Article link
California can now boast that if it were a nation, it would have the fifth largest economy of any country in the world. The state economy has grown despite strict environmental regulations, high taxes, and rising minimum wages. Texas boasts high rates of economic growth with a laissez-faire hands off government approach to managing its economy. Other western states have had similar or larger growth rates to California's. Silicon Valley is a huge growth engine with Apple bringing in $229 billion in revenues (more than the state of Wyoming) and Facebook boasting median pay of $240,000. The consequences include increased traffic, a housing affordability crisis, and the fastest rise in homelessness of any U.S. state. Governor Brown took a deficit that Governor Schwarzenegger handed him in 2011 and currently is operating a $6 billion surplus.
1. How is California managing its economic growth? Does the state deserve praise for its successes or criticism for unaddressed concerns?
2. What can California do about the housing affordability, traffic, and homelessness problems?
3. Does the state need to be worried about a recession or is the economy so strong that it can overcome an economic slowdown?
12 comments:
Great! California manages with a $6 Billion budget surplus, is the fifth largest economy in the world. Here's why it still sucks, with, as Mr. Felder states previously, a housing affordability crisis, and the fastest rise in homelessness of any U.S. state. First of all, there's only a housing affordability crisis in certain parts of the state, namely, the San Francisco bay area. Other places in the state can actually be quite affordable. The fact that there's a housing crisis and a rise in the number of homeless in a place where the medium income is $115,300 shows a very obvious problem of income inequality.
This should be abundantly, ridiculously clear, in a place where East Palo Alto is a half-hour's drive from Hillsborough. Income inequality is an issue here. The state is infamous for being a state of wealthy entrepreneur, but the homeless rate is the third-highest in the country. How to solve this issue? The best way to socially and economically mobilize people into the middle class is to allow people to start businesses and get good paying jobs.
In California, this is almost impossible. California was ranked dead last in a list of the best states to do business, and was ranked 50th out of all 50 states in new business creation in 2015. Additionally, California has the 9th highest corporate income tax rate, the highest “minimum corporate tax” in the country, 5th highest gas tax in the country, is the only state in America that taxes carbon emissions, and the the highest state income tax rate in the nation. This stifles the economy, prevents people from starting businesses, and prevents prospective employers from hiring. I've always said that taxation is theft-and this sort of proves it.
It gets worse. The regulations in California are the worst in the state. For example, California requires licenses for 198 different occupations (the most in the nation). The national average is only 96. No wonder that California has a steadily increasing child poverty rate, the worst “small business failure rate” in America in 2010, which was 69 percent higher than the national average, and the third highest unemployment rate of any state. No wonder that companies such as Amazon are seeking new headquarters outside the state, or even moving out entirely. And the state government strategy of using state welfare programs such as MediCal, CalFresh, and CalWORKs to keep the poor afloat clearly aren't working. Something needs to change. Some free-market strategies are in order.
Specifically, tax reform on an extensive scale (if we're six billion in the black, that means we can actually cut taxes) and cutting regulations on the same scale. Cut back the number of licenses necessary for professions, and specify a special tax credit for new and small businesses, as well as for individuals who's income has increased by a certain amount over a certain amount of time. If we're to continue the trend of having an entrepreneurial spirit and a tradition of being the fifth largest economy in the world, we need to be able to look outside of government for solutions.
Go California!!
California's economy is mostly driven by a lot of coincidences that combined to form Silicon Valley and our state's economic success as a whole. It benefits greatly from its climate, its infrastructure, and its cheap real estate after WWII, and a culture that developed from the earliest tech companies. Silicon Valley is not really possible to recreate, and is just a lucky chance that keeps our economy going while there are issues such as inequality that both Mr. Felder and Granger have mentioned. If the tech bubble bursts or that industry collapses or changes, the issues cannot be glossed over by looking over our surplus, and we will have big issues.
I agree with Granger that inequality is an issue in California, but I don't think that is necessarily the fault of our government. In addition, if you are going to throw around big statistics, we need to see some sources.
I personally don't know how to solve this problem entirely, but I am certain we are able to do it. My main concern is that the state will run out of land to build and work on, but frankly that is an issue for the whole world due to the exponential growth of the human population.
I agree with Granger's perspective that income inequality is certainly an issue, but I disagree about some of his comments about the gas tax and the cap and trade system. Admittedly, from a purely economic standpoint, any government interference that detracts from the profitability of businesses (such as taxing carbon emissions and gasoline use) are harmful to the economy, but we aren't seeing a struggling economy in California, and I don't think that reducing the gas tax is going to make a huge difference for people living here; these systems were designed as environmental safeguards against the unclaimed externalities produced by the automobile industry, the petroleum industry, and others who attempt to forsake air quality for the sake of profits. Businesses should be responsible for all of the products they create, not just the ones that make them money.
