Gino
DiCaro of the California Manufacturers and Technology Association calls me out here for not being understanding enough
about the plight of his bosses in the California manufacturing sector.
His
beef is with a recent piece in which I pointed out that
employment growth in California last year actually outpaced the nation if you
remove the effect of government layoffs and ongoing problems in the
construction industry, which was particularly hart hit by the collapse of the housing
market in California.
My
point was not that California is doing fine, but that analysts and lawmakers
should exercise caution when deriding the "business climate" and demanding
quick fixes that they say will lead to economic growth.
In
his piece, DiCaro does not mention that recent research by the independent
Public Policy Institute of California has shed significant light on this
question.
One
study by the institute showed that California actually loses very few jobs to
other states, probably on the order of about 10,000 a year, less than a drop in
the bucket compared to the more than 15 million jobs in the state’s labor
market. Yes, California probably also loses some opportunities for company
expansion, but those are much more difficult to quantify.
A
more recent study was even more on point for this debate, looking at 11 surveys
that ranks the states on their friendliness to business. California ranks low
in many of those, in part because of the state’s high corporate tax rate. And
the PPIC found that some of those studies did, indeed, seem to be correlated
with economic growth. But that was just the start of the story.
The
analysis also found that the simplicity of a state’s corporate tax code, not
its rate, tracked most closely with economic growth. And while higher
government spending seemed to correlated with lower economic growth, the
biggest culprit was not spending per se but programs that gave people an
incentive not to work. In fact, there is a good case to be made that spending
on infrastructure, education, universities, public safety and the environment,
even health care, all contribute to economic growth.
DiCaro
implies that I am suggesting a "do-nothing" approach, or at least providing
political cover for those who would support such a strategy.
But
investing in and improving kindergarten through community college education,
protecting and enhancing the state’s highly regarded four-year universities,
and safeguarding the state’s number one asset – it’s incredible natural environment
– would not be doing nothing. Combined with a fair and broad-based tax system,
these steps would help put, or keep, California on the road to recovery.
Daniel Weintraub is editor of the
California Health Report at www.healthycal.org