New Geography

Tag: California

  • Top GOP Budget Officials Call for Investigation of Xpress West High Speed Train from Victorville to Los Angeles

    Congressman Paul Ryan, chairman of the House of Representatives Budget Committee and Sen. Jeff Sessions, Ranking Member of the Senate Budget Committee have expressed serious reservations on the proposed taxpayer loan to the Xpress West high-speed rail line that would operate two thirds of the way between Los Angeles and Las Vegas (from Victorville).

    A joint letter dated March 7 to United States Secretary of Transportation Ray LaHood called the taxpayer risks untenable. They asked for a Government Accounting Office investigation of the project and asked Secretary LaHood to suspend final determination on the taxpayer loan until the GAO investigation is completed.

  • Disney Stops Thinking About Tomorrow

    Walt Disney’s first version of Tomorrowland came to life in 1955. The attractions were geared towards the space age, and towards the future of transportation that Disney believed scientists of his time were about to create. The imaginary world was intended to “give you an opportunity to participate in adventures that are a living blueprint of our future.” When Tomorrowland opened, its showpiece was the TWA Moonliner exhibit, which contained the Rocket to The Moon; later, its Flight to the Moon gave another perspective. Once Neil Armstrong walked on the moon, these Disney attractions were no longer science fiction.

    Accommodating the reality of moon flights, the Flight to the Moon was updated to Mission to Mars. Only 14 years after the park opened, the space age that Walt Disney had imagined was becoming a reality. Before President Eisenhower had signed the Interstate Highway legislation, Autopia allowed riders to experience Disney’s interpretation of what the system would one day be like. Autopia accurately envisioned the future of America’s soon to be multilane limited-access highways.

    Another addition to Tomorrowland was the Monsanto House of the Future, added in 1957. Items such as picture phones, television remote controls and a microwave oven familiarized many visitors with these ideas for the first time. Tomorrowland continued to prove itself as an innovative predictor of the near future.

    Downfall of the Futuristic Tomorrowland – Unlike its predecessor, Mission to Mars wasn’t replaced after becoming a reality. Instead, Red Rockett’s Pizza Port, a space themed pizza parlor, took its spot in the 1998 refurbishment. Disney didn’t have enough confidence in a real mission to Mars to update or revamp the ride. Instead of updating it, Disney was essentially saying that a successful human mission to mars was not a fathomable idea.

    At the same time, Disneyland was cutting back on refurbishment in the Carousel of Progress. This attraction took viewers on a journey through the eyes of a “typical” American family exploring life through the dawn of electricity and other technological advancements. Periodic updates were necessary to keep up with the times of its audience. The first version lasted three years, the second six years, and then two years, ten years, and nine years respectively. The attraction has been periodically closed, but hasn’t been significantly modified in 18 years. This increased changeless period waves another flag of concern, as it demonstrates Disney’s view that there has been no noteworthy progress in almost two decades.

    Rather than foreshadowing, like the early Tomorrowland did, current Tomorrowland is opening attractions like Buzz Lightyear Astro Blasters, where passengers shoot targets modeled from Toy Story or a submarine voyage where passengers go “under the sea” to spend time with characters from Finding Nemo. Concentrating on movies expresses that Disneyland has no expectations to focus on the future. The most recent display of this is the sequel of the Star Wars themed motion simulator, Star Tours: The Adventures Continue. Instead of replacing the out of date ride with a new, innovative idea, the same idea from 1987 with newer graphics sufficed. While in the past a bright vision of the future both inspired and guided Disney’s early Tomorrowland, today’s innovative standstill forces the Disney company to draw the focus off the future’s possibilities and gear the theme park towards animations.

    Disney Movies – Select movies demonstrate Disney’s continual hope in the space era. The first Zenon movie was set in the year 2049 and took place in the orbiting space station where Zenon’s family resided. Even though this movie was released in 1999, much after Walt Disney’s death, his visions of a space era are directly displayed. Since Zenon, Disney has released another movie with humans residing in an orbiting space station. In 2008’s Wall-E, the humans were forced to evacuate to space in 2105 when the earth became unsafe for human life.

    While Disney is keeping their space era predictions, they are continuously projecting them further into the future. Originally, 1955’s Tomorrowland envisioned space development for 30 years in the future. 1999’s Zenon gave the orbiting space home 50 years to become reality, and 2008’s Wall-E gave nearly 100 years until humans began to live in space. This growing gap shows that although the idea of space development stays near to Disney’s heart, the company’s pessimism about the technological advancements of society certainly exists.

    Justified Pessimism? – Disney’s pessimistic attitude towards the rate of current advancement comes from a place of truth. New, revolutionary ideas were coming out on a consistent basis in the mid 1900s during Walt Disney’s generation, but near the late 1900s progress as a whole slowed down. Rather than innovating new and fresh ideas, the current generation fine-tunes the revolutionary ideas of their predecessors.

    A kitchen today won’t differ too grandly from one in 1980. Although most appliances may be higher quality, they were still there in both eras. Comparing kitchens from 1980 and 1940 shows vast differences. Not only did appliances get sleeker, but you will also not find a microwave, a food processor nor Tupperware anywhere. These are only a few of the many kitchen changes that came to life in that time period. The kitchen only represents a small sector of technology and advancement, but the trend it represents stands.

    The oldest members of today’s world lived through the invention or development of the airplane, skyscraper, suspension bridge, radio, television, antibiotics, atomic bombs, and interstate highways. The mid-life individuals went through the first moon landing, the popularization of personal computers and invention of search engines, biotechnology, and cellphones. Participants of the younger generation have seen much up- tuning of these devices, but are greatly lacking in brand new revolutionary inventions.

    Facebook and the iPhone may be classified as the monumental inventions of the past decade. While they improved the social networking and convenience of society, can they really be compared the monumentality of the first airplane or personal computer? Previous milestones are being expanded and fine-tuned. Rather than thinking of new revolutionary discoveries, the current generation attempts to fix the old ones. Technology seems to be hitting a very worrisome plateau.

    Walt Disney was justified in the optimism he displayed with 1955’s version of Tomorrowland. He belonged to the generation of innovation, and naturally expected society to continue flourishing. He didn’t foresee the technological plateau blocking Tomorrowland from becoming reality. Currently, Disneyland is trying to divert notice from the lack of change by adding more animated features to Tomorrowland. The new rides help visitors feel as if Tomorrowland is still continually changing, and that progression hasn’t slowed down.

    However, it’s only a matter of time until the whole sector becomes a Disney themed montage. If technological development continues at this rate, Tomorrowland may as well combine with Fantasyland as a childish delusion from the past. As displayed by the modern developments of both Disney movies and Disneyland, the once flourishing future that Disney envisioned for the world is coming to a rapid halt.

    Flickr photo by jnocca93:
    Entrance to Tomorrowland     at Disneyland, California.

    Zohar Liebermensch is a sophomore studying business administration emphasizing in economics with minors in computational sciences and the university honors program at Chapman University. Born in Israel, she moved to northern California when she was a toddler and has been enjoying Orange county for the past two years. She is vice president of the Chapman chapter of the National Society of Leadership and Success as well as a member of the university’s soccer team.

