Economist outlines CA road to prosperity

Dec. 20, 2012

By Katy Grimes

SACRAMENTO — California’s economy isn’t dead — yet.

With a few smart, pro-growth policy changes, California could get back in the game and be the economic leader it once was, Jonathan Williams told me in a visit to our state capitol to analyze the Golden State. He is one of the authors of the 2012 report “Rich States, Poor States” published by the American Legislative Exchange Council. It compares the 50 states on 15 economic variables, such as tax rates and regulations.

But Williams warned that, if California’s leaders do not make some immediate, dramatic structural moves, the dismal economic forecast will overshadow the stunning weather forecast, and could eventually turn California into the least desirable state in the union.

The report’s co-authors are Stephen Moore of the Wall Street Journal and Arthur Laffer, who helped design Calfiornia’s Proposition 13 and Ronald Reagan’s tax cuts. Laffer also heads the new Laffer Center at the Pacific Research Institute,’s parent think tank, and this year authored “Eureka! How to Fix California.”

“Be more like Texas and less like California”

“Texas versus California has become the most stark example,” Williams continued. “The left wing tries to impune Texas, but the job creation, low unemployment, income growth and GDP growth is undeniable.”

So what should California do?

If Brown merely adopted the tax reform policies of Kansas, California would see immediate improvement in the business sector, job growth and unemployment rate. Williams said that this year Kansas flattened its income tax, dropped three tax brackets to two, lowered the top income tax rate from 6.45 percent to 4.9 percent and eliminated the personal income tax for small business owners.

“This pro-growth policy would put California back in play and jump start the economy,” Williams said. “It would tell the entire country that the private sector still matters — that competition matters.” Unlike the federal government, he added, “You can’t print money, so the state must do pro-growth at some point.”

His words confirmed what Intel CEO Paul Otellini recently told the Wall Street Journal. The microchip giant hasn’t added a job in California more than 10 years and closed its last factory in the state around six years ago. “Oh God. I was born and raised here. I’m fifth or sixth generation. It’s one of the nicest pieces of real estate on the planet, and we’re so close to screwing it up, it’s pathetic,” Otellini said. “I’d like to be bullish, but I worry that we have to hit the abyss before we can fix things, and I worry that the abyss will be more like Greece.”

Good weather is not enough

“Over the last 20 years, 3.6 million more Americans have moved out of California than have moved in, and 130,000 more Americans have moved from Hawaii than to it,” “Rich States, Poor States” reported.

Yet every year California legislators brag openly about how the good weather trumps economic policy and low taxes.

“This is too stark to deny, particularly as it relates to regulatory policy in states,” Williams said. “And, we will never know how many people and businesses decided not to move to California.”

Beautiful weather may attract tourists, but if the economic policy isn’t sound, even the beautiful states can’t keep or attract residents. “California charges a premium for nice weather,” Williams said.

Residents of California’s coastal communities may turn their noses up at North and South Dakota, and mock anyone wanting to move there. But Williams said that, with the strong economic policies, the Dakotas have a 2.9 percent unemployment rate. This has led to a new house building market that can’t keep up with the rising demand. “Capital is blind to weather. The numbers don’t lie,” Williams added.

Alaska has one of the harshest climates in the entire Western Hemisphere, but it’s performing better economically than California.

The authors of “Rich States, Poor States” found that, over the last 10 years, more than 4.2 million people have moved out of the highest income tax states and states with the highest local tax burdens.

“A state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country,” said U.S. Supreme Court Justice Louis D. Brandeis.

California’s laboratory eventually will have to switch from experiments that fail to those known to succeed.


Write a comment
  1. Barb
    Barb 20 December, 2012, 06:43

    Excellent commentary! Thanks!

    Reply this comment
  2. Hondo
    Hondo 20 December, 2012, 07:13

    It’s not where the ‘people’ are going. It’s where the investment money is going. It’s going to where there are reasonable taxes, regulation and tort laws. This ain’t a trick question.
    Talking about just ‘taxes’ misses so much of the problem.

    Reply this comment
  3. Mrs. White
    Mrs. White 20 December, 2012, 08:15

    “There are not many, even among educators and statesmen, who comprehend the causes that underlie the present state of society. Those who hold the reins of government are not able to solve the problem of moral corruption, poverty, pauperism, and increasing crime. They are struggling in vain to place business operations on a more secure basis. If men would give more heed to the teaching of God’s word, they would find a solution of the problems that perplex them.

