The new Economic Freedom of North America report evaluating the 92 states and provinces in the U.S., Canada and Mexico for how many obstacles they place on businesses says only one American state — New York — has more such obstacles than California.

The report, assembled by scholars at the Fraser Institute in Toronto, examines the 50 American states, 32 Mexican provinces and 10 provinces/state governments in Canada and compares their differences in government spending, taxes, labor market freedom, legal systems/property rights, sound money, the ability to trade internationally, tax rates, credit market regulation, and business regulations.

New Hampshire, South Dakota, Texas, Florida and Tennessee get the highest marks of any American states. After New York and California, Alaska, Hawaii and New Mexico round out the bottom five.

That means all four of America’s mega-states are in the top five or bottom five, and that the Fraser report is likely to prompt familiar arguments about whether California’s business-unfriendliness is oversold, or whether the higher economic freedoms of Texas haven’t yielded more dividends because talented people value quality of life — i.e., living in California.

Business Insider has upbeat take on California

Last year, in response to CEO magazine ranking states on their hostility to business, Business Insider issued a ranking that evaluated the health of the economies of each of the 50 states. This provides a metric by which one can judge the argument that California’s regulatory climate is or isn’t too onerous.

The CEO survey last year ranked California as the most hostile in the nation for the tenth straight year.

But Business Insider, while acknowledging the CEO critique, had a different evaluation after examining “recent change in housing prices, nonfarm payroll job growth, unemployment rate, GDP per capita, average weekly wage, and state government surplus and deficit.”

It ranked California as having the fourth best economy in the nation, a ranking that might surprise even the strongest defenders of Gov. Jerry Brown’s record, given that many inland counties remain with recession levels of unemployment and underemployment, and given the size of the state’s unfunded retirement benefit liabilities.

But a closer look at the methodology suggests that California benefits greatly from the enormous wealth being generated in the Silicon Valley, a huge plus factor with few parallels in other states. GDP per capita is definitely on an uptick, even if the wages for most Californians are stagnant.

A 2014 Los Angeles Times analysis also provides context on why by one measure, the Golden State seems to be thriving, but not by others.

The fastest job creation has come in low-wage sectors, in which pay has declined. At the high end of the salary scale, a different dynamic has taken hold: rising pay and improving employment after rounds of consolidation.

Most distressing, middle-wage workers are losing out on both counts.

“People talk about it like an hourglass,” said Tracey Grose, vice president of the Bay Area Council Economic Institute. “There are fewer opportunities for people in the middle.”

Regarding the economy, there “is an optimism from small business that hasn’t existed in the past,” said Scott Hauge, president and founder of Small Business California. That’s shown in a comparison of SBC’s 2014 survey of California small business owners with preliminary results from the 2015 survey:

• In the 2014 survey, 49 percent of respondents said California is going in the wrong direction versus 38 percent saying it’s heading in the right direction. In 2015 that has flipped to 48 percent saying the state is going in the right direction and 35 percent saying the wrong direction.
• Last year 34.5 percent felt the economy was poor, with just 16 percent saying it was good. This year 49 percent believe the economy is good with just 13.5 percent saying it’s poor. Last year only 34 percent planned on hiring, versus 43 percent this year.

But when asked about California’s small business climate, the entrepreneurs mostly remained gloomy. In the 2014 survey, 63.5 percent called the small business climate poor, with just 10 saying it’s good. This year 60 percent still consider the business climate poor with 16.5 percent finding it good.

Their gloominess is borne out by the Tax Foundation’s 2015 Business Tax Climate Index. California ranked 48th overall in the country, a lowly position it has held for the last four years. The state was the nation’s worst in income taxes, 42nd in sales taxes and 34th in corporate taxes. Forbes Magazine’s Nov. 2014 business climate survey ranked California 46th in business costs and 43rd in regulatory environment.

Mac Taylor

Legislative Analyst Mac Taylor warned the committee members they need to be careful how their regulations affect the state’s business climate.

“Regulations … are crucial for business,” he said. “You want to always make sure they are smart, that they have good returns, that they are being efficiently done, that they are not excessive, that they are easy for business to follow. So the non-budget aspect is in some ways just as important to business as what happens in the budget. In some ways it can be more important to them.”

Several entrepreneurs pleaded with the committee members to make the state more business-friendly.

Cellpoint Corporation, which repairs cellphone screens, is headquartered in Costa Mesa. But its new manufacturing facility is located in Texas because the companies it serves are there, having been driven out of California, according to Cellpoint CEO Ehsan Gharatappeh.

“I’m always on the road to get this factory up and running,” he said. “It’s not convenient for me, my wife and kids. It would be in my interest to have a factory next to my house. Even if California were to eliminate the state income taxes tomorrow, that still would not be enough to put my manufacturing operations back in California – because all of our customers, Fortune 100 and 500 companies, are there [in Texas].

