Brutal honesty from The Economist, March 31:
Rising unemployment, a growing deficit and persistent outmigration are a painful trinity
HOME TO MANY of America’s most progressive policies, from criminal justice to vehicle emissions, California serves a unique role as a punchbag for right-wing politicians. Every few years it becomes fashionable to declare that it is a failed state, or that the California dream is turning into a nightmare. This rhetoric is often overblown: in terms of pure economic heft California remains the most powerful American state. But for all its continuing prowess in innovation (not least in artificial intelligence), California again appears to be entering one of its periodic rough patches.The state faces three overlapping challenges: rising unemployment, growing fiscal strains and population outflows. All of these should abate over time, but for now they mark out California as a pocket of relative weakness in an otherwise robust American economy.
When the Federal Reserve jacked up interest rates in 2022 in order to tame inflation, many analysts and investors fretted that this monetary tightening would lead to a recession. Instead, the broader economy has been surprisingly resilient. The national unemployment rate remains less than 4%, within spitting distance of a six-decade low. In California, by contrast, the unemployment rate has shot up to 5.3%, the highest of any state (see chart 1).
On its surface the reason for the rise in joblessness in California is no bad thing: as the aftershocks of the covid pandemic fade away, more people are actively seeking jobs. Until they find work, they show up in official data as unemployed. The deeper problem is that the state does not have enough work for them. In California there are roughly 0.8 job openings per unemployed person—the lowest in the country—whereas in America’s other 49 states the overall ratio is 1.6. On Indeed, a recruitment website, California is one of only a handful of states to have suffered a decline in job postings since the eve of the pandemic. Tech firms, which had hired aggressively during the long period of low interest rates, are now retrenching. Silicon Valley’s downsizing has seeped into other parts of the Californian economy, with transport, financial and manufacturing companies all shedding workers.
The Legislative Analyst’s Office (LAO), a nonpartisan fiscal adviser for California’s legislature, last autumn pointed to the rise in unemployment as a potential signal of a recession in the state. The LAO’s judgment matters because it focuses on the state’s fiscal picture, which appears to be badly frayed. Last year California’s income-tax collection tumbled by 25%, similar to falls during the global financial crisis of 2007-09 and the dotcom bust of the early 2000s.
Weakness has persisted. In his budget for the new fiscal year, which begins on July 1st, Gavin Newsom, California’s governor, projected that the state’s deficit would hit $38bn. But the LAO estimates that it is instead on track to hit $73bn. A slightly different methodology accounts for roughly half of that discrepancy, but however the numbers are sliced, California’s constitution requires a balanced budget and it must find a way to close its fiscal hole....
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Bringing to mind the outro from an April 2022 post, "California has the lowest literacy rate of any state, data suggests" which was a link to one of the most bizarre, triumphalist, eliminationist misreadings of policy and politics that you are likely to find anywhere. And for some reason investment advisors were recommending it and passing it around:
....I bring up all this history because the use of eliminationist talk is a direct precursor to genocide. Which makes the series of Medium posts by Peter Leyden and Ruy Teixeira back in 2017-2018 so interesting.
The Great Lesson of California in America’s New Civil War
Why there’s no bipartisan way forward at this juncture in our history — one side must win
By Peter Leyden and Ruy Teixeira
The next time you call for bipartisan cooperation in America and long for Republicans and Democrats to work side by side, stop it. Remember the great lesson of California, the harbinger of America’s political future, and realize that today such bipartisan cooperation simply can’t get done.
In this current period of American politics, at this juncture in our history, there’s no way that a bipartisan path provides the way forward. The way forward is on the path California blazed about 15 years ago.
In the early 2000s, California faced a similar situation to the one America faces today. Its state politics were severely polarized, and state government was largely paralyzed. The Republican Party was trapped in the brain-dead orthodoxies of an ideology stuck in the past. The party was controlled by zealous activists and corrupt special interests who refused to face up to the reality of the new century. It was a party that refused to work with the Democrats in good faith or compromise in any way.
The solution for the people of California was to reconfigure the political landscape and shift a supermajority of citizens — and by extension their elected officials — under the Democratic Party’s big tent. The natural continuum of more progressive to more moderate solutions then got worked out within the context of the only remaining functioning party. The California Democrats actually cared about average citizens, embraced the inevitable diversity of 21st-century society, weren’t afraid of real innovation, and were ready to start solving the many challenges of our time, including climate change.
California today provides a model for America as a whole. This model of politics and government is by no means perfect, but it is far ahead of the nation in coming to terms with the inexorable digital, global, sustainable transformation of our era. It is a thriving work in progress that gives hope that America can pull out of the political mess we’re in. California today provides a playbook for America’s new way forward. It’s worth contemplating as we enter 2018, which will be a critical election year.....
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