Jerry Brown’s long political career will likely end in January 2019, when the 80-year-old’s second stint as California governor concludes. In the media’s eyes—and in his own mind—Brown’s gubernatorial encore has been a rousing success. His backers say that he has brought the state back, economically and fiscally, from the depths of the Great Recession, which hit California harder than it did the rest of the country. Brown has enacted an array of left-liberal policies, to the delight of progressives, and positioned California as a blue-state role model for the American future. A decade of phenomenal growth among Silicon Valley’s landmark companies has boosted the state’s image and helped restore its overall economy. Democrats hope that California will provide a template for reestablishing their appeal to voters nationwide.
But the state’s boom shows signs of leveling off: after growing much faster than the national average for several years, the economy, notes a recent report by the Los Angeles Economic Development Corporation, has now fallen to around the national average; the state is no longer generating income faster than its prime rivals such as Texas, Washington State, Oregon, or Utah. California Lutheran University forecaster Matthew Fienup suggests that the state’s economic growth could fall below national norms if current trends continue.
The growth that so impressed over the past five years has masked a multitude of policy sins, and as California’s economic engine slows down, the underlying problems are becoming harder to deny. People are moving out in greater numbers than they’re moving in. Rates of job creation—and the types of jobs being created—vary widely according to geography. The high-tech hubs of San Francisco and Silicon Valley have added tens of thousands of well-paying jobs during Brown’s tenure, but the rest of the state hasn’t done nearly as well.
Brown has put California on a fiscally unsustainable path. A disproportionate share of the funds paying for his ever-expanding progressive agenda derive from Silicon Valley’s capital-gains tax revenues and inflation of the state’s coastal real-estate prices. Any slowdown in the tech money machine or drop-off in property values could prove disastrous for Sacramento’s budget—California gets half its revenue from its top 1 percent of earners. According to Pew, this makes it the major American state with the most volatile finances. Both U.S. News & World Report and the Mercatus Center ranked California 43rd among the states in fiscal health. And that was during an economic boom.
Brown’s departure will also remove the last (if only partial) restraint on progressives in the state legislature, who largely do the bidding of California’s powerful public-employee unions and the green lobby. These forces will pressure the next governor to ram through even stricter environmental laws, more onerous labor regulations, and a single-payer health-care system. California’s teachers are even pushing for an exemption from state income taxes.
California was once ground zero for upward mobility. No more. During the new millennium, the Golden State has become increasingly bifurcated between a small but growing cadre of elite workers and a far larger pool of poorer families barely scraping by. Wide disparities have opened up between the ultrarich and a fading middle class. The Brown administration has largely ignored the state’s poor and struggling rural areas as it pursues its agenda of remaking California into a progressive paradise. The bill—socially, economically, and fiscally—is coming due.
Throughout much of the twentieth century, California was a population magnet, growing ever more economically vibrant as it attracted the ambitious and the entrepreneurial from other American states and from around the world. Now the state’s long-running population growth is leveling off. During the last decade, high taxes, rising housing costs, and constrained economic opportunity have sent many California residents in search of greener pastures. Domestic economic migrants are pursuing their American dreams in low-tax, pro-growth states like Arizona, Nevada, and Texas.
With fertility rates already below replacement, the state’s population growth fell below the national average for the first time last year. Only four states—Michigan, Ohio, Wisconsin, and Illinois—are attracting fewer newcomers per capita. Immigration won’t solve that problem—new arrivals from foreign countries have trended down over the past decade. Since 2010, Florida attracted international immigrants at a per-capita rate nearly 70 percent greater than California’s. Net domestic out-migration, which declined in the early years of the Great Recession, tripled between 2014 and 2017. Worse, according to a recent UC Berkeley study, more than a quarter of Californians are considering picking up stakes, with the strongest proclivity found among people under 50.