“In a perfect world, I would love to have some laws … to enable a competitive environment and marketplace in California, where big companies could move back to California and all of the small companies like mine that support them could follow in lockstep.”

Regulations

Key to making the state more economically competitive is to not impose punitive regulations, according to Hauge. “In some cases there are situations where regulations are put forth that the economic impact has not been determined,” he said. “That should be a criterion before regulations are put in effect, to know what the economic impact is.”

Dave Petree, CEO of Cloak and Dagger, a cybersecurity firm, asked for tax relief. “Have a program in place where you would waive state tax for the first two or three years for a startup business,” he said. “That would be contingent on the business staying in California for three years after that or all of the taxes become due.”

Two of the committee members were sympathetic to their concerns and requests.

“Unfortunately, we still have the nation’s third largest unemployment rate at 7.1 percent, which is higher than the national average of 5.5 percent,” said the committee vice chair, Assemblywoman Young Kim, R-Fullerton. “California consistently ranks at the bottom as a business-friendly state because of our high business tax climate. Too often California’s innovations become a reality in other states because we have too many hurdles and financial disincentives.

“By enacting pro-job policies, we can keep jobs and employers here and create more opportunities for Californians. As a Legislature, we need to be mindful of proposed policies that would hurt the economy, make it harder to increase jobs and threaten our future tax revenues. Together we should make it easier and less costly to start or expand a business in California.”

SBA

Donna Davis is the administrator for the U.S. Small Business Administration’s Region IX, headquartered in Glendale. Before the committee, she touted the many programs available to help small businesses. The SBA’s Local Assistance website is here.

Davis has been involved in small business herself. According to the SBA website, “She served most recently as the President and CEO of DIR Group, Inc., a business and advocacy consulting firm.  Before that, she was the CEO of the Arizona Small Business Association”

Also wanting to help businesses, especially small ones in her Inland Empire district, was Assemblywoman Cheryl Brown, D-San Bernardino.

Brown said she has been a small business owner for 40 years. And she responded to Davis’ testimony.

“You’re saying things I don’t know anything about,” said Brown. “We don’t seem to get that kind of support. We’re not seeing the kind of robust success that you’re talking about. Owners will go to the bank and try to get the loan cleared and so forth so they can go back to SBA.

“But the process is so cumbersome that many times small business owners won’t have the time to do that. Additionally, if they get through the maze, then we just don’t have access to capital in that region. That’s something I’m going to be working on.”

The state economy

In addition to his comments on the state business climate, Taylor’s 22-minute presentation provided an overview of the state’s economy and some legislative recommendations:

• California’s gross domestic output of $2.2 trillion places it eighth in the world, ahead of Russia and Italy and just behind Brazil. Texas is the second largest state at $1.5 trillion. “It really just shows that California is an economic powerhouse, not only for the U.S. economy but for the world economy,” he said.
• California lost nearly 9 percent of its jobs during the Great Recession – “that’s just astounding,” he said. It’s taken seven years to recoup those losses, nearly twice as long as the job recovery took after the 2001 recession.
• Sixteen percent of California’s population is poor, according to the official poverty measure (based on data from 2011-13). That’s slightly higher than the national rate of 14.8 percent. But the percentage of Californians living in poverty is actually 23.4 percent when using the Supplemental Poverty Measure, which takes into account government benefits as well as cost-of-living expenses such as housing.
• The cost of housing as a percentage of household income is higher in California than the national average of 23 percent. Southern California has the most expensive housing, led by Los Angeles at nearly 30 percent of income, followed by San Diego at 28 percent.
• California is aging rapidly. The 65-74 age group is by far the fastest growing in the state, increasing by more than 60 percent from 2010-20. Next fastest is the over-75 age group, increasing about 35 percent. In contrast, the 24-and-under age group is declining by about 5 percent. “What that means is that it’s really good for your budgetary situation because you don’t have to spend a lot of money just to keep up with the growing population, building more schools, taking care of more kids,” Taylor said. “You can spend it on other things.”
• California has a $650 billion investment gap in infrastructure over the next 10 years, according to the 2013 U.S. Infrastructure Report Card by the American Society of Civil Engineers, which graded California’s infrastructure a “C.” “Infrastructure is an area where we don’t do as good a job as we should,” said Taylor. “We have a five-year infrastructure plan that the governor puts out every year. But we don’t really follow through on it. The Legislature doesn’t have a strong planning process and a way to make sure that you’re spending your limited funds in the most effective way. You spend about $10 billion a year on average on infrastructure.”

The committee’s future informational hearings will look at specific components of the state economy, said Committee Chairman Eduardo Garcia, D-Coachella.

But — surprise! — an updated Brookings Institution study found the inland metropolitan areas of California beat out the upscale coastal cities in the Bay Area and Silicon Valley for overall economic growth in 2013-14.

What most Californians hear and read in the media is the cities of San Francisco and San Jose are leading the jobs recovery in California, with the inland areas still mired in recession.  And indeed those two cities are doing well.