  • In California, Don’t Bash the ‘Burbs

    For the past century, California, particularly Southern California, nurtured and invented the suburban dream. The sun-drenched single-family house, often with a pool, on a tree-lined street was an image lovingly projected by television and the movies. Places like the San Fernando Valley – actual home to the "Brady Bunch" and scores of other TV family sitcoms – became, in author Kevin Roderick’s phrase, "America’s suburb."

    This dream, even a modernized, multicultural version of it, now is passé to California’s governing class. Even in his first administration, 1975-83, Gov. Jerry Brown disdained suburbs, promoting a city-first, pro-density policy. His feelings hardened during eight years (1999-2007) as mayor of Oakland, a city that, since he left, has fallen on hard times, although it has been treated with some love recently in the blue media.

    As state attorney general (2007-11) Brown took advantage of the state’s 2006 climate change legislation to move against suburban growth everywhere from Pleasanton to San Bernardino. Now back as governor, he can give full rein to his determination to limit access to the old California dream, curbing suburbia and forcing more of us and, even more so our successors, into small apartments nearby bus and rail stops. His successor as attorney general, former San Francisco D.A. Kamala Harris, is, if anything, more theologically committed to curbing suburban growth.

    Sadly, much of the state’s development "community" has enlisted itself into the densification jihad. An influential recent report from the Urban Land Institute, for example, sees a "new California dream," which predicts huge growth in high-density development based on underlying demographic trends – like shifts in housing tastes among millennials or empty-nesters rushing to downtown condos.

    Yet it’s not enough for the planners, and their developer allies, to watch the market shift and take advantage of it. That would be both logical and justified. But the planning clerisy are not content to leave suburbia die; it must, instead, be cauterized and prevented, like some plague, from spreading.

    Ironically, it turns out that the "new California dream" is more widely shared by planners and rent-seeking developers than by the consuming public. During the past decade, when pro-density sentiment has supposedly building, some 80 percent of the new construction in the state was single-family, a rate slightly above the national average. Over time, Californians continue to buy single-family houses, mostly in the suburban and exurban periphery. They do it because they are like most Americans, roughly four of five of whom prefer single-family houses, preferably closer to work but, if that proves unaffordable, further out.

    This includes both working-class and upper middle-class markets. The more-affluent, including many largely Asian immigrants, have been willing to buy high-priced homes closer to employment centers in places like Irvine or Cupertino, near San Jose. Meanwhile, the less-affluent of all ethnicities continue to move further out, to places like the Inland Empire or the further reaches of the Bay Area. These peripheral areas have continued to represent the vast majority of growth in both greater Los Angeles and around the Bay Area.

    Meanwhile, some of the urban-centric residential construction now being put up will, as occurred in the housing bust, may be fashionable but, in some cases, not so profitable over time. Construction is being driven mostly by tax breaks, Uncle Ben’s essentially ultralow-interest money for wealthy investors and, in some cases, subsidies. Overall, the Wall Street Journal notes, the rental market is beginning to "lose steam," as people again start looking into buying homes. This may suggest that new speculative building in places like downtown Los Angeles – where there’s good evidence that rents and occupancy levels are, if anything, getting weaker – may end up in tears.

    To date, the anti-suburb jihad has been somewhat constrained by the recession and the collapse of the housing bubble about five years ago. But now that there’s an incipient housing recovery in parts of the state, including Orange County, the constraints could be problematical, particularly for younger buyers about to start a family or for people migrating into the state.

    The impact may be felt first in Silicon Valley and its environs. The planners now dominating the Bay Area want only highly dense bus-stop- or train-oriented development in the valley. Yet, notes real estate consultant John Burns, this does not reflect market realities marked by what they describe "as a resilient and ongoing preference for single-family homes."

    Even more fanciful, they are promoting high density in areas, far distant from current employment centers, in dreary locales like Newark, south of Oakland, claiming workers there will take public transit to jobs in the Valley. The belief among planners and some gullible developers that aging millennials will choose to live in high density, far from costly San Francisco or Palo Alto, and commute to work by transit is somewhat north of absurd; today, a bare 3 percent of workers in Silicon Valley get to work by transit, and downtown San Jose, the logical terminus of any transit strategy, is home to barely 26,000 of the region’s 860,000 workers.

    Some tech workers may put up with a few years of high rents and shared apartments in San Francisco or Palo Alto, but not many will want to live in expensive towers far from both Silicon Valley’s primary employers and the amenities of the big city. Apple’s plans for a new headquarters in Cupertino has drawn criticism from green-minded urbanists precisely because they rest on the sensible presumption that Apple’s workforce will remain largely suburban and car-oriented. One can also wonder the effect on the start-up culture when workers have been forced to live in places lacking the proverbial garage or extra bedroom that historically have nurtured new firms.

    More important still, forced densification, by denying single-family alternatives, is likely, and in some places, already is, spiking prices, which are up $85,000 in Silicon Valley in a year. This, over time, will force millennials, as they age, to look for other locales to meet their longtime aspirations. Generational chroniclers Morley Winograd and Mike Hais, in their surveys, have found more than twice as many millennials prefer suburbs over dense cities as their "ideal place to live." The vast majority of 18-to-34-year-olds do not want to spend their lives as apartment renters; a study by TD Bank found that 84 percent of them hope to own a home.

    Much the same can be said of Asian immigrants, who are now driving much of the new-home sales, particularly in desirable places like Orange County or Silicon Valley. Nationwide, over the past decade, the Asian population in suburbs grew by almost 2.8 million, or 53 percent, while the Asian population of core cities grew 770,000, 28 percent. In greater Los Angeles, there are now three times as many Asian suburbanites as their inner-city counterparts.

    If California is not willing to meet the needs of its own emerging middle class, there’s no doubt that other states, from Arizona and Texas to Tennessee – although not as fundamentally alluring – will be, and are already, more than happy to oblige.

    Rather than seeking to destroy our suburbs, California leaders should expend their energy figuring out how to make them better. Rather than some retro-1900s urbanist vision, they need to embrace the multipolarity of our urban agglomerations. They could look to preserve open space nearby, when possible, or cultivate natural areas, parks, walking and biking trails that would appeal to families as well as to singles.

    Instead of attempting to force employment into the center city, it would make more sense to expand home-based and dispersed work in order to cut down or eliminate commuting times. These moves would create both healthier suburbs and reduce carbon emissions without devastating the natural aspirations of most California families.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

    Suburb photo by BigStockPhoto.com.

  • California Becoming Less Family-Friendly

    For all of human history, family has underpinned the rise, and decline, of nations. This may also prove true for the United States, as demographics, economics and policies divide the nation into what may be seen as child-friendly and increasingly child-free zones.

    Where California falls in this division also may tell us much about our state’s future. Indeed, in his semi-triumphalist budget statement, our 74-year-old governor acknowledged California’s rapid aging as one of the more looming threats for our still fiscally challenged state.

    Gov. Jerry Brown, unsurprisingly, did not acknowledge or address the many factors driving the aging trend that include his own favored policy prescriptions. Whatever their intent, the usual "progressive" basket of policies have had regressive results: a tougher time for both the poor and middle class, and a set of density-oriented policies that are likely to drive up housing prices, particularly for the single-family houses largely preferred by people with children.

