Drought: Californians must demand better for the state

agriculture“Science,” wrote the University of California’s first President Daniel Coit Gilman, “is the mother of California.” In making this assertion, Gilman was referring mostly to finding ways to overcoming the state’s “peculiar geographical position” so that the state could develop its “undeveloped resources.”

Nowhere was this more true than in the case of water. Except for the far north and the Sierra, California – and that includes San Francisco as well as greater Los Angeles – is essentially a semiarid desert. The soil and the climate might be ideal, but without water, California is just a lot of sunny potential, but not much economic value.

Yet, previous generations of Californians, following Gilman’s instructions, used technology to build new waterworks, from the Hetch Hetchy Dam to the L.A. Aqueduct and, finally, the California State Water Project and its federal counterpart, the Central Valley Project. These turned California into the richest farming area on the planet and generated opportunities for the tens of millions who came to live in the state’s cities and suburbs.

Today, California operates on very different assumptions. If growth was valued under the regimes that existed in the 100 years after Gilman, it began to lose its allure in the 1960s and 1970s. Part of this was understandable; much of the state had developed haphazardly, and, particularly in the urban areas, not enough open space was left behind. The greens thrived most here because so many had witnessed the dramatic transformation of so much of the state.

The central figures in this transformation are the Browns. The father Pat was a builder by proclivity, and he made sure Californians not only had lots of water, but excellent roads and a great education system from grade schools and community colleges to the University of California. Brown epitomized California’s opportunity era, with its many excesses but also remarkable social mobility, less poverty and more equality than what we see today.

Jerry Brown, his son, was much the opposite. As his adviser Tom Quinn explained to me 30 years ago, Brown’s politics were informed by an abhorrence of what he called his father’s “build, build, build thing.” Brown Jr., he added, was not just rejecting his father, but a long line of Democrats – from Harry Truman to Lyndon Johnson and Hubert Humphrey – who saw the party’s mission as creating wealth and opportunity for their middle- and working-class constituents.

Brown’s approach, in contrast, has been to embrace the notion of “an era of limits,” sometimes for good cause: On nonproductive, runaway government spending, for example. But the lack of investment in infrastructure – as opposed to social services, pensions and salaries – caused disastrous results, of which the current severity of the drought is just one example.

Part of this is world-view. Although generally scientists reject the claim that the drought stems from climate change, Brown and his amen crew, such as at the New York Times, swear that it’s a big part of the story.

This narrative helps explain why the state, under increasingly strong environmentalist influence, has chosen to refrain from taking steps to mitigate the drought. If it’s part of a general revolt of “gaia,” after all, why bother? Better to don a hair shirt and shrink the consuming base than prepare to meet future demands.

Brown’s distaste for adding storage space – a sentiment shared by his core green backers – goes back to his first two terms. Recently, he seems to have wised up on the need to deal with water infrastructure, but he has been careful not to offend his green allies. He has not called for an end to the unconscionable mass diversion of water to San Francisco Bay to restore ancient salmon runs and to save the Delta smelt. This inaction has helped make the current drought – which recalls at least two others I have experienced over the past 40 years – far worse than it need be.

But Brown’s water policies are only part of broader systemic problem in the political economy. The state’s politics are now dominated by a coalition of environmentalists, wealthy coastal residents and public employees who have little interest in broad-based growth, particularly in the state’s interior. This is reflected not just in water polices, but in such areas as basic transportation infrastructure. During the recession, for example, California cut transportation spending far more than states like Texas. A recent study from the American Association of State Highway and Transportation Officials and a nonprofit group found that California was home to eight of the 20 urban areas with the worst roads in the nation.

Brown’s disdain for infrastructure spending has survived the bad times and continues with the current budget. Similar trends are seen across the state, including even in opposition to building capacity at the ports – leading to a gradual erosion of our dominant market share to competitors, particularly in the Southeast. Some cities invest in expensive rail development but fail to keep up with the more cost-efficient bus service.

Similarly, a commitment to Draconian “renewable energy” goals has helped line the pockets of Silicon Valley investors and utilities at the expense of manufacturers, Main Street businesses and households. And when it comes to new housing, the green regime has created conditions that make the purchase or rental of housing outrageously expensive.

In the process, California has gone from the 25th-worst state in terms of inequality in 1970 to fourth-worst in 2013. Sure, Silicon Valley companies, flush with investment cash desperate for returns, do well, as does high-end real estate. But the historic constituents of the Democrats – minorities, the poor, the working class – have gotten only crumbs, effectively sold out by their own clueless, and often corrupt, political class.

So in the Oedipal conflict between the Browns, it’s not hard to see whose legacy we should seek to emulate. Pat Brown left behind roads, schools and, most critically, a water system, all of which we still depend on. Jerry Brown has promoted his reputation as a climate crusader and architect of the collapse of the Republican Party. His legacy is tied to his high-speed choo-choo, even though many not profiting from the gravy train don’t think it’s a good idea. Indeed, many progressives, such as Mother Jones’ Kevin Drumm, consider the whole thing “ridiculous,” a massive boondoggle.

But unlike some of my conservative friends, I don’t think all the blame belongs to Brown and his Democratic allies. California business did not push hard for new state investment when GOP governors ran the state. In some cases, Republicans also turned against their own traditional support of infrastructure building, embracing an infantile notion that low taxes alone would solve all problems.

California’s mess has many progenitors outside the green machine. Big agriculture, which consumes upward of 80 percent of our water, has not exactly covered itself with glory, resisting ground water controls as they unconscionably pump critically depleted state aquifers to historically low levels. And some growers insist on planting crops like rice, alfalfa and cotton that are more suited to the wet southeast than arid California. Some cities did not meter their own water uses, encouraging waste even as the drought mounted.

