Whitman’s Economic Plan: All Power to the Plutocrats

In the summer of 2001, after a very high-profile public search, Boeing announced it was moving its headquarters from Seattle, where it had been for nearly 100 years, to Chicago. This cause a lot of hemming and hawing among Washington State political leaders, but 10 years later most actual Boeing production work still takes place in the Puget Sound region. The ups and downs of the economy and the airline industry have had a far greater impact on Boeing employment numbers than the fact that a few senior executives moved to Chicago.

Recently, Northrup Grumman executives made a similar move, relocating their HQ to Virginia. Meg Whitman has been using this on the campaign trail as an example of how California’s taxes and regulations are driving away businesses. Except, as KQED’s John Myers points out, Northrup Grumman is moving to help create more jobs in California:

But while Northrop Grumman’s top executives are moving, the company’s not actually leaving the state of California. In a series of emails this week, company spokesman Dan McClain confirmed that some 30,000 employees — one quarter of the company’s worldwide staff — are still here. That means that only slightly more than 1% of the total workforce was relocated.

Whitman also told her audience last month that the CEO of Northrop Grumman told her that no one from state government tried to stop them. Spokesman McClain says the company doesn’t comment on whether conversations with folks like the GOP candidate take place. But contrary to Whitman’s comment, McClain says state officials did talk to Northrop Grumman when the HQ relocation was announced. And he says that the company told those state officials that there could be a silver lining to the decision.

“We explained to them that the move was intended to bring us closer to our U.S. government customers,” wrote spokesman McClain in an email, “and that one of our objectives in moving is to be able to better serve our customers’ needs and hopefully win more business for our California operations.”

Contrary to Whitman’s claims, California remains an excellent place to do business. Just ask Meg Whitman, who had 10 years to move eBay out of California – but never did. California is still successful at attracting businesses, including manufacturing: for example, Tesla is using part of the NUMMI plant to make its electric cars.

Another success story is Siemens, which has a factory in Sacramento that makes light rail vehicles for ALL their Western Hemisphere customers. In a conversation with a Siemens official I had back in April, the company indicated that not only are they happy in California, but that they look forward to expanding their operations to build bullet trains. Similarly, Alstom has opened a factory on Mare Island to make trainsets.

Jed Kolko at the Public Policy Institute of California has examined the question of businesses leaving California, and in a study published in June 2010, debunked the claim that California’s tax and regulatory policies are causing an exodus of jobs:

Rhetoric aside, California loses very few jobs to other states. Businesses rarely move either out of or into California and, on balance, the state loses only 11,000 jobs annually as a result of relocation-that’s just 0.06 percent of California’s 18 million jobs. Far more jobs are created and destroyed as a result of business expansion, contraction, formation, and closure than because of relocation. Business relocations, although highly visible, are a misleading guide to the overall performance of the California economy. The employment growth rate, which takes into account job creation and destruction for all reasons-not just relocation-is a much better measure of the state’s economy.

Whitman’s misleading claims on job relocation is just one part of the much deeper flaws in her economic plans. Instead of using government to help restore the middle class, Whitman proposes to destroy government and the middle class in order to help the rich get richer. Her economic plans are almost entirely directed toward channeling wealth upward, and offer nothing to the mass of working people or unemployed who are struggling through this recession.

Today’s LA Times makes the point clear, in an article titled “Whitman’s economic plan will do little to bring jobs to California, experts say”. The article interviews Kolko and Steven Levy of the Center for Continuing Study of the California Economy, among others, who conclude that California’s recession isn’t due to the way business is treated, but to other factors:

But many policy experts say such plans will do little in the short term to create the 2 million new jobs Whitman promises: The state’s bleak economy is primarily the result of its deep investment in the real estate boom. The resulting mortgage crisis and credit crunch led to hundreds of thousands of construction-related workers being laid off in an industry that is unlikely to rebound anytime soon.