But when measured at the level of Metropolitan Statistical Areas, Fresno, Sacramento and Riverside were ranked higher in combined positive change in employment and Gross Domestic Product growth per person for 2013-2014.

The Brookings Institution’s Metro Monitor survey analyzes to what degree the world’s 300 largest metropolitan economies have recovered to 2007 levels of income and employment.  Eight California cities were ranked in the survey.

Fresno leads the pack

Fresno was the highest-ranked California metro area in 2013-14, with a rank of 49, mainly due to 4.5 percent employment growth. Fresno actually had a negative 0.9 percent growth in GDP.

Next came the San Jose metro area, ranked 72, with a tiny 0.2 percent growth in GDP, but a 3.5 percent jump in employment.

Third came the Riverside metro area, ranked 103, with 0.2 percent GDP growth and 2.8 percent employment growth.

Fourth was Sacramento, ranked 122, attributable to a 1.1 percent increase in GDP and 2.0 percent boost in jobs.

Surprisingly, the San Francisco metro area came in fifth in California and 125th in the world.  Another surprise was that San Francisco had a 0.5 percent decline in GDP, coupled with a 2.6 percent increase in jobs. So high-tech job growth in the San Francisco area doesn’t tell the whole story.

Rounding out the bottom three metro areas in California were San Diego at 142, Los Angeles at 148 and Bakersfield at 178.

San Jose and San Francisco, however, still had the highest GDP per capita by a large margin over the other California areas.

Again surprisingly, California’s eight metro areas averaged a .325 percent decline in per capita GDP in 2013-14, but a 2.76 percent increase in jobs.

It needs to be pointed out that the above numbers only partly reflect the record drought, which worsened in late 2014 and likely will affect the numbers for the inland agricultural areas of California such as Fresno and Bakersfield.

CA Leaps over Brazil in GDP 

On Jan. 15, Bloomberg reported California’s total GDP surpassed Brazil to become the eighth-ranked in the world if our state were a country.  In 2013, California surpassed Russia and Italy.

Gov. Jerry Brown was quick to attribute this higher ranking to the diversity of California’s economy and his financial policies.

However, yet another surprise is that California’s surpassing of Brazil in GDP was mainly because of the decline of Brazil’s economy, much as Italy’s and Russia’s GDP also declined from 2012 to 2013 (see table below).

And California may have the eighth largest GDP in the world, but on a per capita basis, it ranks 18th among 50 states, below Illinois and above Nebraska.

Change in GDP 2012-2013 (in trillions – unadjusted for inflation)

Note: The above numbers reflect nominal, not real, GDP. California’s real GDP increase for 2013 was 2.0 percent. The main difference between nominal and real values is that real values are adjusted for inflation, while nominal values are not. As a result, nominal GDP will often appear higher than real GDP. Nominal vs. Real GDP, and the GDP Deflator — Investopedia.

Peter Schiff tells Cal WatchDog.com’s James Poulos about the coming consequences of our economic policies and why you can’t rely on the dollar. Who will leave California next? Who will leave the United States?

The news caps what has been over six years of roller coaster economic and budgetary uncertainty, for Californian voters and politicians alike. But for most politicians and policy experts, the state’s health is hardly a settled matter.

The situation is nowhere near as dire as it was in 2009, when the nation’s big banks rejected the IOUs issued to cover California’s multibillion-dollar state budget deficit. Arnold Schwarzenegger still was presiding over the budget disaster.

Under Gov. Jerry Brown, who took office in 2011, the state’s credit rating has been stabilized, and hiked taxes and revenues have been used to pull the budget back from the fiscal abyss. On the other hand, stubborn problems remain — from drought and out-migration to a still-daunting debt and a hunger to spend in Sacramento.

In other words, California’s economic situation has been salvaged enough to allow a fresh look at its structural challenges. While Democrats are more inclined to view public transportation and carbon emissions as typical, those further to the right have pointed to policymaking itself as an even more fundamental difficulty.

Gov. Brown’s hope has been to chart what his team has presented as a middle course. But the $68 billion high-speed rail project at the centerpiece of Brown’s agenda has shown the limitations of his approach. While annoying Democrats by re-routing cap-and-trade funds away from emissions reduction, Brown has attracted ridicule from Republicans.

Fast trains vs. big government

Republican antagonism goes beyond traditional tax-and-spend critiques. Democratic policymaking itself, Republicans are well positioned to argue, can be blamed for the logistical, technical, environmental, legal, financial and regulatory impediments to the train’s progress. California’s barely-there high-speed rail has already revealed how competing priorities, unintended consequences and planning overreach typify the kinds of large projects large governments undertake.

There’s even more at stake, however. Brown’s administration, and his legacy, are tied to the bullet train for more than superficially political reasons. The train is a central part of California Democrats’ vision of economic growth and progress. Sympathetic analysts around the country, including the public-transit-heavy East Coast corridor, have insisted that California’s economic future depends on the train and similar projects.

