By Wayne Lusvardi

Scientist Carl Sagan once came up with a “baloney detection kit.”  Perhaps columnist Dan Walters should have consulted it before trying to debunk a study by the Manhattan Institute, “The Great California Exodus,” about why people migrate from the Golden State.

Walters asserted that the study contains “no evidence” to support its conclusion that high taxes, over-regulation, high housing prices and government budget instability drive people out of California. Instead, Walters said each wave of out migration from California coincided with an economic recession. So he concluded that it wasn’t the overtaxed and over-regulated business climate that drove ex-Californians out. Rather, it was recessions that were beyond the control of the state.

There was evidence

The study amassed sufficient, albeit arguable, evidence from which to draw its conclusion.  Check out Chart II and Tables 14, 15, 16 and 17  from the study’s executive summary.

One can quibble with the Manhattan Institute’s interpretation of the data. But it’s not accurate to say that “no evidence” was presented.

Perhaps the interpretation depends on one’s viewpoint. Conservatives and libertarians are prone to conclude that out-migration was self-caused by California.  Liberals are prone to conclude the causes of out-migration were due to external forces over which California had no control.  The reality is probably a little bit of both.

But where is the Preponderance of the Evidence?

On which side of the debate is the preponderance of the evidence?  Neither the study nor Walters’ critique of it attempts to tell us that.

The study does, however, contain data that suggests on which side the preponderance of the evidence might rest.  The study shows the top “sender states” of those who migrate to California; and it shows the top “destination” states where Californians are moving.  What is most revealing is that Californians are not returning to the states they came from, such as Minnesota or New York, despite the possible pull of prior family and community ties.

People moving to California mainly come from big Blue States in the East and the Midwestern parts of the United States that the Tax Foundation ranks as having relatively unfavorable tax and business climates.  As shown in the data below, excerpted from the Manhattan Institute study, the top-10 “sender states” to California are:

Conversely, people moving out of California typically flee to Red States with a much more favorable tax and business climate than California.  The top-10 “destination states” are:

The top ten “destination states” had a business climate ranking at least twice as favorable as “sender states.” A factor of two is typically considered statistically significant.

It would seem safe to tentatively conclude that what drives those out of California is not solely recessions, but the unfavorable tax and regulatory climate compared to other states.

Complicating problem

However, there is a complicating problem with the above tentative conclusion. Large states by population tend to be donor states and smaller states tend to be destination states. So maybe all that we can conclude is that large states send more people to California and smaller states receive more people from California.

However, if state size alone were the major determinant of whether people migrated to or away from California, then Texas — the second most populous state — would have been expected to be both a top “sender” and “destination” state.  However, this was not the case. Texas is only a top “destination” state.  And the probable reason that Texas is also not a “sender state” is that it has a highly favorable tax and business climate. Additionally, Georgia and North Carolina — the ninth and 10th most populated states — are only destination states and not sender states.

I made a separate analysis in Table 2 below. It found only a weak 33 percent correlation between the annual percent of change in California GDP from 1999 to 2010 and the number of people leaving California. The largest wave of recent population flight occurred during the Real Estate Bubble from 2003 to 2007, with people apparently fleeing the high housing prices despite the economic boom.

But boom years also were weakly correlated with out-migration.  This suggests that, as government grew, population flight increased. The data failed to support Dan Walters’ claim that California population flight is mainly related to economic recessions.

As the authors of the Manhattan study humbly state, there are no simple or definitive answers.  We can view the evidence with our cultural and political value biases as proving that recessions cause out-migrations; or conversely that high taxation and regulation do. Or we can try and look at the evidence as non-ideologically as possible.

When we do so it appears that the preponderance of the evidence is on the side of those who contend that high taxes and overregulation drive people out of California.

Table 1.

Sender Versus Destination States Shown by
Tax and Business Climate Rank & Population Rank 

Table 2.

Percent Calif. GDP Change & California Population Flight (1998-2010)
Correlation Coefficient: 33 percent

By John Seiler

The Manhattan Institute recently released a study, using U.S. Census numbers, showing that Californians continue fleeing the state by the hundreds of thousands to avoid record high taxes and strangulating regulations. Walter Williams has a solution:

“Given the widespread contempt for personal liberty and constitutional values, there might be a way for California politicians to solve their fiscal mess. They can simply stop wealthy people from leaving the state or, alternatively, like some Third World nations, set limits on the amount of assets a resident can take out of the state. This would surely be within their jurisdiction and would not raise any constitutional issues, because it would serve a compelling state purpose. In other words, if California were to set up border controls to stop people, as East Germans did at Checkpoint Charlie, before they cross the state line, such action would be protected by the 10th Amendment.

