Sacramento’s Sinking Economy

Katy Grimes: How far does Sacramento have to fall before its citizens show some inkling of caring?

A new Brookings Institution study shows just how far out of touch Sacramento is economically, with the rest of the country and major cities around the world.

Out of the 200 metropolitan areas surveyed, Sacramento dropped to 196 from 179 over the previous four years. It was the lowest rank for any American city on the list.

Even Las Vegas is ranked higher, moving into in Sacramento’s old ranking at 179.

San Francisco is ranked at 187, Riverside is ranked 170 and San Jose jumped from 158 to 61. Wow.

Averaging the previous 15 year period, it is painfully evident just how far Sacramento has fallen. Between 1993 and 2007, Sacramento had the 60th strongest economy of any metro area in the world – how far the state Capitol has fallen.

Memo to the Sacramento Mayor, city council, & supervisors… consult some real economists and pay attention. Any business owner in the private sector could confirm these results with first hand experience.

The study found that the largest 200 metropolitan economies examined account for 14 percent of world population and employment, but generate more than 48 percent of global GDP.

At the bottom of the 200 cities was Athens, Greece. “Western Europe’s other troubled peripheral economies—Portugal, Ireland, Italy, and Spain—also populated the bottom economic performers. Lisbon, Dublin, Seville, Madrid, Naples, Barcelona, and Valencia were among the 10 lowest-ranked metro economies,” the study found.

But the weakest-performing U.S. Metro areas, including Sacramento, “reflected a mix of places hamstrung by poor housing market conditions (e.g., Riverside, Las Vegas, Atlanta), and concentrated in state government services that faced steep cuts in 2011 (e.g., Richmond and Sacramento).”

Sacramento is overburdened with city, county, state and federal government employees. Too much government “business” is not good for the private sector. Whenever government has to make budget cuts, Sacramento is impacted more than other areas of the state. But the biggest problem is the ever-expanding government competing with the region’s private sector and industry. And too many local businesses have become dependent on government contracts, regardless of the arcane and unaccountable business and spending practices of government agencies.

Growth in cities was attributed to manufacturing increases. “Manufacturing-oriented metro areas also posted above-average income gains in higher-income countries. The economic growth of areas such as Stuttgart, Rochester, Milwaukee, and Hamilton in 2010-2011 largely reflected the rebound of their manufacturers,” the report found. “Manufacturing industries not only seemed to boost growth in metro areas specialized in that sector, but also drove economic expansion in 2010-2011 in a wider array of places.”

But California’s answer is to drive businesses away with tax increases, crazy nanny laws, strangling regulations and by increasing government competition with the private sector.

After enjoying rapid growth from 1993 – 2007,  the study found, “Sacramento suffered declines in employment and output in 2007-2008, and steeper losses in 2008-2009. Unlike the nation, however, recovery continues to elude the metro area.”

The Brookings Institution warned that Sacramento will need to focus on industries that are growing elsewhere, in order to recover economically. Sacramento is nearly devoid of manufacturing.

But the Brooking study totally gets it wrong when they claim, “One hopeful indicator is that between 2003 and 2010, Sacramento added 13,857 jobs in the ‘clean economy,’ placing it seventh among the 100 largest U.S. metropolitan areas.” Wrong. The “clean economy” is going to fall like a house of cards one day soon – nothing built entirely on government subsidies and phony woo-woo science lasts.

JAN. 20, 2012