California didn’t go bust. Again. – Silicon Valley


News Flash: California didn’t go bust. Again.

It’s been a quarter-century since I became business columnist for the Orange County Register — and now the Southern California News Group. One economic theme that’s bemused me over these past 25 years is how many times — and how many people — could claim that California is on the brink of financial ruin.

The warnings came in government reports, academic studies and private industry white papers, not to mention brash political comments. Taxes too high. Too many regulations. Too much debt. Too many people and companies leaving.

Basically, the critics say the state and its businesses couldn’t afford everything from immigrants, to clean air and water, to helping its needy, to paying workers decent wages.

And, yes, since 1997 the state’s had close calls with monetary meltdowns — from the dot-com crash, to the mortgage bubble bursting, to the pandemic’s business chill. In the Great Recession, the state briefly issued IOUs to pay some bills. Yet solvency prevailed.

I’m not saying California’s perfect or it doesn’t need a healthy reality check at times. Note that the state government budget grew to $196 billion from $67 billion in 25 years. That’s a tripling in excess of 77% inflation and its 22% population growth.

Of course, the state’s critics can add value to economic policy debates. And past performances are just that — history, not guarantees.

But the doom-and-gloom arguments have gotten tiresome. The logic is faulty. The math suspect. The anecdotes are individual tales, not trends.

It’s fairly obvious voters don’t buy the pessimism, as those calling for “change” can’t seem to win elections. Republicans don’t even have a major candidate to run against Gov. Gavin Newsom this fall.

Gosh, when I became a columnist in 1997, Republican Pete Wilson was still governor — part of 16 consecutive years the GOP held the state’s highest post.  Arnold Schwarzenegger was the only state leader since from the GOP — and many would say he wasn’t much of a Republican.

So with California’s economy on the road to coronavirus recovery — and the state budget swamped with billions is excess cash — I’ll honor my journalistic anniversary with 25 reasons California didn’t go bust …

25. Pacific Ocean: Not only is it a tourist attraction, to the west there’s the dynamic Asian economy uniquely tied to California businesses with $60 billion a year of state products exported to China, Japan & Co.

24. Productivity: California’s public corporations generate $1.4 million of revenue per employee — up 14-fold in 25 years, Bloomberg reports. U.S. company output overall just doubled in 25 years.

23. Logistics: Business success can be tied to swift, efficient movement. California has three of the busiest U.S. ports (Los Angeles, Long Beach and Oakland) and two of the top seven warehouse hubs (L.A. and the Inland Empire).

22. Resilience: Flexibility matters. Add in gumption, too. If California could survive the sluggish 1990s, the deep Great Recession and the pandemic’s pause, let’s politely say it’s got “crisis management” skills.

21. Financing: When Wall Street cut off Gold Rush funds in the 1800s, Californians were forced to master creative money management. That skill fits state’s risk-taking mentality.

20. Pro-worker: California routinely ranks last in chief executive surveys of the “best” place to do business. I translate that to mean “best” place for employees — and that’s important in the “Great Resignation” era.

19. Taxes: A typical Californian has a combined state and local tax burden that’s the nation’s ninth-highest, according to WalletHub. That’s the price of paradise — and the government’s cash flow.

18. Ingenuity: California consistently created the next big thing. From 1963 to 2001, the state was home to 15% of U.S. patents granted. That share grew to 26% in 2002-2015.

17. Hollywood: Another globally recognized landmark. And it’s more than a cultural state of mind, it’s estimated California filming employs 700,000 with a $70 billion payroll.

16. Safety net: California’s aid to the needy is actually “mid-range” — 22nd-lowest level of uninsured for health, 27th-lowest unemployment benefits, and 13th-lowest food stamp usage.

15. Investing: Will giant Calpers pension fund earn enough to pay its bills? Well, its portfolio rose 13% in value last year — and has averaged 7% annually the past 20 years.

14. Budget reform: Various measures — by lawmakers and voters — somewhat trimmed the state government’s ability to spend. Most notably is pension reform that should eventually lower that taxpayer burden.

13. Jobs: In the state they supposedly hate, bosses added 4.3 million workers to the nation’s largest job market in 25 years. That’s 34% growth vs. 23% in the rest of the country.

12. Factories: Making stuff still employs 1.3 million Golden Staters — No. 1 in U.S. Yes, that’s off 500,000 from 1997 but the 28% dip is on par with a 27% nationwide drop. And California factory pay runs $106,000 — 46% more than U.S. factory wages.

11. Diversity: Differing cultures and viewpoints make a richer economy. There’s a 70% chance two random Californians have different racial backgrounds, second-highest diversity rate in the nation.

10. Weather: A huge competitive advantage that’s not only a lure — but allows more business to be done. You know, fewer “rainouts”!

9. Central Valley: If it was a state, it would be the 27th most populous. And it gives the state ample room to grow. Oh, and its agriculture helps feed the nation.

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