What Fiscally Irresponsible Government Looks Like

Perhaps Sweden is a model of fiscal sanity, as Robert Samuelson argues. If you look up fiscal insanity, you might see a map of California. I lived for ten years in the golden state and then got out when the gettin' was good. A few years later I returned for a visit. I discovered what decades of an anti-automobile ideology had produced. It took me two hours to drive fifty miles from the beach inland.

Joel Kotkin argues at the Daily Beast that President Obama is a Californian at heart. Like Governor Jerry Brown, Obama is trying to make fossil fuels less available in favor of green energy. The necessary result of that, in the foreseeable future, is to raise the costs of energy while depressing growth in industries that actually produce high paying jobs in favor of industries that promise jobs but cannot deliver.

Obama regularly asserts that green jobs will play a crucial role in the future of the American economy, but California, a trend-setter in the field, has yet to reap such benefits. Green jobs, broadly defined, make up only about 2 percent of jobs in the state—about the same proportion as in Texas. In Silicon Valley, the number of green jobs actually declined between 2003 and 2010. Meanwhile, California's unemployment rate of 10.9 percent is the nation's third highest, behind only Nevada and Rhode Island…

Texas has created 200,000 oil and gas jobs over the past decade; California has barely added 20,000. The state's remaining energy producers have been slowing down as the regulatory environment becomes ever more hostile even as producers elsewhere, including in rustbelt states like Ohio and Pennsylvania, ramp up. The oil and gas jobs the Golden State political class shuns pay around $100,000 a year on average.

That is obviously true, but his focus on California itself is devastating.

Over the past decade the Golden State has grown its middle-skilled jobs (those that require two years or more of post-secondary education) by a mere 2 percent compared to a 5.3 percent increase nationwide, and almost 15 percent in Texas. Even in the science-technology-engineering and mathematics field, where California has long been a national leader, the state has lost its edge, growing just 1.7 percent over the past 10 years compared to 5.4 percent nationally and 14 percent in Texas.

One of the claims made on behalf of California-style government is that, if it sacrifices growth, at least it makes the economy more equitable. Does it? Kotkin references a Public Policy Institute of California study showing bad news.

California's families have been hit hard by the Great Recession and its aftermath. Family income has declined across the spectrum, with lower incomes seeing the steepest losses. The gap between upper- and lower-income families is now wider than ever. And the number of families in the middle-income range is shrinking. California's families have been hit hard by the Great Recession and its aftermath. Family income has declined across the spectrum, with lower incomes seeing the steepest losses. The gap between upper- and lower-income families is now wider than ever. And the number of families in the middle-income range is shrinking.

The best test of policy is to watch who goes where. California continues to attract immigrants; however, four million more people have flowed out to other states than have flowed in from the same over the last two decades. Look up "voting with your feet".

California's tax and regulatory regime is debilitating for business growth. Steven Greenhut, at Reason, has this:

California's elected officials have been doing as little planning as possible, unless one counts planning to spend tens of billions of dollars the state doesn't have on a high-speed rail line that will partially replicate what the airlines already do now. Our leaders are battling new water-storage facilities and punishing farmers with absurd water restrictions. They impose roadblocks toward building new highway systems and land-use regulations make it nearly impossible to build the homes and businesses necessary to meet the needs of a growing population. One can hardly call that planning…

California remains a beautiful place, but it no longer is the destination for entrepreneurs, free-spirits, and dreamers. These are the fruits of modern-day progressive policies. This should be the cause of much sadness.

Neither Greenhut nor Kotkin bother with the other elephants in the Sacramento chamber. The state's public pension system is underfunded by a $100 billion. Its retiree health care obligations are enormous and altogether unfunded.

California is the poster child for big government excess coupled with a neglect of planning. I would love to tell you that Republicans would have managed better if they had run the state. I imagine that they would have run it into the hole just as fast.

The European has an interview with economist Joseph Stiglitz that is very revealing. I note this comment:

The critical question right now is how we grade economic systems. It hasn't been fully articulated yet but I think we will win this one. Even the Right is beginning to agree that GDP is not a good measure of economic progress. The notion of the welfare of most citizens is almost a no-brainer.

