Giving Common Sense a Chance in California

San Francisco, CA, USAIn California, where Governor Jerry Brown celebrates “the coercive power of the state” and advocates “brainwashing” for the unanointed, victories against Leviathan are rare. Yet last week brought just such a triumph, as a legislative committee rejected an attempt by San Francisco state senator Scott Wiener to take zoning power away from localities in areas within a half-mile of a bus or train stop. Wiener had sold his measure as a solution to California’s housing crisis and a means of bringing about the dense, green, transit-oriented development that the governor and his supporters prefer. Yet it failed, in large part because few cities wish to give up their zoning power and because even affordable-housing advocates don’t believe that handing blank checks to developers will do much to lower rents or housing prices.

But it would be a mistake to see Wiener’s defeat as a triumph of conservative principles of limited government and local control. In fact, two of the senators who voted for the bill in committee were Republicans, both from suburban districts whose constituents would not have been much affected by the bill’s passage. Meantime, some libertarian conservatives, champions of “small government,” supported Wiener’s efforts to expand state power because the proposal would remove regulatory restraints—albeit only in dense cities, not on the periphery.

Some principled moderates and conservatives—like Beverly Hills vice mayor John Mirisch and Anaheim’s Tom Tait—were vocal opponents, as were Republicans from places like Yorba Linda. But to a large extent, Wiener was derailed by his own party: much of the opposition came from solidly Democratic cities, including Los Angeles, San Francisco, and even Berkeley, which might have seemed like natural supporters of his planning notions. But as legislators examined the probable impact of the legislation, it became clear that many neighborhoods—particularly in urban areas like San Francisco—would be stripped of any leverage against developers.

Environmentalists, including the Sierra Club, feared that the bill would allow developers to skirt the state’s often-onerous green legislation. Former LA Weekly editor Jill Stewart, a leader of the anti-Wiener drive, suggests that Wiener took the state’s decades’-long densification drive “off the deep end.” Wiener’s initiative managed to provoke opposition from 37 local progressive groups, and all 13 city council members in Los Angeles wound up opposing it. The killing shot came from the old Left, many of whom live in neighborhoods where the legislation might have had a dramatic effect. Leaders of San Francisco community organizations from the Mission, Chinatown, Cow Hollow, and Excelsior, along with tenants’ rights groups and the local chapter of Democratic Socialists of America, announced their opposition as well. Residents of Los Angeles’s predominately African-American Crenshaw district saw Wiener’s bill as a “declaration of war on south L.A.” Many feared that the legislation would accelerate gentrification by replacing older, affordable structures with new, more expensive ones. Seventy percent of poor Californians already pay the majority of their paychecks for rent costs, which continue to escalate. These forces formed an unlikely alliance with anti-density middle-class residents often denounced as NIMBYs (“not in my backyard”). Many lived in deep-blue but largely suburban areas—some reliably indigo-blue, like Marin—and cities on the San Francisco Peninsula, or less reliably liberal, affluent parts of Southern California, like Newport Beach, Manhattan Beach, and La Canada.

Progressive backers of Wiener’s top-down legislation bemoaned its defeat and are determined to bring it back. The state’s tech oligarchs and “real estate Democrats,” as progressive author Zelda Bronstein calls them, are too powerful to be easily dissuaded. CEOs of Lyft, Salesforce.com, Square, Twitter, and Yelp, as well as senior executives at Google, were among the first to rally behind the bill, and they will likely back similar legislation again. They want dense, expensive housing for their primarily young, childless employees; some would live, as some already do in San Francisco, in glorified boarding houses. To push this agenda, the new elite helped finance the so-called YIMBYs (“yes in my backyard”) as astro-turfed shock troops. In promoting the Wiener bill, the YIMBY contingent sometimes used left-wing rhetoric against rich cities and landlords, though they allied themselves with arguably the most voracious capitalists of all.

The oligarchs, notes author Greg Ferenstein, believe that “urbanization is a moral imperative,” as cities are supposedly “home to more innovation and income equality.” But the Brookings Institution recently ranked San Francisco, already dense, as the second-most unequal city in the nation, while Silicon Valley, like most high-tech areas, is fundamentally suburban. The oligarchs’ view of California’s future—a twenty-first-century version of a medieval gated city, where only a few residents, mostly older whites and  wealthy Asians, own property—has limited appeal. Few people in their thirties want to live in crowded housing or be renters for life.

Wiener and other forced densifiers cast his bill as a step to creating a “greener” California, in which expanded public transit would reduce carbon emissions. Yet, as Los Angeles has densified under its last two mayors, transit ridership continues to drop—in part, notes a recent UC Berkeley report, because incentives for real estate speculation have driven the area’s predominantly poor transit riders further from trains and buses, forcing many to purchase cars.

Except for San Francisco, most of California is not fertile ground for traditional transit. Ridership is declining in dispersed workplaces like Silicon Valley, despite the presence of light rail. Los Angeles has invested $15 billion in light rail—and has lost 16 percent of its riders since 2014. In Orange County, ridershiphas fallen 30 percent since 2008. The real path to a greener future lies in the innovation that once characterized California. Along with ridesharing, electric and autonomous vehicles could play a big role in reducing emissions, and the state is a leader in its percentage of residents working from home.

Claims that packing people together will do much to improve the environment lack evidence. Even the pro-density UC Berkeley Termer Center acknowledges that banning urban-fringe development will account for barely 1 percent of the proposed state greenhouse-gas (GHG) reduction by 2030—not much to show for polices that could drive house prices and rents even higher. Globally, this GHG reduction would represent a statistical rounding error, amounting to .003 percent of annual worldwide emissions.

A frequent rationale for densification assumes that building more units on transit-rich land will help solve California’s housing-affordability crisis. In reality, higher-density housing is costlier to build, running up to 7.5 times more per square foot the cost of building detached housing. Combined with the prohibitive cost of land zoned for these purposes, high-density development is an expensive proposition. Newly publicly subsidized “affordable” apartments in one dense Bay Area development could cost upward of $700,000 to build.

California could address its housing crisis without destroying existing neighborhoods, and in ways that both lower the cost of rental housing and expand the opportunities for homeownership. As many as 275 malls, according to Credit Suisse, will close in the next five years, roughly a quarter of the national total; America already has four to five times as much retail space per capita as the United Kingdom or Japan. A report from the real-estate services firm Cushman and Wakefield predicts that 15 percent of all mall space will need new uses over the next decade. Disused suburban shopping malls are already being redeveloped into housing across Southern California, an effort that could be greatly expanded across the state. Building in outdated retail, office, warehouse, and industrial spots has the virtue of not affecting flourishing neighborhoods and can take advantage of already-existing water, electrical, and road infrastructure.