    The Scriptures describe the condition of the world just before Christ’s second coming. Of the men who by robbery and extortion are amassing great riches, it is written: “Ye have heaped treasure together for the last days. Behold, the hire of the laborers who have reaped down your fields, which is of you kept back by fraud, crieth: and the cries of them which have reaped are entered into the ears of the Lord of Sabaoth. Ye have lived in pleasure on the earth, and been wanton; ye have nourished your hearts, as in a day of slaughter. Ye have condemned and killed the just; and he doth not resist you.” James 5:3-6.

    But who reads the warnings given by the fast-fulfilling signs of the times? What impression is made upon worldlings? What change is seen in their attitude? No more than was seen in the attitude of the inhabitants of the Noachian world. Absorbed in worldly business and pleasure, the antediluvians “knew not until the Flood came, and took them all away.” Matthew 24:39.

    They had heaven-sent warnings, but they refused to listen. And today the world, utterly regardless of the warning voice of God, is hurrying on to eternal ruin.”

    Reply this comment
  4. Rex the Wonder Dog!
    Rex the Wonder Dog! 20 December, 2012, 08:59

    CEO Paul Otellini recently told the Wall Street Journal. The microchip giant hasn’t added a job in California more than 10 years and closed its last factory in the state around six years ago. “Oh God. I was born and raised here. I’m fifth or sixth generation. It’s one of the nicest pieces of real estate on the planet, and we’re so close to screwing it up, it’s pathetic,”

    The most salient point is that not a single job has been added in the state for this tech giant, that is very telling.

    Reply this comment
  5. The Modified Ted Steele Methodologies (tm)
    The Modified Ted Steele Methodologies (tm) 20 December, 2012, 12:32

    Katy– Well done— interesting pov! — Ted!!!

    Reply this comment
  6. Phineas
    Phineas 20 December, 2012, 13:10

    Like Otellini, I fear California is going to have to crash before it can recover. It’s just mindboggling — both how we’ve take one of the richest, most productive states in the Union and run it into the ground, and how naturally strong our economy must be, that it’s taken this many years of bad governance to do it. Gives me hope though; with just some reform, recovery might be swift.

    But the left will never allow that to happen. 🙁

    Reply this comment
  7. CalWatchdog
    CalWatchdog Author 20 December, 2012, 15:32

    I agree Phineas – the left will never allow reform to happen as long as they are in power.


    Reply this comment
  8. Dirtbos
    Dirtbos 20 December, 2012, 19:46

    It is not a matter of if, but a matter of when. Hopefully some common sense and logic will rise from the ashes of the impending California financial meltdown. The left has a strangle hold on this state and will destroy it financially. It is inevitable, barring an epiphany on the part of some California voters. But I don’t hold out much hope for that.

    Reply this comment
  9. The Modified Ted Steele Methodologies (tm)
    The Modified Ted Steele Methodologies (tm) 20 December, 2012, 21:07

    Katy— I hope you’re wrong and that the Dems balance the next budget. That would be a good start.

    Reply this comment
  10. Dee
    Dee 22 December, 2012, 06:40

    I would strongly suggest rather than blindly accepting the data presented in ALEC’s Rich States Poor States that you also consider a report done that looked at the information presented in the ALEC report –

    ” A new study finds that state tax and regulatory policies recommended by the American Legislative Exchange Council (ALEC) fail to promote stronger job creation or income growth, and actually predict a worse performance.

    Since ALEC first published its annual Rich States , Poor States study with its Economic Outlook Ranking in 2007, states that were rated better have actually done worse economically.”

    Reply this comment
  11. Dee
    Dee 22 December, 2012, 11:59

    Evidently my comment this morning didn’t fit your purpose – was not deemed as publishable comment. A comment that offered your readers the chance to compare two reports – looking at the exact same statistics. So your intent is not to educate your readers – but to inculcate them with a specific,particular and limited meme. How unenlightening.

    Reply this comment
  12. CalWatchdog
    CalWatchdog Author 24 December, 2012, 08:18

    Dee: We’ve had some server issues we had to deal with over the weekend. But we just posted your comments. I’m sorry for any inconvenience.

    I’m going to check out the study you mentioned after Christmas.

    — John Seiler, Managing Editor

    Reply this comment

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