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John Wood, Jr.

California’s Economic Recovery is for the Few

There is a strange disconnect that can be noted in the definition of economic recovery promoted by many on the political left when it comes to evaluating the economic performance of Democratic executive office holders. In the case of President Obama, many Democrats are eager to observe the resurgence of the stock market and the return to pre-recession baseline revenue levels as evidence of a restored economy. More recently, as the headline unemployment rate has declined, they’ve claimed the official reduction in unemployment as a landmark of economic recovery. Yet even as progressive rhetoric stresses income equality and champions the financial plight of the poor and the working class, real unemployment (when one factors in those no longer counted in the labor force) is near 10%, the poverty rate close to 15% (where it has been for several years) showing millions of Americans sliding down the ladder of opportunity. This is the disconnect between rhetoric and outcome in President Obama’s America. Much the same could be said, however, of Governor Jerry Brown’s California.

A Bloomberg Business article published after Governor Brown’s State of the State Address at the beginning of the year made much of the fact that California had overtaken Brazil as the world’s 7th largest economy (see Brown’s California Overtakes Brazil). As the Golden State’s GDP recovered from dips following the recession and as California corporations returned substantial profits to investors, the aggregate economy in California did indeed swell as rivals in the global economy such as Brazil and others continued to languish in the aftermath of the global recession.

And why not? For all of the justifiable conservative critiques of the hostility of the California business climate and the departure of significant companies such as Toyota and Tesla from the state, California is still home to more companies on the S&P 500 than any other. It is still home to a technology industry that promises to be an engine of growth in California for as long as companies such as Google, Apple and others feel it worth it to house their operations here. And they may for some time. High tax rates notwithstanding, the reason California can put such burdens on its businesses and still retain them is in large measure because the natural beauty of the state sets a geographic and professional-cultural environment that many large corporations will defy their bottom-lines (up to a point) to be in proximity too. Thus we might fairly credit Governor Brown and California Democrats with having successfully exploited this overwhelming appeal of California through higher and higher taxes that have driven down the state’s debt and deficit to relatively manageable levels, even while driving out jobs, and though the long term obligations of California’s unwieldy pension system remain.

The cost of these policies however could be seen many paragraphs down in the Bloomberg article in the form of California’s nation-leading poverty rate, accompanied by what was then America’s second highest unemployment rate (California currently sits at number 3 in the jobless rankings). Add to this the universally acknowledged high-cost of living in the state, and it is easy to draw this conclusion: California may be a friendly place for investors and upper-income earners. But for the poor, working and middle-class, California is a frustrating place to try and make a future. Yet the capacity for advancement and the well being of the least among us, according to Democrats own rhetoric, ought to be the measure by which we judge the health of an economy.

Indeed, they are right.