Perhaps the biggest boost would come from nurturing, as opposed to demonizing, suburban development. Hostility toward the suburbs eliminates the free market for land, driving up prices, while ignoring the preferences and aspirations of Californians. The most recent census data show that, as in the rest of the country, people, notably millennials, are headed to the periphery. Population growth rates in denser places, like San Francisco and Los Angeles, are dropping precipitously, while regions like the San Bernardino-Riverside area are seeing growth.

Density proponents will wave the bloody shirt of sprawl to oppose this cultural shift, but California already has the highest urban-population densities of any state. Los Angeles’s suburban densities are four times those of metropolitan Boston or Atlanta and double those of New York. Further, population growthhas fallen to less than a quarter of the rate in the two decades following World War II. Any suburban housing boom would be, in historic terms, modest. And as MIT’s Alan Berger notes, modern suburban development can be as environmentally positive as big-city densification. Suburban performance can only improve with the shift to electric cars, the increase in telecommuting, and, eventually, autonomous vehicles.

In the long term, Jill Stewart suggests, the defeat of the Wiener bill shows that the public can indeed challenge California’s autocratic planning regime. The measure brought together opposition groups from the Bay Area, Southern California, and the interior. Beverly Hills’s John Mirisch is pushing for a state-wide initiative to ban co-optation of local control.

Unless this alliance formulates a long-term pro-housing agenda, though, the state political establishment will find ways to force the density issue. A new strategy, one that attracts jobs to the places where people are moving and recycles redundant retail and other urban space into new housing, would relieve the pressure of over-inflated urban markets. Such a commonsense approach, of course, would violate the city-planning dogma favored by most academics and the media. Yet, given the clear preferences of Californians, perhaps it’s time to give common sense a chance.

Left and Lefter in California

california-flagThe California Democratic Party’s refusal to endorse the re-election of Senator Dianne Feinstein represents a breaking point both for the state’s progressives and, arguably, the future of the party nationwide. Feinstein symbolizes, if anyone does, the old Democratic establishment that, while far from conservative, nevertheless appealed to many mainstream businesses and affluent suburban voters. The rejection of Feinstein reveals the eclipse of the moderate, mainstream Democratic Party, and the rise of Green and identity-oriented politics, appealing to the coastal gentry. It offers little to traditional middle-class Democrats and even less to those further afield, in places like the industrial Midwest or the South. In these parts of the country, bread-and-butter issues that concern families remain more persuasive than gestural politics.

To its many admirers back east, California has emerged as the role model for a brave new Democratic future. The high-tech, culturally progressive Golden State seems to be an ideal incubator of whatever politics will follow the Trump era.

Certainly, California is an ideal place to observe this shift, as radicalism faces no restraints here. The Republican Party has little to no influence in politics and culture and not much even among business leaders. For the Democrats, this vacuum allows for a kind of internecine struggle resembling that of the Bolsheviks after the death of Lenin. And just as happened then, a new Stalinism of sorts seems to be emerging—in this case, to the consternation not only of conservatives but also of traditional liberals and moderates of the Feinstein stamp.

Yet as California Democrats exult in what they see as a glowing future, they are turning away from the models that once drove their party’s (and the state’s) success — a commitment to growth, upward mobility, and dispersed property ownership. California’s current prosperity is largely due to the legacy of Governor Pat Brown, who, a half-century ago, built arguably the world’s best transportation, water, and power systems, and created an incubator for middle-class prosperity. Ironically, the politician most responsible for undermining this achievement has been Pat’s son, Governor Jerry Brown. Long skeptical of his father’s growth-oriented, pro-suburban policies, Brown the Younger put strong constraints on growth, especially when these efforts concerned the fight against global warming — a quasi-religious crusade. Battling climate change has awakened Brown’s inner authoritarian; he has lauded the “coercive power of the state” and embraced “brainwashing” on climate issues.

Brown’s stridency on climate, however, does not extend to all leftist issues. Like Feinstein, Brown has some appreciation of the importance of infrastructure, such as the need to increase water supplies, and he exercises at least a modicum of caution on fiscal matters like the state’s gargantuan pension debt. He is not a strict identitarian, having vetoed an attempt to enact Title IX standards of evidence for campus sexual-assault cases, a measure embraced by the state’s vocal feminist leaders.

As Brown prepares to depart, and Feinstein struggles to retain office, a new dominant coalition — led by tech oligarchs, identity politicians, and Greens — is rising to usurp control of the party. This new coalition of the privileged and aggrieved marks a departure both from Pat Brown’s social democracy and his son’s more elitist but still measured politics.

State senator Kevin de León, the emergent leader of this new configuration and cat’s paw of billionaire Tom Steyer, the San Francisco hedge-fund billionaire epitomizes the new approach. Having made much of his fortune in oil sands and coal, Steyer is now the Democratic Party’s prime bankroller, and his largesse extends to the drive to impeach President Trump. He has made common cause with hard-Left politicians like de León, and even embraced unionism—as long as labor follows his extreme position on climate change.

Steyer and other oligarchs are working to eliminate the last vestiges of the old Democratic Party. Climate activists have been targeting, with some success, the so-called Mod Squad — centrist Democrat legislators from the state’s less-prosperous interior and working-class suburbs. This shrinking group, occasionally financed by energy, homebuilding, and other pillars of the old economy, sometimes holds the balance of power in Sacramento, and has managed to slow some of the most draconian climate measures.

De León’s enthusiastic embrace of climate-change dogma may seem odd for a politician whose impoverished district suffers from Los Angeles’s continued de-industrialization, hastened by strict environmental regulation and high energy costs. Instead of backing policies that would create more high-wage jobs, de León’s priorities are largely redistributive. This jibes with his support among public employees and from the militant California Nurses Association. He endorsed the union-backed single-payer health-care plan, a measure that assembly speaker Anthony Rendon tabled as impossibly expensive (it would more than double the state budget). Immigration is another key de León issue. He is a fervent supporter of illegal immigrants, in a state that houses one in fourof the nation’s total, bragging about his own relatives’ use of false IDs.

