California’s Prosperity: Suffering and In Need of Repair
The state’s ongoing budget crisis will soon hit full steam
as legislative negotiations intensify. If they are to craft effective
solutions, legislators must understand the nature of our ailing economy.
The headline unemployment
rate for March was 12.6 percent, which ranks California third-highest in
the nation, behind only Michigan and Nevada. The average length of unemployment
in 2009 was the fifth-highest in the country at 26.5 weeks. The state coffers
are running dry and the bond market is worried about the state’s ability to pay
its bills as witnessed by repeated downgrades to California’s bond ratings.
Too many politicos in Sacramento assume the state’s problems
are part of the larger national recession and/or that California is plagued by
a regional problem affecting other southwest and Pacific states. Both arguments
are incorrect.
Pre-recession data shows California’s economy struggled
compared to the nation as a whole, as well as to our own potential. A 2009 study
examining the most recent five years of economic performance prior to the recession
across a wide range of economic variables ranked California 38th out of the 50
states. Clearly, our economic problems pre-date the recession, are not entirely
cyclical in nature, and remain worse than those of neighboring states during
the same period.
California Prosperity: Assessing the State of the Golden State
California is undoubtedly blessed in many ways. We enjoy
access to Asian and North American markets, we have a well-diversified economy
ranging from basic agriculture to advanced research and development, and we’re
home to some of the world’s most prestigious universities, which serve as hubs for
high-tech innovation. We offer a hospitable climate with real lifestyle
advantages to our residents. And yet despite all these advantages, our state
economy is very ill.
A study recently published by the Pacific Research Institute, California
Prosperity: Assessing the State of the Golden State, empirically
documents the nature and extent of the state’s economic woes.