California, shown above, has long been the destination of American dreamers from other states. It no longer plays that role; residents are leaving for greener pastures out East. Today, the state is still pulling in foreign immigrants, but the percentage of American-born transplants has shrunk significantly as more people leave the state. (Here’s much more detail about California’s exodus.) There are now about 6.8 million California natives living elsewhere, up from 2.7 million in 1980.

That will have serious negative consequences for state economic growth. If the best and brightest leave instead of come here, then our talent pool will be much smaller.

Well, I guess as a consolation prize we still have all our wonderful government workers and their unions.

By Steven Greenhut

Anyone who has lived in California for some time realizes that middle- and upper-income Californians frequently talk about where they are going when they leave California. Most people never actually leave, of course, and birth rates and immigration mostly from Latin America and the Pacific Rim assure that our state’s population keeps growing. But it’s still wise to figure out the root of Californians’ very real angst.

The liberal Democrats who run California mock the idea that people would leave this beautiful state simply because of its tax and regulatory climate. Then again, these people who “run” the state government and make these policies are almost entirely creatures of state government. They tend to have been lifelong government employees and union activists, or attorneys and lobbyists who feed off of the government. They don’t understand or like the private sector and they have no understanding of incentives.

Some researchers insis that businesses are not fleeing the state in large numbers and that whatever business loss California has experienced is not the cause of the state’s enduring job problems.

Such arguments conveniently ignore that most businesses do not actually shut down their brick-and-mortar operations and move to Nevada and Texas. Instead, they stay put but expand in other states. CEOs and their spouses rather live in Newport Beach than Fort Worth, for some odd reason. Apologists for big government ignore that people respond to incentives and disincentives. They don’t think about all the jobs that never were created because of California’s governmental hostility to private enterprise.

Sure, lawyers and lobbyists and even people such as me, journalists writing about the state government, would be foolish to trade California’s beauty for the Nevada desert or the Georgia humidity. But it’s a different story for entrepreneurs. The sad thing is California, known as a worldwide magnet for energy and creativity, is only such a magnet in localized areas, such as in Silicon Valley. Even there, businesses are outsourcing and expanding their operations elsewhere. Even there, executives seem to spend as much time finding tax loopholes as inventing new products.

New study

A new study by the Manhattan Institute, called “The Great California Exodus: A Closer Look,” does indeed take a closer look at the migration numbers and concludes that people really are leaving in droves and businesses are fleeing to lower-cost locales.

Per the study:

“What has caused California’s transformation from a ‘pull in’ to a ‘push out’ state? The data have revealed several crucial drivers. One is chronic economic adversity (in most years, California unemployment is above the national average). Another is density: the Los Angeles and Orange County region now has a population density of 6,999.3 per square mile—well ahead of New York or Chicago. Dense coastal areas are a source of internal migration, as people seek more space in California’s interior, as well as migration to other states. A third factor is state and local governments’ constant fiscal instability, which sends at least two discouraging messages to businesses and individuals. One is that they cannot count on state and local governments to provide essential services—much less, tax breaks or other incentives. Second, chronically out-of-balance budgets can be seen as tax hikes waiting to happen.”

The first factor is the direct result of government intervention. Compare California’s economy to the economies of states with friendlier business climates. No doubt, the third point is true. Thanks to massive pensions and misspending by local governments, the public services in cities here have suffered and it’s only a matter of time before taxpayers will be forced to pay lots more.

Congestion

The second factor, congestion, is not entirely related to public policy, of course. I know from my years in Orange County and the San Gabriel Valley, that many people just get tired of the traffic and the urban problems and head for quieter places. That’s natural. But this would be far less of a problem had policy makers done better transportation planning. In Texas, Colorado and other pro-growth states where Californians tend to move, transportation planners are far more likely to construct roads and freeways. Here, road construction is viewed as an evil, and planners have been more success than in many other places in enforcing a strict New Urbanism that emphasizes light rail and bike lanes over asphalt. Thanks to our global-warming law, high-density land use is the in thing and the high-speed rail boondoggle will supposedly lure us out of our cars. Other states pursue this nonsense, too, but California takes it to a more aggressive level.

One of the great aspects of federalism is that like-minded people tend to move to places that best reflect their values. Californians who value freedom, low taxes, limited government and private enterprise realize that they aren’t particularly welcome here any more. That’s why Nevada — despite having a terrain that looks more like Hades than the Garden of Eden — has been attracting many of California’s best and most energetic people.

Immigration

I’ve always been a fan of immigration, which has put me at odds with some of my newspaper readers in Southern California. As I see it, the people who pull up roots from, say, some hovel in rural Mexico and move to California to better their lives tend to be the most industrious people in their society. Likewise, Texas, Nevada and Utah are receiving some of the most industrious Californians (along with many of its indolent government retirees, who prefer to spend their large pensions in cheaper places, so it is a mixed bag).