The more difficult claim to uphold, however, is that high-speed rail can only be trusted to policy planners and funded with public tax dollars. While California’s effort has run into immediate and grave trouble, its advocates have laughed off proposals like Elon Musk’s private-sector “hyperloop” plan for ultrafast mass transit. Ultimately, the argument for Brown’s favored train hasn’t turned on the wisdom of government-planned economic growth — but on impatience with the current state of Californian productivity.

Squeezing producers

Republicans, however, have expressed their own impatience on this subject. Much of California’s economic health has been driven by technology, tourism and trade, according to Steve Levy, director of the Center for the Continuing Study of the California Economy. Yet California government has pursued an uneven-at-best relationship with Silicon Valley. As Sacramento’s planned crackdown on Uber has underscored, Democratic legislators are often cozy with California’s tech constituency on social and cultural issues, but hostile when it comes to the disruptive power of innovators to create wealth and dictate the pace of economic growth.

Reliance on tourism, meanwhile, has proven to be a double-edged sword even for large economies like Italy’s. Though tourism brings cash in, it also makes locals and residents dependent upon outsiders for productivity. In California, meanwhile, millionaires and others have begun steadily flowing out of state — notably, to more enterprise-friendly states like Texas.

Finally, in the area of trade, a Southern California Teamster strike threatens to undo the gains California has made this year, with consequences spreading throughout the rest of the country. Democrats have long sided with unions in labor disputes; doing so now, however, would require them to dial back their enthusiasm for their state’s economic ranking.

Together, these developments have sharpened the debate over California’s economic future. Even if the state climbs higher in the global rankings, the drama surrounding Sacramento’s approach to productivity shows that size isn’t everything.

It is an amazing commentary on the servility of the media that they buy the White House spin that Republicans sticking to their principles and opposing bigger government is obstructionist; since when has the opposition party had an obligation to enact the agenda of a president of another party?

But if we accept the premise that Obama only deserves blame for the economy if he can get legislation he wants through Congress, when will the parallel California premise be acknowledged? Democrats have had full control of Sacramento for more than three years. Shouldn’t they get blamed for the state’s bad performance relative to the national economy?

“In 2006, California’s unemployment rate dipped to 4.9 percent and its underemployment rate — the number of job-seekers who want full-time work but can’t find it — was 9.1 percent. Both numbers were about the same as the figures for the nation.

“Since then, California has plunged in comparison with the rest of the U.S. Only three states have a worse unemployment rate. Only one state has a higher percentage of people who want to work full time but can’t find such jobs. According to revised Census Bureau measures of poverty that include the cost of living, California has by far the nation’s highest rate — 24 percent.”

When will Dem policies be blamed for CA’s miseries?

That’s from my U-T San Diego editorial that had as its focus the question, “When will Democrats acknowledge the policies they’re implementing aren’t working?”

The question that goes hand in hand with that one is this: When will the California media use the same standard as the inside-the-Beltway set in judging Jerry Brown’s economic stewardship?

Maybe when they finally develop some economic literacy.

I once had a prominent California journalist on my old KOGO radio show a few years ago — at a time when state unemployment was north of 10 percent — and he basically said the Golden State’s economy ebbed and flowed according to its own rhythms, irrespective of actions by the state government.

Yes, I’m sure Occidental Petroleum’s leaving California for Texas was a business decision that happened in a vacuum, irrespective of the policies advocated by the state’s dominant Democrats.

Sheesh.

Alas, it’s not just journalists. State Sen. Mark Wyland, R-Solana Beach, told me in 2010 that he would encounter Democratic lawmakers and staffers in the Capitol who were surprised to learn the state was in a deep recession.

If they didn’t think we were in a recession then, it’s unlikely that they’ll see the need for a course correction now.

Most Californians live within about 50 miles of its majestic coastline — for good reason. The California coastline is blessed with arguably the most desirable climate on Earth, magnificent beaches, a backdrop of snow-capped mountains and natural harbors in San Diego, Long Beach and San Francisco. There is no mystery why California’s population and economy boomed after the Second World War.

The Golden State was aptly named. Its Gold Rush of 1849 was followed a century later by massive growth in the 1950s and 60s. Education in California became the envy of the world. Stanford became the Harvard of the West. A college education at the University of California and California State University systems was inexpensive. The Community College system that fed its universities was ostensibly free.

California’s public school system led the nation in innovation and almost all of its classrooms were new. The highway system that moved California’s automobile-driven commerce eliminated the need for public transportation systems like New York and Chicago. The fertile soil of the Central Valley became the breadbasket of the world.

The next golden wave in the 1980s grew from former orchards south of San Francisco known as Silicon Valley. Intel and other companies led the world’s computer and software revolution. In the 1990s, the dot-com revolution brought immense wealth to more Californians. Its innovators, Google, Apple and others, ushered in the Internet Era. The 2000s brought the greatest housing and mortgage boom in the nation’s history, with innovation centered in Orange County. California was truly the Golden State.

