August 10, 2010

OUR EUROPE:

The Golden State’s War on Itself (Joel Kotkin, 08/08/2010, New Geography)

The old progressivism began in the early 1900s and lasted for half a century. It was a nonpartisan and largely middle-class movement that emphasized fostering economic growth—the progressives themselves tended to have business backgrounds—and building infrastructure, such as the Los Angeles Aqueduct and the Hetch Hetchy Reservoir. One powerful progressive was Republican Earl Warren, who governed the state between 1943 and 1953 and spent much of the prospering state’s surplus tax revenue on roads, mental health facilities, and schools. Another was Edmund G. “Pat” Brown, elected in 1958, who oversaw an aggressive program of public works, a rapid expansion of higher education, and the massive California Water Project.

But by the mid-1960s, as I noted in an essay in The American two years ago, Brown’s traditional progressivism was being destabilized by forces that would eventually transform liberal politics around the nation: public-sector workers, liberal lobbying organizations, and minorities, which demanded more and more social spending. This spending irritated the business interests that had formerly seen government as their friend, contributing to Brown’s defeat in 1966 by Ronald Reagan. Reagan was far more budget-conscious than Brown had been, and large declines in infrastructure spending occurred on his watch, mostly to meet a major budget deficit.

The decline of progressivism continued under the next governor: Pat Brown’s son, Edmund G. “Jerry” Brown, Jr., who took office in 1975. Brown scuttled infrastructure spending, in large part because of his opposition to growth and concern for the environment. Encouraged by “reforms” backed by Brown—such as the 1978 Dill Act, which legalized collective bargaining for them—the public-employee unions became the best-organized political force in California and currently dominate Democrats in the legislature (see “The Beholden State,” Spring 2010). According to the unions, public funds should be spent on inflating workers’ salaries and pensions—or else on expanding social services, often provided by public employees—and not on infrastructure or higher education, which is why Brown famously opposed new freeway construction and water projects and even tried to rein in the state’s university system.

The power of the public-employee lobby would come to haunt the recall-shortened gubernatorial reign of Gray Davis, Brown’s former chief of staff. The government workers’ growing demands on the budget, green groups’ opposition to expanding physical infrastructure, and Republican opposition to tax increases made it impossible for either Davis or his successor, Arnold Schwarzenegger, to expand the state’s infrastructure at a scale necessary to accommodate its growing population.

The new progressives were as unenthusiastic about welcoming business as about building infrastructure. Fundamentally indifferent or even hostile to the existing private sector, they embraced two peculiar notions about what could sustain California’s economy in its place. The first of these was California’s inherent creativity—a delusion held not only by liberal Democrats. David Crane, Governor Schwarzenegger’s top economic advisor, once told me that California could easily afford to give up blue-collar jobs in warehousing, manufacturing, or even business services because the state’s vaunted “creative economy” would find ways to replace the lost employment and income. California would always come out ahead, he said, because it represented “ground zero for creative destruction.”
Graph by Alberto Mena.

The second engine that could supposedly keep California humming was the so-called green economy. Michael Grunwald recently wrote in Time, for example, that venture capital, high tech, and, above all, “green” technology were already laying the foundation of a miraculous economic turnaround in California. Though there are certainly opportunities in new energy-saving technologies, this is an enthusiasm that requires some serious curbing. One recent study hailing the new industry found that California was creating some 10,000 green jobs annually before the recession. But that won’t heal a state that has lost 700,000 jobs since then.

At the same time, green promoters underestimate the impact of California’s draconian environmental rules on the economy as a whole. Take the state’s Global Warming Solutions Act, which will force any new development to meet standards for being “carbon-neutral.” It requires the state to reduce its carbon-emissions levels by 30 percent between 1990 and 2020, virtually assuring that California’s energy costs, already among the nation’s highest, will climb still higher. Aided by the nominally Republican governor, the legislation seems certain to slow any future recovery in the suffering housing, industrial, and warehousing sectors and to make California less competitive with other states. Costs of the act to small businesses alone, according to a report by California State University professors Sanjay Varshney and Dennis Tootelian, will likely cut gross state product by $182 billion over the next decade and cost some 1.1 million jobs.

It’s sad to consider the greens such an impediment to social and economic health. Historically, California did an enviable job in traditional approaches to conservation—protecting its coastline, preserving water and air resources, and turning large tracts of land into state parks. But much like the public-sector unions, California’s environmental movement has become so powerful that it feels free to push its agenda without regard for collateral damage done to the state’s economy and people. With productive industry in decline and the business community in disarray, even the harshest regulatory policies often meet little resistance in Sacramento.

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Posted by Orrin Judd at August 10, 2010 5:46 AM
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