Lieutenant Governor Gavin Newsom, the former San Francisco mayor and frontrunner in the governor’s race, also embraces these policies. After briefly trying to appeal to mainstream business, Newsom has fallen into line with Bay Area-dominated progressives and the big public unions on virtually every issue, including single-payer. His likely election suggests a continuation of California’s current drift, but without Brown’s occasional restraint and intelligence.

The Golden State’s progressive tilt would not be possible without demographic change. The state’s majority-minority makeup has made the capture of middle-class and moderate voters less important. As middle-class families leave California, the electorate is increasingly dominated by racial minorities — with whites, 70 percent of the population in 1970, now less numerous than Hispanics and destined to be roughly one-third of the population by 2030. California’s demography is more and more dominated by the poor and near-poor (roughly one-third of the population), the young and unattached, and a residual population of older whites, many luxuriating on generous state pensions or inflated property values.

What makes all this work is the growing power of the tech oligarchs and their more glamorous cousins in the Hollywood glitterati. The tech boom of the last decade has obscured the decline of California’s basic industries, such as energy and manufacturing. California’s above-average job performance since 2010 is almost entirely a combination of high-income employment growth in the Bay Area and the swelling ranks of low-wage service workers who serve them. The oligarchs, including tech investor Sam Altman, LinkedIn co-founder Reid Hoffman, and philanthropist Laurene Powell Jobs, widow of the late Apple founder, have lined up behind de León. Tech will likely bankroll the pliable and well-heeled Newsom, who already gets cash from Airbnb, Twitter, and Salesforce.com.

This marriage of the poor and the new rich appears to be the dominant theme emerging in California. The oligarchs, as Greg Ferenstein has reported, don’t even pretend to believe in upward mobility for the masses. Instead, they favor policies — such as forced densification — that will house their largely young, childless workers, including the nation’s largest population of H1-B visa-holders. Measures such as State Senator Mark Wiener’s SB 827 would largely strip cities of their ability to control development anywhere near transit stops. Civil rights groups, mainstream environmental organizations, neighborhood associations, and cities themselves have come out in opposition, and even Los Angeles mayor Eric Garcetti, a dedicated densifier, fears a backlash in the city’s remaining single-family neighborhoods. Yet the oligarchs and their YIMBY (“yes in my backyard”) allies, whom they generously fund, have backed the bill.

At its core, the oligarchs’ vision for California represents a kind of high-tech feudalism. Tech companies are starting to dominate sectors like electric and autonomous cars, even seeking monopolies in dense urban areas. They support limiting ownership and consumer choice, even as the bulk of automobiles remain gas-powered. In the longer term, the oligarchs have little interest in creating blue-collar jobs and would prefer to replace employment with algorithms. Deprived of work and unable to pay for housing, the working class and an ever-shrinking middle class would be bought off with income-maintenance payments — twenty-first-century alms for the poor.

Opponents of this new gentry agenda should appeal to the remnants of the middle class and the unsubsidized portions of the working class. Feinstein could win reelection by rallying such voters; her name recognition and ample campaign war chest could help her fend off de León this year. But even if she wins, it will likely be a last hurrah for the old Democrats. Tech oligarchs and activist CEOs have committed themselves to extreme environmentalism, identity politics, and open-borders immigration policy. California’s bevy of clueless celebrities, now celebrated by Time as “suddenly serious” for following the identitarian party line, have also climbed aboard.  As anyone knows who has suffered through awards shows or listened to interviews with stars, the entertainment industry—much like tech — has become homogeneous in its views.

The key issues for the glitterati are not income inequality, upward mobility, or the preservation of middle-class neighborhoods but the feverish pastimes of the already rich: gender and racial issues, climate change, guns, and anything that offends the governesses and schoolmarms of intersectionality. To the ranks of these over-exposed but influential voices, you can also add California’s media and most of its intelligentsia, who seem to get their talking points from progressive sources and work assiduously to limit the influence of moderate (much less conservative) views. With Silicon Valley increasingly able to control content and ever more willing to curb debate, the policy agenda of the state’s new elite may well become reality — a nightmarish one for millions of ordinary Californians.

Is there a niche for sensible politics in California & America?

California-budget-crisis-bear-flagGiven the current state of American politics, and those of our state of California, our founding fathers might well consider not just turning over in their graves but boring deeper towards the earth’s core. Yet amidst the almost unceasing signs of discord and hyperbolic confrontation, there exists a more sensible approach which could help rescue our wobbling Republic.

Centrism has long been the subject of well-meaning advocacy but has lacked a class or geographic focus. It most defines the politics of the suburban middle. Much of the urban core — where Clinton and other Democrats often win as many as 80 to 90 percent of the vote — is now about as deep blue as the Soviet Union was red. For its part, the countryside has emerged so much as the bastion of Trumpism that MSNBC’s Joy Reid labels rural voters, “the core threat to our democracy.”

A niche for sensible politics?

Most Americans do not live in either the urban core or rural periphery; more than half live in suburban areas which nearly split their ballots in 2016 , with perhaps a slight edge for President Trump. Many suburban areas — not only in California or New York but in places like Fort Bend County, outside Houston — went for Clinton. Democrats won big recently in the Virginia suburbs, and did better in those in Alabama; both resulted in stinging defeats for Trump and the GOP.

To consolidate these gains, Democrats need to resist the tendency, most epitomized by the likes of Gov. Jerry Brown, to detest not only suburbs, but the entire notion of expanded property ownership, privacy and personal autonomy. Suburbanites may not like Trump’s nativism and grossness, but they do have an interest in preserving their way of life.

A more reasoned, problem solving approach seems the best course as well for Republicans. The most popular governors in the nation, for example, are not progressive firebrands like Brown or Washington’s Jay Inslee, both under 50 percent approval. Nor are right-wing firebrands so popular; Kansas’ Sam Brownback wins plaudits from less than a quarter of his electorate. They are measured politicians like Maryland’s Larry Hogan and Massachusetts’ Charlie Baker, Republicans from deep blue states with roughly two-thirds approval.

Breaking with the bad

These political leaders suggest a new possibility to circumvent the red-blue, coast-heartland divides tearing the country apart. It could also lead to an end to the spasmodic political upheavals which either favor core cities, as was the case with President Obama, or now President Trump’s base in the more dispersed heartland.

