Driven by shifting economics, demographics, and changing definitions of moderate prosperity, middle class Californians in areas once rife with new arrivals — and dominated by Democratic voters — have begun looking for the residential exits. 

Statewide struggle

Both the Bay Area and the Southland have seen a perfect storm of living costs and population density drive middle-class Californians away. “About one-third of those surveyed by the Bay Area Council say they would like to exit the nine-county region sometime soon,” the San Jose Mercury News reported. “The area’s sizzling job market and robust economy have created a domino effect: income spikes for highly trained workers, more people packing the area’s roads, red-hot demand for housing.”

“What’s more, the technology boom has unleashed a hiring spree that has intensified the desire for homes anywhere near the job hubs of Santa Clara County, the East Bay and San Francisco. The South Bay job market has hit an all-time high after a 5,800-position surge in May, fueling an overall gain of 3,400 jobs for the Bay Area, according to a state labor report released Friday. The region’s soaring housing prices are a key factor driving dissatisfied residents toward the exit door. Several people who have departed, or soon will leave, say they potentially could have hundreds of thousands of dollars left over even after buying a house in their new locations.”

Meanwhile, the sharp housing shortage in Southern California has created similar stresses. “A database of housing affordability statistics created by The Associated Press shows Southern California’s two main metropolitan regions — Los Angeles/Orange counties and the Inland Empire — consistently rank among the U.S. markets that most stretch the household budgets of both homeowners and renters,” as the San Gabriel Valley Tribune noted. “Among the 40 largest U.S. metro areas, census figures show L.A.-O.C. had the lowest homeownership rate, the most financially stressed owners and the highest percentage of middle-aged households that were renters.”

Mainstream and trendy

Politically, California has not weathered as much of a populist storm as other parts of the country — and the world — with as powerful elites. Despite the beginnings of a modest exodus, private and public sector elites have been able to exercise a relatively strong influence over the tradeoffs many middle class residents have proven willing to make on quality of life issues. 

Notable Californians have even led a push to internationalize the state’s changing conception of which foods are central to a thriving middle class. Spearheading a public relations campaign against meat, former governor Arnold Schwarzenegger “is teaming up with WildAid to produce public service ads targeted at Chinese consumers,” Southern California Public Radio reported. “The group has partnered with the Chinese Nutrition Society, a nonprofit professional organization in China. Schwarzenegger is joined in the video by filmmaker James Cameron, of Titanic fame, who makes the link between meat-eating habits and climate change.”

Jeremy Haft, author of Unmade in China: The Hidden Truth about China’s Economic Miracle, told SCPR that “[a]ll indicators point to the continued steep growth in China’s demand for meat.” According to Haft, “eating meat is now viewed as an important part of a middle class diet,” the station added. “In essence, he says, having pork on the table is a sign of social status.” In California, meanwhile, diets low on meat or abstaining from meat entirely have grown in popularity, even as they have been increasingly lampooned. 

A Democratic redoubt

Broadly, populist discontent within the Golden State has not translated into the sort of turbulence that has roiled election season across the country. While Donald Trump has been able to make inroads into middle-class constituencies that have traditionally won Democrats, for instance, his prospects in California have remained dim. “Obviously he’s looking at fantasy land if he thinks he can put places like California and Michigan into play,” Democratic pollster Mark Mellman told The Washington Post.

New data has brought a new urgency to the souring fortunes of California’s middle class.

“Not only are Californians leaving the state in large numbers, but the people heading for the exits are disproportionately middle class working families — the demographic backbone of American society,” the American Interest recently noted.

Looking at labor force categories provides more evidence that California is losing working young professional families,” argued Hoover Institution research fellow Carson Bruno; “while there is a narrative that the rich are fleeing California, the real flight is among the middle-class.”

“Knowing that net out-migrants are more likely to be middle-class working young professional families provides some hints as to why people are leaving California for greener pastures. For one, California is an extraordinarily high cost-of-living state. Whether it is the state’s housing affordability crisis — California’s median home value per square foot is, on average, 2.1 times higher than Arizona, Texas, Nevada, Oregon and Washington’s — California’s very expensive energy costs — the state’s residential electric price is about 1.5 times higher than the competing states — or the Golden State’s oppressive tax burden — California ranks 6th, nationally, in state-local tax burdens — those living in California are hit with a variety of higher bills, which cuts into their bottom line.”

