'California is God's best moment," says Joel Kotkin. "It's the best place in the world to live." Or at least it used to be.
Mr. Kotkin, one of the nation's premier
demographers, left his native New York City in 1971 to enroll at the
University of California, Berkeley. The state was a far-out paradise for
hipsters who had grown up listening to the Mamas & the Papas'
iconic "California Dreamin'" and the Beach Boys' "California Girls." But
it also attracted young, ambitious people "who had a lot of dreams,
wanted to build big companies." Think Intel, Apple and Hewlett-Packard.
Now, however, the Golden State's
fastest-growing entity is government and its biggest product is red
tape. The first thing that comes to many American minds when you mention
California isn't Hollywood or tanned girls on a beach, but Greece. Many
progressives in California take that as a compliment since Greeks are
ostensibly happier. But as Mr. Kotkin notes, Californians are
increasingly pursuing happiness elsewhere.
Nearly four million more people have
left the Golden State in the last two decades than have come from other
states. This is a sharp reversal from the 1980s, when 100,000 more
Americans were settling in California each year than were leaving.
According to Mr. Kotkin, most of those leaving are between the ages of 5
and 14 or 34 to 45. In other words, young families.
The scruffy-looking urban studies
professor at Chapman University in Orange, Calif., has been studying and
writing on demographic and geographic trends for 30 years. Part of
California's dysfunction, he says, stems from state and local government
restrictions on development. These policies have artificially limited
housing supply and put a premium on real estate in coastal regions.
"Basically, if you don't own a piece
of Facebook or Google and you haven't robbed a bank and don't have rich
parents, then your chances of being able to buy a house or raise a
family in the Bay Area or in most of coastal California is pretty weak,"
says Mr. Kotkin.
While many middle-class families have
moved inland, those regions don't have the same allure or amenities as
the coast. People might as well move to Nevada or Texas, where housing
and everything else is cheaper and there's no income tax.
And things will only get worse in the
coming years as Democratic Gov. Jerry Brown and his green cadre
implement their "smart growth" plans to cram the proletariat into
high-density housing. "What I find reprehensible beyond belief is that
the people pushing [high-density housing] themselves live in
single-family homes and often drive very fancy cars, but want everyone
else to live like my grandmother did in Brownsville in Brooklyn in the
1920s," Mr. Kotkin declares.
"The new regime"—his name for
progressive apparatchiks who run California's government—"wants to
destroy the essential reason why people move to California in order to
protect their own lifestyles."
Housing is merely one front of what he
calls the "progressive war on the middle class." Another is the
cap-and-trade law AB32, which will raise the cost of energy and drive
out manufacturing jobs without making even a dent in global carbon
emissions. Then there are the renewable portfolio standards, which
mandate that a third of the state's energy come from renewable sources
like wind and the sun by 2020. California's electricity prices are
already 50% higher than the national average.
Oh, and don't forget the $100 billion
bullet train. Mr. Kotkin calls the runaway-cost train "classic
California." "Where [Brown] with the state going bankrupt is even
thinking about an expenditure like this is beyond comprehension. When
the schools are falling apart, when the roads are falling apart, the
bridges are unsafe, the state economy is in free fall. We're still doing
much worse than the rest of the country, we've got this growing
permanent welfare class, and high-speed rail is going to solve this?"
Mr. Kotkin describes himself as an
old-fashioned Truman Democrat. In fact, he voted for Mr. Brown—who
previously served as governor, secretary of state and attorney
general—because he believed Mr. Brown "was interesting and thought
outside the box."
But "Jerry's been a big
disappointment," Mr. Kotkin says. "I've known Jerry for 35 years, and
he's smart, but he just can't seem to be a paradigm breaker. And of
course, it's because he really believes in this green stuff."
In the governor's dreams, green jobs
will replace all of the "tangible jobs" that the state's losing in
agriculture, manufacturing, warehousing and construction. But "green
energy doesn't create enough energy!" Mr. Kotkin exclaims. "And it
drives up the price of energy, which then drives out other things."
Notwithstanding all of the subsidies the state lavishes on renewables,
green jobs only make up about 2% of California's private-sector work
force—no more than they do in Texas.
Of course, there are plenty of jobs to
be had in energy, just not the type the new California regime wants. An
estimated 25 billion barrels of oil are sitting untapped in the vast
Monterey and Bakersfield shale deposits. "You see the great tragedy of
California is that we have all this oil and gas, we won't use it," Mr.
Kotkin says. "We have the richest farm land in the world, and we're
trying to strangle it." He's referring to how water restrictions aimed
at protecting the delta smelt fish are endangering Central Valley
farmers.
