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Is There Hope for Califrancia?

Posted By Howard Hyde On November 9, 2010 @ 12:25 am In FrontPage | 25 Comments

Progressives, liberals and/or Democrats in California may be breathing a sigh of relief, having dodged a bullet on November 2nd, preserving their control over the Sacramento mansion and their representation in the halls of D.C. Almost the entire county got washed clean with the anti-Obama-Reid-Pelosi tea-party backlash, but apparently since even tsunamis can’t travel across continents, so this one evaporated in the deserts to our east before it could reach our shores.

The relief will be short-lived. Yes, they have the power, but it is the illusory power of a Doctor Frankenstein over his monster. The Golden State is still bankrupt to the tune of $500 billion in unfunded pension liabilities and $70 billion in general obligations, hemorrhaging cash and productive citizens, and sporting one of the highest unemployment rates in the nation. The reflexive policy mix of the progressives to resolve these issues – higher taxes, more regulation of politically unfavored entrepreneurs, politically correct environmental programs, larcenous public employee pension benefits – will only make it worse. We are driving toward a day of reckoning that only Greece could envy, and we just dropped a brick on the accelerator.

Economic environments such as states compete for talent, capital and tax revenue the same way commercial businesses compete for customers and sales revenue. Lose your customer base, go bankrupt. Beyond a certain point, the closer any tax rate gets to 100%, the less the activity being taxed continues to be engaged in, resulting in lower overall revenue; that’s the Laffer Curve. Ignore this ‘mere theory’ at your peril.

California is one of the most beautiful, richly naturally endowed places in the world, with an unmatched offering of beaches, mountains, harbors, fertile soil, lakes, and redwood, pine and sequoia forests. Yet increasing numbers of productive people find it more tolerable to live in the barren deserts of Arizona and Nevada than subject themselves to the lordship of Sacramento’s political class.

A generation ago, California boasted the 6th most productive economy in the world, as compared to other nation states; now we’re number 8 and headed lower. Those who think California has some kind of birthright to economic glory that can never end should study Argentina: 100 years ago number 10 in the world but for at least the past 50 years, an unstable basket case.

Except for truly super-rich people like high-profile attorneys and Hollywood stars and moguls, the upper-middle class has been fleeing this state’s hostile business environment for more business-friendly climates for years, shrinking the tax revenue base as well as employment opportunities for the rest of us. The net out-migration is so bad that the state will lose a seat in the House of Representatives for the first time in over 5 decades. This trend will only accelerate as the tea party influence makes those destinations all the more economically attractive relative to California.

It is delusional arrogance on the part of Sacramento politicians to imagine that they own California’s taxpaying residents and citizens. Has anyone in Sacramento heard of globalization?  California businesses have been pioneers on this frontier, from the San Joaquin food basket to the port of Long Beach and from Hollywood to Silicon Valley. But California does not have a divine monopoly on any of this.

Those of us Californians who live and work outside of the politically favored cliques like the public employee unions find ourselves targeted at best as cash cows to be milked, at worst as enemies of the people. Is California destined to slouch for the remainder of our lifetimes and beyond toward the stagnation, bankruptcy and social unrest that we witness today sweeping from Greece to France, countries whose fiscal and social policies we are imitating?  Or will we pull back from the brink before it is too late?

One of the powers that elected Sacramento politicians lost this time around was that of dictating the redrawing of US Congressional districts within California. Thanks to the passage of Proposition 20 (and the defeat of Prop 27), that power is now vested in the independent (until the Democrats figure out a way to stack it) commission created in 2008 by Proposition 11.

But with few exceptions, the Democrats hold all the reins now; they can’t escape responsibility.  And so when the proverbial toxic biomass hits the green power-generating windmill, perhaps the voters will finally hold them accountable. Earthquakes have aftershocks, and tsunamis come in sets of waves. Maybe there’s hope that a reality check will cause one to finally breach the ideological desert.

Howard Hyde is an IT Manager, conservative activist and blogger. Visit his site at www.HHCapitalism.com.


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