Real estate indicators

“In 2006, 38 percent of middle-class households in California used more than 30 percent of their income to cover rent. Today, that figure is over 53 percent,” according to Christopher Thornberg, director of the UC Riverside School of Business Administration Center for Economics Forecasting and Development. “The national figure, as a point of comparison, is 31 percent. It is even worse for those who have borrowed to buy a home — over two-thirds of middle-class households with a mortgage are cost-burdened in California — compared to 40 percent in the nation overall.”

Recent studies illustrated a continuing plunge in homeowning among traditional buyers in-state. “California’s middle class is being hammered,” wrote Joel Kotkin at the Orange County Register. “The state now ranks third from the bottom, ahead of only New York and the District of Columbia, for the lowest homeownership rate, some 54 percent, a number that since 2009 has declined 5 percent more than the national average.”

Low on houses

Some analysts looking to explain the trend have pointed to a so-called housing shortage statewide. “With supply falling far below demand, California needs to build at least 1 million more homes for low- and middle-income Californians in the next 10 years,” CAFWD suggested, adding that, although Gov. Jerry Brown “did not mention housing in the State of the State address,” he has “not explicitly ruled out addressing the issue in the next three years.”

Giving ammunition to the housing shortage thesis, meanwhile, was “a new report from the California Legislative Analyst’s Office that found that poorer neighborhoods that have added more market-rate housing in the Bay Area since 2000 have been less likely to experience displacement,” the Washington Post noted. But experts have differed significantly on how to read the tea leaves of the data, and analysts disagree on whether increasing density — or what kind of density — is the right answer.

A cloudy picture

The Golden State has been haunted in recent times by sharply mixed economic indicators. “While California has added 2.1 million jobs since 2010, employment in six industries is still below 2007 levels, before the Great Recession, according to the center’s analysis. Those sectors — including construction, finance and manufacturing — generally pay more than the service-type jobs that we’re adding in droves,” the Sacramento Bee noted late last year.

Economic growth concentrated in Silicon Valley has also not done much to relieve the income or jobs picture for middle-classers. “In a recent survey of states where ‘the middle class is dying,’ based on earning trajectories for middle-income cohorts, Business Insider ranked California first, with shrinking middle-class earnings and the third-highest proportion of wealth concentrated in the top 20 percent of residents,” Kotkin observed.

Jobs’ modest family home, where he and Woz started Apple in the garage, now is a kind of shrine to techies and in 2013 was designated a historical site by the Los Altos Historical Commission. (Picture above.)

California, especially Silicon Valley, has become so expensive the middle class is being squeezed out. KQED reported:

The nonprofit Joint Venture Silicon Valley has tracked local economic trends for the last 20 years. This year’s Silicon Valley Index reported the income gap is wider than ever, and wider in Silicon Valley than elsewhere in the San Francisco Bay Area or California.

Joint Venture divides the workforce into three different “tiers.” For high-skilled, high-wage jobs, Tier 1 in Silicon Valley, the median wage is $119,000 a year. For low-skilled, low-wage jobs, or Tier 3, the median is $27,000.

“Thirty percent of our population is living below the self-sufficiency standard,” says Joint Venture Vice President Rachel Massaro. “That means they can’t survive without public or informal private assistance.”

The main problem is that state policies severely restrict building adequate new housing. It’s simple supply and demand: Demand rises faster than supply, so prices go up.

In particular, the California Coastal Commission now limits construction in coastal areas, which has a ripple effect inland for at least 50 miles, raising the price of everything.

Then there are the LAFCOs: local area formation commissions, that also limit construction.

But it’s not surprising President Obama discussed this problem in last night’s State of the Union Address. His solution has three parts:

1. Raise taxes on the wealthy — that is, investors. Which would mean less investment in business and jobs creation.

2. Trickle a little back to the middle class.

3. Increase government.

Meanwhile, in California, The Los Angeles Times reported:

The United States has seen a remarkable turnaround in manufacturing employment since the economy bottomed out five years ago — but California hasn’t.

The state has been among the slowest to recover jobs in an industry long viewed as a bastion of middle-class opportunity.

