I’ve been working in Los Angeles since Wednesday, and my affection for this place grows every time I come to visit. This partly reflects the fact that as a non-driver, I don’t have to contend with the traffic.
Southern California brings to mind the following observation I made in a column a while back:
Earlier this year, the economists Jan Brueckner and David Neumark of the University of California at Irvine released a fascinating paper, “Beaches, Sunshine, and Public-Sector Pay.” Their basic hypothesis is that because people are less willing to leave behind places that have beaches, sunshine and other amenities such as those found in a big city, public-sector workers are able to win higher salaries than they might in places that are humid, frigid, or otherwise desolate. As taxes are ratcheted up in a place like Southern California, the tax-sensitive flee for the Arizona desert or the wilds of northern Idaho. The people left behind just shrug their shoulders and figure that, hey, it’s worth it. Meanwhile, the people who moved away might still be fuming about the fact they were driven out of their hometowns, and they’re not going to let it happen again.
One impressionistic take on what has happened in Los Angeles is that the private middle class has fled in large numbers. For less-affluent Angelenos working in private sector service jobs, a progressive tax burden spares them some of the direct cost of a bloated government, though it doesn’t spare them the heavy opportunity costs imposed by low-quality public services, i.e., a better school system would mean higher human capital endowments, better policing would mean more peace of mind, both would translate into more wealth, etc. The affluent can afford to heavy tax burden, and they can essentially secede from low-quality public services — apart from the congested roads — by sending their children to independent schools, etc.
So this creates a funny dynamic, and a very strange political mix. Los Angeles has become a polarized “luxury city” — a wonderful place to be a person with lots of resources, including lots of time (it helps to be the kind of person who holds office hours instead of the kind of person who has to scramble to meetings and to make sales calls), but a not-so-wonderful place to be an upwardly mobile person, unless you find work in an expanding public bureaucracy in a time when huge income gains among the ultrarich swell public coffers. Upwardly mobile Angelenos find that as the private sector middle class has hollowed up, the best root to economic advancement is often public employment, paid for by taxes on the wealthy remnant. And so the ratchet continues: the public sector workforce expands, at least when times are flush, taxes increase, the quality of services doesn’t improve.
Local governments in California are also crippled. Revenues are raised in highly centralized fashion in California, a legacy of Prop 13. Liberals often criticize Prop 13, but the irony is that it may have led to an “egalitarian” outcome, in which even the most affluent local governments depend on state aid. It’s hard to see how this cycle will be broken. But I don’t think it’s impossible.