Why then would the author have the temerity to ask, “When did Californians become Stupid?” And: Is California the next Detroit?

Unique oblivion

Californians, due to their golden history, live in unique oblivion. When the Tea Party movement caused a political tsunami that swept more than 60 incumbents from political office in 2010, the wave petered out at California’s state line. There was no effect on the 2010 election that saw Democrats take every elected office in the state.

California voters rejected Meg Whitman, the billionaire founder of Ebay, in favor of Jerry Brown. Gov. Brown signed into law a “high-speed rail” bill that will spend $6 billion (the state does not have) to build a train between Fresno and Bakersfield — not Los Angeles and San Francisco, as promised. There was little outcry.

California has a $16 billion deficit that no one seems to notice. Brown’s budget “assumes” that California voters will pass massive tax increases on themselves. If they do not, the 2013 deficit becomes a mind-numbing $20 billion. The budget, mandated to balance by the Calfornia Constitution, has been billions in the red for 10 straight years. How could Californians re-elect the same politicians year after year that produce budgets with multi-billion dollar deficits?

To protect the endangered Delta Smelt, a fish known better as bait, water has been diverted from the Central Valley to the Pacific Ocean. Orchards in the Central Valley have been allowed to wither and die, resulting in unemployment in the Central Valley as high as 40 percent. Imagine Californians living in what was the breadbasket of American now living on food stamps. California voters rejected Republican Carly Fiorina for U.S. Senator in 2010. She ran Hewlett Packard. Instead, they re-elected Democratic Sen. Barbara Boxer ,who vowed to protect the Delta Smelt at the expense of the Central Valley.

California has 519 state agencies, like the state Blueberry Commission, that pay each of their commissioners more than $100,000 per year. State politicians, when asked to make cuts, fire teachers and fire fighters to inflict maximum pain on its citizens, while leaving these patronage commissions intact. State politicians have elevator operators in the state capital to push the buttons for them. Their solution for the overcrowding of the state’s prisons is to release inmates or transfer them to local facilities in already bankrupt cities. Yet, they are re-elected by California voters in numbers consistently higher than the old Soviet Politburo.

California’s public education system, once the envy of the world, now ranks 49th in the nation. Its business climate, according to 650 CEOs measured by Chief Executive Magazine, ranked dead last. Apple will take 3,600 new jobs to Austin, Tex. at its $280,000,000 new facility. Texas ranked first in the same survey.

California unemployment is consistently higher than 10 percent of its workforce, but it’s under-employed, according to a Gallup poll, is 20 percent. There are few jobs for college students who graduate with as much as $100,000 in student loans. Despite the overwhelming evidence that bad public policy is chasing away jobs, the same state politicians are sent back to Sacramento every two years.

In the last two months, three California cities have declared bankruptcy. Compton is next. More will follow. Some cities will simply cease to exist due to $500 million in unfunded pension obligations they simply cannot meet.

The unfunded pension obligations, now swamping California cities, were approved by these same politicians whose re-elections are financed by the unions they serve. Nine years ago, outraged Californians recalled Gov. Gray Davis from office for excessive spending and crony capitalism. Nothing has changed a decade later. Its residents believe the golden state will be golden forever. It may not be the case.

Detroit

History has an unpleasant precedent known as Detroit. In the 1950s, Detroit was a major American city with a dynamic labor force built on the manufacturing miracle that won World War II. Its factories quickly converted tanks, planes and artillery shells into trucks, automobiles and refrigerators that baby boom families demanded. Everyone had a good paying job. Detroit Iron had no competition. Its burgeoning middle class was the model of the world with excellent public schools and universities. It was the 4th largest city in America with 2 million inhabitants, with the world’s most dominant industry — the automobile.

Detroit in 2012 is a shadow of that once great metropolis. Its population has shrunk to 714,000. There are 200,000 abandoned buildings in the derelict city. The average price of a home has fallen to $5,700, unthinkable in California terms. Unemployment stands at 28.9 percent. It has a $300 million deficit. Its public education system, in receivership, is a disgrace, producing more inmates than graduates. The jobs have long ago abandoned Detroit for places like South Carolina and Alabama, far hungrier than Detroit’s leaders who believed the gravy train would never end.

In 2006, the teacher’s union forced the politicians to reject a $200 million offer from a Detroit philanthropist to build 15 new charter schools. The mayor has proposed razing 40 square miles of the 138 square miles of this once great American city, returning it to farmland. Even such a draconian plan may not be enough to save the city from itself.

If a hurricane hit Detroit, more of us would know of this tragedy in our midst, but this fate was man-made and not wrought by nature. Detroit has had one party rule for more than 50 years. Louis C. Miriani served from September 12, 1957 to January 2, 1962 as Detroit’s last Republican mayor. Since that time, the Democrats have ruled the Motor City.

