California and Its Contradictions

Joel Kotkin
Editor of NewGeography.com and Presidential fellow in urban futures at Chapman University

California remains deep blue, but the good news from this week’s elections is that it has not yet achieved complete ballot-box unanimity. California voters appear to have turned two or three house seats red, and statewide voters rejected some of the most extreme progressive proposals governing contract workers, affirmative action, expansion of rent control, and raising property taxes on commercial properties.

Overall, to be sure, California voters reaffirmed one-party rule, giving Joe Biden a two-to-one victory and maintaining the Democratic veto-proof majority in both legislative houses. The dominant urban centers, San Francisco and Los Angeles, went ever further into left field, approving radical measures such as increasing wealth taxes and using public funds to fight racism. They also overwhelmingly backed measures to raise commercial property taxes, expand rent control, and reimpose affirmative action, though these efforts failed miserably elsewhere in the state. San Francisco, where Biden won 85 percent of the vote, also voted for a new tax on companies where CEOs make too much compared with employees, and a measure to allow noncitizens to serve on public boards.

The good news for Californians is that the rest of the state is not quite ready for socialist rule by the public unions and their allies. “It’s not so much light pouring through the window, as a small crack opening,” suggests Joel Fox, editor of the widely read California political website Fox and Hounds Daily. The opportunity for centrists and conservatives lies in what a Marxist might describe as “heightening the contradictions” within the blue alliance. Consider the battle over Proposition 22, funded by Uber and Lyft, to overturn the state’s onerous AB5 law, which sought to force employers to treat contract drivers as full-time employees. This mandate, as the tech firms understood, would destroy their business model and their fortunes. Tech elites, who also worked tirelessly to defeat Donald Trump, spent an estimated $200 million to push the measure against labor opposition, and they seem to have won the day,

The conflict between the tech elites and labor, though, is not restricted to ride-sharing firms. Taxes remain a major battlefield. With the apparent defeat of Proposition 15, legislators seem likely to consider new statewide measures to raise income-tax rates to as high as 16 percent. This cannot be good news to the tech industry; not only its fabulously rich owners but also many of their well-paid top employees would be affected.

The state’s business regulations threaten even the most heralded, emblematic California companies. Disney executive chairman Robert Iger has fought with the state’s progressives, who generally favor extreme lockdowns, to keep his businesses open. 

Disneyland remains closed, resulting in 28,000 layoffs, even as the company’s parks in Florida and abroad are operating. The state’s inflexibility led Iger to resign from Governor Newsom’s coronavirus recovery taskforce.

Tesla’s Elon Musk has also dissented, having battled with Alameda County officials about the opening of his plant. More importantly, he seems to be shifting his investment focus, and perhaps even his headquarters, from California. He has already announced big expansion plans for both Tesla and Space X in Texas.

The contradictions between tech and entertainment oligarchs and the hard Left are likely to intensify in the years ahead. The state has neglected the basics of business competitiveness, particularly in creating the mid-skilled jobs crucial to a healthy economy. University of California at Irvine’s Ken Murphy estimates that, outside the Bay Area, 85 percent of all new jobs have paid below the area median income of $66,000; 40 percent pay under $40,000 a year. Once a beacon of opportunity, the Golden State suffers the nation’s highest cost-adjusted poverty rate.

Governor Newsom’s high-profile preening about lockdowns has made things worse, particularly for tourism and hospitality. In September, California’s unemployment rate stood at 11 percent, well above the national average of 7.9 percent and better than only four other states in the nation. Since the March lockdown, California, with 12 percent of the nation’s population, accounts for 16.4 percent of its unemployment.

Of the 55 largest metropolitan areas in the U.S., some of the worst job losses from February to August have occurred in the Bay Area and Los Angeles-Long Beach. Things are particularly grim for the L.A. area, with its huge exposure to losses in hospitality and other low-end service fields. Overall, Los Angeles has lost 11 percent of its jobs, Murphy notes, significantly higher than the 8 percent drop nationally.

At the same time, one sees clear signs that tech growth will be limited, as more companies expand outside the state and some, like Palantir, the data-mining software company, relocate, in its case to Denver. Some 40 percent of Bay Area tech workers say that they would like to move to a less expensive region, which suggests locations outside of California. In a recent survey, three-quarters of high-tech venture funders and founders predicted the same for their workforces.