    These policies have helped turn California into a state that looks less Sunbelt and more like the long-aging centers of the Northeast and the Midwest. It also mirrors declines in fertility and marriage rates in the most-rapidly aging parts of Europe and east Asia. These regions are shifting toward what Chapman University’s recent report, in cooperation with the Civil Service College of Singapore, characterized as post-familialism. Released this past fall in Singapore, the report will be presented in Orange County this week.

    We believe that the rapid decline of marriage and fertility rates in many advanced countries inevitably leads to economic decline, reduced workforces and, likely, an inevitable fiscal disaster. This may be becoming now more true in the United States, a country which once boasted the most vibrant demographics in the high-income world but since the 2007-09 recession has seen a rapid drop in both its marriage rate and fertility rates to well below 2.1 children per female, what is generally referred to as "the replacement rate."

    Just as it differs by country, the degree of post-familialism varies among countries, but it also does among states and regions. Some states, notes a recent Packard Foundation study, such as Texas, Utah and North Carolina, have seen double-digit gains in their child populations over the past decade while California’s has dropped by over 3 percent. Some urban regions like Raleigh, Austin, Houston, Charlotte, Dallas-Fort Worth and Atlanta have also seen rises in their number of children, with population between ages 5 and 17 growing by 20 percent or more over the past decade.

    Historically, California and its regions stood among these family magnets, but no more. Like the states of the Northeast and upper Midwest, the Golden State is becoming rapidly geriatric, as families opt out, and immigration, the primary source of our growth in younger people, declines in an economy ill-suited to migrants with aspirations for a better life.

    Southern California, where immigration has dropped by roughly a third over the past decade, has shared in this decline.

    All three major regions of greater Los Angeles – the San Bernardino-Riverside area, Orange and Los Angeles counties – have seen a sharp drop in their percentages of children. Only the Inland Empire remains still relatively youthful overall, with some 26 percent of its population under 15, well above the national average. In contrast, Los Angeles and Orange counties experienced a 15.6 decline in under-15 population, highest among the nation’s metropolitan areas. Meanwhile, the over 60 population grew by 21 percent.

    One clear indicator can be seen in our declining school populations. Despite massive expenditures for new construction, over the past decade the Los Angeles Unified School District has seen enrollment drop by 7.5 percent. In that period, the student count fell by over 50,000, the largest numerical drop in the nation.

    What is leading to this exodus of families? Sacramento politicians and their media enablers blame insufficient investment in education or simply national aging trends as the root causes. But then, why are other states, including our key competitors, gaining families and children?

    Sacramento lawmakers of both parties share some responsibility. The dominant progressives’ regulatory and tax agenda continues to reduce economic prospects for younger Californians, leading many young families to exit the state. In contrast, older Anglos, the bulwark of the now largely irrelevant GOP, are committed to massive property tax breaks because of Proposition 13. Add good weather and the general inertia of age, and it’s not surprising that families might flee as seniors stay.

    Other factors work against parents, prospective or otherwise. The knee-jerk progressive response to our demographic problems usually entails more money be sent to the schools.

    But they rarely include the student-oriented reform measures such as those enacted in New Orleans (where I am working as a consultant). The poor performance of public education, clear from miserable test results and dropout rates, makes raising children in California either highly problematic or, factoring the cost of private education, extremely expensive.

    If you think Proposition 30’s higher sales and income taxes will change anything, think again.

    Much of that money will end up, almost inevitably, going toward pensions of teachers and other state workers. The hegemonic teacher unions have as their primary goal protecting the system at all costs and resisting change.

    Equally critical, the state’s "enlightened" planning policies also work to discourage families. California’s new climate-change-mandated housing regime – preferring apartments over houses – does not specifically target families, but the case for greater density is often predicated on an ever-declining number of families and an undemonstrated growing preference for density. "Singles and childless couples are the emerging household type of the future," suggests developer and smart growth guru Chris Leinberger.

    These post-familial trends have been incorporated into the influential report, "The New California Dream," widely accepted as gospel by many in our state’s development community.

    The author, the University of Utah’s Chris Nelson, interpreted early 2000s public opinion surveys to suggest a growing preference for smaller lot sizes and apartments, though the data indicate no change over the past 10 years. Developers assume that as singles, empty-nesters and childless couples become as the state’s primary market, this likely misperceived preference will gain even greater strength

    So what would a post-familial future mean for California? You don’t need a crystal ball to figure this one out. Just look at what is happening in other rapidly aging economies, especially Japan, but also much of Europe.

    Dense housing, high taxes and lack of space (such as back yards) tend to discourage family formation. Slower population and labor-force growth then slows the economic engine, which, in turn, creates a greater imbalance between workers and pensioners. The result, ultimately, could be a kind of fiscal Armageddon.

    Fortunately, none of this is inevitable. States such as Utah, Texas and North Carolina continue to attract families, bringing with them new workers, companies and customers. As their economies grow, they can generate broadly based revenue, unlike California, which is increasingly reliant on housing or stock-price bubbles that benefit the already affluent and older populations.

    It is not our karma, Gov. Brown, to submit to a Japanese-like demographic demise. But revitalizing California will require a radical reevaluation of priorities and reconsideration of policy impacts on families.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

    Childhood kids photo by BigStockPhoto.com.

  • More Bubble Trouble in California?

    Just six years since the last housing bubble, California is blowing up another. This may seem like good news to homeowners and speculators alike but it could further accelerate the demise of the state’s middle class and push more businesses out of the state.

    On its face, a real estate turnaround should be a strong sign of an economic recovery. In Southern California, home sales have jumped 14 percent over last year and the median price is up 16 percent, some 25 percent in Orange County. We may not quite be at 2007 super-bubble levels but we’re getting there, particularly in the more desirable areas.

    Yet, before opening the champagne, we need to look at some of the downsides of this asset recovery. We are not seeing much new construction, particularly of single-family homes, so the supply is not being replenished as inventory sinks. Meanwhile, many of the homebuyers are not families seeking residences, but flippers, Wall Street types and foreign investors. A remarkable one-in-three Southern California home purchasers paid with cash, up from 27 percent from last year.

    It’s clear that this increase is not being fueled primarily by income growth among middle-class Californians; these "prices are rising disconnected from household incomes," notes one analyst. Indeed, California incomes have been dropping somewhat more rapidly, down $2,600 per household from 2007-11, according to the American Community Survey, compared with a $200 drop nationwide. California incomes are still 13 percent higher than the national average, but a lot less so than in the past, particularly given the much higher costs and taxation.

    This leads to what is becoming the biggest problem facing the state – a decline in the rates of affordability. The previous bubble left us a legacy of more-affordable housing, an advantage we may now be losing. Historically, and in much of the country, the median multiple, which compares the median-price home to median household income, was in the three range. At the height of the previous bubble, the median multiple for the Los Angeles-Orange County metropolitan area, reached 11.5 in 2007, then fell to a still-elevated 5.7 in 2009, notes demographer Wendell Cox. It remained steady in 2011, but in just the past year the measurement has shot up to 6.2. A few more years at this rate, and housing affordability could worsen materially.