“The fact that many Californians have managed to get their assets out of the state complicates the issue. Article 1, Section 8 of the United States Constitution authorizes Congress “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” This is known as the commerce clause. There’s no question that people who pull up stakes and leave California affect interstate commerce; California has less tax revenue, and recipient states have more. What California Attorney General Kamala D. Harris might do is sue Nevada, Arizona, Texas and Oregon in the federal courts for enticing, through lower taxes and less onerous regulations, wealthy California taxpayers.

“Were California to take such measures and have a modicum of success, one wonders how many Americans would be offended by such an encroachment on personal liberty. After all, how would forcing an American to remain in a state differ in principle from forcing him to purchase health insurance?”

I expect such a plan — “Stay in California — Or Else” — to be part of Gov. Jerry Brown’s State of the State Address next January. It’s the only way to save the state. For one thing, building a California Wall around the state, much like the old Berlin Wall, would create hundreds of thousands of jobs. Unemployment would drop and the state’s economy would be booming again.

By Laer Pearce

In The Great California Exodus: A Closer Look, the Manhattan Institute has chronicled California’s fall from “the state with more jobs, more space, more sunlight, and more opportunity” to, well, the state with more sunlight.

In documenting the 3.4 million people who left the state in recent years — that’s just about enough to double the population of Oregon — the study identifies three reasons why California has been transformed from a “pull in” state to a “push out” state. Of course, one reason is the state’s pathologically unfriendly treatment of business. The second is the related collapse of its state and municipal finances. The third reason is less familiar to most, and shows just how good California has become at inflicting economic wounds upon itself.

It’s the state’s high density. While less than 6 percent of the state’s landmass is developed — about 50 percent is government-owned and about 45 percent is agricultural — to most Californians, it feels like a very crowded state.

In my home of Orange County and neighboring Los Angeles County, the density is hovering just below 7,000 people per square mile.  That makes the LA/OC megalopolis the most densely populated metro area in the country. San Francisco/Oakland is second, and San Jose is third. New York City is fourth, with a meager 5,319 people per square mile. Chicago is 25th.  Of the 50 densest metro areas in the country, 20 are in California.

It shouldn’t come as a surprise that, when places get too crowded, people (including business owners) move if they have the chance. In the late 19th century, America’s largest cities had densities of 50,000 or even 100,000 people per square mile.  When streetcars and trains, then cars, opened the door to suburbia, urban densities plummeted. Philadelphia is a case in point; its density fell from 56,000 people per square mile to 12,000 during those years.

As California’s expensive coastal counties started getting uncomfortably crowded in the 1990s, many moved one or two counties to the east to get more room for less.  Of course, those are the very areas that were the hardest hit by the housing and job market collapse. So now they are the California counties losing the most people to other states.

Higher density

What is progressive California doing about this? It should come as a surprise to no one that it’s doing exactly what it shouldn’t be doing:  Crusading Sacramento bureaucrats are forcing higher density on everyone.

The tool of this latest round of madness is 2008’s California Sustainable Communities and Climate Protection Act, or SB 375, authored by Darrell Steinberg, D-Sacramento, now the Senate president pro-tem. SB 375 stepped up California’s regulatory game from just controlling every aspect of how houses are built to dictating where they can be built.

The law mandates regional sustainable growth plans, and definitely doesn’t include suburbia in the “sustainable” column.  The Brown administration is using it like a hammer in its Quixotic campaign to single-handedly free the world of global warming.  For example, Attorney General Kamala Harris recently sued San Diego under SB 375 because its long-range plan did too much for highways, the transportation system that supports suburbia, and not enough for mass transit.

More to the administration’s liking is the Bay Area’s “Initial Vision Scenario for 2035,” which proclaims that, by 2035, the Bay Area’s population will grow by 2 million people, yet there will be fewer cars there than there are today.  That will only happen if yards, tree-lined streets and a car commute to work are traded in for lofts by the train station.

But, as the Manhattan Institute study illustrates, when faced with a choice between already too-dense cities and less dense (demographically and politically) places like Arizona, Texas, Oregon or Utah, more and more Californians are opting out of the craziness.

A number of years ago, New Republic senior editor Gregg Easterbook wrote, “Sprawl is caused by affluence and population growth, and which of these, exactly, do we propose to prohibit?” California’s Progressive leadership has apparently chosen both, firing one more shot into its suffering economy in the process.

Laer Pearce is the author of the new book, “Crazifornia: Tales from the Tarnished State.” Portions of this column are excerpted from the book.

Oct. 1, 2012

By Steven Greenhut

SACRAMENTO — Not long ago, I penned a case for staying in California, arguing that there’s nothing wrong here that isn’t fixable.

