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When U.S. economy recovers, will California be left behind? California lost one of its Fortune 500 companies the other day when Science Applications International moved its headquarters from San Diego to McLean, Va. The announcement came not long after Toyota announced that it would shut down California's last auto assembly plant, and the two corporate moves provided new fodder for the never-ending debate over California's business climate. The debate has taken on a sharp edge during the worst recession since the Great Depression, raising fears that as the rest of the nation recovers, we won't. California remains a global powerhouse. Even with Scientific Applications' corporate move, we still have 50 firms on the Fortune 500 list. Nevertheless, our output is shrinking, hammered by foreign and domestic competition, and we have more than 2 million unemployed workers, pushing our jobless rate beyond 12 percent. The state lost nearly 40,000 more jobs in September. Our once-soaring housing market continues its plunge, retail sales are in the toilet, exports have declined sharply, tax receipts are cratering, the state budget gushes red ink, its credit rating is a joke, and journalists are flocking to California to describe, sometimes gleefully, our malaise. "Will California become America's first failed state?" asks a recent British newspaper headline. The honest answer is that we don't know the answer. Even economists with doctorates can't agree on whether California will stage another dramatic recovery from recession or continue to sink. The University of the Pacific sees the recession ending in California this fall. Beacon Economics, a private consulting firm, says it "does not believe that the downturn will have permanent consequences for California." UCLA's Anderson Forecast says that while unemployment remains "ugly," it sees "in trade and manufacturing, there is new evidence that demand for California-produced goods is increasing. Even in the very weak consumer sector, there are indications that the collapse of hospitality, retail, wholesale and transportation employment may be coming to an end." However, California Lutheran University's new economic center is more dour, saying that "California's economic fundamentals are not good (and) it's not surprising that our forecast for California's economy is negative. We expect that California's economy will continue to perform poorly in relation to the United States economy for some time." Are our fundamentals weak? Do we have too many regulations that hurt chances for investment? Is our tax structure out of line? Is our shabby public infrastructure an investment turnoff? Is the Golden State killing its golden goose? We should take those questions seriously and not merely assume that we will spring back. The folks in Michigan used to make that kind of assumption. Source: Dan Walters – Sacramento Bee |
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