Welcome to the March Health and Medicine issue of NorthBay biz. This month, in addition to looking at area hospitals’ latest life-saving devices and treatments, we feature a special report on the construction industry. So please enjoy all the distinct local coverage this month as NorthBay biz continues its 35-year tradition of serving the best interests of the business community in the North Bay.
Here we go again—another year, another budget crisis. It looks like the state’s shortfall this time around is $26 billion. As a sort of an ironic tribute to the insanity of the times, $26 billion seems like no big deal. What’s all the fuss about? The federal government has the market cornered on unimaginable deficits. They’re talking trillions, not just measly billions.
But let’s focus on our state’s problems anyway, because very shortly, the wailing and gnashing of teeth will begin in earnest as Sacramento’s finest—our elected officials—will begin their annual exercise in finger pointing, trying to blame anyone but themselves for the state’s near financial collapse. Let there be no doubt, however, that all that currently ails California can be laid at their feet. And it doesn’t have to be this way. For grins, let’s briefly compare California with Texas; you be the judge about which state’s formula of governance is most effective.
To begin, Texas is a very hospitable and business-friendly state, welcoming new business startups and all the new jobs they create with open arms. Unemployment there is just under 8 percent, well below the national average and four points lower than in California. Notably absent in Texas is a state income tax and a capital gains tax. California not only has one of the highest progressive state income tax rates in the nation (actually, it’s the second highest to New York, another state on the brink of bankruptcy), but a capital gains tax too. While companies, people and jobs are fleeing California, 70 percent of all new jobs in 2008 were created in Texas. And, by the way, that state is running a budget surplus. Not really surprising when a dynamic marketplace is fostered.
California lost another 5,900 manufacturing jobs in December, bringing the total of manufacturing jobs lost in the state to 607,000 since 2001. New housing stats show there were fewer housing starts in the North Bay in 2009 than there’ve been in the last 40 years. Much has been made by our state pols that the next wave of job creation will be in the tech and green industries, but Facebook (located in Palo Alto) just announced it’s building a new facility in Oregon that will employ hundreds in its construction and 35 employees upon its completion. And MiaSole, a solar power components manufacturer (located in Silicon Valley) is building a new factory in Atlanta that will employ more than 1,000 people. But beyond these two recent examples, the exodus is actually more alarming. Consider: from 1990 through 2007, 3.4 million more Americans moved out of California than moved into our state. Isn’t it about time to stop fooling ourselves about how wonderful the weather is and face the reality that the tax base is moving on, no longer willing to let their pockets be picked?
How can we let this keep happening—company after company announcing plans to build, grow and expand elsewhere, taking all those new jobs with them? These companies are only acting in their own self-interest, because the state’s policies are leaving them little choice. Each departure leaves less fuel in the tank, and what’s the plan when the tank hits empty? I guess it isn’t too hard to raise taxes yet again, but it does get more difficult to collect them when nobody has a job.
Here’s the problem: Over the past several decades, California has drifted increasingly toward governing based on central planning solutions and away from individual-based solutions. As Texas streamlined regulations, lowered or simplified taxes and relieved litigation threats, California did the opposite, using litigation and regulation to transfer wealth from its creators to various special interest groups and killing millions of jobs in the process. As a consequence, California business hasn’t been able to compete on a level playing field, and government has become the enemy of meaningful job creation.
When are the politicians going to get it? What will it take? The state is spiraling down in a sinkhole of debt, and all they can do is propose more of the same. The tenor of feelings within the country is changing, and it’s changing quickly even here in California. The senatorial election in Massachusetts sent a very clear message about priorities. And as though operating on another planet (or maybe in a vacuum), Senator Leno introduces SB810, which proposes a state run single-payer health care system. As is usual with this kind of in-your-face proposal, SB810 includes no detailed financing structure, just the creation of another massive bureaucracy. That’s how this state is governed. Ideology trumps all. If the feds can’t get it done, we’ll do it here. To hell with what the people think or want. We know better.
What this country—and especially this state—needs is for the government to get the hell out of our way and let us stimulate the economy. Borrowing money against our children’s future sure isn’t the way. Piling up mountains of debt ensures forestalling any true recovery. All that debt just sucks away future growth with every astronomical interest payment. Printing money devalues money saved. And government creating jobs is just another drag on the private sector’s ability to create jobs, as it just moves money around from one sector to another, which, in the end, is all paid for with taxpayer dollars anyway. Wealth creation? I don’t think so. Lower taxes, rollback regulations and streamline the bureaucracies, and then watch the economy recover. Implement these steps, and you’ll help eliminate the current economic uncertainties. Then watch business—especially small business—roar to life creating the jobs that will end this recession.
That’s it for now. Enjoy this month’s magazine.
