That’s a harbinger for the rest of the state, Esmael Adibi told CalWatchdog.com; he’s the director of the A. Gary Anderson Center for Economic Research at Chapman University. “The economic growth is in that area,” he said. “This is the growth of social media at Apple, Facebook, Google, Yahoo and other companies. It’s design and research in Northern California.”

But not even Northern California can contain all the tech. The Playa Vista area of Los Angeles also is burgeoning with new developments.

The Los Angeles Times reported that in January, “Yahoo Inc. is moving its Santa Monica operations to Playa Vista, joining the droves of major tech companies that have opened offices in the booming Westside neighborhood.

“The Sunnyvale, Calif., Internet company signed a long-term lease for about 130,000 square feet at the new Collective campus in Playa Vista. The move will bring at least 400 jobs from its current location, with space to accommodate growth.”

And Google Inc. “has spent nearly $120 million on 12 vacant acres next to a historic hangar where aviator Howard Hughes built his famous ‘Spruce Goose’ airplane in the Playa Vista neighborhood near Marina del Rey.

“Google is also expected to lease the Hughes hangar built in 1943. The 319,000-square-foot building … could be home to as many as 6,000 well-paid, highly educated workers.”

Manufacturing

Adibi said this is a major difference from the high-tech economy of decades past, which centered on manufacturing. But that sector has declined as aerospace jobs have moved to other states. And as Apple and other companies moved manufacturing mostly overseas.

Apple ended its California manufacturing when it closed its Fremont plant in 1993. Now most Apple devices read, “Designed by Apple in California. Assembled in China.”

Adibi said California’s factory employment dropped to 334,000 in 2014 from 664,000 in 1990. Most factory jobs are for the middle-class workers of the type who built the state, especially Los Angeles and its surrounding communities. Jobs include skilled work, such as for engineers; accountants and managers; and unskilled work for those on the assembly lines.

By contrast, the new tech jobs largely are for the “digerati,” the high-IQ, well paid workforce of the information economy.

New economy

The changeover to the new economy, which Apple’s phenomenal recent growth underscores, brings up the worm in the apple, as it were: the worry economists have over income inequality, which is something politicians are taking up.

The New York Times reported today on President Obama’s new budget proposal, a 10-year plan that “stabilizes the federal deficit but does not seek balance, instead focusing on policies to address income inequality as he adds nearly $6 trillion to the debt.”

A U.S. Census Bureau report found that, from 2012 to 2013, California was one of 15 states to see income inequality increase.

And a new study by the Economic Policy Institute found income growth in California from 1979 to 2012 rose 190 percent for the top 1 percent of income earners — but declined 6 percent for everybody else.

Such inequalities inevitably bring calls for higher taxes on the wealthy. But taxes for higher-income earners in California already have risen, with the top state income tax rate currently set at 13.3 percent, compared to 9.3 percent as recently as 2004 — a 43 percent increase.

California’s economic future is bifurcated by its gleaming high-tech companies climbing to ever-higher success — as the rest of the economy struggles and falls behind.

I wrote about this angle in the U-T San Diego today:

“University of California-Irvine economist David Neumark’s review of 100-plus major academic studies — which did not include studies from ideologically aligned think tanks — concluded that 85 percent of the analyses “find a negative employment effect on low-skilled workers.” Automation is likely to worsen this effect; Google “Europe” and “Corner Café” and you’ll see a Starbucks initiative that inevitably will be copied and yield mass displacement of U.S. fast-food workers.

“But even if minimum-wage hikes don’t kill jobs, the idea that this policy is a promising solution to income inequality makes little sense. In the big picture, what we need are many more people with in-demand job skills that lead to middle-income careers. And what we badly need from our elected leaders is an acknowledgment that California’s approach isn’t working in creating these job skills.

“Income inequality isn’t just growing in the U.S. It’s growing in all advanced nations as technological advances wipe out middle-class jobs by the millions. It’s growing everywhere as the job marketplace increasingly values — and strongly rewards — a narrower range of skills than it did previously.

“The best way to minimize the disruption this inexorable change creates is by maximizing the number of people with job skills not diminished by ‘creative destruction.’ For starters, we need a focus on computer science and technological expertise in middle school and high school — not curriculums based on the educational values of the 1950s. We also need to make it much easier for displaced workers of any age to go back to the classroom to get practical job training.

“Pursuing this ambitious agenda would be far more daunting than raising the minimum wage. But it has promise to significantly reduce income inequality — not nibble at the margins.”

Does left want to create middle-class jobs? Or play populist games?

As the success of the “war on women” rhetoric in getting young women to the polls in 2012 suggests, both parties are likely to be in permanent 24-7-365 campaign mode on a national level from here on out. That doesn’t bode well for substantive debate.