One idea has been to promote an independent candidacy of Ohio GOP Gov. John Kasich and Colorado’s John Hickenlooper, who have worked on health care reform together. Both men are thoughtful, come from swing states and enjoy high popularity ratings. Sadly, Kasich, to date, has backed away from such a campaign, although perhaps the combination of a future Trump meltdown and a more pronounced Democratic shift to the left, could make him reconsider.

Veteran political observer Lou Cannon suggest that a more centrist, common-sense politics has a market. Independents are a growing trend, now accounting for 40 percent of the electorate, that is particularly marked among millennials. Both major parties, deservedly in my mind, are near record lows in terms of popularity among voters. Skeptics counter that polarization is growing and that many independents remain largely adherents of one party or the other, even if they detest their leaders.

How about California?

California is widely seen as a one-party state, dominated largely by rabid progressives. Yet “decline to state” voters are growing and now larger than Republicans. Surprisingly, the Democratic preference has also dropped over the past 25 years from 49 to 45 percent.

Right now the best hope for independents lies in the candidacy of environmentalist Michael Shellenberger, co-founder of the Oakland-based Breakthrough Institute. Unlike many of his green allies, Shellenberger has the courage to denounce climate policies that create higher housing and energy prices, in the process stunting upward mobility.

Shellenberger points out that the current Brown policies have not done so well in reducing emissions, as recently documented in the green magazine Grist. The main reason for last year’s emissions drop turned out to be surge in hydropower, from last year’s wet weather. Shellenberger traces the state’s less than stellar performance as well to the shutdown of nuclear power, arguably the most effective way to reduce carbon. More important still, he sees a state under the control of a corrupt political machine, first crafted by John Burton in the 1960s, dominated by “public employees and green energy companies.”

Unlike our self-styled progressive leaders, Shellenberger favors policies that address climate without undermining the middle and working classes. He defends “the California dream” and accuses the front-runner, former San Francisco Mayor (surprise!) Gavin Newsom of “talking more about Trump” than assessing the state’s real needs.

Best of all Shellenberger epitomizes the notion that politicians should address real problems, rather than posturing for the adoration of the media, celebrities and billionaires with clearly too much money and time on their hands. “Does it matter if a policy is liberal or conservative,” he asks. “Who cares? What matters is what works.”

Originally published in the Orange County Register.

Cross posted at New Geography.

Editor of NewGeography.com and Presidential fellow in urban futures at Chapman University

The Delusion of Eric Garcetti for President

Photo courtesy of Eric Garcetti, Flickr.

Someone may be putting something in the Los Angeles water supply. In the past months, two unlikely L.A.-based presidential contenders — Mayor Eric Garcetti and Disney Chief Robert Iger — have been floated in the media, including in the New York Times.

But before we start worrying about how an L.A.-based president might affect traffic (after all this is the big issue in Southern California), we might want to confront political reality. In both cases, the case for our local heroes’ candidacies is weak at best, and delusional at worst.

The Disney fantasies

The Iger case is, if anything easier to dismiss. Iger can sell himself, like Trump, as a business success story, and with probably far-fewer questionable business transactions. Yet Iger, trying to run as a progressive in an increasingly left-wing Democratic Party, will face numerous challenges that dwarfs those faced by Trump.

Iger, for example, will have to run against the sad record of his company’s self-serving interference in Anaheim. Disney is generally a low-wage employer, and, in Orange County, this can be seen as contributing to the enormous disparity between cost of living and low salaries. I don’t suggest that companies should be primarily social justice warriors, but when a corporate executive runs, he’s going to be subject to their scrutiny.

Other problems also abound. For example, in 2016 the firm laid off 250 of its Orlando tech employees, replacing them with H-1B visas holders from an Indian outsourcing firm, and then, insisted that some train their replacements before being laid off. Let’s just say that won’t play well if Iger had to run against populists like Bernie Sanders, Elizabeth Warren, or even Joe Biden.

Should mayors run the world?

If Iger suffers from Mouse made illusions, Garcetti gets his from urbanist circles, who increasingly maintain that mayors should run the world. This may seem strange given that core cities account for barely a quarter of our major metropolitan population. In the Los Angeles metropolitan area, most of regional growth takes place well outside the urban core. The slow growing city, which was first claimed to have reached four million people in 2008, has still not achieved that number according to the U.S. Census Bureau.

Unfortunately for Garcetti, L.A. makes a hard sell as an exemplar for the economic future. Some cities like New York and San Francisco, have enjoyed robust expansions of employment in the past decade, but not Los Angeles. Overall, notes a recent survey in Wallet Hub of 150 cities in the country in terms of job prospects, ranked Los Angeles 115th well below less hyped places as Irvine, Rancho Cucamonga, Ontario and even Fontana.

Garcetti’s has tried to sell L.A.’s “silicon beach” as a hot tech location but, despite the success around the now faltering Snapchat, overall STEM growth over the past decade has been slightly negative. Remarkably for a one-time tech behemoth, the county now has less STEM employment per capita than the national average. At the same time, rankings of inequality and poverty, as measured by urban theorist Richard Florida, place the L.A. area, which includes the surrounding communities, dead last among the 20 largest metros. Overall the poverty rate in both the city proper and in the riot zone is higher now than before the 1992 riots.

Has Garcetti’s density agenda paid off elsewhere? One in four Angelinos, according to a recent UCLA study, spend half their income on rent, the highest again of any major metro.

Garcetti’s backers praise pro-density policies and hail him as a crusader against sprawl. But ordinary citizens are less enthused about his policies for narrowing streets, which has not only slowed traffic but also seen an increase in accidents; congested traffic also tends to generate more greenhouse gas. Garcetti gets kudos for his transit fixation but last year Los Angeles accounted for almost one-quarter of the strong national decline in transit ridership; in the period spanning his first term, Los Angeles lost 113 million annual rides, 16.6 percent of its 2014 ridership.

Deep blue visions on the national stage.

Of course, Mayor Garcetti is not to blame for all L.A.’s troubles, which have been festering for decades. His culpability lies with doubling down on failed policies. If someone is running for the highest office in the land, it’s nice to have something to brag about other than speculative high rises in the inner core and the arrival of two football teams, both scheduled to play in Inglewood.

The good news may be neither of these people are going anywhere. Both Garcetti and Iger seem unlikely to outdo California’s favorite daughter, Sen. Kamala Harris, in the early primaries. She may have little to show for her time in office — except for a genius for grandstanding — but her multi-cultural allure, to coin a phrase, trumps that of white male heterosexuals in today’s identity crazed Democratic Party.

