The Next Gov. Should Set Goals to Break California’s Dickensian Economy

Dr. Sam Blakeslee and Pete Peterson
Dr. Sam Blakeslee, Director of the Institute of Advanced Technology & Public Policy and former State Senator. Pete Peterson, Dean & Senior Fellow, Pepperdine School of Public Policy, Davenport Institute, Pepperdine University

Our next Governor will face the daunting challenge of an economy that is best described by the opening line of Dicken’s Tale of Two Cities“it was the best of times, it was the worst of times”. Sadly, this Dickensian economy, though affording great bounty to those at the top, is failing to help those who work the hardest, middle- and lower-income earners.

Yes, California has much to celebrate.  We are home to the most formidable tech companies on the planet with half of the world’s tech billionaires living in Silicon Valley.   State coffers bulge with historic budget surpluses fed by unprecedented revenues.  Our economy enjoys utopian levels of unemployment and is ranked as the world’s 5th largest. And although Governor Brown can proudly point to a strong state balance sheet, soaring levels of renewable energy, and reformed spending priorities, another set of numbers tell a deeply disturbing story. These numbers reveal a failing social contract that no longer affords reliable pathways to success for many hard-working Californians.  These are the numbers that our next Governor will face on his first day in office.

The Public Policy Institute of California reports that about four in ten Californians are living in or near poverty. The Missouri Economic Research and Information Center analyzed the cost of living in all 50 states and found that California ranked in the bottom 10 in every category – 49th in housing, 48th in transportation, and 46th in grocery costs.  Decent housing, higher education, quality daycare and healthcare – the pillars of a thriving middle class – are increasingly priced beyond the reach of the average two-income household.

The result is that many retirees, as well as some of our most-talented young people, are leaving for more affordable states. Those living at the margins, without the ability to leave, are struggling to stay off the streets. A recent UCLA study documented the strong correlation between the explosion in homeless camps and the inability of Californians to keep up with rising costs.

It is these grim numbers that spurred a group of policy wonks, former pols, and community advocates to put aside partisan battles and come together to wrestle with a transcending question – “What should California do to reverse this decades-long decline in our quality of life?” Our group, the Economic Mobility Collaborative, framed that answer as a letter to the next Governor and it was signed by scores of the state’s civic leaders.

The essence of that letter is the following:

If there is any hope of reversing these devastating trends, our next Governor will need to prioritize, above all else, improving the average Californian’s quality of life. That means tackling housing costs, transportation impacts, educational access, and creation of head-of-household jobs – the basic building blocks of economic mobility for Californians not born to wealth. It’s not sexy, it doesn’t fit on a bumper sticker, and it certainly doesn’t happen with a few speeches and feel-good bills. Turning this state around will take a Herculean effort.

We now know that this turn around cannot be achieved by simply adopting ever more aggressive income redistribution policies. As the state with the nation’s highest personal income tax rates as well as the most generous social welfare policies we are reaching the limits of what government can do directly, and it isn’t enough to meet the need.  Indeed, the recent federal repeal of the SALT deductions likely would cause further efforts at income redistribution to backfire badly by increasing the incentive for jobs and capital to seek opportunity elsewhere.

Instead we need to also look at what government can do to make this 2.7 trillion dollar economy work for average Californians. The same technology advancements that connect people with each other socially can do the same for peer-to-peer entrepreneurship and delivery of government services.

Gavin Newsom was correct when he wrote in his book, Citizenville:

“We need to allow people to bypass government. We must encourage them to take matters into their own hands, to look to themselves for solving problems rather than asking the government to do things for them. New technology is making this more feasible than ever”.

Imagine how average lives could be improved if Sacramento set out to remove barriers that currently impede market forces from rapidly increasing the supply and lower the costs of everything from apartments and homes, to text books and vocational classes, and to knee replacements, hearing aids, and prescription eyewear.  What if California put its green eyeshades on and actually calculated the true cost of each additional permit, professional certification, or agency that regulates everything from building housing, to buying power, to cutting hair and painting nails.

What would it take to turn the state around? A lot. But it could be accomplished. Doing so would require the next Governor to attack the issue with the same level of determination and focus that Governors Brown and Schwarzenegger devoted to tackling environmental goals over the past 15 years. California is on track to achieve its 50% renewable energy procurement goal well before 2050. The state is moving forward aggressively to meet its 75% waste diversion goal by 2020. We are leading the nation with our goal of slashing carbon emissions by 40% below 1990 levels by 2030.

California has proven that it can achieve enormously difficult objectives by adopting “rates and dates” policy goals that are predicated on an ambitious vision. Why not apply such an approach toward improving the quality of life of average Californians? Why not set an ambitious quality-of-life goal over the next 8 years that advances home ownership, lowers homelessness, and reduces the percent of income spent on rent – to provide just one example? Could there be any goal that does more to advance social justice in California?

Once a quality-of-life metric and set of goals is established, the traditional silo-approach of policy development can be replaced with a systems-based methodology that evaluates whether a particular law or regulation positively or negatively impacts the average Californian’s quality of life.

We already do something like this in the legislature when looking at the financial costs of a piece of legislation. The Assembly and Senate Appropriations Committees analyze every bill, score it, calculate the total general fund cost and then determine what the state can afford before allowing the bill to be considered for passage. Similarly, the California Environmental Quality Act requires an assessment of environmental impacts before ground is broken for any major project. We need a similar policy-making processes that advances, in a measurable way, a quality-of-life metric that reflects how average Californians are doing.

This commitment to prioritize quality-of-life through future state polices need be neither conservative nor liberal, would advantage neither Republicans nor Democrats, and would transcend many of the outdated near tribal alignments that have divided us for so long. Instead, this uniquely California form of populism could show how state government can transform a dysfunctional Dickensian economy into a new kind of 21st Century Citizenville economy; one that returns prosperity, empowerment, and economic mobility to all Californians. Such an enterprise would be a worthy and heroic undertaking for our next Governor, and one that could pull together Republicans and Democrats, business and labor, progressives and conservatives into a larger populist coalition that is dedicated to improving people’s lives.

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