California is aging, too. The state’s crude birthrate (live births per 1,000 population) is at its lowest since 1907. Los Angeles and San Francisco ranked among the bottom ten in birthrates among the 53 major metropolitan areas in 2015. Between 2000 and 2016, San Francisco–Oakland and San Jose ranked 34th and 47th in terms of millennial growth among the country’s 53 largest metro areas. A dearth of young people would pose particular problems for an economy like California’s, long dependent on innovation, traditionally the province of younger workers and entrepreneurs. Seventy-four percent of Bay Area millennials are considering a move out of the region in the next five years. Since 2000, Los Angeles–Orange County has seen some of the nation’s slowest growth of 25- to 34-year-old residents; since 2010, it has remained substantially below the national average on this measure. The progressive narrative suggests that those leaving California are poor, poorly educated, or both. Yet according to the Internal Revenue Service, out-migrant households had a higher average income than those households that stayed or moved in; even the Bay Area is experiencing growing out-migration from increasingly affluent people. Though the new federal tax changes, which will limit state tax deductions, will likely not affect the wealthiest oligarchs and landowners, they could further accelerate the departure of the merely somewhat affluent.
The current climate contrasts sharply with the 1950s and 1960s, when Jerry Brown’s father, the late Edmund G. “Pat” Brown, pursued dynamic pro-development policies as California’s governor. During those decades, the state constructed new infrastructure that sparked growth in fields as diverse as high-tech, aerospace, fashion, agriculture, basic manufacturing, and entertainment. What was then a model freeway system connected California’s cities to new middle-income communities in the San Fernando Valley, the South Bay of San Francisco, Orange County, and along the spine of the San Francisco Peninsula, which morphed into what we now call Silicon Valley. Pat Brown’s administrations modernized and extended the state’s water-supply system and crafted a public university system that was the envy of the nation, if not the world. Describing Brown’s leadership in transformational terms, biographer Ethan Rarick called the twentieth century the “California century.”
These reforms sparked a long economic boom not only on the California coast but also in the state’s massive interior. In those days, the region had political clout, as Republicans and Democrats competed for votes in Fresno, San Bernardino, and Kern Counties. Today, the California heartland tilts Republican but has lost its influence, as political and economic power has consolidated around deep-blue Silicon Valley and San Francisco.
Like his father, Jerry Brown is a liberal Democrat, yet he has worked overtime to undermine much of Pat Brown’s pro-growth legacy. With the cooperation of a compliant state legislature dominated by liberals, Brown has increased taxes, instituted polices making energy much more expensive in California than in neighboring states, pursued regulations causing housing costs to rise to unprecedented levels, and positioned California as a safe space for illegal immigrants. Brown’s policies embrace the values not of aspirational California but those of its wealthy coastline residents. From water and energy regulations to a $15 minimum hourly wage, Brown’s agenda reflects the ultraliberal political predilections of the Bay Area. That’s where Brown himself lives, as do many of the state’s political elite, including Lieutenant Governor Gavin Newsom and U.S. senators Dianne Feinstein and Kamala Harris. The rest of the state has been pushed to the political margins and keenly feels its powerlessness. “We don’t have seats at the table,” laments Richard Chapman, president and CEO of the Kern County Economic Development Corporation. “We are a flyover state within a state.”
Though widely praised by left-wing think tanks and progressive foreign governments, Jerry Brown’s policies have unquestionably exacerbated income inequality in California. According to the Social Science Research Council, California now has the highest levels of income inequality in the United States. In the last decade, according to the Brookings Institution, inequality grew more rapidly in San Francisco than in any other large American city; Sacramento ranked fourth on this measure. California is home to a disproportionate share of the nation’s wealthiest people, including four of the 15 richest on the planet. Yet more than 20 percent of Californians are considered poor, adjusted for housing costs. That’s the highest percentage of any state, including Mississippi. According to a recent United Way study, close to one in three California families is barely able to pay its bills. Los Angeles, by far the state’s largest metropolitan area, has the highest poverty rate of any large region in the country. In the 4 million–strong Inland Empire, a population nearly as large as metropolitan Boston suffers one of the highest poverty rates among the nation’s 25 largest metro areas.
Originally published in City Journal. For the remainder of the article please go here.
Cross-posted at New Geography.