Cross-posted with

The good news? Like
most rock or movie stars, there’s nothing fundamentally wrong with
California. It’s still talented, and retains great physical gifts. Our
climate, fertility and location remain without parallel. The state
remains pre-eminent in a host of critical fields from agriculture to
technology, entertainment to Pacific Rim trade.

California can come back only if it takes a 12-step program to jettison
its delusions. This requires, perhaps more than anything, a return to
adult supervision. Most legislators, in both parties, appear to be
hacks, ideologues and time-servers. This time, when the danger is even
greater, we see no such sense of urgency. Instead we have a government
that reminds one more of the brutally childish anarchy of William
Golding’s 1954 novel "Lord of the Flies."

Arnold Schwarzenegger has not turned out to be that supervision. Rather
than the "post-partisan" leader hailed by the East Coast press, he has
proven to be the political equivalent of the multi-personality Sybil.
One day he’s a tough pro-business fiscal conservative; next he’s the
Jolly Green Giant who seems determined to push the green agenda to a
point of making California ever more uncompetitive.

Contrast this pathetic performance with what happened after our last
giant recession in the early 1990s. At that time, a bipartisan
coalition of leaders – Speaker Willie Brown, State Senator John
Vasconcellos and Governor Pete Wilson – worked together to address what
was perceived as a deep economic crisis. They addressed some key
problems and brought the state back from the brink. California
recovered smartly between the mid-90s and the new millennium.

Overall though, things are worse now. California has been flirting for
the past year with its highest unemployment rate since the Great
Depression. The last time we could blame the end of the Cold War for
much of our economic distress; now the problem is a more broadly based,
largely self-inflicted secular decline.

A bloated government is part of the problem: Between 2003 and 2007,
California state and local government spending grew 31 percent, even as
the state’s population grew just 5 percent. The overall tax burden as a
percentage of state income, once middling among the 50 states, has
risen to the sixth-highest in the nation, says the Tax Foundation. Even
worse, the state is getting ever less benefit from these revenues;
since the Pat Brown era the percentage of budget spent on basic
infrastructure has dropped from 20 to barely 5 percent.

Although these taxes are often portrayed as "progressive," California
has continued to become more socially bifurcated. Our ranks of
middle-wage earners are dropping faster than the national average even
as the numbers of the affluent and poor swell. Overall California’s per
capita income, roughly 20 percent above the national average in 1980,
now barely stays with the national average. When housing and other
costs are factored in, Los Angeles, San Francisco and Fresno rank among
the top five major urban areas in America in terms of percentage of
people in poverty, according researcher Deborah Reed of the Public
Policy Institute of California. Only New York and Washington, D.C. do

At the root of these problems is an increasing lack of economic
competitiveness. An analysis of the economy made for the Manhattan
Institute shows California losing its edge in everything from
migration, income, jobs and in entertainment industry employment. Tech
companies may cluster in Silicon Valley but many are sending their new
jobs abroad or to other sites. Recently, several leading Bay Area firms
– Twitter, Adobe, eBay, Oracle and Adobe – have established major new
operations in the Salt Lake area alone.

So how do we turn it around? First, let’s find some adults, like former
Speaker Robert Hertzberg or GOP financer Gerald Parsky, who know what
it is to run a business and comprehend that the economy actually
matters, and get them to head up a commission on the economy. Second,
our leaders and policy elites must engage the emerging new business
leadership of the state, which is increasingly immigrant, Asian and

Right now neither party seems focused on the state’s future besides
enriching their core constituencies. Lower taxes – the favored strategy
of the right – on the already wealthy reflects an understandable desire
to preserve one’s asset but is insufficient as a strategy.

Democrats meanwhile seem determined to defend public sector pensions,
Draconian labor, the high-speed rail boondoggle and environmental
regulations, no matter what the cost to the economy.

However contradictory their sound bites, the established parties are
each following a script that would assure the next generation of
Californians – largely Latino – remain an underclass that will have to
move elsewhere to reach their aspirations. The left would do it by
killing jobs in such fields as agriculture, manufacturing, construction
and warehousing. As Robert Eyler, chairman of the economics department
Sonoma State puts it, "the progressives have become the regressives."

For their part the GOP would kill the new California by starving it.
They have no plan to bolster the basic services – like community
colleges, roads, water and power systems – that will allow future
working-class Californians to thrive.

Their interests ignored by the parties, the immigrants and their
offspring still represent the very key source of demographic energy and
entrepreneurship that can revitalize the state. If you still want to
see hopeful stirrings in California, go to places like Plaza Mexico in
Lynwood or the new Irvine center recently built by the Diamond
Development Group. Appealing to young families and distinct tastes,
these retail facilities have thrived as the rest of the state’s overall
retail economy has declined.

More important still are the companies started by immigrant
entrepreneurs like John Tu, CEO of Kingston Technology or scores of
smaller Asian-owned firms in places like the San Gabriel Valley. Since
the 1990s, newcomers have launched roughly one in four Silicon Valley

Add to this the muscle of the emerging Latino economy, led by food
processing companies like the Cardenas Brothers, who now provide Costco
with its frozen Mexican food.

Due to their strong family and cultural ties in California, such ethnic
firms appear less likely to move than more Anglo-dominated companies.
But if the state keeps eroding public services and adding new
regulations, these firms – like their counterparts in Silicon Valley
and elsewhere – will place most of their new jobs as well in Utah,
Texas or overseas.

What we have here, in the end, is a massive disconnect between
economics and politics. Does anyone in Sacramento talk to or even know
about the largely Middle Eastern-led L.A. fashion industry? Is anyone
talking to the hip sportswear mavens of Orange County’s own "Velcro
valley"? Or what about agriculture, our traditional ace in the hole,
which is largely disdained by the state’s intellectual and media class
who see in large farms the work of the corporate devil?

Somehow these productive voices – essential to our comeback – must be
placed at the center of the debate. Sacramento’s leaders need to talk
not just to lobbyists but to the key job-creators.

These are the people who, even in hard times, are showing how we can
grow an economy based on our natural advantages of climate, ethnic
diversity, entrepreneurship and location.

Ultimately we must make the creation of new jobs a priority that goes
beyond formulaic mantras about lower taxes or illusory, state-supported
"green jobs." With a return to growth, California can still address its
basic problems and challenges. But first we must corral the ideological
hobbyhorses now running wild through Sacramento and make the needs of
job-creators the central issue for our policy-makers.

This article originally appeared in the Orange County Register.