    The new bubble can be seen elsewhere in the state. The most prominent inflation in housing values can be seen in the San Francisco Bay Area, which has enjoyed the most buoyant recovery from the recession. Never a cheap area, in 2006, San Francisco reached a median multiple of10.8 and Silicon Valley (San Jose) rose to 9.3. When the bubble imploded, the median multiple fell to 6.7 in both metropolitan areas, still well above any level recorded before the housing bubble. But now, amidst a concentrated boom in the western side of the Bay, the median multiple rose the equivalent of 1.1 years of income in San Francisco (to 7.8) and 1.0 years of income in San Jose (7.9) in a single year.

    Of course, you can argue that the higher prices in the Bay Area are explainable at least in part by a growth in employment and wealth generated by tech start-ups. But what about soaring prices in places like the Inland Empire (Riverside-San Bernardino), Sacramento or Fresno, where economic growth has been torpid, and unemployment remains well north of 10 percent? Over the past year, Sacramento’s median multiple has risen from an affordable 2.9 to 3.2, the Inland Empire from 3.2 to 3.7 while Fresno’s has gone from 3.1 to 3.5.

    As these prices rises, the California dream, already increasingly off-limits in the coastal areas, begins to become less achievable even in the inland areas. Already, barely 55 percent of Californians own their own home, down from the bubble-period high of 60 percent in 2005 and compared with upward of 65 percent nationally.

    Traditionally, the pent-up demand for houses would be met in the marketplace, but California’s Draconian planning laws make this very difficult. In the first 11 months of 2012, the Census Bureau reports that the Los Angeles-Orange County metropolitan area had half as many construction permits than much smaller Dallas-Fort Worth, 60 percent of Houston’s permits and fewer even than the relatively tiny Austin, Texas, metropolitan area. More to the point, more than 70 percent of L.A.’s construction was in multifamily units while the majority in most areas, (except for such areas as New York, San Francisco, San Jose and San Diego) was in single-family homes.

    Given the state’s planning preference for high-density housing, even in suburban and exurban areas, there’s little hope that California single-family home buyers can expect much relief. As millennials age, and seek out this form of housing as they start families, they will likely look increasingly elsewhere, for example, in Dallas-Fort Worth, Houston, Phoenix or Atlanta. The great California exodus, which slowed during the housing bust, will likely pick up, joining up with the continued movement of employers to more business-friendly states.

    In the short run, of course, not everyone loses from a new bubble. Owners of homes, particularly along the coast, will see a big increase in their net worth. There could be good times ahead again for what author Bob Bruegmann calls "the incumbent’s club." With projected new units running at one-half their 2007 level until 2015, scarcity will help the state’s graying gentry. These same citizens also enjoy a double bonus, since most are protected by Proposition 13 from paying higher property taxes on their rising property values.

    The bubble may also have short-term positive impact on local governments, which may benefit from high property taxes if more homes change hands at higher prices. The "wealth effect" could also bring new capital-gains income to a state government whose revenue stream increasingly depends on the upper-class taxpayer, particularly after the passage of Proposition 30, which increased the state’s reliance on high-income earners. In this sense, the asset inflation could help Gov. Jerry Brown enjoy his much-trumpeted surplus, and he may even avoid the deficit projected next year by the Legislative Analyst.

    These positive effects may be outweighed by bigger concerns. The pushback against single-family homes will restrain the growth of the construction industry, still down 400,000 jobs from its 2006 peak. This is particularly critical for working-class Californians, many of whom previous made decent livings in this industry.

    But workers and homebuilders won’t be the only ones affected; so, too, will consumers. Without a loosening of regulatory constraints, pent-up demand for housing, particularly the single-family variety, will remain largely unaddressed. This will further inflate the bubble even in unfashionable areas. We may soon see a surplus of rental apartments, but not enough single-family homes; the ownership market, as evidenced by the rising median multiples, will continue to tighten, and prices could rise even more, even in a mediocre economy.

    The groups hit hardest by this scenario will be middle- and working-class Californians, particularly above the age of 30-35, most of whom desire to own their own home. Unable to qualify, or unwilling to overleverage, many will be forced either to give up their dreams or look elsewhere, taking their talents and, eventually, their offspring, with them.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

    Photo by Sean Dreilinger: One of two adjacent bank owned homes.

  • Prescription for an Ailing California

    Only a fool, or perhaps a politician or media pundit, would say California is not in trouble, despite some modest recent improvements in employment and a decline in migration out of the state. Yet the patient, if still very sick, is curable, if the right medicine is taken, followed by the proper change in lifestyle regimen.

    The first thing necessary: Identify the root cause of California’s maladies. The biggest challenge facing our state is not climate change, or immigration, corporate greed, globalization or even corruption. It’s the demise of upward mobility for the vast majority of Californians, and the rise of an increasingly class-ridden, bifurcated society.

    California’s class problem spills into virtually every aspect of our malaise. It is reflected in both the nation’s highest poverty rate, above 23 percent, and a leviathan welfare state; California, with roughly 12 percent of the population, now accounts for roughly one-third of the nation’s welfare recipients. This burgeoning underclass exacerbates the demand for public services, deprives the state of potential taxpayers and puts enormous pressure on the private sector middle-class to come up with revenue.

    The growing class chasm also distorts state priorities, creating an inordinate demand for public sector employment – and related jobs in health and education – while inculcating deep-seated resentment among private-sector entrepreneurs and professionals toward a state that asks much of them, but gives increasingly little.

    Conservatives generally have recoiled from a class-based analysis, hoping to play on ethnic or cultural fears to advance their agenda of lower taxes and less regulation. Their incoherence and inability to adjust to changing demographics have left them increasingly irrelevant.

    On the other hand, progressives feel comfortable with class as an issue, but see more regulation and ever higher taxes on the private sector as the solution. Yet the experience of the past decade has shown their folly, as California’s middle class has continued to shrink, and poverty has worsened, particularly in the state’s interior. The dangers of a large permanent underclass of unemployed and underemployed should be clear even to the most dreamy progressive.

    Essentially, there is only one practical solution to this dilemma: a program that promotes economic growth. This strategy would transcend the recent reliance on asset-based bubbles that have boosted property markets and technology stocks. Another bubble, whether an investor-driven spike in property values in Newport Beach or a stock mania in Silicon Valley, may provide a temporary boost in revenue but will do very little to improve employment for the vast majority or to stabilize long-term finances.

    The recent surge in tech employment in places like Silicon Valley is neither likely to persist or improve conditions for many Californians. The days of huge employment gains in Silicon Valley – where jobs more than tripled from 1970-2000 – are over. Even in the current boom, the Valley’s employment remains down from a decade ago, and the rest of the state is doing decidedly worse. Social media simply will never be a major job producer or productivity enhancer; Facebook has 4,300 American employees, while old-line firms, like Intel, which have been shifting employment out of the state, have 10 times as many.

    Other proposed bromides, like Gov. Jerry Brown’s promised 500,000 "green jobs," need to be dismissed for what they are – stories we tell our children so they will fall asleep. High-speed rail, another modern-day Moonbeam program, is seen, even by many progressives, such as Mother Jones’ Kevin Drum, as an "ever more ridiculous" boondoggle based on "jaw-droppingly shameless" assumptions.

