By Victor Davis Hanson
California’s multidimensional decline—fiscal, commercial, social, and
political—sometimes seems endless. The state’s fiscal problems were especially
evident this past May, when Governor Jerry Brown announced an “unexpected” $16
billion annual budget shortfall. Two months later, he signed a $92 billion
budget that appears balanced only if voters approve an $8.5 billion tax
increase in November. According to a study published by a public policy group
at Stanford University, California’s various retirement systems have amassed
$500 billion in unfunded liabilities. To honor the pension and benefit
contracts of current and retired public employees, state and local governments
have already started to lay off workers and slash services.
Not just in its finances but almost wherever you look,
the state’s vital signs are dipping. The average unemployment rate hovers above
10 percent. In the reading and math tests administered by the National Assessment
of Educational Progress, California students rank near the bottom of the
country, though their teachers earn far more than the average American teacher
does. California’s penal system is the largest in the United States, with more
than 165,000 inmates. Some studies estimate that the state prisons and county
jails house more than 30,000 illegal aliens at a cost of $1 billion or more
each year. Speaking of which: California has the nation’s largest population of
illegal aliens, on whom it spends an estimated $10 billion annually in
entitlements. The illegals also deprive the Golden State’s economy of billions
of dollars every year by sending remittances to Latin America.
Meanwhile, business surveys perennially rank
California among the most hostile states to private enterprise, largely because
of overregulation, stifling coastal zoning laws, inflated housing costs, and
high tax rates. Environmental extremism has cost the state dearly: oil
production has plunged 45 percent over the last 25 years, even though
California’s Monterey Shale formation has an estimated 15.4 billion barrels of
recoverable oil, according to the U.S. Energy Information Administration.
Geologists estimate that 3 trillion cubic feet of natural gas sit untapped as
well. Those numbers could soar with revolutionary new methods of exploration
(see “California Needs a Crude
Awakening,” Summer 2012).
Between the mid-1980s and 2005, the state’s aggregate
population increased by 10 million Californians, including immigrants. But that
isn’t the good economic news that you might think. For one thing, 7 million of
the new Californians were low-income Medicaid recipients. Further, as economist
Arthur Laffer recently noted in Investor’s Business Daily, between
1992 and 2008, the number of tax-paying Californians entering California was
smaller than the number leaving—3.5 million versus 4.4 million, for a net loss
of 869,000 tax filers. Those who left were wealthier than those who arrived,
with average adjusted gross incomes of $44,700, versus $38,600. Losing those
869,000 filers cost California $44 billion in tax revenue over two decades,
Laffer calculated.
Worst of all is that neither the legislature nor the
governor has offered a serious plan to address any of these problems. Soaring
public-employee costs, unfunded pensions, foundering schools, millions of
illegal aliens, regulations that prevent wealth creation, an onerous tax code:
the story of all the ways in which today’s Californians have squandered a rich
natural and human inheritance is infuriating.
So why, you might ask, would anyone stay here?
For some of us, family heritage explains a lot. Sometime in the 1870s, my
maternal great-great-grandmother homesteaded our farm and built the farmhouse
in which I currently live, near what is now the town of Selma. I grew up
working alongside her grandson—my grandfather, who was born in the same
farmhouse in 1890 and died there in 1976. He worshiped California. Even in his
eighties, he still marveled at the state’s unique combination of rich soil,
lengthy growing season, huge aquifer, and water flowing down from the Sierra
Nevada mountains. He planted most of the fruit and nut trees growing in my yard
today. On my father’s side, my great-grandfather helped found the nearby
Swedish colony of Kingsburg, where a plaque in a municipal park—thankfully not
stolen during a recent wave of bronze thefts—marks Hanson Corner, the site of
the ancestral family farmhouse.
My mother, a 1946 Stanford law graduate, was one of
the state’s first female appellate court justices and would lecture me about
the brilliance of California’s four-level court system. My father—a Pat Brown
Democrat convinced that technical training was in short supply for the influx
of Southeast Asian and Hispanic immigrants—helped found a vocational
junior-college campus in the 1970s. Countless Californians are like me:
determined to hold on to the heritage of our ancestors, as well as our memories
of better times and the property on which we grew up. We feel that we played no
part in our state’s current problems, and we’re reluctant to surrender to those
who did.
Another draw to California is its culture. The
California way, casual and even flaky, can sometimes become crass and self-indulgent;
for evidence of that, just visit Venice Beach or Berkeley’s Telegraph Avenue.
