California’s economy is not down for the count, it is merely winded from a blindsided punch.
The Golden State is typically branded as one of the least business–friendly states. Fortunately for Californians, the measure behind this scarlet letter is overly simplistic. It is based solely on tax rates and wages, rather than on production levels or the level of economic diversity and entrepreneurialism.
Data gathered by the Public Policy Institute of California shows business losses in California made up less than 1% per year between 1992 and 2003.
California boasts 28 million residents and a $1.8 trillion economy (comparable to top developed countries), so it is misleading when California is cited as the leader in foreclosures and layoffs.
California remains a powerhouse, reshaping the game by taking the lead (as it always does) in the next economic booms: high tech and clean energy.
California’s per capita carbon emissions are less than half of the national average. California investment in clean technology is five times higher than the second leading clean technology state.
Energy consumption in California has stayed stable while the rest of the nation’s energy use has doubled (saving Californians nearly $56 billion in energy costs). This trend will continue as California utilities are required to integrate renewable sources into one-fifth of their energy production by next year, increasing that rate to one-third by 2012.
On top of that, California is pulling away from a car-dependant transportation paradigm and suburban sprawl, backed by recently passed legislation.
What has caused recent dysfunction is California’s absurd budget. California is plagued by mandated government spending sprouted from special interest groups, a fickle and absolutely unequal tax system spawned by Proposition 13, and an impossible two-thirds supermajority required to fix any budget problems.
The economy actually grew last year, but state revenue crashed because of the gaping holes in the pocket of the state’s tax system. [For more information on California misinformation, see the first tuesday California Myths Archive.]
first tuesday take: Brokers and their agents can take in a breath of fresh air. The truth amid the smoke of supply-side demagoguery and depressing pessimism is that California is a powerful and dynamic economy, a step beyond most other American states. The best of the best live in California, as California has always lead the charge in economic innovation. The state’s business leaders prudently pulled back as the recession set in. But they are making the best of the recession, and are poised to spring into action at the right moment. That flexibility is the envy of all other state economies, even those with commodity economies which are doing well, for the moment.
Brokers know that jobs will return. Hibernation only lasts for the winter – an economic spring will come, and California’s strong economy will return to its natural glory. We note that many brokerage offices are restructuring and growing in numbers, producing agents and sales. [See our first tuesday market chart, How California’s Mighty Have Fared, One Year On.]
Re: “Despite Its Woes, California’s Dream Still Lives,” from Time Magazine.