When I first moved to California in 1998, Republicans still had hope of winning statewide office. In 1988, George H.W. Bush actually carried the state. Currently, President Obama — who is running a tight race nationwide with Mitt Romney — is ahead by 24 points in California. This is becoming self-selecting, with those who work for government or dependent on government (through contracts or welfare) staying here and those who are more entrepreneurial heading to places that welcome them rather than torment them with endless regulations and increasingly surly regulators.

Soon enough, California Democrats will have two-thirds control of both houses of the Legislature, and they can then raise taxes as much as they choose and as often as they want. Think about that while you browse through Movoto looking for real estate in the Carson Valley.

I love California and take every opportunity to explore its wonderful culture and geography. I’ve traveled to 56 of its 58 counties (I’m still missing Del Norte and Modoc) and even my family has some back-up plans elsewhere if taxes keep getting worse and freedoms continue to erode. Many of my friends and neighbors are far less enamored of the state (mainly because they are from here and haven’t spent the winters I’ve spent in Ohio, Iowa and Pennsylvania), and so many of them are at least actively exploring their options. Do an informal poll of your friends and neighbors and it’s likely that most of them have at least considered moving to another state.

This is a tragedy, the result, as Manhattan Institute’s report explains, of politics. The state can be put “back on track,” the authors wrote. “All it takes is political will.”

Unfortunately, political changes can be among the toughest to create. I’m all for staying put in this magnificent place and working to change the economic trajectory, but it’s wrong to hold any illusions. The exodus is as real as it is understandable.

I call it: California’s U-Haul Economy.

This is from Nevada News & Views:

(Warner Todd Huston/The Union Label) – Computer software giant Adobe, computer game monster EA Games, and Internet auction king ebay are abandoning California to set up shop in Utah. Why? California’s horrid business climate and high taxes.

Adobe Systems, maker of a suite of graphics programs such as Adobe PDF, Illustrator, Photoshop, and InDesign, have announced that they are building a $100 million facility in either Salt Lake City or in nearby Utah County, Utah. The facility will bring thousands of jobs to Utah over the next few decades.

In May the Internet auction company ebay also announced a major new facility to be built in Salt Lake City. The $287 million data center will also bring hundreds of new jobs to the Bee Hive State.

Not to be forgotten, games maker Electronic Arts opened its new facility in July in Salt Lake City where around 100 employees are already at work.

These companies fleeing California’s horrid business climate are not alone. There has been a steady flow of businesses out of California for the better part of a decade. As California’s political morass worsens, as its budget woes increase, and as her politicians are proven incapable of making the hard budgetary decisions to take power from unions and chop unnecessarily lavish social programs, the state’s jobs are bleeding out. California is an a freefall the end of which is still unseen.

Here is a partial list of the large and medium-sized companies that have either moved parts of their business or have left the “land of milk and honey” for brighter prospects altogether:

Abraxis Health, Adobr Systems, Inc. Alza Corp., American AVK, American Racing, Apple Computer Audix Corporation, Apria Healthcare Group, Assurant Inc., Barefoot Motors Bazz Houston Co., Beckman Coulter, Bild Industries Inc., Bill Miller Engineering, Ltd. BMC Select , BPI Labs, Buck Knives, CalPortland Cement California Casualty Group, CalStar Products Inc., Checks To-Go, Chivaroli & Associates CoreSite, A Carlyle Company, Creel Printing , Dassault Falcon DaVita Inc. , Denny’s Corp., Digital Domain, Ditech DuPont Fabros Technology, ebay, Inc., EDMO Distributors, Inc. Edwards Lifesciences, Electronic Arts, Inc., EMRISE Corp., Facebook FallLine Corporation, Fidelity National Financial, First American Corp., Fluor Corp. Foxconn Electronics, Fuel System Solutions, Gregg Industries, Hewlett-Packard Hilton Hotels Corp., Hino Motor Manufacturing USA, Intel Corporation, Intuit of Mountain View J.C. Penney , Kimmie Candy Co., Klaussner Home Furnishings, Knight Protective Industries Kulicke & Soffa Industries Inc., LCF Enterprises, Lennox Hearth Products Inc., Lyn-Tron, Inc. Mariah Power, Maxwell America, Miasolé, MotorVac Technologies Nissan North America, Northrop Grumman, One2Believe, Patmont Motor Werks, Inc. Paragon Relocation Resources, Pixel Magic, Plastic Model Engineering, Inc. Precor, Premier Inc., Pro Cal of South Gate, Race Track Chaplaincy of Amer., Red Truck Fire & Safety Co. SAIC, Scale Computing, Schott Solar Inc., SimpleTech Smiley Industries, Solaicx, SolarWorld, Special Devices Inc. StarKist , Stasis Engineering, Stata Corp., Tapmatic Teledesic.

It should be noted that Utah is a right-to-work state.

And this is just the beginning. California’s economy has two basic features: anti-business and anti-jobs. Anyone starting or expanding a business here needs to see Dr. Leo Marvin.

Nov. 7, 2010