For many Democrats, the loss of jobs demands not a change in state policies that chase away jobs but further expansion of government, including the creation of a basic income for its vast numbers of underemployed and underemployed. This is particularly critical for the Latino working class that—in sharp contrast with Latinos in Texas—has remained attached to Democrats, giving Trump barely half the percentage he won in the Lone Star State. Rather than push for economic growth, young Latinos, such as millennials elected this week to the city council in predominantly Hispanic Santa Ana, follow a progressive script about racial justice, public spending, and rent control.

Given the lack of upward mobility in California, such positions are not surprising. A population with little hope of starting a business, owning a home, or making a decent income naturally looks to government as its provider. Add to this the state’s extreme climate policies, which disproportionately affect industries that employ blue-collar workers, and it’s a perfect storm for continued progressive agitation.

If California remains intellectually dominated by a leftist media and academic elite promoting class warfare, it will be hard to create a more diverse, less dependent political culture. Instead, we will see the continued flight of middle- and working-class families out of state. They leave behind both an expanding underclass—a recent UCLA report found that there were enough homeless students of grade-school age to fill five Dodger Stadiums—and older, wealthier residents who came to California when the going was good.

Some conservatives rightly hail the rejection of the affirmative action referendum and of AB5 as landmark victories that show a potential pushback to the state’s relentless progressivism. “Californians are conservatives who think they’re Democrats,” suggests the right-of-center California Policy Center. This hopeful sentiment has some basis, but for now, it’s not likely that the state will abandon the high-tax and heavy-regulation policies that impoverish its population. For example, radical new proposals for slavery reparations—though California was admitted to the Union as a free state—are likely to emerge soon. Worse yet, California’s political reach seems to be expanding, despite its manifest failures, creating its own system of ideological satellites. Arizona, for example, has raised its state income taxes to among the nation’s highest, and states like Colorado and Nevada have shifted steadily leftward.

Ultimately, the battle to change policy direction—for the West generally, and maybe in the country as a whole—has to be won in California. This can only be accomplished by convincing young people and minorities that their future aspirations make them allies to the shrinking white middle-class population. Until ethnic minorities, including Asians—the state’s most rapidly growing and economically vigorous minority, which widely opposed the affirmative action proposition—absorb the pro-business and pro-growth ethic that built Californian prosperity, the state will at best continue its sideways drift into malaise.

Similarly, the attempt to drive Uber and Lyft out of business seems likely to alienate at least some of tech honchos and their employees. In an era where tech jobs are more mobile, and other regions are making appeals both to younger workers and high-paid executives, the state faces a severe economic reckoning. But given the progressive proclivities of the tech sector, any shift to a pragmatic center might be gradual, at best.

More critical to change may be an incipient rebellion against progressive policies by working-class voters. Some pushback is evident even from the unions and union-friendly politicians, as well as leading civil rights groups, representing working-class districts. Early opposition to Newsom’s proclamation banning gas-powered cars has come from the likes of Democrat Jim Cooper, who represents a largely working-class district south of Sacramento. Copper recently noted that the greens, “from their leaders to their funders, are nearly all white,” and their policies tend to seek “environmental justice” in forms that create a “burden to lower-income, working-class Californians.”

Even some of the Democrat-aligned private-sector labor unions have become more hostile to Newsom’s “visionary” actions. The oil and gas industry employs 152,000 people in California, and these workers, two-thirds without college degrees, make $80,500 a year on average—far more than the average for “green” jobs. “Can we immediately start talking about jobs? We can hate on oil, but the truth is our refinery jobs are really good middle-class jobs,” tweeted labor heroine Assemblywoman Lorena Gonzalez, author of AB 5. “Jobs can’t be an afterthought to any climate change legislation.”

These divisions and contradictions suggest the path exists for a true restoration of California as a beacon of entrepreneurship and opportunity. Election Day brought some promising results, but a state that retains a veto-proof legislature, a lockstep progressive governor preparing for a future trip to the White House, powerful public unions, and a debilitated political opposition still faces a long road back to sanity—and prosperity.

 

This article was originally published by City Journal Online.

 

Comment on this article


Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.