The number one problem facing California’s economy is a lack of good jobs and good wages, exacerbated by a rising cost of living – particularly energy and health care costs – that throttle business growth. Whitman’s plans, however, would not only address none of those problems, they would make many of them worse.

By eliminating the state’s capital gains tax (which is likely the primary reason why Whitman is running for governor; that tax cut would more than offset the money she’s spending on the election), Whitman would encourage CEOs of California businesses to follow Carly Fiorina’s lead and offshore their workforce in order to increase their profit margins, which would suddenly be bigger thanks to the elimination of the capital gains tax.

Whitman would go further – by massively cutting public spending, on everything from infrastructure to health care and schools, she would make it even more difficult for the middle class to make ends meet. That in turn would destroy small businesses, who would see their customers stay home and their own costs rise (especially transportation and health care). On the other hand, large corporations would benefit, even though hardly anyone else would.

Finally, Whitman’s promise to increase the state’s unemployment rate through mass layoffs of public employees will have a further damaging ripple effect on an already fragile and slow-moving economic recovery.

True economic recovery will come only when the middle- and working-classes are provided economic security and stability. That cannot happen without government. For example, one of the biggest blocks to people founding a new business – and new businesses are a major source of job creation – is the lack of universal health care. Because of the enormous cost of health care, workers tend to stay at their existing job instead of leaving to take their new idea and use that innovation to create value, to create new jobs. And as any small business knows, the cost of providing health care puts them in a difficult position – either they provide it at a high cost, or they don’t provide it and their workers become less effective due to illness or high turnover when workers find another job with benefits.

Another problem that California faces – the costly dependence on fossil fules – would be made worse by Whitman’s policies. Our current recession was caused by the culmination of 30 years of policies intended to support the sprawlconomy. But when gas prices broke $3 per gallon in 2006, that all came crashing down, creating a credit crunch that is impairing recovery and causing mass layoffs in the construction sector.

Clearly, part of economic recovery has to be energy independence and more sensible urban planning that emphasizes density, in order to provide stable costs for working Californians. Yet Whitman proposes to undermine this too, saying we should suspend the high speed rail project as well as AB 32, and likely would continue Arnold’s attack on public transportation. Here again we see favoritism toward existing wealth, this time in the form of oil companies, who prefer to keep sucking prosperity and economic security away from Californians so they can get even richer than they are now by destroying their sustainable competition.

Overall, Whitman’s economic policy is a kind of plutocratic Bolshevism, in which she, Carly Fiorina, the Koch Brothers, the oil companies, and other wealthy elites act as a kind of revolutionary vanguard determined to seize power in Sacramento and in Washington DC in order to give all power to the plutocracy.

Whitman’s vision of a 21st century California economy is one of impoverished workers who lack health care, basic services, and any semblance of economic security in order for a small group of people to enjoy even greater wealth than they already possess.

As I explained on Friday, it’s class warfare, and the upper class is winning. The November 2010 election is therefore a major turning point in California history, determining whether the plutocrats will take over our state and succeed in their efforts to impoverish us, or whether we will fight back and start building a sustainable, secure 21st century California Dream.

6 thoughts on “Whitman’s Economic Plan: All Power to the Plutocrats”

  1. “the elimination of the capital gains tax. ”

     Unlike Federal tax system, CA does not have a distinct capital gains tax rate for individual taxpayers.  By saying “THE capital gains tax”, it makes it sound as if they are already treated as separate special class of income (for purposes of ultimate tax liability.)

  2. For this bit of Holy Grail witch-trial logic:

    Our current recession was caused by the culmination of 30 years of policies intended to support the sprawlconomy.

    No it wasn’t.

    It was caused by lunatic financial deregulation followed by the predictable orgy of accounting control fraud. Just like the S&L crisis was.

    Just because they used houses doesn’t mean the cause is sprawl. They did it to other commodities too, like oil, electricity and red wheat.

    Tulip mania in Holland wasn’t caused by agriculture, either.

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