In what is becoming a particularly stupid trend, right-wingers are increasingly comparing California to foreign countries that best exemplify whatever it is they dislike. We’ve shown how the “California is Greece” claim is baseless. Now comes another similar claim about California’s impending doom, with Chief Executive magazine comparing us this time to Venezuela:
“The leadership of California has done everything in its power to kill manufacturing jobs in this state,” observed another CEO. “As I stated at our annual meeting, if we could grow our crops in Reno, we’d move our plants tomorrow.”
How is it that the nation’s most populous state at 37 million, one that is the world’s eighth-largest economy and the country’s richest and most diverse agricultural producer, a state that had the fastest growth rate in the 1950s and 1960s during the tenures of Democratic Governor Pat Brown and Republican Governors Earl Warren and Ronald Reagan, should become the Venezuela of North America?
Californians pay among the highest income and sales taxes in the nation, the former exceeding 10 percent in the top brackets. Unemployment statewide is over 12.2 percent, higher than the national average. State politics seems consumed with how to divide a shrinking pie rather than how to expand it. Against national trend, union density is climbing from 16.1 percent of workers in 1998 to 17.8 percent in 2002. Organized labor has more political influence in California than in most other states. In addition, unfunded pension and health care liabilities for state workers top $500 billion and the annual pension contribution has climbed from $320 million to $7.3 billion in less than a decade. When state employees reach critical mass, they tend to become a permanent lobby for continual growth in government.
Bill Dormandy, CEO of San Francisco medical device maker ITC, summed it up: “California has a good living environment but is unfavorable to business and the state taxes are not survivable. Nevada and Virginia are encouraging business to move to their states with lower tax rates and less regulatory demands.”
There are so many flaws here that I literally do not know where to begin. But let’s start with the claim that California government is “killing” manufacturing jobs. The NUMMI plant in Fremont survived 30 years of auto industry retrenchment and cost cutting. Its closure came when the Detroit auto industry hit the wall, and when Toyota felt the need to cut back on capacity in the midst of the worst recession in 60 years.
Meanwhile, other manufacturing businesses are thriving. For over 25 years Siemens has been building light rail vehicles for the entire Western Hemisphere at its Sacramento plant, is very happy in California, and not only has no desire to move, but is already expanding its operations. Another international rail car manufacturer, Alstom, has set up shop at Mare Island. China has been looking at reopening NUMMI to build high speed rail cars. None of them were deterred by California’s regulations or taxes.
Speaking of taxes, the implication that taxes in California are somehow higher now than they were in the past is also bullshit. California’s corporate tax rate is 5 points lower today than it was 30 years ago. The same link shows that corporate taxes paid as a percentage of income are actually lower today than at any time during the 1960s. Chief Executive magazine is simply wrong on the facts here.
The rest of the quoted section is the usual anti-union nonsense, an overstated pensions bill (it’s closer to $100 billion, and that gets paid out over decades), and more right-wing framing.
There’s no actual evidentiary comparison to Venezuela – the CEOs apparently picked that country at random as an example of a left-wing bogeyman since the Soviet Union has been dead for 20 years and everyone has apparently forgotten about Cuba.
More importantly, California remains a global economic leader that has shown it can still create jobs and innovate. True, the state is facing one of the worst recessions in 60 years – but that’s not due to high taxes or regulations.
Instead it’s due to the institutional sclerosis that leaves California trapped in dependence on 20th century sectors of the economy and unable to embrace 21st century centers of job creation. High speed rail, expanded educational opportunities, universal health care, and greater urban density are all the building blocks of a 21st century economy and job growth, enabling smaller businesses and independent entrepreneurs to create new jobs.
If the right-wingers at Chief Executive magazine were to focus their criticisms on the 2/3rds rule and term limits, then we might be getting somewhere. But instead they chose to peddle discredited right-wing ideological frames.
I could think of a few countries that reminds me of, but I’ll be consistent and not go down that silly path. I have to say, I’m waiting for someone to say California is like France – I think that would be the ultimate compliment.