Since February 2010, U.S. manufacturing employment has increased at a rate of 6.7%, with some Midwestern and Southern states such as Indiana and South Carolina seeing gains of 15% or more. By contrast, California manufacturing has grown at about 1% over the same period.

Manufacturing jobs are good, middle-class jobs, for both skilled and unskilled folks. But we’re not getting them here.

High costs

The Times quotes Jordan Levine, director of research at Beacon Economics in Los Angeles: “It comes down to housing costs and the costs of doing business in California overall.”

An obvious culprit is AB 32, the Global Warming Solutions Act of 2006, which places immense new burdens on businesses. It also just increased gas prices for  everybody beginning Jan. 1.

The price increase is hidden because of the global and national declines in oil and gas prices. But compare these national prices today from GasBuddy.com:

Lubbock, TX: $1.70
Colorado Springs, CO: $1.73
Kansas City, MO: $1.75
Detroit, MI: $1.83
Gary, IN: $1.84
Birmingham, AL: $1.94
Orange County, CA: $2.49
Los Angeles, CA: $2.51
Bakersfield, CA: $2.60
San Francisco, CA: $2.71
Honolulu, HI: $3.15

California drivers obviously are being ripped off big time by their own government. Like Texas, California also is a major oil-producing and -refining state. So why does a gallon of petrol cost a dollar more in San Fran than Lubbock?

The high cost of gas also hurts most the poor and middle class who have long commutes — something itself often caused by the high cost of housing. A worker making $50,000 in L.A. often has to live out in Riverside just to pay the rent, forcing a long commute at high gas prices.

But the president, to be echoed by most California Democrats, insists the real problem is that rich investors aren’t taxed enough.

Not so much for the middle class. The Times reported:

On the surface, California’s job market is booming.

The state has now recovered all the jobs lost during the recession, and done so at a faster pace than all but five states.

The growth, though, belies a troubling imbalance. 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.”

On top of that, California is the most expensive place to live in America. The 9.3 percent income tax rate, supposedly only on the “rich,” digs in at about $55,000 of income, barely into the middle class here. Severe government regulations on housing construction, especially by the California Coastal Commission and the LAFCOs, causing housing to cost twice to four times what it does in other states.

“California is back,” the politicians insist. Yes, if you’re a Silicon Valley billionaire. If not, then not so much.

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.

Now China is surging again, with growth of 7.8 percent in the quarter — and rising. The Wall Street Journal reported, “On a quarter-to-quarter basis, growth rose by 2.2%, suggesting an annualized rate of growth of 9.1%.”

Meanwhile. U.S. economic growth is a pathetic 2.5 percent during the fourth year of our so-called “recovery.” But is it a recovery? Middle-class incomes have stagnated and are lower than in 1989 — the year President Reagan left office. That's 24 years of stagnation as China has surged. Despite the “recovery,” median income dropped 4.2 percent under President Obama.

It's even worse in California. As I wrote a couple of days ago, the middle-class no longer can afford homes here, at least in the coastal areas.

President Bush hammered the U.S. middle-class with his then-record deficits, hyper-regulation through the USA Patriot Act and Sarbanes-Oxley, and cooperating with then-Fed Chairman Alan Greenspan in inflating the dollar. Obama has continued hammering the economy through the Dodd-Frank hyperregulations, tax increases, even higher record deficits and now Obamacare. The middle class just can't get a break from either political party.

Gold standard

Meanwhile, China now is moving toward a gold standard, which would turbocharge its economy. It hates it that its economy is tied to the U.S. dollar, which the Federal Reserve Board has been inflating for more than a decade. Record U.S. deficits are funded through bonds financed by China, Japan and other countries. The money's value then is eroded through inflation, sharply cutting the bonds' value.

GoldMoney.com's Alisdair Macleod reports from China:

Xinhua, China’s official press agency on Sunday ran an op-ed article which kicked off as follows:

“As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.”

China does have a broad strategy to prepare for this event. She is encouraging the creation of an international market in her own currency through the twin centres of Hong Kong and London, side-lining New York, and she is actively promoting through the Shanghai Cooperation Organisation (SCO) non-dollar trade settlement across the whole of Asia. She has also been covertly building her gold reserves while overtly encouraging her citizens to accumulate gold as well.