On another note, whereas I see the issue of income inequality, I don't think that this is the main issue facing Californians. Due to its identity as a global hub of commerce, Silicon Valley attracts a lot of millionaires, and while this may inflate the gap between the incomes of low-wage earners and high-income individuals, the fact that Ohio or Alabama has less income inequality than California does not mean that the low income earners in Alabama are making more money. The real problem lies in the ridiculously inflated prices for housing that we find in California. However, I do not think that rent control is the solution to this. According to an article in the NYT, California is already far under the necessary pace of building new housing to keep up with population growth, and simply putting a ceiling on rents will do anything to help this. If we were to repeal the Costa Hawkins act completely, putting rent limits on new apartment complexes, people would be disincentivised to build new housing, creating a shortage that would further exasperate the situation of homelessness in the Bay Area. While this would bode well for those who do manage to find apartments, it would not bode well for the many people who would be unable to do so. On the other hand, more moderate solutions such as mandating the inclusion of affordable units in new construction projects would help to bolster the availability of affordable housing without providing such a hefty disincentive for new housing developments.
This will help to alleviate homelessness, but clearly won't do the full job. I am not quite sure what else can be done to increase the availability of affordable housing, but I plan to think about it as a potential topic for my research paper.
In terms of traffic, the nature of living in a prosperous place like CA is that people like to drive their own cars. That being said, there are other prosperous cities where public transit seems to be a more prevalent way of transportation; I think that the bullet train is one step to encouraging this, and I think that other steps making public transit more appealing to the high income individual would be a good idea; I just don't see it happening (not to mention it would hurt the car industry here).
Lastly, I do think that we will have to face some kind of recession in the near future, as all business cycles eventually turn downward and correct themselves. This is no different than in CA ,and I think that high costs of living could speed this process up. For example, California is no longer seen as a great place for big companies to set up their headquarters due to the high minimum wage needed to pay workers just to make a living, and some California businesses could look to shift their locations inland in the search of more profitable operations. Also, when business/stocks go down, high income earners are hit very hard, and due to our progressive taxation system, this hurts California's budget greatly, inhibiting our spending capacity to fund initiatives such as infrastructure development and the subsidy of low income housing, a positive feedback loop that doesn't bode well for your average Californian. At the end of the day though, our economy tends to bounce back pretty well after recessions, so I'm not too concerned about it.
California's economic growth is doing great, due to silicon valley. California has the highest effective poverty rate in the nation, in large part because of our high cost of housing. I believe we will need a $10 billion revolving fund to help home and property owners build Accessory Dwelling Units (in-law units or granny flats). Some estimates show that up to one-third of our housing shortage could be addressed with these lower-cost units. For traffic in California; in Los Angeles, if we rid of the 9 to 5 work schedule, letting just 10% of employees work at home one day or even a half day, a week would have a dramatic effect on congestion. These combined strategies would be far more effective than adding lanes to any of L.A.'s freeways. Also Fewer than 9% of commuters carpool, less than half the number 35 years ago. Converting carpool lanes to dedicated big-rig lanes in major goods-movement corridors would do much more to provide congestion relief.
I believe that the economy is strong enough that we can overcome an economic slowdown
California's economic growth is great but they are not handling it properly. An increasing rate of homelessness shows that we are in a crisis, we are leaving people behind in the worst condition possible. The revenue from this huge economy should go towards helping more people, we can not have a $6 billion dollar surplus and allow our people to starve and live out on the streets.
As commented above, California's economy is doing very well, but it is concentrated in certain areas such as Silicon Valley. The money could be distributed better to help reduce traffic, because of the influx of people coming in due to the grown of the tech industry. With so many moving to California, homelessness and increase to housing prices is inevitable, but, with all the new money coming in, the state should do more to help those in need. The state should learn from the past, all booming economies are bound to slow down, we should be prepared for a recession just in case.
I believe that California's economic growth has both advantages and disadvantages. The main disadvantage being that the cost of living has gone up dramatically. Because people are making large amounts of money, especially in areas such as Silicon Valley, everything's cost rises. House prices, food prices and even electricity and gas have all gone up dramatically. This makes it much more difficult for people moving to California as discussed above. I'm not sure that all of the surplus should be used toward the homeless, but maybe investing some of it into education or green energy or something of that sort
I think that California is not really manging its economic growth correctly. There needs to be a balance between economic growth and concerns about the environment. California most definitely deserves praise for its successes because of how much Apple brings in and for all of the things like technological and medical advancements. However, because of California’s prosperity, the concerns such as increased pollution, increased traffic, and housing affordability crisis are important issues to be addressed. California is not taking into account of the people that are suffering and are only paying attention to those that are wealthy already. To better housing affordability, I think California can increase the minimum wage. While the minimum wage can’t increase that much, people would still benefit. Homelessness can be limited by creating places that offer support such as food, water, basic necessities, etc.
I agree that though the economy is doing well, the advantages and wealth are concentrated in certain areas and it overall is causing the cost of living to increase significantly. This becomes detrimental to a large proportion of the population. Because the economy is at a high right now, it’s important to stay cautious about the future as we’ve seen how economies that have peaked in the past have been followed by falls or recessions.
Post a Comment