Meanwhile,
taxes are harming the private economy. According to the Tax Foundation,
California has the 48th-worst business tax climate. Its income tax is
steeply progressive. Millionaires pay a top rate of 10.3%, the
third-highest in the country. But middle-class workers—those who earn
more than $48,000—pay a top rate of 9.3%, which is higher than what
millionaires pay in 47 states.
And Democrats want to raise taxes even
more. Mind you, the November ballot initiative that Mr. Brown is
spearheading would primarily hit those whom Democrats call
"millionaires" (i.e., people who make more than $250,000 a year). Some
Republicans have warned that it will cause a millionaire march out of
the state, but Mr. Kotkin says that "people who are at the very high end
of the food chain, they're still going to be in Napa. They're still
going to be in Silicon Valley. They're still going to be in West L.A."
That said, "It's really going to hit
the small business owners and the young family that's trying to
accumulate enough to raise a family, maybe send their kids to private
school. It'll kick them in the teeth."
A worker in Wichita might not consider
those earning $250,000 a year middle class, but "if you're a guy
working for a Silicon Valley company and you're married and you're
thinking about having your first kid, and your family makes 250-k a
year, you can't buy a closet in the Bay Area," Mr. Kotkin says. "But for
250-k a year, you can live pretty damn well in Salt Lake City. And you
might be able to send your kids to public schools and own a
three-bedroom, four-bath house."
According to Mr. Kotkin, these
upwardly mobile families are fleeing in droves. As a result, California
is turning into a two-and-a-half-class society. On top are the
"entrenched incumbents" who inherited their wealth or came to California
early and made their money. Then there's a shrunken middle class of
public employees and, miles below, a permanent welfare class. As it
stands today, about 40% of Californians don't pay any income tax and a
quarter are on Medicaid.
It's "a very scary political dynamic,"
he says. "One day somebody's going to put on the ballot, let's take
every penny over $100,000 a year, and you'll get it through because
there's no real restraint. What you've done by exempting people from
paying taxes is that they feel no responsibility. That's certainly a big
part of it.
And the welfare recipients, he
emphasizes, "aren't leaving. Why would they? They get much better
benefits in California or New York than if they go to Texas. In Texas
the expectation is that people work."
California used to be more like
Texas—a jobs magnet. What happened? For one, says the demographer,
Californians are now voting more based on social issues and less on
fiscal ones than they did when Ronald Reagan was governor 40 years ago.
Environmentalists are also more powerful than they used to be. And Mr.
Brown facilitated the public-union takeover of the statehouse by
allowing state workers to collectively bargain during his first stint as
governor in 1977.
Mr. Kotkin also notes that demographic
changes are playing a role. As progressive policies drive out moderate
and conservative members of the middle class, California's politics
become even more left-wing. It's a classic case of natural selection,
and increasingly the only ones fit to survive in California are the very
rich and those who rely on government spending. In a nutshell, "the
state is run for the very rich, the very poor, and the public
employees."
So if California's no longer the Golden land of opportunity for middle-class dreamers, what is?
Mr. Kotkin lists four "growth
corridors": the Gulf Coast, the Great Plains, the Intermountain West,
and the Southeast. All of these regions have lower costs of living,
lower taxes, relatively relaxed regulatory environments, and critical
natural resources such as oil and natural gas.
Take Salt Lake City. "Almost all of
the major tech companies have moved stuff to Salt Lake City." That
includes Twitter, Adobe, eBay and Oracle.
Then there's Texas, which is on a
mission to steal California's tech hegemony. Apple just announced that
it's building a $304 million campus and adding 3,600 jobs in Austin.
Facebook established operations there last year, and eBay plans to add
1,000 new jobs there too.
Even Hollywood is doing more of its
filming on the Gulf Coast. "New Orleans is supposedly going to pass New
York as the second-largest film center. They have great incentives, and
New Orleans is the best bargain for urban living in the United States.
It's got great food, great music, and it's inexpensive."
What about the Midwest and the Rust Belt? Can they recover from their manufacturing losses?
"What those areas have is they've got a
good work ethic," Mr. Kotkin says. "There's an established skill base
for industry. They're very affordable, and they've got some nice places
to live. Indianapolis has become a very nice city." He concedes that
such places will have a hard time eclipsing California or Texas because
they're not as well endowed by nature. But as the Golden State is
proving, natural endowments do not guarantee permanent prosperity.
Ms. Finley is the assistant editor of OpinionJournal.com and a Journal editorial page writer.
A version of this article appeared April 21,
2012, on page A13 in some U.S. editions of The Wall Street Journal, with
the headline: The Great California Exodus.