There can be little doubt from these actions that China is preparing herself for the demise of the dollar, at least as the world’s reserve currency. Central to insuring herself and her citizens against this outcome is gold. China has invested heavily in domestic mine production and is now the largest producer at an estimated 440 tonnes annually, and she is also looking to buy up gold mines elsewhere. Little or none of the domestically mined gold is seen in the market, so it is a reasonable assumption the Government is quietly accumulating all her own production without it becoming publicly available….

So why is the Chinese Government so keen on gold? The answer most likely involves geo-politics. And here it is worth noting that through the SCO, China and Russia with the support of most of the countries in between them are building an economic bloc with a common feature: gold. It is noticeable that while the West’s financial system has been bad-mouthing gold, all the members of the SCO, including most of its prospective members, have been accumulating it. The result is a strong vein of gold throughout Asia while the West has left itself dangerously exposed.

The West selling its stocks of gold has become the biggest strategic gamble in financial history. We are committing ourselves entirely to fiat currencies, which our central banks are now having to issue in accelerating quantities. In the process China and Russia have been handed ultimate economic power on a plate.

Dominate

It looks like China will become the dominant world economy a lot sooner than expected. U.S. global economic dominance depended on the strong, stable U.S. dollar backed by gold. That ended in 1971 when President Nixon took us off the gold standard.

Except for the Reagan 1980s and the short period under President Clinton and Republican House Speaker Gingrich in the late 1990s, periods of tax cuts and pro-middle class policies, the economy has been on a downward trajectory under both parties. Without the gold standard, federal, state and local governments were unleashed to spend, inflate and borrow at will.

Now the party's over. China is surging. I recommend learning Mandarin.

According to data provided by Trulia, the three least affordable areas in America are San Francisco, where just 14 percent of homes are affordable to the middle class; Orange County, where I live, and where just 23 percent are affordable; and Los Angeles, at 24 percent.

Next is New York City, at 25 percent.

Then California picks up again, with the fifth-least affordable area being San Diego at 28 percent; followed by San Jose at 31 percent; and Ventura County at 32 percent.

So, six of the seven least-affordable areas in America are in California.

Nor is this likely to get any better. The main culprit is the California Coastal Commission, imposed by voters in 1972. Most of those who voted for it now are dead; it’s been 41 years. Yet their descendants have to live under its dictatorial prevention of adequate housing along the coast. If the voters of 1972 had been told, “Your grandchildren will not be able to afford to live in California because of the CCC,” it would have lost overwhemingly.

Gov. Reagan

I recently asked the Reagan Library to research for what Gov. Reagan’s position had been in 1972. Jennifer Mandel, Archivist, wrote back to me:

“The Reagan administration did not generally support the creation of new government entities in principle, and did not support the establishment of the California Coastal Commission.  Although the administration may have agreed with the concept of coastal controls, there were several objections to Prop 20.  Most notably the initiative was considered too ambiguous regarding key definitions and unbalanced in the areas of jurisdiction.”

Indeed. The CCC is the closest thing in America (at least until Obamacare) to a Soviet-style arbitrary government agency, which just does whatever it wants, trampling on property rights all the way. Other regulations also severely restrict housing construction in the coastal areas. But the CCC is the key one, and sets the tone for everything else.

The CCC boasts its mission is:

“Protect, conserve, restore, and enhance environmental and human-based resources of the California coast and ocean for environmentally sustainable and prudent use by current and future generations.”

But the “future generations” of 1972 now are here, and they can’t afford the “prudent use” of the coast, or anything else in California. They only can afford to leave.

It’s not going to get any better because the CCC is not going to be repealed. Little new housing will be guilt. Meanwhile, high state taxes and anti-business regulations are keeping wages low, preventing the middle class from moving up to higher income brackets.

Only a tiny elite of oligarchs and the environmental elite now can afford to live along the coast. It’s their playpen.

As I have noted, in the United States, there has been no “economic recovery,” and the American middle class is shrinking.

But Mexico is booming, with a growing middle class. The latest from ABC News/Univision:

“A new study on Mexico helps to explain the recent fall in Mexican immigration to the U.S. It suggests that Mexico is slowly becoming a “middle class country.

“The study by Mexico’s National Statistics and Geography Institute [INEGI] says that 42 percent of Mexican homes qualify as “middle class” while 39 percent of the country’s overall population falls into this social category.