Basically, my old New Yorker’s advice to both these guys is: “fuggedaboutit.” America may be nutty enough to nominate a Californian, but it won’t be either of you.

Originally published in the Orange County Register.

Cross-posted at New Geography.

The California Economy’s Surface Strength Hides Looming Weakness

If you listen to California’s many boosters, things have never been so good. And, to be sure, since 2011, the state appears to have gained its economic footing, and outperformed many of its rivals.

Some, such as Los Angeles Magazine and Bloomberg, claim that it is California — not the bumbling Trump regime — that is “making America great again.” California, with 2 percent job growth in 2016, gained jobs more rapidly than most states. The growth rate was about equal to Texas and Colorado, but behind such growth centers as Florida, Nevada, Oregon, Washington, Utah and the District of Columbia.

Bay Area: Still the tower of power

sanfrancisco3Over the past few years, the Bay Area has grown faster in terms of jobs than anywhere in the nation. But this year, according to the annual survey of the nation’s 70 largest job markets that I do with Pepperdine University public policy professor Michael Shires for Forbes, there is a discernible slowing in the region. For the first time this decade, San Francisco lost its No. 1 slot to Dallas, which, like most other fastest-growing metros, boasts lower costs and taxes, and has created more middle-class jobs than its California rivals.

The San Francisco area, which includes suburban San Mateo, remains vibrant. More troubling may be the weakening of the adjacent San Jose/Silicon Valley economy, which dropped six places to eighth — respectable, but not the kind of superstar performance we have seen over the past several years.

This partly reflects an inevitable slowdown in information job growth. As the startup economy has stalled, and the big players have consolidated their dominance, sector growth has dropped from near double digits to well under half that. Perhaps more telling has been a shift in domestic migration, which was positive in San Francisco earlier in the decade, but has now turned sharply negative. These are clear signs of a boom that is cooling off.

Southern California: Stuck in second gear

Southern California continues to lag. San Diego managed only a mediocre 29th-place finish. That’s better than Orange County, which managed an even less impressive 37th, and Los Angeles, by far the state’s largest job market, which reached only 40th place.

In Southern California, many seem to mistake high housing prices for economic vigor. High prices do create a wealth effect for those who own property, and this creates ancillary jobs in home repair and real estate. The area has also benefited from something of a boom in hospitality, medical and educational jobs.

But this does not make up for less-than-stellar creation of high-wage jobs. Los Angeles has expanded information jobs, much of them tied to Hollywood and the media-oriented “Tech Coast” corridor along coastal Southern California, but it continues to lose blue-collar manufacturing jobs. Professional business growth has been weakening since 2013. Lower-wage jobs in the health and hospitality industries, meanwhile, have enjoyed more robust expansions. Poverty in Los Angeles, particularly in South L.A., is arguably worse than during the riots a quarter-century ago.

Orange County suffers less from poverty but also sees rapid growth in low-end sectors like hospitality, which has grown almost 20 percent since 2011. Unlike Los Angeles, professional and business service employment — the largest of the high-wage sectors — has seen steady growth, up 20 percent since 2011, but information growth has been weak and manufacturing continues to decline.

Perhaps the biggest surprise may be the 14th-ranked Inland Empire, which has benefited from, among other things, the soaring home prices along the coast. Outside of information jobs, which have declined, the region has seen steady growth in manufacturing, wholesale trade and professional and business services. As much as the middle-class economy still exists in Southern California, it is now solidly ensconced in this region.

Future prospects

In the coming years, California’s claim of being the economic exemplar of the country may be further undermined by legislative overreach. The statewide rise in the minimum wage will hit the lower-wage sector, particularly outside the coastal enclaves. Various plans to boost the welfare state, such as a single-payer health care system that includes the undocumented, and a host of union-driven initiatives, seem certain to drive up costs and impose an ever-heavier tax burden on the state’s struggling middle class.

Perhaps most threatening, over time, may be a host of new environmental laws which will impose enormous burdens on affordable housing, energy prices and industrial growth. The slowdown in tech growth, coupled with a looming decline in the markets as the Trump agenda unravels, could weaken the capital gains juggernaut that has sustained the state through the past decade. Gov. Jerry Brown, under whose watch spending has risen 45 percent, is already predicting a large deficit for next year.

So far this decade, California has defied economic logic, largely due to the explosive growth of Silicon Valley, as well as the effects of rapid real estate appreciation. Yet, these gains have failed to reverse, and in some ways have even exacerbated, the state’s highest-in-the-nation poverty rate, growing inequality and a mounting outmigration of middle-class families. These facts suggest that it’s time to end the celebration and start focusing on how create a more expansive, less feudal California.

Originally published in the Orange County Register.

Cross-posted at New Geography.

ditor of NewGeography.com and Presidential fellow in urban futures at Chapman University.

Pothole Coast Highway: California Faces an Infrastructure Crisis

Pot hole in residential road surface

The Pacific Coast Highway stretch between Dana Point in Orange County, Calif., at the southern end, and Fort Bragg in Mendocino on the northern end, “is a bucket-list trip,” the New York Daily News enthused two years ago. “Stretching 650 curve-hugging, jaw-dropping miles along the ruggedly beautiful central coast of California, Highway 1 is one of the most scenic roads in the country.”

What the newspaper didn’t mention is that anyone winding along California roads might think that the Big One has already hit. Streets and highways across the state are in awful shape: a cracked, crumbling mess pock-marked with potholes, which tend to grow larger due to time, weather, and government negligence.

Some potholes grew so monstrous after recent heavy winter rains that California Highway Patrol officers in Oakland actually named one — “Steve.” They should have called it “Jerry,” after Governor Brown, who has done little about the state’s failing infrastructure except talk about it, while continuing to seek funding for a costly and unnecessary high-speed rail system. A bit of help for the weary motorist who’s thinking about making a justifiable claim against Caltrans for the damage it’s done to his car? Not in Brown’s California. Chapman University professor and City Journal contributing editor Joel Kotkin wrote last year in the Orange County Register that Brown’s goal “is to make congestion so terrible that people will be forced out of their cars and onto transit.”

