Welcome to the March Building and Development issue of NorthBay biz magazine. In reading our stories this month, I think you’ll quickly realize that our take on the building industry is quite different from the prevailing negative vibe you’ve been reading or hearing from the various media outlets over the past couple of years. In our stories, we talk to local experts who’ve journeyed down the “market downturn” road before. Hopefully, you’ll find what they have to say refreshing and maybe even find some “positives” that have otherwise been largely unreported. So please enjoy all the stories, special features and columns in the North Bay’s only locally owned business publication—NorthBay biz.
As space ran out, last month’s column left off wondering about a couple of things—the efficacy of the federal stimulus package and how California is rapidly transforming from a place where dreams came true into a place where they can’t. And maybe one prime contributing reason for California’s decline is that its highest-skilled and best paying employment sectors have been steadily bleeding jobs over time. This lost private sector employment has been replaced with government jobs. Here’s a look at just three private sector job categories to illustrate my point. The industries are information technology, financial services and manufacturing, and their annual salaries average $75,000. The government job average salary is slightly north of $50,000 a year. And since 1990, these three skilled, high-paying industries have shed more than 400,000 jobs in California. Over that same time frame the government has more than made-up the difference by adding 450,000 jobs.
Now what’s wrong with this picture? Beyond the obvious salary differential, there’s the multiplier effect of new job creation. Every private sector skilled job created will lead to the creation of 2.75 other new jobs, versus 1.75 new jobs for every government job created. Legislators in Sacramento just don’t get it. Excessive regulation and taxation is killing the golden state. Companies are fleeing the state and, with that exodus, the tax base is reduced. As this transpires, it exacerbates the state’s crippling deficits. It’s front-page news when a major employer closes up shop and, with the closure, hundreds or thousands of jobs are lost. But, at the same time, you don’t hear of the hundreds or thousands of small businesses that are forced to lay off employees or shutter their business because of government policy. Currently, California unemployment is approaching 10 percent.
And still the legislature doesn’t get it. Instead, it remains the pawn of special interests, foregoing what’s in the best interest of the citizens of the state. Public employee unions file lawsuits to stop the Governor from furloughing state workers for two days a month, thinking, I guess, that they’re immune to the hardships everyone else in the state is subjected to. And State Controller John Chiang has weighed in on where he stands during the state’s economic travails. Chiang is on record as stating he won’t issue state tax refunds, but rather IOUs to conserve the state’s cash, but he doesn’t support the Governor’s furloughs designed to do the same thing. It’s obvious the State Controller has chosen to support the public employees union interests and not the taxpayers.
California’s economic viability depends upon a steady stream of income, sales, property and corporate taxes for its revenue. And ever-increasing government services and programs are made possible by an expanding business climate employing a high-wage workforce. Right now, the state has the third highest unemployment rate in the country, with the only growing sector being government jobs. Business, especially small business, can lead the state out of this recession, but the current regulatory and fiscal burdens make it very difficult. It really is an uphill struggle when business costs here are 23 percent higher than the national average. It doesn’t have to be that way.
But maybe California’s salvation lies in Washington, D.C.? Could the trillion-dollar stimulus bill be the answer? Let’s look at what we know about this latest bailout plan. Well, it was authored behind locked doors by Congressional leadership that decided to forego the normal committee process and, when examined by non-partisan analysts, they concluded the legislation couldn’t guarantee creating a single job! Not off to a good start are we? Another critic concluded that the stimulus package is three parts social spending to one part stimulus. It can’t possibly begin to work quickly, and it represents a permanent expansion of government power and bureaucracy, not an expansion of business. The trillion-dollar stimulus plan has morphed into nothing more than an appropriations bill.
I’ll leave you with these thoughts. On our current path, we’re headed directly toward nationalizing the economy. This approach has never worked anywhere it’s been tried. The President is quoted as saying, “This is not the time for entrepreneurs to make profits and get bonuses.” The Vice President, when talking about private sector CEOs says, “I’d like to throw these guys in the brig.” As if governmental policy (and outright malfeasance) had nothing to do with our economic plight. Senator Claire McCaskill has introduced a bill that will enable the government to dictate salaries of any company receiving bailout money. What a slippery slope—not to defend the outrageous compensation packages some CEOs received, but it isn’t the government’s role to set wage scales of private industry. Imagine where that would lead. And another bill, if passed, would let judges determine and ultimately alter the terms of mortgage contracts. No matter how well intentioned, what will that do to the sanctity of, and trust in, the enforceability of all contracts?
Despite hundreds of years of evidence to the contrary, we are on a course that puts more faith in the government to save the economy than the free market. This is a recipe for economic disaster. This is a massive transference of wealth and represents huge growth in the size and power of the government. When an integral part of the stimulus plan is to issue tax rebates to people who pay no taxes, we’ve abandoned the principles this country has prospered under for more than 200 years and blindly stepped off the ledge into full blown socialism. With nothing but best intentions, the consequences inherent within this plan will fundamentally change America forever.
That’s it for now. Enjoy this month’s magazine.