Look at this stunning graphic, which shows Mexican domestic air travel tripling in less than 25 years:

U.S. recession

It’s also remarkable that this has happened even though the U.S. economy — obviously Mexico’s major destination for exports, as well as for remittances Mexican workers in the U.S. send back South — has been struggling to get out of the Great Recession. If our economy were stronger, Mexico’s would be growing even faster.

The article doesn’t discuss why the Mexican growth is occurring. But the reason is clear: In 1994, Mexico took really bad advice from the Clinton administration and devaluated the peso by half. This caused what’s called the “Mexican peso crisis” or “Tequila crisis,” sending hundreds of thousands of Mexicans to El Norte looking for work. But after that, pro-market policies were adopted by new Presidente Ernesto Zedillo, even though he was a member of the stodgy old PRI. He cut taxes and regulations and the economy boomed.

After 70 years in absolute power, the PRI also finally allowed opposition parties to rise. In 2000, PAN candidate Vicente Fox won and continued the market reforms. He was succeeded the PAN candidate Felipe Calderon in 2006, who also advanced markets.

Presidente Pena

Last year, Enrique Pena Nieto brought the PRI back to power. But he has pledged even more market reforms, including trying to privatize the inefficient Pemex state oil monopoly, which would bring to Mexico the vast oil boom the rest of North America is enjoying; and Carlos Slim’s telecommunications monopoly, which keeps prices high, retarding the growth of the Internet economy.

Contrast with U.S.

Let’s contrast Mexico’s great progress with regression in the United States. After his 1993 tax increase and his bad advice on Mexico’s devaluation in 1994, President Bill Clinton actually switched to pro-market policies after he lost control of both houses of Congress in November 1994. You might remember him insisting, “The era of big government is over.” He then worked with the Republicans to cut taxes three times, reformed welfare and supported Fed Chairman Alan Greenspan’s non-inflationary policies. He even balanced the budget his last two years in office.

Disaster came with the election of Republican President George W. Bush in 2001. He went on a wild spending spree, boosting domestic spending faster than any president since LBJ in the 1960s. Bush allowed Greenspan to reverse course and debase the dollar, with the currency declining against gold from $255 then to $1,400 today. That’s why the gas you fill up your car with rose from 99 cents a gallon to $4 today.

After the Enron and other financial scandals, Bush again in 2002 signed the anti-business Sarbanes-Oxley hyper-regulations. Co-author Rep. Michael G. Oxley, R-Ohio, soon condemned it as regulatory overkill, but the damage was done.

Bush’s tax cuts were temporary, meaning people couldn’t plan; and mostly were repealed by the Fiscal Cliff deal on Jan 1, 2013 between President Obama and Republican House Speaker John Boehner.

Bush also promoted no-interest housing and Greenspan’s ultra-low interest rates, which goosed the housing bubble of the mid-2000s.

Then, when the bubble burst in 2007 and the Great Recession hit, followed by the Sept. 2008 financial crisis, Bush panicked again and signed the TARP $700 billion bailout of Wall Street by Main Street.

Obama doldrums

Under Obama, taxes have been raised and Obamacare is ripping up the economy like a metastasizing cancer. The phony “recovery” continues only because current Fed Chairman Ben Bernanke pumped trillions of dollars of created Funny Money into the system; and has kept interest rates near zero percent to goose the stock and housing markets. That means the middle class suffers 2 percent (or more) inflation, but gets nothing from its passbook savings accounts.

In the past, even during recessions, interest rates always were kept about 2 percentage points above inflation; which would mean interest rates now should be 4 percent, instead of the actual 2 percent.

So the middle class, instead of seeing its savings rise 2 percent, sees them effectively dropping by 2 percent from inflation. Savings gap: negative 4 percent. That’s why the U.S. middle class, despite the bogus “recovery,” is declining fast.

But the middle class is rising in Mexico. When I leave California, I’ll be headed to prosperity “South of the Border” — down Mexico Way.

By John Seiler

Dan Walters writes:

“About a quarter-century ago, I wrote a book about California’s social, economic, demographic and political evolution and quoted a couple of academics as predicting ‘the possible emerging of a two-tier economy.’

“Today, we can eliminate the ‘possible’ qualifier because it’s a proven fact.