Not all of California’s infrastructure problems can be blamed on the winter weather. In 2015, in the midst of a withering drought, the Mercury News reported that a family’s car hit a “killer pothole” near Sacramento with such force that its airbags inflated. Repairs would have cost nearly $15,000, so the insurance company wrote if off as a total loss. Though that might sound like a one-off event, California roads are indeed wrecking cars. “Deficient roads” in the Los Angeles area cost motorists an average $2,800 in annual repair costs. The state implicitly admits that its roads are a mess through a law that enables car owners who feel they’ve “lost money or property as a result of any action or inaction by Caltrans” to make five-figure claims against the agency.

The Reason Foundation, which for decades has rated road conditions across the country, ranked California roads 42nd in the nation in its 22nd Annual Highway Report. The state is 45th in rural-interstate pavement condition, 48th in urban-interstate pavement condition, and 48th in congestion in urbanized areas, the study says. “Half of the nation’s rural interstate mileage in poor condition is located in just five states,” says Reason’s Adrian Moore, and California is one of them. Media reports say that nearly 60 percent of the roads need repair. Will Kempton, a former Caltrans director, told the Los Angeles Times in February that road conditions were the worst he’d ever seen.

Roads aren’t the only infrastructure breaking down in California; its dams are no longer trustworthy. The Oroville Dam in the Sierra Nevada foothills almost failed this winter when its main spillway fell apart. It didn’t, but its near-collapse was a warning, as the New York Times reported, that the state’s “network of dams and waterways is suffering from age and stress.” The San Francisco Chronicle said a year ago that “there are 200 dams in California that are at least partially filled with mud and are approaching the end of their working lives.”

This isn’t a surprise to policymakers, who’ve been on notice for some time. According to the Association of Dam Safety Officials, California had 334 “high-hazard potential” dams in 2005; by 2015, 678 earned that designation. Officials were told in 2005 that the emergency spillway at the Oroville Dam posed a serious risk.

Also vulnerable are the state’s levees, especially those in the Sacramento-San Joaquin River Delta network. Problems in this patchwork of largely muddy banks, built by farmers rather than civil engineers, put much of the state’s water supply at grave risk.

Rather than fix the state’s vital artery system and shore up its dams and levees, Brown and other policymakers prefer to focus on the shiny bauble of high-speed rail and a fanciful mixture of mass transit and bike lanes in an effort to move Californians out of their cars and into forms of transportation favored by Sacramento’s political bosses. Those who resist the agenda because they want to maintain the freedom facilitated by cars are likely to be hit with a new fuel-tax hike (in a state that already has some of the highest fuel taxes in the country).

More taxes, tolls, or user fees might be tolerable if the additional dollars improved the roads. But California has a history of taxing motorists to pay for pet projects that have zero connection with improved street and highway conditions. The Golden State’s existing patterns of density and sprawl have made reliance on car travel a necessity for most residents. Mass-transit advocates can wish for magical people-moving networks that will make cars obsolete, but the state’s planners need to focus on repairing the infrastructure we already have before they start implementing their dreams of a shining California future.

Why California’s Finances Could Derail Their Energy Plans

Energy power linesAccording to State Senator John Moorlach, R-Costa Mesa, California has real financial problems that need to be immediately addressed. A self-described Truman Democrat, Joel Kotkin, in a recent syndicated article echoes the same sentiments. Some of the problems are California has the highest taxes overall in the nation, worst roads, underperforming schools, and the recent budget has at least a $1.6 billion shortfall.

Moreover, depending on how the numbers are analyzed California has either a $1.3 or a $2.8 trillion outstanding debt. This is before counting the maintenance work needed for infrastructure, particularly roads, bridges and water systems. Yet tax increases aren’t covering these obligations, and even the bullet train project, which held so much promise when it was passed are now billions over budget.

However, the financial strain also has California’s net financial position running a $169 billion deficit according to the Comprehensive Annual Financial Report, which puts California ranked last in the nation. Deferred maintenance on our state roads and highways is roughly $59 billion. Estimates of California’s unfunded pension liabilities – assuming a rate of return – above 5% has CalPERS at $114.5 billion, CalSTRS at $76.2 billion and UC Pension at $12.1 billion.

California in addition has the highest unfunded retiree medical liability in the nation, second highest gas taxes when cap and trade is added, highest corporate and individual income taxes, and lastly has the worst business competitive environment in the U.S. as well.

Our biggest issue of all could be that our nation’s unfunded pension liabilities have reached upwards of $5.6 trillion with California’s share at $956 billion. These above-mentioned sobering assessments of our state’s financial and societal health are reasons to question why California has become an outlier of progressive policies – particularly when it comes to energy – with renewable energy being at the forefront of our overall energy portfolio.

At one time California was the leader in sensible environmental, education, manufacturing and cultural polices, but those days have seemingly passed. As the country moved to the right during the recent election, California has entrenched itself as the stronghold of the left-leaning, progressive movement. Nowhere has this played itself out than in California’s embrace of global warming with AB 32 and SB 32. Both energy policies are known to restrict economic growth, and make all forms of energy more expensive. Whether you believe or not in global warming and climate change, California’s embrace of the fundamental tool for economic growth – affordable, scalable energy – has now become harder than ever to achieve with the voters, California legislature and Governor’s full embrace of these policies.

At this time California isn’t creating middle or upper middle class jobs, except in the northern California region. With San Francisco leading the way. Apple just announced they are creating 2,000 jobs in Arizona with firms such as Toyota, Tesla and Carl’s Jr., having followed suit the last few years. Recent labor announcements about California creating 21,600 private sector jobs in December turned out to be a false narrative.

According to payroll processing company Automatic Data Processing Inc. working with Moody’s Analytics Inc., put the figure at only 2,400 “goods producing types of jobs.” Meaning that nine out of ten jobs created were service sector, minimum wage paying levels jobs.

With this type of employment opportunities being created how are Californians expected to pay for an energy portfolio that strongly relies on renewable energy? This could be turned around with great paying careers that the oil and gas industry provides. As an example, according to Russell Gold’s book “The Boom,” page 62, the average oil-field worker made $91,400.

Renewable energy at this time doesn’t work on the type of basis that could power neighborhoods, cities, counties, or this state. Additionally, renewable’s technology hasn’t solved a number of key issues for energy security, reliability and scaling at a cost effective measure to reach all California markets.

These main problems are: 1) storage of excess energy, 2) intermittent weather issues when using wind and solar, 3) generous tax credits needed for profits (Tesla as an example), and 4) modernizing the grid needs to take place, because renewable energy causes surges that California’s grid isn’t able to handle from over 38 million Californians.