    Instead of delusion, California needs policies that can boost economic growth in precisely those areas – construction, agriculture, manufacturing and energy – with the best prospects for creating good, high-paying jobs for both blue- and white-collar Californians. Yet, right now the Legislature and, even more so, the empowered state apparat, seem determined to do everything they can to strangle an incipient recovery in these industries.

    Sadly, much of this is done in the name of the environment, but often based on dubious assumptions. Laws that seek to reduce water allocations to the Central Valley are justified as protecting a bait fish, but create windswept new deserts, along with shocking poverty, in the state hinterland. It is no longer enough to protect the still-wild environment; mankind itself must be pushed away from areas that, in some cases, for generations, has provided food for the world, income for families and revenue to the state.

    Concerns over climate change have justified much of the state’s regulatory tsunami. Yet it is absurd to assert that California by itself can change global climate conditions in any meaningful way, given that the big increases of carbon emissions are all coming from the developing world; overall, America’s emissions already are dropping far more quickly than in other high-income parts of the world, largely due to the natural gas boom.

    Yet such mundanities matter little when our greatest policy goal seems to be to make the regulatory apparat, Hollywood and Silicon Valley moguls and their favored nonprofits feel better about themselves; if it provides job opportunity for zealots or the rent-seeking kind for favored venture capitalists and companies like Google, all the better.

    Worse, the consequences of these policies, such as soaring energy prices, likely will not be felt in Portola Valley, Corona del Mar or Pacific Palisades, but, rather, in Santa Ana, Modesto and Oakland. Our regulatory regime already has cost California the opportunity to cash in on two significant booms – in manufacturing and in fossil fuel energy – that are creating middle-income job opportunities and upward mobility in other parts of the country.

    On the environmental side, these policies could have an overall negative effect by driving both people and industries to areas that, because of climate and regulatory environment in their new homes, likely will expand their carbon footprint. Arguably the best thing California can do to reduce global carbon emissions would be to boost its industrial profile. The state also should be leading the shift to natural gas, which California, a potentially big player, so far largely has refused to join.

    Another great opportunity lies in housing, a key source of both white- and blue-collar jobs. Population growth may have slowed, but the pent-up demand, largely from immigrants and millennials, for single-family homes, remains potentially strong. If the supply was increased, and prices moderated, homebuying would become more attractive for families with children. Emissions could be cut in more family-friendly ways, by encouraging more fuel-efficient cars, the dispersion of industry and, most particularly, telecommuting.

    Sparking the revival of these basic industries and higher-wage employment would enhance California’s budget situation over time far more than increasing taxes on the remaining residue of entrepreneurs and professionals. Energy work, in particular, pays high wages, often more than for many tech jobs, and both manufacturing and construction generally provide higher incomes than the low-wage service work that has become the only option for millions of Californians.

    Getting kids from the Central Valley or East Los Angeles working on housing sites, factories and energy facilities is both the most humane, and practical, way to right our fiscal ship. Growth in these industries would also spur the knowledge sector of the economy; many of the strongest gains in STEM (science, technology, engineering and mathematics) jobs in recent years have occurred in manufacturing regions, such as Detroit, or in the energy belt, notably Houston. California’s technical know-how should not be expended simply on developing computer games and social networks; resuscitating the tangible economy would also diversify employment opportunities for the highly skilled.

    Government can play a critical, even determinative, role here. But it needs to shift priorities from redistribution and wealth suppression to providing the basic infrastructure essential for a growth economy. It means transforming our education system from a jobs and pension program for public sector workers and corporate rent-seekers to a focus on providing our economy with the skills – including those used in basic industries – needed for a revived California. It means spending money on the kind of infrastructure, such as gas pipelines, roads, urban bus lines, water and energy systems, that can spur growth instead of misallocations such as high-speed rail and subsidized green energy boondoggles.

    This back-to-basics approach could restore California’s aspirational promise, and not only for a favored few in a handful of favored places, but for the majority of our people, from the mountains to the sea.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

  • California’s Politics of Farce

    Karl Marx wrote, "History repeats … first as tragedy, then as farce." Nothing better describes how California, with its unmatched natural and human riches, has begun to morph into what the premier California historian Kevin Starr has called "a failed state" – a term more usually applied to African kleptocracies than a place as blessed as the Golden State.

    The tragedy begins with the collapse of a governance system once widely hailed as a leader in efficiency and foresight but which now perpetually teeters at the brink of insolvency and suffers among the worst credit ratings of all the states. Only 20 years ago, the state’s fiscal debt per capita was just below the national average; now it ranks consistently toward the bottom No surprise, then, that California routinely ranked as the "worst governed" state in America.

    This poor performance has consequences, particularly in terms of business. Today, CEOs rank California as just about the worst place to do business in the country, and have for a remarkable eight years in a row. And it’s not just the plutocrats who are angry; a survey by the economic forecasting firm EMSI shows that, in 2011, California also ranked 50th, just ahead of Michigan, in new business startups.

    Unlike my conservative friends, I do not think the fault lies entirely with the Democrats. Instead, it has to do with the total eclipse of the state’s once-lively two-party system. As Starr has noted, California’s golden age of governance from the 1940s to the 1960s was largely a bipartisan affair, with power shifting between the parties. "Despite their differences," Starr writes, "Democrats and Republicans saw sufficiently eye-to-eye" to embrace policies that drove California’s growth.

    Progressives, for their part, often suggest this paradigm died with the 1978 passage of Proposition 13, which diminished local government and concentrated fiscal power in Sacramento. Yet even as late as early 1990s, when the state was facing a dire recession due to the end of the Cold War, liberal Democrats such as Assembly Speaker Willie Brown and state Sen. John Vasconcellos managed to work well with Republican Gov. Pete Wilson and business leaders like Peter Ueberroth to force policy changes that helped spur the state’s last sustained recovery.

    The more recent demise of California governance stems from demographic trends and political miscalculations that have turned our state increasingly into something akin to Mexico under the old dictatorship of the PRI (Institutional Revolutionary Party). Wilson’s decision to embrace the anti-illegal-immigration measure Prop. 187 as part of his 1994 re-election strategy helped precipitate this shift. Although Prop. 187, which passed easily, helped in the short run, it crippled the Republican Party in the ensuing decades.

    Before 1994, Republicans were capable of winning upward of two-fifths of the Latino vote. But after that, as the Latino portion of the electorate grew, from 7 percent in 1980 to more than 21 percent today, these voters became, much like the African-American vote, essentially a bloc owned by the Democrats. In 2010, Jerry Brown won nearly two-thirds of their votes in his bid to return as governor. Asian voters, despite their decidedly middle-class and entrepreneurial bent, sensed the whiff of nativism among Republicans and also turned to the Democrats. With minority communities’ share of the electorate growing every year, the GOP essentially has backed itself into permanent minority status.

    This has set the stage for a bizarre political farce, where minority representatives in Sacramento – with few exceptions – consistently vote against the interests of their own constituents on issues such as water allocations in the Central Valley or regulations that boost energy and housing prices. In their clamor to join the "progressive" team, they, in effect, are placing the California "dream" outside the reach of the state’s heavily minority working class.

