California's Mess Not Texas' Fault

June 27, 2011

As California’s budget battle continues, Republicans and Democrats have engaged in a rhetorical battle regarding the relative merits and demerits of our lovely state and one of the nation’s other megastates, Texas. This debate started after a legislative delegation made up mostly of Republicans went eastward in April to meet with Lone Star State officials to learn about job growth; it has re-emerged as Texas Gov. Rick Perry is being mentioned as a potential GOP presidential hopeful.

“From 2008 to 2010, Texas added more than 165,000 jobs,” said Assemblyman Dan Logue, the Marysville area Republican who organized the fact-finding mission. “During that same time period, California lost 1.2 million jobs. In terms of creating jobs, Texas is clearly doing something right, and California is doing something wrong.”

I read that quotation on the website of Gov. Perry, who is known for his trips to California to encourage our state’s highly taxed and regulated businesses to move to his state, where they are welcomed rather than treated like pariahs. The Los Angeles County city of Vernon, targeted for extinction in the wake of a corruption scandal, has even run ads blasting Texas for trying to steal its businesses.

Despite efforts by a prominent left-of-center California think tank to show that California businesses aren’t leaving the state in droves, California businesses are expanding elsewhere. Corporate executives might prefer keeping the headquarters in picture-perfect San Diego or Irvine or San Jose rather than moving it to in dusty El Paso or swampy Houston, but they aren’t creating many new jobs here. Who can blame them?

Exit Plans

Everywhere I go, I am met by California taxpayers and business owners who love their state. But they share the stories of their search to go elsewhere — or else their exit plan if things get much worse, economically. Some of this is idle chat, but many people are serious, as the Logue statistics show. Our state’s population continues to grow, but the new jobs are mainly in the service sector. We’re becoming a two-tier society, and that old-fashioned California entrepreneurial spirit is dying, having the life sapped out of it by regulators and bureaucrats.

Even California’s government retirees are fleeing for all parts of the inter-mountain West, where they can enjoy their six-figure pensions and not have to put up with all the high taxes, high cost of living and other hassles. Californians have always embraced a form of exceptionalism, believing that the normal rules don’t apply out here. But while I love that the old Midwestern and Eastern social mores don’t matter so much on the Left Coast, there’s no escaping the laws of economics.

Entrepreneurs go into the private sector, where they take risks, innovate, and create jobs and fortunes. The private sector fills the public sector’s coffers with cash, whereas the public sector burns through the money on its endless commissions and high salaries, runs up billions of dollars in unfunded retirement liabilities, complains that it can’t do its job because of tough economic times, and then demands higher taxes. Bad businesses go belly up. Bad bureaucracies never go away and they always lobby for more money. This is how it has always been in all countries and states.

Texas has many flaws, but at least the leaders there seem to understand the importance of private investment and the limits on government. It’s sad, in a way, that California leaders need to make such a trek to remind themselves of those simple, timeless lessons, and that I even need to devote a column raising these obvious points.

Caltrans Slumlord

We all know how government operates. In 2006, the Orange County Register reported on how Caltrans became the state’s biggest slumlord.

The road-building agency used eminent domain to acquire thousands of properties for roads it never built, then let the properties rot. As one Register reporter put it recently, this is “a story about how the nation’s largest freeway builder neglected its massive land holdings, creating blight and despair. It was about how Caltrans kept properties off the tax rolls, draining county coffers of tens of millions of dollars in lost revenues. It was a about abuse of power.”

Now, as reported by the Los Angeles Times, we learn that Caltrans has been spending absurd sums of money putting new roofs on these old properties, spending many multiples of what such a roof would cost on the open market. In one case, the agency spent more than $171,000 for a roof on a decrepit, vacant house.

This is how government operates. It is inefficient, immune to market pressures, driven by bureaucratic decisions and prone to abuse its power. Anyone who has dealt with a government agency will tell stories of how irrational its decision-making and spending decisions can be. Had private owners been in charge of the properties, they would mostly be well kept, and no one would pay 170 grand for a new roof.

Little Accountability

In the private sector, where business owners are looking for those “evil” profits, they tend to do whatever it takes to make the customer happy. In the government sector, where money falls out of the sky, or at least is dependent on political decisions rather than on voluntary exchange, the bureaucrats do their job as they see fit, with little accountability and even less concern for customer satisfaction.

California officials cannot figure out their budget problems. They cannot figure out how to build infrastructure that keeps pace with a growing population. They cannot figure out how to lure good-paying jobs or to stem the plunge in home prices. Meanwhile, they continually look to raise taxes, which is nothing more than a transfer of wealth from those who create it to those who squander it.

The answer to all these questions is simple: Do less. Govern less. Spend less. Let the market work. Then the jobs will flow, and the public coffers will be filled again.

This isn’t about Texas, but about enterprise and freedom. Until California voters understand that, it’s going to be a long time before we are prosperous again.

— Steven Greenhut