California's Decline

Joel Kotkin reports on the state of California :

It’s become a veritable holding cell for every kind of special interest lunacy, from radical Greens and the plaintiffs’ bar to the voracious public employee unions. As pet social programs, entitlements and pensions have soared, infrastructure spending — the hallmark of the Pat Brown regime and once 20 percent of the state budget — has shrunk to less than 3 percent.

Not surprisingly, this regime has succeeded in pushing many business and middle-class people to leave California. By 2005, the movement of people out of the state finally surpassed total foreign immigration into the state.

One big problem has been high housing prices. Onerous regulations imposed by the legislature, notes developer Randall Lewis, can delay approvals for new home construction for up to five years longer than those in neighboring states and can jack up the price of the average home by $20,000 or more.

To be sure, the big players in technology and entertainment still often keep their main offices, and sometimes their research facilities, here. But at the same time, they tend to locate their middle-management and production jobs in more affordable, enterprise-friendly states and countries.

This is one reason Silicon Valley’s much-ballyhooed Internet 2.0 boom, notes the Milken Institute’s Ross DeVol, is producing one-half to one-third the job growth compared with previous expansions. “The job growth is elsewhere,” he adds.

Already, notes DeVol, California, once a perennial leader in job creation, has fallen at best to the middle of the pack and will soon plunge well below the national average as the state absorbs the full impact of the housing bubble’s collapse. Real-estate-related employment this decade has accounted for as much as half of all of the state’s new jobs since the early 2000s.

The weakening job picture also will accelerate the historic slide of California’s role as a bastion of upward mobility. From the 1930s to as late as the 1980s, Californians generally got richer faster than other Americans; in 1946, Gunther reported, Californians enjoyed the highest living standards and the third-highest per capita income.

Since 1989, California’s median household income growth has trailed the national average by a significant margin. The already large class divide — often bemoaned by the state’s left — now grows faster here than in the rest of the country. The middle class has been hammered: Housing affordability stands at below 10 percent in the state’s biggest metropolitan areas as prices have risen seven to nine times faster than income.

Redistributionist politics have been no bargain for the poor, either. Today, notes a recent Public Policy Institute of California study, California ranks 15th-highest in the rate of poverty of all American states. When cost-of-living adjustments are made, only New York and the District of Columbia fare worse.

Is California going to lose a seat in the U.S. House after the 2010 census?