“A Census Bureau poverty report and another from the Center on Budget and Policy Priorities,released simultaneously last week, should remove any lingering doubt about California’s stratification.

“The Census Bureau is experimenting with a new way of gauging poverty, one that uses more measures of income and outgo and the cost of living. And by that new standard, California has — by a wide margin — the highest level of poverty of any state, with nearly a quarter of its 38 million residents in that category.

“Meanwhile, the CBPP calculated, state by state, gaps in various family income brackets and found that California has the third largest ‘income inequality‘ between those in the highest and lowest levels, and the second largest between those in the highest and middle quintiles.”

That shows how prescient has been Walters, the dean of California reporters. Since I came to California 25 years ago, I’ve learned more about the state from him than anybody.

As Aristotle was the first to write, the key to liberty is a large middle class. That’s because only if the vast majority of people are financially able to take some time off to participate in politics can you have the discussions necessary to ensure and advance freedom.

If a society has a large number of poor people, such folks are too busy scraping together the means to survive to engage in politics adequately, meaning not just vote, but take the time to learn such things as the evils of socialism and the high taxes needed to pay for it. Such is the very definition of what we now call a “Third World” country — which definition now fits California. Wikipedia’s map of the Third World, posted above (click to enlarge), should be changed to include California.

Explanations

Walters’ explanation:

“The decline of a once-vigorous industrial economy wiped out countless well-paying, middle-class jobs. The emergence of a post-industrial economy rooted in trade, services and technology marginalized those without the specific talents and training the new economy demanded.

“Public policy did not adjust to that new economic reality, nor to the rapid ethnic diversification of the state’s population.

“In particular, public education failed to adjust — in part because school finance and governance shifted from local hands to state politicians and bureaucrats and became politically polarized. The very wide disparities in educational outcomes, from test scores to dropout rates, between white and Asian students on one end and black and Latino kids on the other attest to that failure.”

That’s pretty good. Here’s my explanation:

1. The California Coastal Commission, imposed in 1972 by voters most of whom now are dead, severely restricted housing construction in coastal areas. Other anti-housing measures were added, such as SB 375 in 2008, sponsored by Senate President Pro Tem Darrell Steinberg, D-Sacramento, and signed into law by Republican anti-California obsessive Gov. Arnold Schwarzenegger, further restricted the housing supply. California also has a very high divorce rate, leading to two households instead of one, which increases demand for housing and thus the price of housing.

The result is housing prices more than twice that of the rest of the country. Along with other high expenses (see below), you have to make about twice what you do in the rest of the country just to stay in the middle class.

2. You’re forced to pay sky-high taxes that just went higher. Forget the rich, who just got their taxes jacked up by Proposition 30, passed by another generation of misguided voters. Prop. 30 also increases sales taxes, already the highest in the country, grabbing another $1 billion a year, mainly from the middle class.

The top middle-class tax rate, 9.3 percent, also kicks in at around $48,000 of income, by far the highest of any state. California is the only state whose income tax is both “progressive” (aimed at the rich), because the top rate now is 13.3 percent, and “regressive” (aimed at the middle class) because of that 9.3 percent kicking in at $48,000. Indeed, $48,000 puts you in the lower-middle class. You can’t even raise a family on that in California (although you could in low-cost Michigan or Arkansas).

3. The crummy K-12 government school system means you need to pay for tutors or private-school tuition. That means you have to make even more money — which is taxed at the 9.3 percent rate!

4. Anti-jobs legislation, such as Arnold’s and Gov. Jerry Brown’s beloved AB 32, have killed hundreds of thousands of high-paying, middle-class jobs in industry.

5. The government-worker unions run roughshod over the state, totally dominating everything, as the recent election showed. With the Democratic supermajority now in both houses of the Legislature, the unions will be demanding payback, raising taxes and imposing regulations at will. With union power so great, the only people thriving in California are: Silicon Valley billionaires with  180-plus IQs, Hollywood moguls and stars, drug dealers and government workers.

6. As Walters notes, California now is a heavily Blue state, meaning (my interpretation) its political culture is pro-government, pro-tax, anti-business, anti-jobs, anti-middle class.

7. There’s one “good” development. The continued exodus of productive people from California will cause another housing crash when the next recession hits, likely some time next year. Then those who haven’t fled will have a slightly better chance of moving up into the middle class.