Let’s return for a moment to those thrilling days of yesteryear, all the way back to, well, last year’s governor’s race.
For month after month, Republican Meg Whitman slammed Jerry Brown and the Democrats for what she argued was California’s dreadful business climate (Sure, the state had had a GOP governor for the previous seven years, but details, details).
Echoing Republican grumblings of years past, Whitman argued that California was bleeding jobs to business-friendly states like Arizona, Texas and Nevada, states with lower taxes, less environmental regulation, lower costs and generally better treatment of business types, both tycoons and entrepreneurs.
To hear Whitman and other Republicans talk, those states were the Promised Land for business, virtual Gardens of Eden for those American dreamers who wanted to create jobs and move this country back into a Golden Age of prosperity.
But a recent road trip through Nevada and Arizona suggests that blaming California’s business climate for the state’s current economic woes is more politics than reality.
And Shangri-La hasn’t moved to the desert.
A January study by a pair of public policy groups, for example, found that both Arizona and Nevada were in worse budget shape than California.
While budget numbers are a constantly moving target in every state, the state found that California’s $19 billion deficit is about 21 percent of its general fund budget, Arizona’s $3.1 billion deficit is 36 percent of its much smaller budget while Nevada has a deficit of about $1.8 billion, or a whopping 54 percent of its total general fund budget.
Nevada’s budget hole is the worst in the nation and the Legislature is desperately working to craft a solution that Democrats and Republicans can agree on (Sound familiar?)
Nevada Assemblywoman Debbie Smith of Sparks, chair of the budget-writing House Ways and Means Committee, described the problem like this: “The Legislature needs to prepare a budget for two years. There’s only enough money for one year.”
In December, Nevada’s unemployment rate was a seasonally adjusted 14.9 percent, highest in the nation and well above California’s 12.5 rate.
The state also leads the nation in its home foreclosure rate, which has left neighborhoods in Sparks and North Las Vegas as little more than ghost towns, with a few homeowners leaving the lights on in a sea of bank-owned homes.
And as far as the business climate goes, just about anyone who has dropped a quarter in a slot machine and left an e-mail address with a hotel casino has been inundated with offers of free rooms and other goodies in an attempt to drum up business.
Then there’s this description in a different part of that university report:
“The state has relied disproportionately on temporary or one-time measures to fill its fiscal holes, rather than permanent repairs to the tax and expenditure system, despite the fact that many of the problems are long run in nature.”
Nope, that’s Arizona they’re talking about, not California.
Times are so tough there that voters last year overwhelmingly voted to boost the sales tax from 5.6 percent to 6.6 percent and Jan Brewer, the very conservative governor of that very conservative state, backed the plan as a budget necessity.
Democrats and Republicans are battling over plans for even deeper cuts in school and higher education funding. And then there’s Arizona’s decision to save money by banning certain types of organ transplants for low-income patients eligible for the state’s Medicaid program.
Both states have long contrasted their “regulation-lite” atmosphere with California’s record of business rules, worker protections and environmental regulation. Last year, for example, the Nevada Development Authority ran TV ads in Southern California featuring a monkey as a California legislator and urging businesses “to kiss California red tape and taxes goodbye” and relocate to Las Vegas.
That’s the same Las Vegas that in a November study by the Brookings Institution and the London School of Economics ranked 146 of 150 world metropolitan areas in economic performance, behind only Dublin, Ireland; Dubai; Barcelona, Spain; and Thessaloniki, Greece.
The pro-business tilt of Nevada and Arizona can’t be blamed for their financial problems. But it also didn’t protect them from the tsunami of economic troubles that washed over the entire country in the wake of the mortgage market disaster.
But that cuts both ways. No one’s arguing that California doesn’t need to take a hard look at its regulatory playbook and toss out the parts that don’t make sense or do more harm than good to the state’s economy.
Blaming those regulations for the state’s ongoing fiscal catastrophe, however, pretty much ignores the similar effect the recession has had on states very different from California. That argument is politics, not economics.
John Wildermuth is a longtime writer on California politics.