As California relishes its role fighting the new President, it is hard to imagine his administration doing anything to assist California lowering its energy costs. It’s not hard to imagine that if you live in Los Angeles, San Francisco or other expensive coastal enclaves that a $200,000 a year salary isn’t enough once taxes are paid. Therefore, why is California nudging the new President towards confrontation?

Gun control, immigration, and even snubbing him at his inauguration, members of the California Congressional delegation are playing a dangerous game. Joel Kotkin has many times called California’s energy policy an amalgamation of “green clergy, or a clerisy.” Trump also has control over federal dollars. California is expected to receive $105 billion this year, with $78 billion going to health and human services programs. Likewise Trump has nominated pro-fossil fuel advocates to the Departments of State, Energy, Interior and the EPA. It doesn’t seem wise for California to not want to work with the Trump administration on opening up parts of California to energy exploration to assist with politically disagreeable problems now in the mix.

California has billions of gallons of oil and trillions of cubic feet of natural gas sitting off our coastlines and in the Monterrey shale. Jobs aren’t being created that can sustain working families, infrastructure is lagging and our energy portfolio isn’t functioning correctly to contain costs.  Our high-energy costs are one of the biggest factors why companies and CEOs are leaving California.

Many astute energy observers believe California will need to cut 100,000 jobs and increase energy prices to meet our ambitious climate goals. These goals could be met with moving towards natural gas and nuclear-powered plants.

A desirable goal for the new year would be for voters to begin considering voting for moderate, business-friendly Democrats, and sensible environmental Republicans who believe in an all-of-the-above approach when it comes to energy policy.

This perfect amalgamation of animosity rapidly approaching California could be mitigated with sensible, low-cost energy policies that benefit all of California.

Todd Royal is a geopolitical risk and energy consultant based in Los Angeles.

Californians Approve $5 Billion per Year in New Taxes

For the last few years, using data provided by the watchdog organization CalTax, we have summarized the results of local bond and tax proposals appearing on the California ballot. Nearly all of them are approved by voters, and this past November was no exception.

With only a couple of measures still too close to call, as can be seen, 94 percent of the 193 proposed local bonds passed, and 71 percent of the proposed local taxes passed. Two years ago, 81 percent of the local bond proposals passed, and 68 percent of the local tax proposals passed. No encouraging trend there.

Outcome of Local Bond and Tax Proposals – November 2016

outcome-of-local-bond-and-tax-proposals-november-2016

A simple extrapolation will provide the following estimate: Californians just increased their local tax burden by roughly $4 billion, in the form of $1.9 billion more in annual interest payments on new bond debt, and $2.1 billion more in annual interest on new local taxes. But that’s not even half the story.

California’s voters also supported state ballot initiatives to issue new bond debt and impose new taxes. Prop. 51 was approved, authorizing the issuance of $9 billion in new bonds for school construction. Prop. 55 extended until 2030 the “temporary” tax increase on personal incomes over $250,000 per year, and Prop. 56 increased the cigarette tax by $2 per pack. The cost to taxpayers to service the annual payments on $9 billion in new bond debt? Another $585 million per year. Even leaving “rich people” and smokers out of the equation, California voters saddled themselves with nearly $5 billion in new annual taxes.

But as they say on the late-night infomercials, there’s more, much more, because California’s state legislators don’t have to ask us anymore if they want to raise taxes. November 2016 will be remembered as the election when a precarious 1/3 minority held by GOP lawmakers was broken. California’s democratic lawmakers, nearly all of them controlled by public sector unions, now hold a two-thirds majority in both the state Assembly and the state Senate. This means they can raise taxes without asking for consent from the voters. If necessary, they can even override a gubernatorial veto.

And they will. Here’s why:

There are three unsustainable policies that are considered sacrosanct by California’s state lawmakers and the government unions who benefit from them. (1) They are proud to have California serve as a magnet for undocumented immigrants and welfare recipients. (2) They are determined to continue to overcompensate state and local government workers, especially with pensions that pay several times what private workers can expect from Social Security. (3) They have adopted an uncritical and extreme approach to resolving environmental challenges that has created artificial scarcity of land, energy and water, an asset bubble, and a neglected infrastructure that lacks the resiliency to withstand large scale natural disasters or civil emergencies.

All three of these policies are extremely expensive. “Urban geographer” Joel Kotkin, writing in the Orange County Register shortly after the Nov. 8 election, had this to say about these financially unsustainable policies:

“This social structure can only work as long as stock and asset prices continue to stay high, allowing the ultra-rich to remain beneficent. Once the inevitable corrections take place, the whole game will be exposed for what it is: a gigantic, phony system that benefits primarily the ruling oligarchs, along with their union and green allies. Only when this becomes clear to the voters, particularly the emerging Latino electorate, can things change. Only a dose of realism can restore competition, both between the parties and within them.”

Despite the increase in consumer confidence since the surprising victory of Donald Trump in the U.S. presidential election, the stock and asset bubble that has been engineered through thirty years of expanding credit and lowering rates of interest is going to pop. The following graphic, using data from Bloomberg, explains just how differently our economy is structured today compared to 1980 when this credit expansion began.

1980-vs-2016

As can be easily seen from their price/earnings ratios today, publicly traded stocks are grossly overvalued. Equally obvious is that interest rates have fallen as low as they can go. For more discussion on how this is going to affect the economy, refer to recent California Policy Center studies “How a Major Market Correction Will Affect Pension Systems, and How to Cope,” and “The Coming Public Pension Apocalypse, and What to Do About It.” Despite healthy new national optimism since Nov. 8th, the economic fundamentals have not changed.

California’s democratic supermajority legislators, and the government unions who control them, are going to have a lot of explaining to do when the bubble bursts. For decades they have successfully fed their unsustainable world view to the media and academia and the entertainment industry. For over a generation they have brainwashed California’s K-12 and college students into militantly endorsing their unsustainable world view. This year they conned California’s taxpayers into approving another $5 billion in new annual taxes. But the entire edifice exists on borrowed time.

Ed Ring is the vice president of research policy at the California Policy Center.

What Do American Workers Have To Lose By Trying Donald Trump?