California, blessed by magnificent and varied geography, mild weather and an “anything’s possible” culture, suffers mainly from a political process controlled by union advocates hell-bent on protecting their power and privilege, no matter what that means for the state’s public finances and public services.

While still standing by this “we should stand our ground” point of view, I’ve found little to be hopeful about in the current political season, with polls showing Gov. Jerry Brown’s tax-increase plan (Proposition 30) holding a solid lead, an initiative that would chip away at union power (Proposition 32) failing, and President Barack Obama holding a 24-point lead in the presidential race in California.

Polling results on all three above-mentioned matters are not surprising, but they do suggest how far we are from the paradigm shift needed to get California back on a better track.

The most troubling thing I’ve seen is the delusion embraced by the state’s dominant Democrats, who really believe that California is only one massive tax increase away from being fixed.

“Maybe I know too much about this stuff, but we’re in a recovery, a slow recovery, and it’ll keep recovering with any luck,” Gov. Jerry Brown said in early September. “And if the Republicans would get out of the way and let, you know, the stimulus and the investment go forward, such as the Democrats have proposed, we’ll be better off.”

The state’s problems don’t bother me nearly as much as knowing that voters and officials here are in denial about the problem and have no clue how to fix it. It’s getting harder to blame Republicans for this any more, especially in California where they are an endangered species.

If voters approve Prop. 30, California’s income-tax rates will be the highest in the nation — 21 percent above the second-highest state of Hawaii and 34 percent above the third-highest state of Oregon, according to anti-tax activist Richard Rider of San Diego.

Taxes and regulations

California is high on the list of most other taxes and regulations, and its wasteful public services are not reformable because of union power.

Business owners talk not just about the costs, but about harassment by myriad government tax and regulatory agencies that often treat them like criminals.

Freedom is on the decline as government gains more authority to micromanage virtually everything. Just check out the kind of bills the governor is now signing into law. (I love Steve Breen’s cartoon, which says, “If you’re a Californian and want to start a small business, there are a number of different routes you could take.” It then shows the various interstate highways that lead to other states.)

Yet Brown insists that California is still “the land of dreams.” And some academics say the talk about a California exodus to other states is not true. In May, University of Southern California Professor Dowell Myers argued that we shouldn’t believe “the tales of gloom. Californians aren’t fleeing.” The main problem, he wrote, is Californians don’t spend enough public money on schools.

This is where I want to bang my head against the wall. There have been some reductions in per-pupil public-school spending from 2008, given California’s budget problems. But these reductions come after massive spending increases in previous years and Proposition 98 mandates 40 percent of the general fund goes to K-14 education.

Schooling is so important, yet California’s leaders have been resistant to imposing the real reforms that will improve schools through competition and teacher testing — ideas that run afoul of the powerful California Teachers Association.

New study

Despite these delusions, productive people are leaving and they will do so more rapidly if this “just tax and spend more” advice is followed.

A new study from the Manhattan Institute called “The Great California Exodus: A Closer Look” offers a reality check. Yes, Californians are fleeing mostly for pro-growth states with a better tax and regulatory climate. California used to be a destination state, but has outsourced 3.4 million residents in the past 22 years.

“The data suggest that many cost drivers — taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs — are prompting businesses to locate outside California, thus helping to drive the exodus.”

As authors Tom Gray and Robert Scardamalia explain, Californians are fleeing “chronic economic adversity,” congestion, and “constant fiscal instability” at the state and local governmental level, which “can be seen as tax hikes waiting to happen.”

All these reasons, even congestion, have a strong public-policy component. Businesses and individuals get tired of being viewed mainly as an ATM machine for government. If the state’s political leaders, most of whom come directly out of “public service” or the union movement, talked to business owners (and not just the crony capitalists they meet at the Capitol), they might learn about the trials of doing business here.

California is a highly urbanized state, and coastal metropolises are understandably crowded, but draconian land-use restrictions and misguided transportation policies (roads are bad, rail is good) exacerbate the problem. These “New Urbanist” policies embraced statewide have created unnecessary sprawl and congestion by pushing development far from job centers and into the Inland Empire and the Central Valley.

Governmental instability is an understandable reason to flee. In cities that have overspent on lush pensions and wasteful redevelopment projects, traditional public services (infrastructure, public safety, parks, etc.) suffer — something that will get worse as more localities file for bankruptcy.

The Manhattan Institute authors argue that California can be fixed if Californians have the “political will.”

Unfortunately, protests in Spain and Greece, much further down the same path California is taking, suggest that politicians can go many more years without showing the necessary political will to make necessary but tough reforms.

Let’s hope California retains enough of its historic entrepreneurial spirit to muster the will to turn things around.

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.