    It’s almost surreal to see people who represent impoverished East Los Angeles and Fresno, for example, vote exactly the same way as those who represent rich, white and older voters in Marin County and Westside Los Angeles. You don’t have to watch "Downton Abbey" to see "upstairs, downstairs" politics. Despite mouthing progressive rhetoric, California’s minority legislators seem intent of creating an increasingly feudalized California.

    And what of the middle class – once the bastion of both the GOP and the kind of "responsible liberalism" that promoted growth under the late Gov. Pat Brown? This largely Anglo group has been shrinking, both for decades as a percentage of California’s population and, during the past 10 years, in absolute numbers. From 2000-10 the number of non-Hispanic whites in the state dropped from 15.8 million to 14.95 million.

    Increasingly, the residual California middle class is either part of the public sector nomenklatura or the swelling ranks of retirees. These people often feel no compulsion to leave California for the reasons – such as weather and high property taxes – that drive their counterparts out of places like New York or Illinois. In contrast, the productive, working-age private middle class, harassed by taxes, regulations and soaring costs, increasingly appears more of an endangered species than the famed Delta smelt.

    Of course, there remain pockets of private sector strength, such as Silicon Valley and Hollywood, as well as the various biomedical and biotech companies that still thrive in places such as Orange County and San Diego. These, however, increasingly represent legacy industries, beneficiaries of past accomplishments and better entrepreneurial conditions. Yet, even here, despite the current tech boom, California’s position over the past decade has declined relative to more business-friendly states.

    In the immediate future, we should expect more of the same from our one-party government. Flush from the passage of Prop. 30, tax increases backed by public sector unions, there is little to restrain them beyond occasional resistance from Gov. Brown. Having made California’s income taxes the highest in the U.S., legislators and local officials are already busily concocting new taxes, fees and another spate of bond issues to prop up the nation’s most-cosseted public sector, and, of course, fund its rich pensions at the expense of mostly middle-class taxpayers.

    Indeed the emphasis on income taxes, representing now close to half of state revenue, creates perverse economic outcomes. With their funds hidden in overseas accounts and other dodges, Hollywood moguls and their Silicon Valley counterparts may hang around, mouthing progressive shibboleths while dining exquisitely. But there is clearly erosion among the less-glamorous entrepreneurial class. The number of households earning above $300,000 dropped by 45,000 from 2006-09, according to the Department of Finance, while those earning under $100,000 has grown by more than 180,000. It’s likely that Prop. 30 will accelerate this trend.

    But it’s not only taxes that will depress growth. Our Mad Hatter one-party, public-sector-dominated state seems keen to press its regulatory assault on employers and job creators. With climate change-related legislation certain to boost already high energy costs, we also can expect industries, from food processing to semiconductors and aerospace, to continue heading to friendlier locales.

    Unless these policies are challenged, California will continue to underperform well below its potential. Even worse, a state that created the modern American Dream of upward mobility will continue to devolve toward a kind of neofeudalism dominated by a few rich, with many poor and a well-fed, tenured government caste. The only way to halt this continuing farce in Sacramento is for Californians of all backgrounds to recognize that government that so earnestly claims to serve "the people" is doing anything but that.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

  • The California-China-CO2 Connection

    Michael Peevey, President of the California Public Utilities Commission, is sincere and concerned about CO2 emissions. At a recent presentation at California State University Channel Islands, he spoke about California’s efforts to limit emissions. He mentioned green jobs, but, to his credit, he did not repeat the debunked claim that restricting CO2 emissions will be a net job creator. He also acknowledged that it doesn’t much matter what California does, if China doesn’t change its behavior. It turns out that if California were to reduce its carbon emissions to zero, in about a year and a half global CO2 would be higher anyway, just because of the growth in China’s emissions.

    Peevey talked about California’s increasingly ambitious plans for carbon reduction in the future. The goals include returning to 1990-level CO2 emmisions by 2020, and then an 80 percent reduction by 2050, regardless of population changes.

    This is going to be expensive. And the price of some of the potential technology — such as capturing atmospheric CO2 and pumping it underground — will include a lot more than the direct cost. The ultimate costs will, unfortunately, include increased global CO2 emissions.

    Some readers will remember the first time Larry Summers, the former US Treasury Secretary (under Bill Clinton) put his public career at risk because of his bluntness. In 1991, while Chief Economist at the World Bank, Summers gained international notoriety by saying in a memo, “I’ve always thought that under-populated countries in Africa are vastly under polluted.”

    That was the first of many times that lots of people demanded his head. He’s since claimed that it was sarcasm, but I don’t believe it. I believe he meant that environmental quality is a luxury good; that poor people need things like food and shelter, and they don’t much care if they trash the environment in the process. So, if pollution were localized, the poor would gain jobs and the wealthy would have an improved environment. Presumably, each would be happier.

    Of course, that sounds terrible to most people. But that’s precisely what we are doing here in California, only we’re doing it worse.

    California, by making production so very expensive, is chasing producers to places with low pollution controls. It’s worse than the situation Summers describes, because carbon dioxide emissions do not remain local. They spread throughout the atmosphere. Perversely, California is causing a global increase in CO2 emissions by its regulations limiting CO2 emissions in California.

    The problem is the result of acting on the concept of Think Globally and Act Locally (TGAL). TGAL works when pollution is local. But when air pollution is free to float around the world, you have to have a different strategy, and get the most reduction for your investment.

    And you don’t get the most for your investment in California. In terms of carbon efficiency — the ability to generate output while emitting less CO2 — California is one of the world’s most efficient economies. Each new reduction in CO2 becomes increasingly expensive. That is, reducing emissions is subject to increasing marginal costs. Reducing carbon emission in California is really expensive because we’re so carbon efficient already. Reaching the 2050 goal will be incredibly expensive. Worse, it won’t do any good.

    It’s not as if California can really afford it. Last month, I participated in the South Coast Association of Governments (SCAG) Third Annual Economic Summit. This great event provided lots of information about the economic challenges facing Southern California. For example, we learned that Los Angeles County’s economy will probably not reach its pre-recession level of jobs until at least 2018 and perhaps not until 2020.

    That’s a sobering thought.

    California State Sen. Roderick Wright, D-Los Angeles, a powerful speaker, documented California’s industrial decline, and made an emotional appeal for polices that produce jobs. The audience gave Wright a rousing ovation, something quite rare at economic conferences. The problem is that the audience was comprised of economic development people. Too bad no one else was listening. It was poorly attended by policy makers. There were only a handful of elected officials.

    California’s economy is struggling, even if many in the political class refuse to acknowledge the fact. Because of that, our investments need to be wise. The correct strategy for California is global. We need to go looking for the low hanging fruit.

    The low hanging fruit is mostly in developing countries like China, India and Brazil. We’ve tried to get them to cut their emissions at Kyoto and the like, but they refused, pointing out that they are much poorer than the West, and that we were able to develop with lower-cost polluting industries. They have a point.

    We should help them cut their carbon emissions. Reducing a ton of CO2 emissions is far cheaper in China than in California. So, let’s reduce it there.