John Dingell, Democrat congressman for the 15th District outside Detroit, has served since 1956. His father was the congressman there from 1930 to 1956. Despite the disastrous decline of their city, Detroit voters send him back to Congress every two years.

One-party rule

Similarly, California now has one-party rule. The Democrats of California did not need a single Republican vote to pass their budget. They now own the Golden State’s fate. The politicians’ plan to address the nation’s largest deficit is to raise taxes instead of cutting spending. If the Proposition 30 tax increase passes, the deficit would drop from $20 billion to a mere $12 billion.

Democrats have done nothing to cure the systemic problems of a bloated bureaucracy. Brown, referring to the state’s highway system, once said, “If we do not build it, they will not come.” Caltrans stopped building highways under Brown, but the people kept coming. Now 37 million Californians are locked in traffic jams each day.

Brown was rewarded for such prescience with re-election as Governor. California’s egotistical politicians passed AB 32, the Global Warming Solutions Act in 2006. Dan Sperling, an appointee to the California Air Resources Board, and a professor of engineering and environmental science at UC Davis, is the lead advocate on the board for a “low carbon fuel standard.” The powerful state agency charged with implementing AB 32 and other climate control measures claims the low carbon fuel standard will “only” raise gasoline prices $.30 gallon in 2013. But The California Political Review reported implementation of these the policies will raise prices by $1.00 per gallon.

Detroit was once the most prosperous manufacturing city in the world.  Will California follow Detroit down a tragic path to ruin? In 1950, no one fathomed the Detroit of 2010. In 1970, when foreign imports started to make a foothold, the unions and their bought and paid for politicians resisted any change.

In the 1990’s, as manufacturers fled to Alabama and South Carolina, the unions and their political lackeys held firm even as good jobs slipped away. No one in Detroit envisioned their future, even as schools declined, the jobs withered and the once proud city deteriorated in front of their own eyes.

No longer golden

California was once the Golden State. Today, it is no longer so golden. Its schools are in decline. Its business climate is equally dismal. Its cities are facing economic ruin, with exploding pension obligations and a declining tax base. Housing prices have fallen 30 to 60 percent across the state, evaporating trillions of dollars of equity. Unemployment remains stubbornly high and under-employment is rife. The Central Valley is in a depression, with 40 percent unemployment. Do our politicians need any more signs?

Brown’s budget will first slash money to schools and raise tuition on its students, while leaving all 519 state agencies intact. He apparently will protect political patronage at all costs. Jobs, and job creators, are fleeing the state. Intel, Apple, Google and others are expanding out of the state. The best and brightest minds are leaving for Texas and North Carolina. The signs are everywhere. State revenues are declining during many years. Meanwhile, the voters sleep and blindly send the same cast of misfits back to Sacramento each year — just as Detroit did before them.

The beaches are still beautiful. The mountains are still snow capped and the climate is still the envy of the world. Detroit never had that. But will California’s physical attributes be enough? If the people of California want to glimpse their future, they need look no farther than once proud City of Detroit. It can happen here.

Robert J Cristiano, Ph.D., is the Real Estate Professional in Residence at Chapman University in Orange, Calif.; a Senior Fellow at the Pacific Research Institute in San Francisco, Calif.; and president of the international investment firm, L88 Companies LLC in Washington, D.C., Newport Beach, Denver and Prague. He has been a successful real estate developer for more than 30 years.

By Katy Grimes

The U.S. economy lost more than 1.4 million jobs between December and January. But it’s almost impossible to find any reports in the mainstream media about this.

Instead, the media primarily have reported on reduced federal spending, as if that is enough of a balancing act. But the government has no choice but to make cuts as the United States now runs deficits of more than $1 trillion. It cannot continue.

Much of the media have been ignoring the truth about the economy, cherry-picking some factoids and telling outright falsehoods.

Shrinking labor force

According to the Bureau of Labor Statistics, the percentage of the U.S. labor force “that is employed” has continually fallen since 2006.

But it gets worse.

The number of Americans “not in the labor force” more than tripled during Barack Obama’s first term in office. This number is particularly interesting because it is larger than the increase in the number of Americans “not in the labor force” during the entire decade of 1980-1990.

The mainstream media have been giddy reporting 157,000 jobs were added to the U.S. economy in January. But it’s the “non-seasonally adjusted” numbers — the number of Americans with a job — which actually decreased by 1,446,000 between December and January, according to Michael Snyder, an economist, attorney and author of the Economic Collapse blog. These numbers are even more important.

The Bureau of Labor Statistics reports that the labor participation number has been in a free fall since 2006:

2006: 63.1 percent employed

2007: 63.0

2008: 62.2

2009: 59.3

2010: 58.5

2011: 58.4

In January, only 57.9 percent of the civilian labor force was employed.

What does this mean?