Donald TrumpIn a recent column, Joel Kotkin again makes a great case why American workers should vote against the Ruling Class and their poster child candidate, Hillary Clinton including:

“Middle-class revulsion with the political mainstream has been driven by slow economic growth, stagnant wages, a dysfunctional education system, and, for smaller businesses, a tightening regulatory regime. Homeownership is now at a nearly half-century low. New business start ups, for the first time in three decades, are not keeping up with the number of deaths. Both stats reveal a real decline in aspiration. Most Americans, in a stunning reversal of past trends, see a worse future for their offspring than themselves. Who can blame them? Middle-class breadwinners and working-class wage-earners now suffer from deteriorating health and shorter lifespans.”

However, Kotkin makes a remarkably week case why American workers should support Hillary Clinton over Donald Trump and continue America on the same track, albeit much more crooked.

Joel Kotkin does not criticize any of Donald Trump’s policies. Kotkin likes Trump’s “themes, notably economic nationalism and control of immigration.”

Kotkin’s stated reasons for American workers supporting Hillary Clinton are:

  • “A Trump administration would be unlikely to reflect blue-collar interests, but rather those of his inner circle, which includes some of the most ravenous Wall Street operators. The same is true of his general election opponent.”  [BTW, “ravenous Wall Street operators” overwhelmingly support Hillary Clinton.]
  • “His clear incompetence, narcissism and mean-spiritedness.”

One never knows whether candidates will attempt to fulfill their promises and whether they will be successful. On Wednesday, Donald Trump reaffirmed his immigration promises. Trump has been consistent in putting America and American first. Trump has not “moved to the middle” after winning the nomination like most politicians. While you can find isolated statements in Donald Trump’s many extemporaneous speeches and interviews, Trump has been remarkably consistent in his policy positions throughout the campaign.

Assuming is it uncertain whether Donald Trump will attempt to keep his promises and be successful in doing so, American workers have a choice between a known bad result in Hillary Clinton and possibly good, possibly bad result in Donald Trump, and if Trump is even partially successful in keeping his promises, he will be better than Clinton. Given that choice, wouldn’t every rational American worker choose the possible good result of Donald Trump vs. the known bad result of Hillary Clinton?

“Narcissism and mean-spiritedness” are subjective. Given the harm to American workers from Hillary Clinton continuing ruling class policies, why shouldn’t American workers support Trump whose policies will serve their economic interests? General Patton might be described as “narcissistic and mean-spirited,” but he was a great leader, who loved America, and led his men to victory.

I totally do not get “clear incompetence.” While not every business venture was successful, Donald Trump was very successful in business. He successful built many large projects in complicated, difficult political environments. He built a multibillion dollar company. Trump dispatched 16 other candidates in the primaries. Trump is gaining on Clinton despite the unified and unprecedented MSM bias and opposition and Hillary Clinton’s massive money advantage from Ruling Class donors.

Donald Trump would be hard pressed to do worse than the corrupt, incompetent, “do as we say not as we do” Ruling Class that is making America less free, less prosperous and less secure.

As Trump asks African Americans, what do American workers have to lose by trying Donald Trump?

This piece was originally published by Fox and Hounds Daily.

Middle Class Fleeing CA at Record Rates

http://www.dreamstime.com/-image14115451New data has brought a new urgency to the souring fortunes of California’s middle class.

“Not only are Californians leaving the state in large numbers, but the people heading for the exits are disproportionately middle class working families — the demographic backbone of American society,” the American Interest recently noted.

Looking at labor force categories provides more evidence that California is losing working young professional families,” argued Hoover Institution research fellow Carson Bruno; “while there is a narrative that the rich are fleeing California, the real flight is among the middle-class.”

“Knowing that net out-migrants are more likely to be middle-class working young professional families provides some hints as to why people are leaving California for greener pastures. For one, California is an extraordinarily high cost-of-living state. Whether it is the state’s housing affordability crisis — California’s median home value per square foot is, on average, 2.1 times higher than Arizona, Texas, Nevada, Oregon and Washington’s — California’s very expensive energy costs — the state’s residential electric price is about 1.5 times higher than the competing states — or the Golden State’s oppressive tax burden — California ranks 6th, nationally, in state-local tax burdens — those living in California are hit with a variety of higher bills, which cuts into their bottom line.”

Real estate indicators

“In 2006, 38 percent of middle-class households in California used more than 30 percent of their income to cover rent. Today, that figure is over 53 percent,” according to Christopher Thornberg, director of the UC Riverside School of Business Administration Center for Economics Forecasting and Development. “The national figure, as a point of comparison, is 31 percent. It is even worse for those who have borrowed to buy a home — over two-thirds of middle-class households with a mortgage are cost-burdened in California — compared to 40 percent in the nation overall.”

Recent studies illustrated a continuing plunge in homeowning among traditional buyers in-state. “California’s middle class is being hammered,” wrote Joel Kotkin at the Orange County Register. “The state now ranks third from the bottom, ahead of only New York and the District of Columbia, for the lowest homeownership rate, some 54 percent, a number that since 2009 has declined 5 percent more than the national average.”

Low on houses

Some analysts looking to explain the trend have pointed to a so-called housing shortage statewide. “With supply falling far below demand, California needs to build at least 1 million more homes for low- and middle-income Californians in the next 10 years,” CAFWD suggested, adding that, although Gov. Jerry Brown “did not mention housing in the State of the State address,” he has “not explicitly ruled out addressing the issue in the next three years.”

Giving ammunition to the housing shortage thesis, meanwhile, was “a new report from the California Legislative Analyst’s Office that found that poorer neighborhoods that have added more market-rate housing in the Bay Area since 2000 have been less likely to experience displacement,” the Washington Post noted. But experts have differed significantly on how to read the tea leaves of the data, and analysts disagree on whether increasing density — or what kind of density — is the right answer.

A cloudy picture

The Golden State has been haunted in recent times by sharply mixed economic indicators. “While California has added 2.1 million jobs since 2010, employment in six industries is still below 2007 levels, before the Great Recession, according to the center’s analysis. Those sectors — including construction, finance and manufacturing — generally pay more than the service-type jobs that we’re adding in droves,” the Sacramento Bee noted late last year.

Economic growth concentrated in Silicon Valley has also not done much to relieve the income or jobs picture for middle-classers. “In a recent survey of states where ‘the middle class is dying,’ based on earning trajectories for middle-income cohorts, Business Insider ranked California first, with shrinking middle-class earnings and the third-highest proportion of wealth concentrated in the top 20 percent of residents,” Kotkin observed.

Originally published by CalWatchdog.com