Another East Coast liberal misjudges CA

Krugman - wikipediaApril 1, 2013

By John Seiler

California is such a complex state that it’s often amusing when East Coast liberals try to explain it to us. The latest is from New York Times columnist Paul Krugman. His article appeared in the April 1 edition of the Times, so maybe it’s an April Fool’s joke.

He writes of the ongoing supposed California comeback:

But a funny thing happened on the road to collapse: it turned out that the main culprit in the electricity crisis was deregulation, which opened the door for ruthless market manipulation. When the market manipulation went away, so did the blackouts.

Actually, there was no “deregulation,” only a different form of regulation that was worse, as I wrote in about 50 editorials in the Orange County Register as the crisis unfolded. There was no “market” to manipulate, only a rigged scheme that Enron and others figured out how to exploit. And when the crisis hit, Gov. Gray Davis signed up for high-priced, long-term contracts that gouged ratepayers until they expired only recently.

See what I mean? Krugman knows nothing of our state.

Writing in the Washington Examiner, Conn Carroll explodes some other Krugman misconceptions:

1. California has the nation’s highest unemployment
Krugman does mention that, “Unemployment in California remains high,” but he fails to mention just how high it is. In fact, California is tied with Mississippi and Nevada for the highest unemployment rate in the country at 9.6 percent.

2. California has one-third of all welfare recipients
Krugman says asserts that California’s “problems bear no resemblance to the death-by-liberalism story line the California-bashers keep peddling.” But he neglects to mention that California is home to one-third of all U.S. welfare recipients despite housing just 12 percent of all U.S. citizens.

3. California has the nation’s highest poverty rate
Despite all the welfare spending, California still somehow manages to have the nation’s highest poverty rate. Go figure.

4. California has the nation’s highest taxes
Krugman does mention that “serious studies have found very little evidence either that tax hikes cause lots of wealthy people to move or that state taxes have any significant impact on growth,” but he fails to mention that California’s taxes are not just high, but the highest in the nation.

Seiler comment: Krugman doesn’t specify the “serious studies,” but he probably is referring to one last fall by two Stanford sociologists, not economists. I demolished that “study” here.

5. California has the nation’s third highest income inequality
California’s already high taxes have failed to adequately redistribute income. Even before the Great Recession, California already had the third-highest income inequality in America (behind New Mexico and Arizona). And according to the Public Policy Institute of California, it only got more unequal during the recession: “Compared to the rest of the country, California experienced larger declines in income at the bottom of the distribution and smaller declines at the top — leading to the largest gap between upper and lower incomes in at least 30 years.”

6. California’s teachers are among the nation’s highest paid while its students are among the least educated
Krugman also claims that “decades of political paralysis have degraded the state’s once-superb public education system.” And it is true: California’s public education system is terrible. In 2011, the state’s eighth-graders finished 48th in reading, ahead of just Louisiana and Mississippi, and 48th in math, ahead of just Alabama and Mississippi. But California is not skimping on teacher pay. It’s teachers are the third highest paid teachers in the nation.

7. California has the nation’s highest energy prices
Krugman does mention the state’s blackout problems in 2001, but blames the entire incident on “deregulation” and “market manipulation.” But California’s failure to build new power plants, refineries, pipelines, and transmission lines is very real. There is a reason California has nation’s the highest gas prices and the among the nation’s highest electricity prices, despite sitting on billions of barrels of oil.

8. California’s budget isn’t balanced
Credit Krugman for noting that California’s budget is only a “projected” one, but he then fails to mention how unreliable California’s tax revenue projections have been in the past. A recent California Common Sense study showed that, since the recession began, the governor’s projections have overestimated revenues by an average of 5.5 percent. Apply that average to Brown’s 2013 projections and California’s budget would suddenly go from $1 billion in the black to $3.9 billion in the red.

9. California is deep in debt
Even if California’s current budget does produce a tiny surplus this year, the state is still deeply in debt. According to the state’s own auditor, California has a negative net worth of $127 billion, about half of which stems from “$57.5 billion in outstanding bonded debt issued to build capital assets for school districts and other local governmental entities.”

Seiler conclusion: Krugman should come out to California and see for himself what’s going on. He should drive around Los Angeles and see the boarded-up storefronts, the crumbling roads, the vast underground black market of tax avoidance. He should go to the schools where half of students never graduate high school.

He then should come to Orange County, where unemployment is 3 percentage points less than the state level — and where we have lower taxes and regulations than the rest of the state. But even here, thanks to high state taxes and city and county budgets raided to pay sky-high pensions, the roads are crumbling.

Krugman should stop believing the propaganda emanating from Jerry Brown’s office, leave his ivory tower, fly out here and find out what’s really going on.

Tags assigned to this article:
Gray DavisJerry BrownJohn SeilerPaul Krugman

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