Stiglitz displays the moral flaw that underlies the problems of modern governments. The point of GDP growth as a measure of economic progress is that it tells us something we need desperately to know but may not want to hear: whether we are in fact providing for the social outcomes we desire. Those who purport to measure the welfare of citizens almost always measure something else: whether their favorite policies have been enacted.

California shows what happens when a government ignores fiscal realities in favor of impressionistic goals. The outcome does not favor the welfare of most citizens. There is a lot of this going around in the modern world.

Comments

[Donald Pay]

Why not deal with South Dakota issues to make your point?

After all California citizens pays in more to the federal government than it gets back in order to subsidize you welfare queens in South Dakota. By welfare queens, of course, I'm talking about the ag industry, road builders, timber industry, and, let's just say it, college professors. If Californians could get South Dakota to deal with its own economy and fiscal issues responsibly and get off the government teat, California might be able to deal with its own fiscal issues.

Still, that government subsidy South Dakota gets from California (and other blue states), and all the economic activity generated by it, are figured into the GDP, along with the economic activity generated by all government debt, corporate debt and personal debt. Now, knowing this, KB, is GDP really the statisic that's really the best indicator of "whether we are in fact providing for the social outcomes we desire?"

[duggersd]

The problem with doing anything fiscally sensible in California is the people who receive the benefits in CA far outweigh the number of people who pay. I believe in one of those articles, they mention something like 25% of the people are on Medicaid. Not that Governor Terminator was the virtue of conservatism, but when he tried to pass some modest cuts in government spending he was overruled by the legislature and I believe by the people in special elections. We get the kind of government we deserve. California will eventually implode.
Donald, does that statistic about how much California gets compared with what they pay include the military bases in CA? Also, in one of the articles I was reading, part of the reason for the low pay in to receive ratio has to do with the relatively young population that does not receive SS benefits (1 in 8). I am not sure I count SS benefits as federal spending per capita since that is just people getting back what they put in. In SD, it is almost 1 in 5.

[A.I.]

Good points Donald.

A question for you though KB: Who do you include in the "we" who desire social outcomes. I thought you movement conservatives were only interested in individual outcomes.

[Bill Fleming]

Other than the climate, of course, the big difference between Sweden and California is that Sweden doesn't have any Republicans. ;^)

[LK]

Dr. Blanchard,

You mock Stiglitz for declaring, "The notion of the welfare of most citizens is almost a no-brainer." You assert, "Those who purport to measure the welfare of citizens almost always measure something else: whether their favorite policies have been enacted."

Yet, your examples of decline are replete with examples of citizens or visitors declining welfare:
1) "It took me two hours to drive fifty miles from the beach inland"
2) "The state's remaining energy producers have been slowing down"
3) "Family income has declined across the spectrum"

Other statements such as "Our leaders are battling new water-storage facilities and punishing farmers with absurd water restrictions." seem to be the author's lament that a favorite policy has not been enacted.

It seems that both sides in this debate use citizens' welfare when it suits and failed pet policies when it suits.

The problem with ignoring citizens' welfare and relying on GDP is GDP ignores distribution. I'm fairly certain that California's GDP, or whatever the equivalent is for a state, is far higher than South Dakota's yet in California "The gap between upper- and lower-income families is now wider than ever. And the number of families in the middle-income range is shrinking."

[Stan Gibilisco]

"California will eventually implode."

Yup. And we will bail them out.

[duggersd]

And the difference between California and the rest of the nation is California does not have any Republicans.

[Ken Blanchard]

A.I.: "we" is made up of individual people. Have you heard of social conservatives? Societies are large collections of individuals.

Bill: there are Republicans in California?

LK: We probably agree a lot more on social outcomes than you would imagine. My point here is that wanting to do something doesn't automatically generate the means with which to do it. California pursues all sorts of laudable goals without figuring out how to pay for them and, in fact, pursuing them in ways that depresses the economic growth that might pay for them.

Donald: the idea that South Dakota is causing California's problems is five kinds of stupid.