But at its best, California still creates a ’49er bustle of self-invention that
makes little allowance for class, titles, or hierarchy. As someone who
established a classics program with mostly minority students at California
State University’s Fresno campus, I can attest that real talent is often found
unfettered by hierarchy. In a state with no majority culture, where it is
almost impossible to determine a person’s income by race, dress, accent, or
bearing, performance tends to trump reputation or appearance. The proverbial
“millionaires and billionaires” whom I see drinking coffee on University Avenue
in Palo Alto on Monday are dressed no differently from the loggers I talk with
in the Huntington Lake bar in the Sierra on Friday. Some of the wealthiest
farmers in the world are indistinguishable from their tractor drivers. In
California, one earns respect more from what one does than from what one has
done.
Some of the reasons that people began migrating to
California haven’t changed, even in the twenty-first century: dysfunctional
politics cannot so easily mar what nature has so abundantly bestowed.
California will always be warm, dry, and beautiful, and it boasts an
unparalleled diversity of climate and terrain. This past winter, I could leave
my Sierra cabin (altitude 7,200 feet, with 20 feet of snow piled nearly to the
roof) in the morning, drive down to 70-degree afternoons on my farm in the
Central Valley, and arrive in the evening at the Stanford University campus,
with its cool bay breezes. What’s most striking about California isn’t its
rugged mountains, gorgeous beaches, and vast plains, but their proximity to one
another. That nearness is an obvious incentive for Californians to stay put. In
the winter, when midwestern sunbirds fly to Arizona and New Yorkers go to
Florida, Californians are never farther than a few hours’ drive from the coast.
This beauty is economically profitable as well. Thanks
to its climate, California can grow three crops a year, while most states
struggle with one or two. The long growing season—plus great soil, plenty of
irrigation, vast agribusiness economies of scale, and technological support
from nearby universities—means that California’s farms can produce almost twice
the usual tonnage of fruits and vegetables per acre. Not only are California’s
cotton, wine, fruit, and dairy industries more productive than any in the
world; hundreds of millions of affluent Asian consumers translate into
skyrocketing export-commodity prices for the state’s farmers. This year,
beleaguered California farms—fighting water cutoffs, new regulations, and
encroaching suburbanization—will nonetheless export over $17 billion worth of
food overseas (see “California’s Water Wars,” Summer 2011). In so mild a
climate, moreover, outdoor construction is an all-year enterprise. It’s hard to
believe that the world’s most productive farmers and most innovative builders
would pack up and leave without a fight.
California also possesses enormous natural wealth in
oil, gas, minerals, and timber. With commodity prices high and new technologies
for energy exploration emerging all the time, the dollar wealth below
California’s surface is greater than ever. The existential stuff of any
civilization remains food and fuel, and California has more of both than any
other state. So we wait for sanity to return to our officials, as our natural
untapped wealth grows ever more valuable.
And no explanation of California’s appeal would be
complete without mentioning how many top universities it hosts. In most
rankings of the world’s universities, Stanford, Caltech, UC Berkeley, and UCLA
make the top 20. The industries that best explain why California is still the
world’s eighth- or ninth-largest economy—Silicon Valley, the Los Angeles
aerospace industry, Napa Valley wineries, and Central California
agriculture—originated in the research and development programs of the state’s
vast public university system.
True, that system faces considerable budget pressure
and has increasingly adopted a highly politicized and therapeutic curriculum.
California State University, in particular, has lowered its standards,
admitting students who don’t meet traditional GPA and test-score thresholds, so
that over half of entering freshmen must enroll in remediation courses. But the
state’s 50-year-old master plan for higher education—which instituted a
tripartite arrangement of junior colleges, the California State University
system, and the elite ten-campus University of California—remains viable. The
schools still draw top scholars from around the world. And students come as
well, especially engineering and computer students from China, India, South
Korea, and Japan. Many end up settling here. Even in these bad times, it’s
difficult to destroy such an inspired system.
Another reason to feel hopeful about California is that it’s reaching the
theoretical limits of statism. To pay for current pensioners, the state simply
can’t continue to bestow comparable defined-benefit pension packages on new
workers, no matter how stridently the public-sector unions claim otherwise. And
as public insolvencies mount—with Stockton, Mammoth Lakes, and San Bernardino
seeking bankruptcy protection a year after Vallejo emerged from it—public blame
is finally shifting from supposedly heartless state taxpayers to the unions.
The liberal unionism of an aging generation is proving untenable, as we saw in
recent ballot referenda in which voters in San Diego and San Jose demanded that
public-worker compensation plans be renegotiated.
