By John Seiler

In numbers released this morning by the Bureau of Labor Statistics, California’s unemployment in July remained the same as in June, 10.7 percent. But that was an improvement from the 11.9 percent of July 2011.

The U.S. unemployment rate of 8.3 percent for July 2012 also was the same as the previous month. The BLS reported, “Regional and state unemployment rates were generally little changed or slightly higher in July. Forty-four states recorded unemployment rate increases, two states and the District of Columbia posted rate decreases, and four states had no change.”

The economy seems in stagnation mode in the runup to the election, with employers waiting to see which politicians voters choose on Nov. 6, and what policies — despite the promises made on the campaign hustings — are implemented in January.

This is more evidence that the U.S. economic “recovery,” if it can be called that, is the slowest since World War II. Reported the Christian Science Monitor, “Since World War II, 10 U.S. recessions have been followed by a recovery that lasted at least three years. An Associated Press analysis shows that by just about any measure, the one that began in June 2009 is the weakest.

“The ugliness goes well beyond unemployment, which at 8.3 percent is the highest this long after a recession ended.”

Empty cradles

The weak recovery extends even to birth rates. According to the Economist:

“For years, America was unusual among rich countries in having a relatively high TFR of around 2.1, the so-called “replacement rate”, at which a population stabilises over the long term. European countries were typically below that rate, sometimes far below it.

“So it comes as something of a shock to discover that in 2011 America’s fertility rate was below replacement level and below that of some large European countries. The American rate is now 1.9 and falling. France’s is 2.0 and stable. The rate in England is 2.0 and rising slightly.

“American fertility reached its recent peak in 2007; its fall has coincided with the economic crisis that began at the end of that year. Recession seems to have reduced fertility through at least two channels. First, migrants often cannot find work and go back home. Since they tend to have slightly larger families than native-born citizens, this reduces fertility. It has happened in Spain in the past two years, and may be happening in America as Mexicans leave.

“Second, loss of income, compounded by the housing crisis, is causing young people to postpone marriage, the setting up of new homes, and having children.”

It’s not much of a “recovery” if people are too depressed to have kids.

California holding America back

California used to lead America out of recessions, its gigantic, high-tech industries being the Lead locomotive that pulled the train up the mountain. Now, we’re the caboose that follows everything else.

Meanwhile, the state political establishment is obsessed with placing even more burdens on the state with a passel of tax increases, beginning with a tax on multistate businesses that passed the Assembly. Next up are three tax increases on the November ballot. And it looks like the biased, pro-tax increase labels put on them by leftist Attorney General Kamala Harris are goosing the initiatives in the polls, and perhaps on election day.

Well, why not? California needs to kill even more jobs. Our 10.7 percent unemployment rate is still in third place, behind Rhode Island at 10.8 percent and Nevada at 12 percent.

We like to be No. 1.

By Brian Calle and Josephine Djuhana

It should come as no surprise that the economic growth rates and prosperity for states with excessive regulations and taxes are much lower when compared to states with fewer regulations and modest taxes. Incentives, such as low taxes and humble regulations, attract business and investment, which in turn spur economic benefits and job growth. It is not Republican or Democrat, liberal or conservative, “it’s just good economics,” as Arthur Laffer, noted economist and economic advisor to former President Ronald Reagan, likes to say.

California lawmakers ought to take note.

Laffer’s new book, “Eureka! How to Fix California,” was commissioned by the Pacific Research Institute, CalWatchDog.com’s parent think tank. The former California resident attempts to knock some sense into the political class in Sacramento, urging policy makers to focus on good economics instead of politics as usual. He wrote the book, he said, to create a blueprint for reforming California— to put the once Golden State back on a path of prosperity.

Laffer looked at various state economic data and found some significant disparities between states that instituted progressive income tax policies versus those that did not—particularly the gap in state growth between states with income taxes and states with none.

Eleven states introduced progressive income taxes within the past fifty years—Connecticut, New Jersey, Ohio, Rhode Island, Pennsylvania, Maine, Illinois, Nebraska, Michigan, Indiana and West Virginia. And of the 11, all states declined as a share of the U.S. economy. Michigan’s economy, for example, was at 5.08 percent of the US economy in 2005; that percentage slid to 2.64 percent in 2010. Like Michigan, Ohio’s wealth diminished as a result of similarly poor economic policies, Laffer argues. “The only things that still look nice in Ohio are the public government buildings,” remarked Dr. Laffer, during a recent stop on his book tour in Orange County.

Laffer also explores migration patters between states with varying tax rates; comparing “right-to-work” states—states where employees retain the right to decide whether or not to join or financially support a union—and “forced unionism” states—where an individual must pay union fees as a condition of employment and has forced union representation.

Right-to-work growth

In right-to-work states, Laffer found more economic growth, while “forced union” states trended the opposite direction.

The 22 right-to-work states experienced a 52.83 percent jump in gross state product; on the other hand, the 28 “union-shop” states had a 41.72 percent gross state product growth, less than the 46.61 percent US average.

“Right-to-work” states also trumped their forced-union counterparts in personal income growth, payroll employment growth, population growth and net domestic in-migration. Part of the reason that the growth gap is so large is that employers have a tendency to move away from forced-union states, not just to scale back wages and salaries, but also to avoid intrusive union rules, lawsuits, work stoppage threats and more.

Laffer’s proposal to reform California’s tax system should come as no surprise for those who have followed his work. He calls for a flat tax for the state of California; one simple tax on net business sales, and another on personal unadjusted income. His proposal does call for keeping “sin taxes” on the books, those taxes on cigarettes, etc., that are more meant to alter behavior than to raise revenues. Those concerned with the role of government in legislating personal decisions might argue that such sin taxes ought to be ousted as well.

California’s current tax system causes much unsettling volatility in state tax income year-to-year by making budgeting at the state level often incoherent. For example, in 2001, income from capital gains taxes (and other onetime revenues) made up a quarter of state tax revenue, according to Laffer.

And California has so many taxes (Laffer stopped counting after he studied 162 of them) that the tax code is overwhelmingly and unnecessarily complex, hence Laffer’s push to simplify it.

Looking at Sacramento today, though, there appears to be no political will in the legislature or with Gov. Jerry Brown to reform the tax code and especially institute a flat tax. Laffer dismisses that, noting that, when Brown ran for president in 1992, Brown proposed a national flat tax, making it part of his platform in the Democratic primary. “He was the first prominent presidential candidate to ever propose a national flat tax,” Laffer said. Optimistically, Laffer argues that, given the right situation, Brown could be amenable.  We shall see. Brown, this time around, seems more beholden to public employee unions than during his previous stint as governor.

“Political partisanship is ruining the politics of our country,” Laffer concludes. Fixing California requires a nonpartisan effort to eliminate excessive taxes and regulations, and to create a business-friendly environment that encourages economic activity. Laffer’s blueprint, in short, challenges California politicians to put partisanship aside and embrace simple economics.