But at some point, it seems likely that the middle class — especially those with laid-off family memories or nervousness about their own prospects — will begin to tire of the Occupy rhetoric and the class-war cliches — the very efforts that laid the groundwork for the current relentless focus by Dems on the minimum wage. I wrote about the diminishing long-term returns of populist rhetoric in January:

“We could have marginal income tax rates of 90 percent, and it wouldn’t change the fact that for 40 years we have been moving inexorably toward an economy in which elite skill sets are highly rewarded while improving technology and automation steadily thin out jobs in which those with average job skills used to be able to make middle-class wages. Instead of the 1 percent vs. 99 percent divide, this is the divide that matters most. New York Times economics columnist Tyler Cowen pegs this gap as the 15 percent of working adults with elite job skills vs. the 85 percent without. …

“Thinking in fresh new ways about how we can become the society we need to become is not as tidy or viscerally satisfying as simply blaming the 1 percent. But it has far greater promise of actually yielding a more broadly prosperous society.”

In California, alas, thinking in fresh new ways is verboten in the state Capitol. Majority lawmakers are vastly more likely to use their clout to protect unions and public employees, to give trial lawyers new ways to squeeze money out of the legal system, and to pay tribute to the green religion then to actually take steps to create middle-class jobs.

Will most Californians notice this? Maybe not. I increasingly buy the theory that values drive voting more than pocketbook issues, a big change from a generation ago. And so in California, as long as non-white voters believe right-wingers are uncomfortable with them, right-wingers are doomed in statewide elections. As long as independent, secular Californians believe right-wingers are judgmental social conservatives, they’re doomed in statewide elections.

But if California libertarians and fiscal conservatives ever managed to advance a candidate who kept the focus on jobs and the economy and avoided the right’s baggage, it wouldn’t take a miracle for a GOPer to get elected to statewide office — just a 5-to-1, UCLA-in-this-year’s-March-Madness kind of long shot.

Notice that growth the next two years will average only about 3 percent, when at least 4 percent is needed to begin making up for the huge losses during the Great Recession. At that time, as the chart showed, the economy was in free fall with “growth” declining at nearly a 10 percent annual rate.

CERF also expects jobs growth to be weak, at under 2 percent the next couple of years, as the following chart shows. Again, that remains anemic, and isn’t enough to make up for the massive jobs crash during the Great Recession. Notice the 6.8 annual rate of jobs destruction on the chart.

According to CERF Director Bill Watkins:

I think this is unsatisfactory, because the growth is too slow to help the most disadvantaged among us. It’s also unsatisfactory because government policy is a reason that our economy is growing so slowly. …

California, though, has created a set of policies that couldn’t be more effective in constraining
economic growth if constraining growth was the purpose of policy. I describe this policy set as
DURT: Delay, Uncertainty, Regulation and Taxes.

The CERF analysis jibes with last November’s finding by the U.S. Census Department that California, when the cost of living is taken into account, has the highest poverty rate of any state.

DURT

Watkins explained the meaning of DURT:

“D” stands for Delay. It  means the difficulty of starting projects because of the immense amount of red tape imposed by the state. He said:

A building can be planned, built and completed in Texas, while a similar project is still in the early stages of planning in California. Heck, the Transcontinental Railroad was built in less time than a railroad station would be approved in California today. In California, a project requires the approval of “stakeholders,” apparently defined as anyone who objects to the project. If a “stakeholder” objects and the developer tries to move forward, the project’s cost can be driven up without limit by endless environmental lawsuits.

“U” stands for Uncertainty. Businesses have no idea what regulations will grind into them in the future, nor what existing regulations even mean. Watkins:

California cities’ code and planning documents mean little or nothing. In many cities, if a project is submitted and it meets every condition of building codes and planning documents, that’s just the beginning of negotiations.

“R” stands for Regulation. In particular, said Watkins, the state’s economy is being strangulated by carbon regulations, such as AB32, the Global Warming Solutions Act of 2006. He brought up a great irony:

There is nothing local about carbon dioxide. It is a gas that spreads itself throughout the
environment. However, in part because of mindless repeating of the phrase “Think
globally, act locally” California’s approach to atmospheric carbon reduction is perverse.

California has one of the most carbon efficient economies on earth. That is we use
relatively small amounts of carbon to generate a unit of economic activity. Reducing
carbon emissions here is expensive. By contrast, China is very carbon inefficient. A
dollar spent reducing carbon there would achieve far more than a dollar spent trying to
reduce emissions here.

“T” stands for Taxes. And California has the highest income, sales and gas taxes in the country. Watkins warned:

California’s highest-in-the-nation top marginal tax rate is layered atop other DURT components and thus is even more detrimental than it otherwise would be. If it were up to me, I’d fix the delay, uncertainty, and regulation issues and see where we are then. My guess is that the increased economic activity would be enough to allow cuts in top marginal taxes while increasing government spending, making the state even more attractive.

Unfortunately, he said, reform is going to be difficult because “powerful forces are heavily invested in the status quo.”

