a German-dominated Europe - something that the European project was actually supposed to stop. Something that those who went before us actually paid a heavy price in blood to prevent. I don't want to live in a German-dominated Europe and nor do the citizens of Europe.
But you guys have played a role, because when Mr Papandreou got up and used the word 'referendum'. Or Mr Rehn, you described it as 'a breach of confidence', and your friends here got together like a pack of hyenas, rounded on Papandreou, had him removed and replaced by a puppet Government. That was an absolutely disgusting spectacle that was.
And not satisfied with that, you decided that Berlesconi had to go. So he was removed and replaced by Mr Monti, a former European Commissioner, a fellow architect of this Euro disaster and a man who wasn't even a member of parliament.
It's getting like an Agatha Christie novel, where we're trying to work out who is the next person that's going to be bumped off. The difference is, we know who the villains are. You should all be held accountable for what you've done. You should all be fired.
And I have to say, Mr Van Rompuy. 18 months ago when we first met, I was wrong about you. I said you would be the quiet assassin of nation states' democracy, but not anymore, you are rather noisy about it aren't you. You, an unelected man, went to Italy and said, 'This is not the time for elections but the time for actions'. What in God's name gives you the right to say that to the Italian people.
Here is another YouTube clip with an extensive interview with Nigel on Russian television, made almost a year ago (Dec 1, 2010).
Transcript:
"Here we are on the edge of a financial and social disaster and in the room today we have the four men who are supposed to be responsible. And yet we have listened to the dullest most, technocratic speeches I've ever heard.
You are all in denial. By any objective measure the euro is a failure. And who exactly is responsible, who is in charge out of all you lot? The answer is none of you because none of you have been elected; none of you have any democratic legitimacy for the roles you currently hold within this crisis.
And into this vacuum, albeit reluctantly, has stepped Angela Merkel. And we are now living in a German-dominated Europe - something that the European project was actually supposed to stop. Something that those who went before us actually paid a heavy price in blood to prevent. I don't want to live in a German-dominated Europe and nor do the citizens of Europe.
But you guys have played a role, because when Mr Papandreou got up and used the word 'referendum'. Or Mr Rehn, you described it as 'a breach of confidence', and your friends here got together like a pack of hyenas, rounded on Papandreou, had him removed and replaced by a puppet Government. That was an absolutely disgusting spectacle that was.
And not satisfied with that, you decided that Berlesconi had to go. So he was removed and replaced by Mr Monti, a former European Commissioner, a fellow architect of this Euro disaster and a man who wasn't even a member of parliament.
It's getting like an Agatha Christie novel, where we're trying to work out who is the next person that's going to be bumped off. The difference is, we know who the villains are. You should all be held accountable for what you've done. You should all be fired.
And I have to say, Mr Van Rompuy. 18 months ago when we first met, I was wrong about you. I said you would be the quiet assassin of nation states' democracy, but not anymore, you are rather noisy about it aren't you. You, an unelected man, went to Italy and said, 'This is not the time for elections but the time for actions'. What in God's name gives you the right to say that to the Italian people.
Here is another YouTube clip with an extensive interview with Nigel on Russian television, made almost a year ago (Dec 1, 2010).
Wednesday, November 16, 2011
High speed rail in California grows from $9B to $98.5B
In this Washington Post op-ed, even their editors shake their collective heads in amazement at what has happened in California. A referendum on a high-speed rail line that was estimated to cost 9 billion dollars has now skyrocketed in costs to over ten times the original estimate.
There are governors who are hitting the reset button on various infrastructure projects that aren't economically viable. Chris Cristie put the kibosh on a train tunnel from New Jersey to Manhattan in late 2010. Scott Walker and Rick Scott have refused federal money for high-speed rail projects that were obvious boondoggles, and which would be financially unsustainable once the lines were open for business. The governors were roundly criticized by the mainstream media and Progressives for actually applying cost/benefit ratios and logic to these problems and pulling the plug on them when they didn't make financial sense. In the case of New Jersey's train tunnel, there were already sunk costs. But governor Christie knew that there were going to be cost overruns that his state was responsible for, and he put the project on indefinite hold.
So fiscal sanity rules at the state level, where state budgets have to balance at the end of the year. Jerry Brown aught to stop this insanity, or if he doesn't have the spine, put a referendum on California's ballot initiatives to ask the voters if they really want to be on the hook for a rail line that will cost California tens of billions in money they don't have.
There are governors who are hitting the reset button on various infrastructure projects that aren't economically viable. Chris Cristie put the kibosh on a train tunnel from New Jersey to Manhattan in late 2010. Scott Walker and Rick Scott have refused federal money for high-speed rail projects that were obvious boondoggles, and which would be financially unsustainable once the lines were open for business. The governors were roundly criticized by the mainstream media and Progressives for actually applying cost/benefit ratios and logic to these problems and pulling the plug on them when they didn't make financial sense. In the case of New Jersey's train tunnel, there were already sunk costs. But governor Christie knew that there were going to be cost overruns that his state was responsible for, and he put the project on indefinite hold.
So fiscal sanity rules at the state level, where state budgets have to balance at the end of the year. Jerry Brown aught to stop this insanity, or if he doesn't have the spine, put a referendum on California's ballot initiatives to ask the voters if they really want to be on the hook for a rail line that will cost California tens of billions in money they don't have.
California -- not so good for business
In this LA Times opinion piece, Wendel Cox and Steven Malanga shine a spotlight on California's growing anti-business climate, and how such a climate causes more jobs to be lost than added.
California — toxic for business
Unless Sacramento moves to improve the business climate, California's reputation as one of the country's most toxic business environments will make it hard for the Golden State to regain its luster.
By Wendell Cox and Steven Malanga November 14, 2011
November 14, 2011
Krugman called out by Nile Gardiner
In this article, Nile Gardiner highlights Dr. Paul Krugman's slight-of-hand in a recent NYT opinion piece. Europe's woes and travails squarely rest with Keynesian economics, or at least the policies now practiced by Progressives (Democrats and the like) everywhere; more entitlement spending and larger government payrolls creating a 'multiplier' effect that 'grows' the economy, rather than the Monitorist economic view that government should be downsized to make budgets balanced.
How would Dr. Krugman solve the Euro-zone problem (brought about by policies he pushed and currently pushes for the US)? More spending (famously theorizing that the fourth, largest stimulus passed by Democrats in the spring of 2009 was undersized-- less than half of what should have been spent)? Enlarging entitlements and the recipient pool? More environmental regulations? More union work-rules and constrictions on free-enterprise?
Enjoy the article.
How would Dr. Krugman solve the Euro-zone problem (brought about by policies he pushed and currently pushes for the US)? More spending (famously theorizing that the fourth, largest stimulus passed by Democrats in the spring of 2009 was undersized-- less than half of what should have been spent)? Enlarging entitlements and the recipient pool? More environmental regulations? More union work-rules and constrictions on free-enterprise?
Enjoy the article.
Paul Krugman is rewriting history now that the eurozone, beloved by US liberals, is going down in flames
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