[Bill Fleming]

Yes. They run the military, agribusiness, law enforcement, and about half of the biker clubs. (...approx 30% of registered voters are GOP. Not all that much lower than the national average.) Apparently you didn't get down to San Diego when you lived there? ;^)

[Ken Blanchard]

And somehow they amazingly cause all of California's problems. The things I wouldn't know if it weren't for Bill.

[duggersd]

Democrat politicians want to extend unemployment, making it possible to have (note, not earn) a living without working. Democrat voters will vote for Democrats who will protect those checks, as per Congresswoman Chakka Fattah, D, PA. Republicans amount to about 30% plus in CA. Democrats amount to almost 45%. It is not hard to do the math. Republicans can do next to nothing to bring sanity to state government. BTW, 45% is a little over the national average for Democrat affiliation on a national level. No wonder CA is a mess. Those damned Republicans!

[A.I.]

Yes KB, I have heard of "social conservatism". It has damn little to do with fiscal issues though--as described by Wikipedia: "Social conservatism is a political, and usually morally influenced, ideology that focuses on the preservation of what are seen as traditional values. Social conservatism is a form of authoritarianism often associated with the position that the national government, or the state, should have a greater role in the social and moral affairs of its citizens, generally supporting whatever it sees as morally correct choices and discouraging or outright forbidding those it considers morally wrong ones."

You have described yourself as a "movement conservative" which Wikipedia describes as: The term movement conservatism was an inside term describing conservatism in the United States‎ and New Right. According to Nash (2009) the movement comprises a coalition of five distinct impulses. From the mid-1930s to the 1960s, libertarians, traditionalists, and anticommunists made up this coalition, with the goal of fighting the liberals' New Deal. In the 1970s, two more impulses were added with the addition of neoconservatives and the Religious Right.[1]

Note the Religious Right, which is the social conservatives, is a bit of an after thought. As a force for social issues like health care and education, social conservatism is an oxymoron. And as a force for authoritarianism, it is and enemy of the liberty embodied in our constitution.

[Bill Fleming]

I'm not the only one saying it, KB. I do understand that you wish I were and why though.

Even so:

http://www.washingtonpost.com/opinions/lets-just-say-it-the-republicans-are-the-problem/2012/04/27/gIQAxCVUlT_story.html

Excerpt:

"The GOP has become an insurgent outlier in American politics. It is ideologically extreme; scornful of compromise; unmoved by conventional understanding of facts, evidence and science; and dismissive of the legitimacy of its political opposition.

When one party moves this far from the mainstream, it makes it nearly impossible for the political system to deal constructively with the country’s challenges."

[Ken Blanchard]

Bill: nice job of evading the question. The Ornstein/Mann article is a hit piece, and a particularly stupid one, as Powerline has demonstrated http://www.powerlineblog.com/archives/2012/05/who-you-callin-extremist.php.

However, even if Republicans are very bad no good people, that doesn't mean that they can be responsible for the fiscal irresponsibility of government in that bluest of blue states, California.

[Ken Blanchard]

A.I.: social conservatives are no more authoritarian (indeed, they are far less so) than liberals who want to make people stop drinking cola. However, the point was that conservatives are hardly less interested in social outcomes than individual outcomes, as you put it.

[Erik Sean Estep]

KB: I like Obama/Biden on the EPA, but OB need to let us drill for oil. Obama has sold out labor for the environmentalist lobby.

[Maribel]

in previous posts, give me some of that stilmuus money an I'll (somehow!) manage to create four or five jobs with the money. I'm referring to the $393K amount that cmjcex worked out.Isn't that how it's supposed to work.Wait! They're non-union jobs My bad, no wonder the Gubmint hasn't come calling!Igor

[Yusan]

Even if you give them credence to their nbuemr of jobs saved or created, $786 billion divided by 2 million works out to $393,000 per job. Where can I apply for one of those jobs?

[Kristin]

You do group shots beautiful. I love the close up imgaes.What ever happened to your Christmas presents btw? I thought you were waiting on something and then I never heard if they had been shipped.

[Antonio]

These are awesome piruects! And I'm sorry about your week. Boo! BUT I must admit that I laughed while reading this only because I loved how you described everything! hehe! Anyway, you're amazing.