    There are political problems with this proposal. California’s carbon regulations were sold to the people on the absurd claim that the regulations would be profitable: better than low cost, better than a free lunch.

    The bigger problem would be convincing California voters to tax themselves to clean up Chinese factories. That seems to me to be an information dissemination problem. If Californians knew the true cost of the existing program, and how little reduction in global CO2 concentrations it brings, they might logically be willing to look at other approaches. If they knew how much more effective a dollar spent on Chinese emissions was than a dollar spent on California emissions, they might seriously consider the proposal. The proposal could always be sweetened by requiring that all the work be done by California companies.

    It would be good for Californians. It would be a big step towards restoring California’s economic vigor. It would make a serious dent in global CO2 concentration. It would be less costly than our current plan.

    Let’s do it.

    Bill Watkins is a professor at California Lutheran University. and runs the Center for Economic Research and Forecasting, which can be found at clucerf.org.

    Flickr photo by doc tobin: Smog on the Great Wall.

  • California’s Demographic Dilemma

    It’s been nearly 20 years since California Gov. Pete Wilson won re-election by tying his campaign to the anti-illegal immigrant measure Proposition 187. Ads featuring grainy images of presumably young Hispanic males crossing the border energized a largely white electorate terrified of being overwhelmed, financially and socially, by the incoming foreign hordes.

    The demographic dilemma facing California today might be better illustrated by pictures of aging hippies with gray ponytails, of legions in wheel-chairs, seeking out the best rest home and unemployed young people on the street corner, watching while middle-age families drive away, seeking to fulfill mundane middle-class dreams in other states.

    The vital, youthful California I encountered when moving here more than 40 years ago soon could be a thing of the past – if we don’t address the root causes of an impending demographic decline. The days of fast population growth have certainly passed; the state’s population growth barely equaled the national average in the past decade. In the urban strips along the coasts, particularly in the Los Angeles Basin, growth has been as little or half that level.

    To be sure, particularly in this region, few would want to see a return to breakneck population growth. But there’s little denying that California has shifted from a vibrant magnet for the young and ambitious to a state increasingly bifurcated between an aging, predominately white coastal population and a largely impoverished, heavily Hispanic interior. This evolution, as suggested in last week’s essay, has much to do with what passes for "progressive" policies – high taxation, regulation and an Ecotopian delusion that threatens to crush the hopes of many blue-collar and middle-class Californians.

    California’s consistent net outmigration over the past two decades continues, albeit at a slower rate. Over that period, California, notes a recent Manhattan Institute report, has lost a net 3.4 million people. This outflow has slowed with the recession and housing bust, but could swell again, as in the past, when the housing market recovers, and people can sell their homes.

    This long-term outmigration likely stems from a combination of persistently weak job growth, relatively higher unemployment rates amid generally far higher housing prices. Until 1970, notes demographer Wendell Cox housing prices in California, including Los Angeles and Orange County, were generally in line with national averages, adjusted for income.

    But over the past four decades, California’s housing prices relative to income have mushroomed to more than twice the national average. This is particularly true in places such as Orange County, where housing prices, particularly near the coast, are so high that younger even solidly middle-class families have little chance to enter the market.

    These high prices are the result not merely of market forces, but also the perverse impact of Proposition 13, which allows people to stay longer in their homes, as well as regulatory restraints on new housing construction. The regulatory vise, if anything, is almost certain to get worse as the state’s "climate change"-inspired regulations seek to all but ban new single-family house construction, all but guaranteeing higher prices.

    Until recently, the impact of net outmigration has been ameliorated by immigration, not just the kind memorialized in Wilson’s grainy ads but of the legal variety, as well. Over the past decade, however, immigration enforcement data indicates that California has suffered a gradual erosion in its appeal to immigrants; this is particularly true for the L.A. Basin. In 2000, for example, Los Angeles-Orange County received 120,000 new immigrants; a decade later the annual intake had dropped by 87,000.

    Essentially, immigration into the L.A. Basin fell 27.5 percent while immigration nationwide remained essentially stable; the numbers of Houston, Dallas, Seattle, Washington and New York, in contrast, remained level or grew.

    Particularly troubling has been the relative decline in Asian immigrants, whose numbers now surpass Hispanics, and who also tend to be better educated than other newcomers. An analysis of migration of Asians conducted by demographer Wendell Cox, shows Asians heading increasingly to places like Houston, Dallas-Fort Worth, Raleigh, N.C., and Nashville, Tenn. Still home to the largest concentration of Asian-Americans, the L.A. Basin’s growth rate is now among the lowest in the nation, 24 percent in the past decade, compared with 39 percent in New York, and more than 70 percent in Dallas-Fort Worth and Houston.

    Some, like USC’s Dowell Myers, suggest slowing migration and population growth may actually be a positive, and claims "the demographic picture is brighter than it is has been in decades." He suggests that, rather than depend on the energy of newcomers, we now ride on "the skills of homegrown Californians."

    Certainly, slower growth may help with our traffic problems and even provide a break on housing inflation, but the contours of our demographics appear less than favorable. Over the past decade, for example, virtually all the largest metropolitan areas – including Silicon Valley – have seen slower percentage growth in college graduates than the national average. The big exception has been Riverside-San Bernardino, which started from a low base but has appeared to attract some college-educated people from the more expensive coastal regions.

    In contrast, largest rate of growth in educated people has taken place in regions such as Raleigh, N.C.; Austin, Texas, Phoenix and Houston; all these cities have increased the number of bachelor’s degrees at least one-third more quickly than the major California cities. Although California retains a strong educational edge, this is gradually eroding, particularly among our younger cohorts. In the population over age 65, California ranks an impressive fourth in terms of people with bachelor’s or higher degrees; but in the population under 35 our ranking falls to a mediocre 28th. If we are becoming more reliant on our native sons than in the past, we may be facing some serious trouble.

    This pattern can also be seen in those with graduate educations, where we are also losing our edge, ranking 19th among the younger cohort. More worrying still is the dismal situation at our grade schools, where California now ranks an abysmal 50th in high school attainment. Our students now rank among the worst-performing in the nation in such critical areas as science and math.

    If these issues are not addressed forcefully, what then is our demographic trajectory? One element seems to be a decline in the numbers of children, particularly in the expensive coastal areas. Over the past decade, according to the Census, the Los Angeles-Orange County region has suffered among the most precipitous drops in its population under age 15 – more than 12 percent – than any large U.S. metropolitan area.

    The numbers are staggering: in 2010 the region had 363,000 fewer people under age 15 than a decade earlier, while competitors such as Dallas-Fort Worth and Houston increased their youngsters by over 250,000 each. Orange County alone suffered an 8 percent decline in its under-15 population, a net loss of 54,000.

    If current trends continue, we may not be able to rely on immigrants to make up for an nascent demographic or vitality deficit. In fact, demographer Ali Modarres notes that L.A.’s foreign born-population is now older than the native-born, as their offspring head off for opportunities in lower-cost, faster-growing regions.

