Kevin de León, the state Senate’s president pro tem, has been making his way slowly to a global conference on climate change in Paris next month.One of his stops, last week, was London, where he spoke to a group of British legislators and business leaders, touting the economic benefits of California’s efforts to curb carbon dioxide emissions.“We have the world’s seventh largest economy, and we have robust job growth that outpaces the rest of the nation, all while reducing carbon emissions and cleaning up the air we breathe,” de León said, according to a release from his office.De León and Gov. Jerry Brown are planning to attend the Paris conference – whose focus may change somewhat after last week’s terrorist attacks – to trumpet California as a global leader in carbon reduction, even though the Legislature killed a central part of their legislation.They were forced to remove a provision calling for a 50 percent reduction in automotive petroleum use by 2030 to save the rest of the de León-authored bill that tightens up requirements on electric power utilities to shift to renewable sources.Brown has often joined de León in claiming that carbon-reduction efforts, particularly the mandate on utilities to shift to renewable sources of power, are building, not damaging, the state’s economy.However, there’s no reason to believe there’s any more than a tangential relationship between the two. California has barely begun to crack down on carbon emissions so its effect on the state’s economy, positive or negative, has been infinitesimal.Furthermore, California’s economy is not really booming.A few sectors, principally the Bay Area’s technology industry, are doing very well, but recovery from the Great Recession elsewhere has been spotty.Our job-growth rate is far from the nation’s highest, our unemployment rate is 10th highest, and our underemployment rate is third highest. We also are No. 1 in poverty with nearly a quarter of Californians impoverished.Two days after de León delivered his upbeat speech to the British elite, the Assembly Committee on Jobs, Economic Development and the Economy, chaired by fellow Democrat Eduardo Garcia, staged a hearing in Ontario on economic disparity.Its staff briefing paper noted the state’s emergence from recession, but added, “Unfortunately the benefits of this recovery have not reached all areas of the state and only a select segment of the population is sharing in the resulting prosperity.”While those on the economic ladder’s top rungs are doing very well, the report continued, “many other Californians, however, are not thriving and continue to experience significant levels of unemployment, steeply rising housing and higher education costs, and stagnant wages and incomes.”It appears that de León and Brown are getting their economic data from California’s one-percenters, rather than reality. And that’s especially odd, given that de León represents one of the state’s poorest Senate districts.
The truth is that California will look most like the average because the state is the largest contributor to the average. So where is California extra growth coming from? Silicon Valley:
Since the Great Recession, California's labor force and economic growth has beendependent on one region: the Silicon Valley-Bay Area. For instance, without the Silicon Valley-Bay Area, the Golden State's employment growth between 2009 and 2014 and real gross domestic product per capita between 2009 and 2013 each drop about 2 percentage points. This is a 55% reduction in economic growth and a 25% cut in employment growth for California without this one region.Relying on just one region for a significant portion of economic and employment activity places the nation's largest state in a precarious position. But this also has problematic budgetary effects. It is no secret that California's budget is entirely dependent on its economic health for one reason: its volatile, extremely progressive income tax system. As of the enacted Fiscal Year 2015-2016 budget, the personal income tax accounts for 67% of all general fund revenues and 49% of all general and special fund revenues. Because of the personal income tax's reliance on capital gains tax revenue (which in California is taxed as ordinary income), this dominant revenue source experiences wild roller-coaster-like swings when the stock market and economy move. During good times, revenue overwhelmingly flows into state coffers, but even the slightest of downturns threatens to turn off the cash spigot.
But wait, California exports down:
California feels China’s pain.
The recent economic struggles of the populous overseas nation have caused a slowdown in the state’s export trade industry.
The latest evidence came in October 2015 figures released by Beacon Economics, the consulting firm that breaks down California’s export totals from U.S. Commerce Department figures. Beacon said in-state businesses shipped merchandise valued at about $14.7 billion in October, down 5.4 percent from $15.53 billion sent abroad in October 2014.
Amid the sea of data in the report was this: California shipments to China in the August-to-October period fell by 11.4 percent, from $4.19 billion last year to $3.71 billion in 2015. Shipments declined across the board, from computer equipment to agricultural products.
That is not all agriculture, most of it is high tech tools, tech licensing and ads and software. I never truste economic data generated by California government.
The Spiral Connection.
A few tech stocks drive the market. They falter, then pension funds need subsidies and state taxes drop. Regions outside of Silicon Valley are dependent on the public sector. But government hiring drops as pension costs rise. Jerry Brown brilliant economic management turns into a fraud.
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