In recent years, California has coped with fires and floods, earthquakes and landslides.
But this past week, the state encountered a new kind of obstacle. Twice in three days, in his inaugural and State of the State Address, Gov. Gray Davis offered what passes for his economic vision of the Golden State. It wasn’t pretty. Nor was it prescient.
What was it, then? Try abbreviated. Toss out the platitudes and air kisses to the “heroes” in the gallery and Davis’s State of the State was less than 20 minutes of policy grist. The inaugural, two days’ beforehand, was just as brief. So much for deep thoughts.
But even worse, Davis wasn’t himself. There was something about the week that seemed to border on . . . Gore-ish behavior.
It wasn’t just that Davis engaged in very public displays of affection with his wife during the inaugural ceremony, reminiscent of Al and Tipper getting frisky during the 2000 Democratic National Convention. Or, that one of the contributors to Davis’s media offensive was Chris Lehane, previously Gore’s campaign spokesman now working out of San Francisco, which may explain why Davis’s rhetoric at times smacked of “the people vs. the powerful” (Davis singled out polluters, guns, and energy providers as California’s great evils). Gore attended Davis’s first inaugural in January 1999; maybe he left behind some pods for the second inaugural.
The problem is: The more Davis talked economics, the more one got the sense that this what America would have been subjected to do were it Al Gore, not George W. Bush, had delivered this week’s big speech in Chicago.
In case you haven’t been paying close attention, California is running a $34.8 billion budget deficit. That’s according to the state’s department of finance, which isn’t showing anyone how it does its math (California’s legislative analyst office places the deficit much lower, around $21.1 billion). It’s a morbidly obese figure for the Golden State, as California’s shortfall amounts for about half of the entire debt accumulated by all 50 states. And it sets the stage for an ugly debate between the governor and the state legislature over what services to cut and taxes to raise in order to balance the budget, as is constitutionally required.
That debate begins in earnest today, when Davis announces the details of his proposed budget fix. In the meantime, there’s another debate awaiting California, and it’s a mirror reflection of the coming fight between the White House and Congress over what policies best harvest and sustain economic growth. Fortunately, for Americans, their president gets it. Unfortunately, for Californians, their governor doesn’t.
In Davis’s view, the key to California job-creation centers on an amalgam of ideas dedicated to job-growth: new jobs in construction, manufacturing, biotechnology, and the ever-vague “homeland security”. Trade and tourism, two cornerstones of California’s “new” economy that fueled job-growth in the late-’90s, somehow were overlooked by Davis this week.
In his State of the State Address, Davis proposed a California Office of Homeland Security, which will exist in part to help Silicon Valley financially benefit from the war on terrorism. The governor Davis also touted the virtues of California biotech, proposing a “life sciences initiative” to boost the state’s number of lab technicians and increase the flow of capital and federal grants into California-based research.
Given his way, Davis would accelerate the delivery of $18 billion in voter-approved bonds. He claims that would result in some 368,000 new construction jobs for schools and parks and water projects. In a sop to the business community, Davis also called for an extension of the state’s manufacturers’ investment credit. However, he didn’t open the door to the more dramatic: a repeal of labor-friendly laws Davis signed in his first term, including family leave and a boost in workers’ comp benefits.
Davis, at times, fudged statistics. In his State of the State Address, he said Californians personal income is down. According to the state LAO, it increased in 2002 (a mere 1.2 percent, compared to 6 percent during the recent years). He also said employment is down when, in fact, California added nearly 110,000 jobs last year (a figure on which Davis and legislative Republicans disagree).
And the governor trotted out the smoke and mirrors. Davis pronounced a goal of 500,000 new jobs over the next four years. That sounds impressive and made for good headlines. Unfortunately, it’s neither an original Democratic concept (in the 1994 governor’s race, Kathleen Brown peddled the promise of a one million new jobs), nor is it ambitious.
Over the past decade, California has added more than two million jobs (the state’s workforce is 16.4 million Californians). As the Sacramento Bee’s Dan Weintraub explained in a recent column: “By historical standards, 125,000 jobs per year would be a pittance. Over the past 10 years, the state has added an average of about 240,000 jobs annually. And the governor’s own Finance Department has projected that the population of Californians between the ages of 20 and 64 — the adult labor force — will grow at about 290,000 per year for the next decade. Compared to the past year, when the state has seen virtually no net job growth, 125,000 new positions would be great. Still, the governor’s stated goal would leave half of the state’s additional working people without a job during his second term.”
What California is left with is a Democratic governor who approaches his state’s economy just as Congressional Democrats have reacted to the Bush stimulus package — bottom-up, when it should be the reverse: market-down. Republicans look at economic fixes as functions of flourishing markets, free-up capital, and a favorable regulatory climate. That’s the essence of the Bush plan. It’s also how Davis’s Republican predecessor, Pete Wilson, cured California’s economy a decade ago. In his 1993 State of the State Address, Wilson offered tax cuts and credits and declared war on job-killing over-regulation. It wasn’t long before California went from 50th to 1st in the nation in job creation.
Davis, like his fellow Democrats in Washington, think in opposite terms. This week, Congressional Democrats fired back at the Bush economic plan with calls for more job-training, a higher minimum wage, and sinking more federal money into building schools and roads. Translation: a short-term fix. Let’s assume that would have been Gore’s prescription (plus some futuristic technology stuff) had it been his speech, not Bush’s, in Chicago.
And that’s not so different from Davis’s remedy of throwing state bond money at California’s economic problems rather than searching for a fix that creates jobs on the natural, rather than the artificial stimulus of job creation sparked by massive state borrowing, which is what bonds are. Davis’s plan may put more Californians to work this year, but what happens three or four years hence, when those construction projects peter out? Then again, Davis is constitutionally out of a job in four years, so maybe that’s a job for his successor.
Money may be in short supply in Sacramento, but inflated rhetoric isn’t. In his inaugural, Gray Davis declared that California’s budget deficit “boggles the mind and threatens the unprecedented progress we’ve made together. This is a national crisis, afflicting nearly every state in America.”
That’s not quite true. It’s not a national crisis. And not “nearly every state” has put itself in the same hole as self-indulgent California.
Let’s hope other states find smarter solutions to what ails them.
— Bill Whalen is a research fellow at the Hoover Institution.