    Ultimately the state’s political and economic leadership needs to confront these demographic shifts, and the potential threat they pose to our prosperity. We can’t just delude ourselves that we attract the "best and brightest" from other states without creating improving the basics critical to families, from other states and abroad, such as education, reasonable housing costs and business climate. California ‘s beauty, great weather and a bounteous legacy remain great assets, but the state can no longer rest on its laurels if it hope to attract, and retain, a productive population capable of rebuilding our state’s now-faded promise.

    Joel Kotkin is executive editor of NewGeography.com and a distinguished presidential fellow in urban futures at Chapman University, and a member of the editorial board of the Orange County Register . He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared in the Orange County Register.

    Photo illustration by krazydad/jbum

  • California’s Blue Utopia

    The Progressive wing of the Democrat Party sits at the left end of their spectrum. JFK’s liberal positions would be regarded as moderate today. Progressives have a unique vision of what a blue state utopia would look like that begins with clean air, clean water, and green energy. Over the last twenty years, with the backing of the public employee unions that control the political process in California, the Progressives have managed to neuter the Republican Party and turn California Blue, owning every elective office in the state. They did not need much help according to Dan Walters, who stated, “Even the most anti-immigrant, anti-gay marriage, anti-tax, anti-abortion Republican activist must now recognize that with the party’s wipeout in last month’s elections, continuing down its recent path is a plunge into complete irrelevance”.

    In 2012, the progressive Democrats captured a super majority in both houses so that with their Progressive governor, they no longer require a single Republican vote to pass any form of legislation, leaving conservatives an “irrelevant” minority.  As an independent businessman, I have created many jobs and opportunities. But despite my contributions to society, and the taxes I have paid over the last thirty plus years, the Progressives believe I need to pay more so that I pay “my fair share.” Only when I pay my fair share can their blue vision of utopia be fulfilled.

    What is my fair share? Under existing Federal and State income tax rates, I will pay 50% of my income in taxes. In California alone, my “fair share” on a million dollars of income is $133,000 each year. In exchange for my taxes, I receive little from the state. In addition, I pay gasoline taxes that pay for the upkeep of the highways. I pay airline taxes that maintain the airports I use. I pay among the highest in the nation sales tax on what I consume. I pay property taxes for the schools my grown children no longer use (they have already left California). I pay utility taxes for the upgrade of infrastructure. I pay higher health insurance rates. I already pay more than my own way.

    I used to develop new homes in California and paid development fees, school fees, park fees, bridge & thoroughfare fees, endangered species fees, utility hook up fees, and processing fees to employ the city workers who reviewed my plans. Such fees totaled $40,000 to $75,000 for each new home built in California. I more than paid my own way. Such new homes are no longer feasible in California considering that home prices have fallen between 20-40% since 2008. And with the new regulations to be imposed in 2013 with the passage of the Global Warming Solutions Act of 2006, housing and energy will cost even more making new houses even less attractive than they are now.

    A problem in Blue Utopia

    The number 1 topic of conversation amongst the despised 1% in California today is when you are leaving California or whether you can leave. Property owners who cannot move their apartment building or office complexes can move their homes and change their residency. On a flight from Austin, Texas to Orange County last week, I sat next to the owner of a substantial manufacturing business whose plant is in the inland southern California community of Ontario. He lives in Austin, flies in on Monday and home on Thursday. He spends less than 180 days a year in California. His savings in state income taxes more than pays for his airfare, hotel and rental car expenses. His home and gas and energy all cost less in Texas. More significantly, he will not expand his plant in California and intends to move his plant and people to Texas over the next five years.

    What do the progressives have to say about a successful businessman wanting to move out of the state? Some like Paul McCloskey who recently attempted to pass a ballot measure for a Wealth Tax imposed on those leaving the state, would like to follow the French. France imposed a 75% tax rate on anyone making more than one million Euros per year. France’s Prime Minister Jean-Marc Ayrault said about people leaving France for lower rates, “We cannot fight poverty if those with the most, and sometimes with a lot, do not show solidarity and a bit of generosity," McCloskey’s proposal would impose an additional 17.5% tax on those with incomes exceeding $150,000 ($250,000 joint) and 35% on incomes exceeding $350,000/year. He would use the extra income to purchase shares of California public companies to “influence their environmental policies and practices”. While his ballot measure did not succeed, it is sobering to think the Democrats do not need a single Republican vote to pass legislation such as this.

    So many of the 1% are quietly leaving. The exodus has already begun. Spectrum Location Solutions reported that 254 companies left California in 2011. Despite claims of an upturn, a press release by the State Controller’s office last week revealed tax revenues from both personal income taxes and corporate taxes fell during the month of this November. Revenue from personal income dropped 19 percent below projections while corporate tax revenue was down a whopping 213.4 percent. Such declines will continue unabated for years to come as the California brain drain proceeds.

    When a government becomes a one-party state, nothing can stop the utopians and zealots of either party. In California, there’s no brake on progressives imposing its vision of Blue Utopia on its people.   California may have clean water, clean air and green energy but at the expense of its people, prosperity and fiscal health.

    The problems in Blue Utopian society will be similar to the unintended consequence of protecting the Delta Smelt in the Central Valley. The Blues labeled this tiny fish, previously known as “bait,” as an endangered species. The Endangered Species Act was created to protect the American Bald Eagle but now extends protection for the Delta Smelt, forcing water to be diverted from the farms of the Central Valley to the Pacific Ocean. The Delta Stewardship Council shows the water cutoffs had no effect on the smelt population. But it did a devastating effect on another endangered species: the California family. When 300,000 acres went fallow, 37,000 jobs were lost. Unemployment has reached 40% in some areas of the Central Valley. Food lines have appeared in the world’s most fertile agricultural valley. Farmworkers were forced to accept bags of carrots grown in China. Orchards that existed for decades died without water. The Central Valley now needs food stamps to feed its residents.  

    The Blues are excited to impose their vision of Utopia on California. I, for one, will not be here to see it. My home goes on the market next month. My company has already re-located to another state. My children have already moved away seeking a future more promising than anticipated here in California. It is ironic because that is why I left my parents in Cleveland, Ohio to come to California four decades ago. I will be sad to leave my home and friendships acquired over decades. But I realize our leaders will neither notice, and if they did, they would not care. 

    As the tax revenues continue to fall (as they always do when rates increase), the Blues will rail against the remaining 1%, claiming that if only “they” would pay their fair share, things would be perfect. They will raise rates, fees, costs, and penalties again on the business class, and will do so as long as they hold power.

    But there is a problem in Blue Utopia. Short term, the state may be supported by the occasional Internet or Housing Bubble, but the money will finally run out.  When it does, maybe they will ask us to come back to the Golden State. They will promise to lower rates and turn the water back on. But it is already too late for the dead orchards of the Central Valley. And it will soon be too late for all but a handful of entrepreneurs of California.

    ¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨

    Robert J Cristiano PhD is the Real Estate Professional in Residence at Chapman University in Orange, CA, a Senior Fellow at the Pacific Research Institute in San Francisco, CA and President of the international investment firm, L88 Companies LLC in Washington DC – Newport Beach – Denver – Prague. He has been a successful real estate developer in California for more than thirty years and now makes his home in Austin, Texas.

    California coast photo by BigStockPhoto.com.