Ever since I moved to California in 1989, there has been a steady drumbeat about how California is anti-business and that the demise of the Golden State is upon us.
We’ve all heard the refrain. Taxes are exorbitant. Mindless regulations stifle innovation and strangle small business. Organized labor has too much power.
As a result, the story goes, jobs, companies and people are making an exodus to Texas and other states that understand what it takes to start and run a company.
The latest anxiety revolves around Toyota Motor Corp’s. decision to pull out of Torrance in Southern California and move to a Dallas-area business park with up to 4,000 jobs.
The move is obviously a blow to our state and to Toyota’s employees in Southern California. But Gov. Jerry Brown was probably right last week when he told reporters after a business breakfast that there was little California could have done to keep Toyota from leaving.
From all we have heard from Toyota, its decision seems to have been based on the company’s desire to consolidate its North American operations in a more central part of the nation.
But Neel Kashkari, the Republican former assistant secretary to the U.S. Treasury who is running for governor and trailing badly in the polls, did his best to try to lay the loss of jobs at Brown’s feet.
The governor didn’t fight hard enough to keep the company Kashkari suggested, and said Brown “has no idea how the private economy works.”
Brown probably didn’t exactly clarify matters when he cited the early 20th Century Austrian economist Joseph Schumpeter and his theory of “the creative destruction of capitalism” when Brown was asked to react to Toyota’s departure.
He might have been better off handing out copies of a lengthy article in the current edition of Washington Monthly by Phillip Longman, a senior research fellow at the New America Foundation.
“Oops: The Texas Miracle That Isn’t,” read the headline, and the piece is instructive reading for people who prefer facts over popular narrative and anecdotes.
Let’s stipulate before going any farther that California is a high-cost state, and that a number of national surveys rank California as a tough place to do business.
Of course there’s truth to some of the critiques. We do need to be smarter about finding the sweet spot between adequate regulation and protection of the public and policies that encourage the creation of businesses and jobs.
But take a closer look at Texas, the current popular example of how to build a robust economy, and the picture is murkier than advertised.
Much of the state’s job growth comes from a boon in drilling for natural gas and oil, which would be hard to replicate in California, a state where there is strong public support for protecting the environment.
There is no income tax in Texas, but according to Longman, most Texas business pay higher “total effective tax rates” than the national average and even California.
In an article filled with hard data and references to various public and private studies, Longman goes on to write that Texas “may be a great place to be a big oil or petrochemical company, or a politically favored large corporation able to wring out tax concessions . . . But for the vast majority of businesses, which are small and not politically connected, Texas doesn’t offer any tax advantages and is in many ways a harder place to do business.”
And California’s status as a pricey place to do business is not all due to wrongheaded public policy at the state or local level, as some would have us believe.
As the Los Angeles Times recently noted―in the same editorial that said it would be a mistake for California policymakers to not be concerned about the loss of Toyota and other large companies to other states―the issue is murkier here, too.
California’s “enormous population strains its infrastructure and safety-net programs, demanding ever-larger investments in roads, water, schools and healthcare,” the Times wrote. “Its topography traps smog, requiring costlier efforts to clean emissions. The results are a cost of living and a cost of doing business that are among the highest in the country.”
There’s no question California has many challenges and doesn’t always meet them as wisely as it can. The same can be said of any state and of our nation. But it’s also true that there are literally millions of people doing quite well in California and living productive and satisfying lives.
We have business that thrive here and California continues to recover from the national recession and add new jobs faster than most other states.
Our state is still a beacon of innovation and creativity. It is a magnet for tech innovators and investors and we get more venture capital in California than just about anywhere else.
We can do better and we must. In education, infrastructure and, yes, even social services. But how many Californians would trade Texas for living here? According to the U.S. Census Bureau, only about 80,000 more Californians moved to Texas than the number of Texans who moved to California between 2010 and 2011,. That is hardly an exodous.
There are some lessons we could probably learn from Texas about economic growth, just as there are some lessons they can learn from us. I know it’s campaign season, but we should expect and require context from people who want us to believe almost all the news about California is bad.