“A 1954 Studebaker Lark has more momentum than this economy!” said CNBC’s financial expert, Rick Santelli. He noted in December that the labor force participation rate has dropped significantly since Obama was elected. According to the Bureau of Labor Statistics, this means the number of Americans age 16 or older who decided not to work or even to seek a job increased by 8,332,000 to a record 88,839,000 in President Barack Obama’s first term.

“The people who run the country — on both sides of the aisle — they love to get elected and they also love to fib about the statistics in any way they can,” Santelli said. “Once again, I think my common phrase these days is: Shame on all of them.”

“Before Obama took office, the labor force participation rate had not been as low as 63.6 percent since 1981, the year President Ronald Reagan took over from President Jimmy Carter,” a time of deep recession, CNS News reported. Santelli noted in January the total debt that our children are currently charged with is $3.5 million per baby born today. Santelli is right. Instead of just listening to the media hype and spin, look at the numbers.

According to the BLS, in 2007 more than 146 million Americans were employed.  Today, that number has dropped to 141.6 million, even though our population has grown by about 15 million.

What recovery?

State, local and federal governments, together with the help of the media, report that we are in a “recovery.” They insist unemployment is lower than it was a couple of years ago.

But the truth is the continuing drop in the labor force. And during Obama’s first term the number of Americans on food stamps increased by an average of about 11,000 per day. These statistics go hand in hand.

“When Obama was inaugurated in January 2009, the number of Supplemental Assistance Nutrition Program (SNAP) recipients was 31,939,110. By October 2012, the latest month reported, they had jumped to 47,525,329,” CNS News reported. “That means the food stamp program grew by approximately 11,133 recipients per day from January 2009 to October 2012.” SNAP is formerly known as the Food Stamp program.

CNS News also reported, “[F]ederal spending on SNAP has increased every fiscal year that Obama has been in office. In FY 2009—when SNAP was still known as the ‘Food Stamp’ program—the government spent $55.6 billion. According to an April 2012 report from the Congressional Budget Office, SNAP enrollment increased by 70 percent between 2007 and 2011.”

The Obama administration, California Gov. Jerry Brown and the media have been misleading about unemployment, welfare expansion, government entitlements and the true condition of our economy. But they appear to be closely protected by much of the media.

California’s poverty rate of 23.5 percent is the highest in the nation — much higher than the national average of 16.1 percent, according to the U.S. Census Bureau.

Killing off small business

Millions of small businesses are on the verge of extinction. Yet local, state and federal bureaucrats and politicians just continue to heap more taxes and fees on them, more rules and more regulations. Just since November when President Barack Obama was re-elected, the federal government has issued hundreds of new regulations.

“Get your boot off of my neck!” says one small business owner I know every time she is forced to pay another tax increase of additional license cost or fee.

A recent Gallup poll found 61 percent of all small business owners in America are worried about the potential cost of healthcare because of Obamacare. A shocking 30 percent of all small business owners in America say they are not only not hiring, but they fear that they will go out of business within the next 12 months.

“More U.S. small-business owners say they let more employees go than they hired on average over the past 12 months, for a net hiring index of -10 in January, according to the Wells Fargo/Gallup Small Business Index,” Gallup Economy reported on Jan. 31.

Texas Governor Rick Perry recently called for returning “excess tax money” to taxpayers in his state, while California small businesses lost jobs as their taxes rose.

Yet according to the National Federation of Small Business California, small businesses account for more than 97 percent of all jobs in California.

What better way to destroy the economy than to kill off small businesses?

Spin and hype

Even bad economic news is hyped by the media as though it is good news.

In response to the news that the economy “contracted” by -0.1 percent in the final quarter of last year, Democrats touted the claim of Paul Ashworth, chief U.S. economist for Capital Economics, that it’s “the best-looking contraction in U.S. GDP you’ll ever see. The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging.”

Breitbart’s John Nolte summed up the spin:

* “Politico saw the jobs numbers as something that ‘could soothe some of the renewed economic anxiety in Washington.’

* “The AP saw the jobs numbers as proof the ‘U.S. job market is proving sturdier than expected” and “mostly encouraging.’

* “CBS News wants to assure all of us that the ‘[l]atest job numbers signal economic recovery.’

* “Yahoo News says, “Don’t Be Fooled by the GDP Report: The Economy Is Gaining Strength.'”

List of bad news

Nolte made a list of the bad news far too many Americans face:

* “What you’re seeing from the media is shamelessly dishonest propaganda.

* “Poverty is increasing.

* “Gas prices have almost doubled.

* “The price of health care premiums has exploded and will only explode more (but-but-but Obama said…!)

* “Poor and middle-class incomes are falling.

* “One-in-five Americans are on food stamps.

* “The non-partisan GAO says Obama’s exploding deficit is unsustainable.

* “Eight million people are looking for work.

* “Our labor force has shrunk to 30-year levels (170,000 more dropped out last month).

* “Chronic unemployment hasn’t been this bad since before World War II.

