Monday, November 12, 2012

Why Stay?

Victor Davis Hanson, in a piece for City Journal, looks at what's become of California and asks why anyone who could leave doesn't. Most of his article is an elaboration on the reasons why many people, including himself, choose to stay - reasons that include the natural beauty of the state, family heritage, climate, and so on, but how much longer those allurements will continue to work their charm is an open question given all that's wrong:
California’s multidimensional decline — fiscal, commercial, social, and political — sometimes seems endless. The state’s fiscal problems were especially evident this past May, when Governor Jerry Brown announced an “unexpected” $16 billion annual budget shortfall. Two months later, he signed a $92 billion budget that appears balanced only if voters approve an $8.5 billion tax increase in November. According to a study published by a public policy group at Stanford University, California’s various retirement systems have amassed $500 billion in unfunded liabilities. To honor the pension and benefit contracts of current and retired public employees, state and local governments have already started to lay off workers and slash services.

Not just in its finances but almost wherever you look, the state’s vital signs are dipping. The average unemployment rate hovers above 10 percent. In the reading and math tests administered by the National Assessment of Educational Progress, California students rank near the bottom of the country, though their teachers earn far more than the average American teacher does. California’s penal system is the largest in the United States, with more than 165,000 inmates. Some studies estimate that the state prisons and county jails house more than 30,000 illegal aliens at a cost of $1 billion or more each year. Speaking of which: California has the nation’s largest population of illegal aliens, on whom it spends an estimated $10 billion annually in entitlements. The illegals also deprive the Golden State’s economy of billions of dollars every year by sending remittances to Latin America.

Meanwhile, business surveys perennially rank California among the most hostile states to private enterprise, largely because of overregulation, stifling coastal zoning laws, inflated housing costs, and high tax rates. Environmental extremism has cost the state dearly: oil production has plunged 45 percent over the last 25 years, even though California’s Monterey Shale formation has an estimated 15.4 billion barrels of recoverable oil, according to the U.S. Energy Information Administration. Geologists estimate that 3 trillion cubic feet of natural gas sit untapped as well. Those numbers could soar with revolutionary new methods of exploration.

Between the mid-1980s and 2005, the state’s aggregate population increased by 10 million Californians, including immigrants. But that isn’t the good economic news that you might think. For one thing, 7 million of the new Californians were low-income Medicaid recipients. Further, as economist Arthur Laffer recently noted in Investor’s Business Daily, between 1992 and 2008, the number of tax-paying Californians entering California was smaller than the number leaving — 3.5 million versus 4.4 million, for a net loss of 869,000 tax filers. Those who left were wealthier than those who arrived, with average adjusted gross incomes of $44,700, versus $38,600. Losing those 869,000 filers cost California $44 billion in tax revenue over two decades, Laffer calculated.

Worst of all is that neither the legislature nor the governor has offered a serious plan to address any of these problems. Soaring public-employee costs, unfunded pensions, foundering schools, millions of illegal aliens, regulations that prevent wealth creation, an onerous tax code: the story of all the ways in which today’s Californians have squandered a rich natural and human inheritance is infuriating.
You can read Hanson's reasons for sticking it out despite these manifold dysfunctions at the link. He closes with this:
The four-part solution for California is clear: don’t raise the state’s crushing taxes any higher; reform public-employee compensation; make use of ample natural resources; and stop the flow of illegal aliens. Just focus on those four areas—as California did so well in the past—and in time, the state will return to its bounty of a few decades ago. Many of us intend to stay and see that it does.
Unfortunately, last Tuesday Californians chose to disdain Hanson's advice and voted to raise taxes on the wealthy yet again.

One reason this is important for non-Californians is that many of the policies that have plunged what used to be an economic mecca into economic and social decrepitude are similar to what Mr. Obama wishes to foist upon the rest of the nation. Higher taxes, unrestricted immigration, restricted use of natural resources, and more onerous regulations on business are all on the menu for the next four years, and unrealistic public-employee compensation is an integral part of the Democrats' plans in many other states besides California.

We can't afford it any more than California can, and if we continue to tax and spend like we have for the last 4-6 years we'll wind up like California writ large and asking ourselves why anyone who can afford to leave the U.S. doesn't.

Andrew Wilkow and Peter Schiff offer some thoughts on the unintended consequences of taxing the rich in this video: