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The GOP Will Fix California’s Economy

With the recall election just four weeks away, it’s hard to recognize the Golden State these days. If you believe the bevy of right-wing and “pro-business” candidates running for governor, record high taxes have made the California economy look like Minsk under Brezhnev, and Californians are fleeing the state for such lower-tax alternatives as Arizona and the Yap Islands.

There’s no question that California isn’t the suburban-Arcadian paradise of memory and myth. Cities grow more congested; commutes grow longer and slower; decent-paying blue-collar jobs grow scarcer; public schools have been in decline for decades. But many of these changes are the result of national policies on trade, global finance, immigration, housing, transportation and the like; others stem directly from the decisions of California voters to enact such measures as Proposition 13.

Which, of course, is not the way that Schwarzenegger and McClintock tell the tale. If you believe them, the high-tax regime of Gray Davis is killing jobs and sending longtime residents scurrying from the state like the Joad family with its truck in reverse.

Gray Davis has sins to answer for, but when it comes to doing away with jobs and presiding over a California exodus, the real culprits are George W. Bush and Pete Wilson. To begin with, taxes in California just aren’t all that high by national standards. According to a new study by the Federation of Tax Administrators, California ranks 18th among the states in the tax burdens borne by individuals and businesses.

What’s more, during the current hemorrhage of jobs that’s known as the Bush presidency, California has fared somewhat better than the nation as a whole. Between November 2001 and July 2003, the United States lost 0.8 percent of its jobs, while California, on a percentage basis, lost half that: 0.4 percent. According to a new analysis by the California Budget Project, the job loss that California has experienced is concentrated in the dot-com north (Santa Clara County lost a stunning 17 percent of its jobs between July 2001 and July 2003). Unemployment has remained far lower in Southern California, and the job boom in San Bernardino and Riverside counties has actually continued apace during the past two years.

And when it comes to wages, California’s economy shows genuine strength. The average wage of the median-income California worker has increased by double the rate of the median-income American worker in recent years: by 6.8 percent from the first half of 2000 through the first half of 2003, compared to 3.4 percent nationally. The disparity is even wider for poorer workers at the 20th percentile in earnings. In California, their wages have increased by 8.1 percent during this period, compared to 2.2 percent nationally.

None of this is to argue that things are particularly rosy in California these days. The uptick in wages in recent years follows a precipitous fall from the mid-’80s through the late ’90s as the middle-income jobs in aerospace ceased to exist, and wages were slashed throughout a range of construction and service-sector jobs to exploit the coming of Mexican and Central American immigrants. This year’s state budget imposes steep tuition increases on college students across California and will diminish the size of entering classes, if not eliminate them altogether, next year. (That, of course, is because the Republicans in the Legislature preferred to impose the costs of closing the deficit on public-college students and their families rather than levy a tax increase on the wealthiest Californians.) And the state’s worker-comp laws do need to be reformed to remove burdens from employers.

 

But to listen to the Republican indictments of Gray Davis for killing jobs and failing to balance the budget is to behold a massive political-psychological displacement. Plainly, when it comes to losing jobs and failing to balance a budget, George W. Bush is the club champion; indeed, his stewardship of the American economy is beginning to rival Herbert Hoover’s for sheer perverse, long-term ineptitude. Like everyone else, Republicans must suffer through the Bush economy, but they are too invested in the success of the administration and in the wisdom of its tax-cut-über-alles philosophy to admit its failings. Thus, when Arnold and Tom blame Davis for the state of the economy, they have a ready audience.

Moreover, as Schwarzenegger careens around the state collecting money from low-wage industries, his view of what it will take to restore a proper “business climate” grows more and more suspect. Last week, he was endorsed by the California Farm Bureau, whose chief legislative priorities include repealing last year’s landmark legislation granting binding arbitration to farm workers. In the world according to Arnold, agribusiness is just a bunch of guys with the best interest of the state at heart; farm workers are a special interest whose demands on the state are at best inherently suspect.

There’s no doubt that the climate for California businesses that thrive by paying abysmal wages has grown harsher in the past couple of years. Cities and counties up and down the state have adopted living-wage ordinances; the state’s union movement, spearheaded by the aggressive and strategically savvy Service Employees International Union, has actually grown even as labor has declined nationally. (According to a new study from the University of California’s Institute for Labor and Employment, the percentage of unionized workers in California grew from 16 percent to 18 percent from 1998 to 2002, as it was declining nationally, and much of that growth has come among janitors, home-care workers and other low-wage employees.) On the other hand, the gains these workers have won have come in industries such as health care and building maintenance, which can’t exactly export their jobs across state lines. Far from killing these jobs, these collective-bargaining and legislative victories have enhanced the lives — and purchasing power — of hundreds of thousands of Californians.

Many of these victories stem in good part from the support that unions have cultivated among Democratic elected officials. But when Republicans speak of restoring a proper business climate and reducing union power, they’re not talking about the power of the prison guards’ union over state elected officials: The guards have given as generously to Republicans as they have to Democrats. They’re talking about reducing the only leverage that low-wage Californians have won for themselves. And in his embrace of agribusiness and his blanket condemnation of unions, Schwarzenegger has embraced the version of “business climate” that augurs nothing good for the 1.9 million families of working poor in California.

It’s particularly outrageous that Schwarzenegger should complain of the exodus of jobs from the state, for he has hired the very policymakers under whom that exodus reached its height. The great years of mass migration out of California were 1993–96, when 1.6 million Californians moved to other states as aerospace collapsed. The governor during this mass flight was, of course, Pete Wilson, whose strategists and brain trusters now run Arnold’s campaign. It was hardly Wilson’s fault that the Cold War ended while he was governor of California, but for the Wilsonistas to blame Davis for job loss now — since it pales alongside the hits the state took when they were in control, and alongside the job-loss record that George W. Bush is racking up today — is industrial-strength chutzpah. The more so, since the Wilson gang blamed the last economic downturn on the immigrants among us.

Indeed, given the record of economic performance racked up by Wilson and the last two Presidents Bush; given the GOP’s obsessive belief in the snake oil of tax cuts; given McClintock’s belief in absolute property rights and Schwarzenegger’s embrace of Wilson’s economic wizards — given all this, why would anybody think the Republicans have even the slightest idea about how to fix the economy of this state?

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