* “The long-term unemployment rate is more than 14 percent. And if the labor force was merely the same size today as it was the day Obama took office, today’s unemployment rate would be closer to 11 percent.”

When’s the last time the media talked about any of that?

By JOHN SEILER

When Gov. Jerry Brown takes office in less than a month and deals with the state’s $25 billion budget deficit, he will get no more help from the state’s economy than he has from departing Gov. Arnold Schwarzenegger.

California’s economy will grow at only an anemic 1.2 percent in 2011, according to the 33rd Annual Economic Forecast of Chapman University’s A. Gary Anderson Center for Economic Research. It was released Monday.

Chapman’s forecast is the most accurate in the state, correctly predicting the 2007-08 economic crash, as well as the modest recovery which began in the summer of 2009. It is prepared by Chapman President Jim Doti, also an economist, and Esmael Adibi, an economist and director of the Anderson Center.

California’s slow growth will be less than half the 3.3 percent growth Chapman forecasts for the U.S. economy, which itself is the lowest growth rate coming out of a recession since World War II. For example, after President Reagan’s tax cuts, in 1983 the economy burst out of a recession with 7 percent annual growth.

California’s slow growth compared to the national economy is another indicator of how the state is the “sick man” among America’s 50 states.

Here’s Chapman’s dismal forecast for California’s “recovery”:

Basically, what happened is that the incredible housing boom of the mid-2000s so overbuilt housing that it will take years for that sector to recover in California.

Interest rate, home values and tax receipts

Although people have been saving more to get through these hard times, that hasn’t helped much. The forecast found, “In addition to payroll job losses that reduced income from wages & salaries, the Federal Reserve’s near-zero interest rate policy has reduced interest earnings thereby exacerbating the decline in nominal personal income both at the state and local levels.”

Back during the housing boom, economists talked of a “wealth effect.” At the time, Adibi explained to me that increases in a home’s value lead to about a 1 percent increase in consumer spending. Thus, if your home’s value rises $100,000 — as millions of homes did during the boom — you would spend about $1,000 of that on consumer goods, thus adding to the growth in TVs, vacations, cars, etc.

Now, Adibi’s Forecast for California notes:

Rapid declines in personal income and the negative wealth effect emanating from declining home prices led to sharp declines in consumer spending. Total taxable sales decreased at an unprecedented double-digit rate beginning in the fourth quarter of 2008 and well into 2009. This decline was not confined to only a few categories of spending.

In light of sharp declines in income and spending, it is not surprising that California tax revenue collapsed during this recession. Total taxes from three major sources of revenue declined by 15.3 percent from $90.6 billion in fiscal year 2006-07 to $76.7 billion in 2008-09.

Combined with the imprudent spending increases of the mid-2000s, no wonder the state has a $25 billion budget deficit.

Export growth

One somewhat bright spot for California is that our major export markets are expanding, meaning they buy more of our goods and services.

The forecast predicts:

The level of California’s exports is projected to grow even faster than the U.S. The most recent available statistics show California’s merchandise exports increased by 30.8 percent in the third quarter of 2010 as compared to the first quarter of 2009. This rapid increase is partly due to the weakness in the value of dollar but more importantly reflects our trading partners’ strong economic growth.

Slow jobs growth

The forecast expects weak jobs growth that will modestly boost personal incomes and taxable sales, which “should improve the state’s general funds revenue, but the structural deficit will remain intact.” As a result, “no significant job growth is forecasted in the state and local government sectors.”

Without a growing tax base, there just isn’t enough money to hire more government functionaries.

Chapman finds:

In spite of such a drop in tax revenue and a significant decline in general funds, state government continued to add to its employment base through 2009. By 2010, however, the estimated number of state employees declined by 2.6 percent from 493,000 to 480,000.

Stagnation station

The Chapman forecast is another wake-up call for the state. There’s no Disney ending to the state’s economic stagnation. The budget is going to have to be cut to fit the lowed tax base. Tax increases, which voters have roundly rejected the past two years, are not an option, and in any case would chase more businesses from the state, further lowering the tax base.

Joseph Vranich, the Business Relocation Coach, just added 35 more businesses to his list of firms that “have left California completely or re-directed substantial capital to build facilities out of state that in an earlier era would have been built here.” His total now is 193. Here’s just one on his list:

Comcast is eliminating 212 jobs in Livermore as part of a move to shift its centralized collection operations out of California to Sandy, Utah, south of Salt Lake City. The job eliminations are set to begin in January and end by June. The new Utah operation will serve Comcast customers from California and Washington state.

To bring California’s fabled dynamism — to restore the California Dream — the state is going to have to do more than pass another fake budget, loaded with gimmicks and loans. It’s going to have to rethink its entire relationship of government to business and jobs creation.

The other 49 states, and the more than 200 countries around the world, are not going to give California a pass.

John Seiler is a CalWatchDog.com reporter and analyst. His email: writejohnseiler@gmail.com.