In a remarkably good article here at newgeography, Joel Kotkin details how California has been transformed from the Golden State to the state most likely to go bankrupt. He sums up his argument as follows:
What went so wrong? The answer lies in a change in the nature of progressive politics in California. During the second half of the twentieth century, the state shifted from an older progressivism, which emphasized infrastructure investment and business growth, to a newer version, which views the private sector much the way the Huns viewed a city—as something to be sacked and plundered. The result is two separate California realities: a lucrative one for the wealthy and for government workers, who are largely insulated from economic decline; and a grim one for the private-sector middle and working classes, who are fleeing the state.
Kotkin notes that government spending was completely out of control prior to the present Great Recession:
Between 2003 and 2007, California state and local government spending grew 31 percent, even as the state’s population grew just 5 percent. The overall tax burden as a percentage of state income, once middling among the states, has risen to the sixth-highest in the nation, says the Tax Foundation. Since 1990, according to an analysis by California Lutheran University, the state’s share of overall U.S. employment has dropped a remarkable 10 percent. When the state economy has done well, it has usually been the result of asset inflation—first during the dot-com bubble of the late 1990s, and then during the housing boom, which was responsible for nearly half of all jobs created earlier in this decade.
A large part of the problem of California is the contempt that government has for business and economic development:
As for the old progressives’ belief that government shouldn’t scare away productive, competitive, long-term enterprise, that, too, has been abandoned by their successors. “Our economy is not inducing the right kind of business,” says Larry Kosmont, a prominent business consultant in Los Angeles. “It’s too expensive to operate here, and managers feel squeezed. They feel they can’t control the circumstances any more and have to look somewhere else.” The problem isn’t just corporate costs, either. The regulatory restraints, high taxes, and onerous rules enacted by the new progressives lead to high housing prices, making much of California too expensive for middle- and working-class employees and encouraging their employers to move elsewhere.
Silicon Valley, for instance—despite the celebrated success of Google and Apple—has 130,000 fewer jobs now than it had a decade ago, with office vacancy above 20 percent. In Los Angeles, garment factories and aerospace companies alike are shutting down. Toyota has abandoned its Fremont plant. California lost nearly 400,000 manufacturing jobs between 2000 and 2007, according to a report by the Milken Institute—even as industrial employment grew in Texas and Arizona. A sign of the times: transferring factory equipment from the Bay Area to other locales has become a thriving business, notes Tom Abate of the San Francisco Chronicle.
Nevada has benefited from the California exodus of businesses by running ads like the one below in California:
The article is brilliant and should be read from end to end by anyone wondering what is wrong with government and the economy in California, and in many other states.