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The economics of delusion: Joel Kotkin
True, California’s short-term budgetary issues have been somewhat relieved, largely due to soaring capital gains from the tech and high-end real estate booms. But the state inevitably will face a soaring deficit as those booms slow down. Brown is already ...
By Joel Kotkin and Bill Watkins
08/06/16, 8:52 AM PDT
In Sacramento, and much of the media, California is enjoying a “comeback” that puts a lie to the argument that regulations and high taxes actually matterThe hero of this recovery, GovJerry Brown, in Bill Maher’s assessment, “took a broken state and fixed it.”Yet, if you look at the long-term employment trends, housing affordability, inequality and the state’s long-term fiscal health, the comeback seems far less miraculousSilicon Valley flacks may insist that the “landscape now has been altered,” so prosperity is now permanent, but this view is both not sustainable and deeply flawed.
Jobs: The long viewSince 2010, California has begun to generate jobs at a rate somewhat faster than the nation, but this still has just barely made up for the deep recession in 2007The celebratory notion that true-blue California is outperforming red states like Texas is valid only in a very short-term perspectiveIndeed, even since 2010, the job growth in Austin and Dallas has been higher than that in the Bay Area, while Los Angeles has lagged well behind.If you go back to 2000, the gap is even more markedBetween 2000 and 2015, Austin has increased its jobs by 50 percent, while Raleigh, Houston, San Antonio, Dallas, Nashville, Orlando, Charlotte, Phoenix, Salt Lake City — all in lower-tax, regulation-light states — have seen job growth of 24 percent or aboveIn contrast, since 2000, Los Angeles and San Francisco expanded jobs by barely 10 percentSan Jose, the home of Silicon Valley, has seen only a six percent expansion over that period.
Regional concentrationAs Chapman University economist and forecaster Jim Doti recently suggested, the California boom is exceedingly concentrated in one region“It’s not a California miracle, but really should be called a Silicon Valley miracle,” Doti noted in his latest forecast“The rest of the state really isn’t doing well.”The Bay Area has experienced a phenomenal recovery from the Great Recession, but San Jose has just exceeded, finally, its pre-dot-com boom jobs totalSan Francisco has done a bit better, but it still took about 13 years to recover from the dot-com bustThe tech sector has provided a huge portion of the state’s job volatility, and has been on a rollThere is no reason to believe that the tech sector’s volatility has melted awayIt’s based on disruptive technology.
Due to the lack of new housing construction, this boom is being undermined by ferociously high costsOnly 13 percent of San Franciscans could purchase the county’s median home at standard ratesFor San Mateo, the number is 16 percentIt is no surprise that as many as one in three Bay Area residents are now contemplating an exitThere are clear signs of slowing job growth, as companies look for space in less expensive, less highly regulated areasEven Sergei Brin, a co-founder of Google, recently suggested that startups would be better off launching somewhere else.
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