State budget

Watkins noted that the state’s seemingly good state budget numbers, producing surpluses instead of deficits, reflect the inrush of taxes from the Proposition 30 tax increase, passed by voters in 2012; and from the recent increases in stock market valuations.

He also commended Gov. Jerry Brown for not going on a spending binge, as Gov. Gray Davis did in 1999-2000 during the dot-com boom of that time; which resulted in the $40 billion deficits of 2001-02, as the dot-com boom turned into a dot-bust.

On new spending projects, Watkins dings Brown for only two things: First, the governor’s pet project, high-speed rail.

Second, “not addressing California’s other financial issues, the ones that are contributing to California’s dismal credit rating.” These include what Brown himself has dubbed the “Wall of Debt” the state owes, such as $4.5 billion a year to the California State Teachers Retirement System to keep it solvent.

Otherwise, Watkins said, Brown “effectively resisted the legislature’s knee-jerk impulse to increase long-term spending commitments.”

In short, the state shows some improvements that certainly are better than the decline during the Great Recession. But California’s economy just isn’t strong enough to propel growth to lift many people out of poverty, and to maintain a strong middle class.

By Chris Reed

With the op-ed in last week’s Wall Street Journal about California’s enormous potential for a fracking-driven energy boom, it’s beginning to look like how Gov. Jerry Brown deals with the issue will be a national story. It’s one that will test the narrative about Brown being the ultimate pragmatist, a liberal who raps regulation and a Democrat who sees tight-fistedness as akin to good government.

Bard College professor Walter Russell Mead is no conservative, but he’s a very thoughtful critic of modern liberalism and its essential unaffordability. He too thinks how the Golden State deals with its oil shale is a huge story. Still, he joins the long list of East Coast pundits who have no feel for California politics:

“California’s greens are sure to raise a fuss over any new drilling in America’s greenest state, but their fears are misplaced. Drilling for shale oil doesn’t risk water contamination in the way drilling for shale gas does, and much of the drilling will be done on existing oil fields. …

“Rather than pushing against any and all new drilling in California, smart greens should be looking for ways to move forward with drilling while ensuring that environmental concerns are taken care of.”

Such “smart greens” do not exist in California. Opposition to fracking has been reflexive and strident. The Golden State’s greens and their bureaucratic allies are so dogmatic that they have actually talked themselves into believing higher energy prices, specifically those created by AB 32, are good for the economy.

The advice from Pennsylvania’s governor

The question for Jerry Brown is whether he will heed the green hysterics — or Ed Rendell, the former Democratic governor of Pennsylvania, who saw fracking create jobs and economic growth in his state without the downside warned of by enviro groups.

New York Gov. Andrew Cuomo has a late-February deadline for deciding whether to extend his state’s ban on fracking. This New York Post story from Nov. 30 would leave one assuming that Rendell would offer Gov. Brown the same advice he offers Gov. Cuomo:

“‘New York would be crazy not to lift the moratorium’ imposed by former Gov. David Paterson in 2008, Rendell told The Post.

“‘I told Gov. Cuomo I would come to testify before any legislative committee,’ Rendell added. ‘I told [Cuomo] it’s a good thing to do.’

“Rendell’s strong pro-fracking comments are a coup for the drilling industry and for economically depressed upstate New York, which is clamoring for jobs.

“The no-nonsense Rendell, a former head of the Democratic National Committee, has a lot of credibility on the issue. … Rendell’s former environmental commissioner suggested it’s outrageous for New York to continue buying natural gas from other states without drilling for its own.

“’I do find it stunningly hypocritical to buy gas that comes from fracking wells somewhere [else] in the US and then say fracking is bad,’ said the former commissioner, John Hanger.

“He argued that natural gas is less polluting than coal or oil. …

“Rendell noted he barred the dumping of fracking water into wells and imposed fracking-well fees to hire 100 additional environmental inspectors.

“’The environmental harm can be significantly reduced or limited,’ by putting safety regulations in place ahead of time, he said.”

Rendell, like Jerry Brown, enjoys a rep as a blunt pragmatist. But Rendell also has a regular-guy populist vibe about him. That’s not our Jerry. Whatever his other qualities, I challenge anyone to point to any single event of his most recent four years as governor that suggests he has empathy for the long-term unemployed. Brown seems unlikely to use Rendell-style rhetoric in touting what fracking will do for hurting Californians.

As for Cuomo, he’s also not a populist. Instead, the New York governor is considered a clever straddler, someone who can win liberal votes by stressing cultural issues like gun control while governing as a pro-business centrist.

It’s hard to imagine how either Brown or Cuomo can finesse fracking, which threatens green dreams of a massive shift to renewable energy sources. Cuomo also wants to be president someday. So it is going to be intriguing — and, at least for political junkies, fun — to watch how fracking and the brown energy revolution play out this year in America’s two most influential states.