Though the fiscal situation is dire, Californians can
take comfort from the fact that their budget, unlike the federal government’s,
is smaller than at any time since 2006. The state constitution currently
requires two-thirds of the legislature to approve any tax hike (though Governor
Brown’s ballot initiative in the November election would raise taxes without
the legislature’s approval). Since Democrats lack the supermajority necessary
to raise taxes, and since California cannot print its own money, the
legislature has been forced to shrink budgets.
Californians are also fickle and can turn on a dime.
For all its loud liberal credentials, the state is as likely to cut government
as to raise taxes. Over the years, Golden State voters have passed ballot
propositions limiting property taxes, outlawing free public services for
illegal aliens, ending racial preferences, demanding “three-strikes”
incarceration for repeat felons, and abolishing bilingual education programs in
public schools. Two statewide propositions at the ballot box in November would
limit public unions’ prerogatives and require balanced budgets. The state and
federal courts and Sacramento bureaucracies overturn most resolutions of this
kind or try to avoid enforcing them, but the referenda demonstrate how California
can explode into conservative anger at any moment. No wonder the Democratic
state legislature regularly tries to change the ballot process.
At some point, the state’s southern border will
finally be closed, and with it the unchecked yearly flow of illegal immigrants.
The economic downturn in the United States, globalized new industry in Mexico,
and increased border enforcement have already resulted in lower numbers of
illegals. No national support exists for wholesale amnesty or for open borders.
And with an enforced border, California will see not only decreased remittances
to Mexico and Latin America and a reduced draw on state services but also,
perhaps, a change in attitude within the state’s largest ethnic group. After
all, illegal immigration warps the politics of the Mexican-American community,
which constitutes more than 40 percent of the state’s population. The unlawful
entry of Mexican nationals into California not only ensures statistically that
Mexican-Americans as a group suffer from disproportionate poverty rates; it
also means that affluent third- and fourth-generation Mexican-Americans become
part of a minority receiving disproportionate state help. As one of my
middle-class, third-generation college students once put it: “Without the illegal
aliens in this school, I wouldn’t get special treatment.”
Without influxes of massive numbers of illegal
immigrants, California Latinos could soon resemble California Armenians,
Japanese, and Portuguese—whose integrated, assimilated, and intermarried ethnics
usually earn more than the state’s average per-capita income. With controlled
borders, Chicano Studies departments should eventually go the way of Asian
Studies and Armenian Studies—that is, they would become small, literary, and
historical, rather than large, activist, and partisan. Indeed, the great fear
of the liberal Hispanic hierarchy in government, media, and academia is that
without illegal immigration, the conservative tendencies of the Hispanic middle
class would cost the elites their positions as self-appointed spokespeople for
the statistically underachieving.
To grasp a final reason for optimism about California’s future, you need to
understand that many of the state’s political problems result from a
bifurcation between the populous coastal strip from San Diego to San Francisco,
where the affluent make state policy, and the vast, much poorer interior, from
Sacramento to San Bernardino, where policy dreams about immigration,
agriculture, public education, and resource use become nightmares in practice.
But this weird juxtaposition of such different societies within one state is
starting to change. Hispanic Redwood City, nestled next to tony Atherton and
Palo Alto, now has as many illegal aliens per capita as do distant Madera and
Tulare. Living in high-priced Bel Air, Brentwood, or old Pasadena no longer
shields one from crime or from the decay of the California transportation
system.
On the congested coastal strip, building regulations,
zoning absurdities, and environmentalist prohibitions on new construction
prohibit almost anyone under 40 from acquiring a house without a sizable
inheritance or an income in the upper six figures. Elites in Santa Monica and
Menlo Park are starting to notice that their once-premier public schools don’t
perform at the level that one might expect from the astronomical sales, income,
and gas taxes. Shutting down thousands of acres of irrigated farmland in the
state’s interior, at a time when foreign buyers are lining up to buy California
produce, translates into higher prices at the Santa Barbara food co-op. Soon,
even the Stanford professor and the La Jolla administrator may learn that
illegal immigration, cumbersome regulations, and terrible elementary schools
affect them as well.
The four-part solution for California is clear: don’t
raise the state’s crushing taxes any higher; reform public-employee
compensation; make use of ample natural resources; and stop the flow of illegal
aliens. Just focus on those four areas—as California did so well in the
past—and in time, the state will return to its bounty of a few decades ago.
Many of us intend to stay and see that it does.
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