So what do we do now? How about not using state law to say “no” to everything and start saying “yes” to the things most Californians need. The Right needs to get beyond its 1978 Howard Jarvis moment. The greens should clamber down from their mountaintop and start embracing a combination of solutions that includes not only conservation but more reservoirs and more desalination. Business has to accept fewer subsidies and a more intelligent selection of crops to adjust to the new reality. The public needs to accept that our houses need to have landscaping that looks more like Tucson than England.

But it’s more than just water. We also need to start saying yes to those things – natural gas electrical generation, new housing, better roads and buses – that actually would improve the lives of Californians. Caught between the clueless Republicans and the ecotopian fantasies of the Left, Californians need to reject both, and demand something better for this state.

Cross-posted at New Geography and Fox and Hounds Daily

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

Economic Contrast: Texas vs. CA

In the last decade, Texas emerged as America’s new land of opportunity — if you will, America’s America. Since the start of the recession, the Lone Star State has been responsible for the majority of employment growth in the country. Between November  2007 and November 2014, the United States gained  a net 2.1 million jobs, with 1.2 million alone in Texas.

Yet with the recent steep drop in oil prices, the Texas economy faces extreme headwinds that could even spark something of a downturn. A repeat of the 1980s oil bust isn’t likely, says Comerica Bank economist Robert Dye, but he expects much slower growth, particularly for formerly red-hot Houston, an easing of home prices and, likely, a slowdown of in-migration.

Some blue state commentators might view Texas’ prospective decline as good news. Some, like Paul Krugman, have spent years arguing that the state’s success has little to do with its much-touted business-friendly climate of light regulation and low taxes, but rather, simply mass in-migration by people seeking cheaper housingSchadenfreude is palpable in the writings of progressive journalists like the Los Angeles Times’ Michael Hiltzik, who recently crowed that falling energy prices may finally “snuff out” the detested “Texas miracle.”

Such attitudes are short-sighted. It is unlikely that the American economy can sustain a healthy rate of growth without the kind of production-based strength that has powered Texas, as well as Ohio, North Dakota and Louisiana. De-industrializing states like California or New York may enjoy asset bubbles that benefit the wealthy and generate “knowledge workers” jobs for the well-educated (nationwide, professional and business services employment rose by 196,000 from October 2007 through October 2014), but they cannot do much to provide opportunities for the majority of the population.

By their nature, industries like manufacturing, energy, and housing have been primary creators of opportunities for the middle and working classes. Up until now, energy  has been a consistent job-gainer since the recession, adding  199,000 positions from October 2007 through October 2014, says Dan Hamilton, an economist at California Lutheran University. Manufacturing has not recovered all the jobs lost in the recession, but last year it added 170,000 new positions through October. Construction, another sector that was hard-hit in the recession, grew by 213,000 jobs last year through October. The recovery of these industries has been critical to reducing unemployment and bringing the first glimmer of hope to many, particularly in the long suffering Great Lakes.

Reducing the price of gas will not change the structure of the long-stagnant economies of the coastal states; job growth rates in these places have been meager for decades. Lower oil prices may help many families pay their bills in the short run. But there’s also pain in low prices for a country that was rapidly becoming an energy superpower, largely due to the efforts of Texans.

Already the decline in the energy economy, which supports almost 1.3 million manufacturing jobs, is hurting manufacturers of steel, construction materials and drilling equipment, such as Caterpillar. Separately, the strengthening of the dollar promises harder times ahead for exporters  in the industrial sector, and greater price competition from abroad, amid weakening overseas demand. Factory activity is slowing, though key indicators like the ISM PMI are still signaling that output is expanding.

Right now in Texas, of course, the pain is mounting in the energy sector. Growth seems certain to slow in places such as Houston, which Comerica’s Dye says is “ground zero in the down-draft.” Also vulnerable will be San Antonio, the major beneficiary of the nearby Eagle Ford shale. The impacts may be worst in West Texas oil patch towns like Midland, where energy is essentially the economy.

Yet there remain reasons for optimism. Cheaper energy prices will be a boon for the petrochemical and refining industries, which are thick on the ground around Houston and other parts of the Gulf Coast. The Houston area is not seeing anything like the madcap office and housing construction that occurred during the oil boom of the 1980s. Between 1982 and 1986 the metro area added 71 million square feet of office space; including what is now being built, the area has added just 28 million square feet since 2010. Compared to the 1980s, the residential market is also relatively tight, with relatively little speculative building.

The local and state economies have also become far more diversified. Houston is now the nation’s largest export hub. The city also is home to the Texas Medical Center, often described as the world’s largest. Dallas has become a major corporate hub and Austin is developing into a serious rival to Northern California’s tech sector.

Texas needs to increase this diversification given that oil prices could remain low for quite a while, and even drop further after their recent recovery.

This is not to deny that the state is facing hard times. Energy accounts for 411,372 jobs in Texas, about 3.2% of the statewide total, according to figures from Austin economist Brian Kelsey quoted in the Austin American-Statesman. If oil and gas industry earnings in Texas fall 20%, Kelsey estimates the state could lose half of those jobs and $13.5 billion in total earnings.

Low prices also could also devastate the state budget, which is heavily reliant on energy industry revenues. A reduction in state spending could have damaging consequences in a place that has tended to prefer low taxes to investing in critical infrastructure, and is already struggling to accommodate break-neck growth. The only good news here is that slower population growth might mitigate some of the turndown in spending, if it indeed occurs.

But in my mind, the biggest asset of Texas is Texans. Having spent a great deal a time there, the contrasts with my adopted home state of California are remarkable. No businessperson I spoke to in Houston or Dallas is even remotely contemplating a move elsewhere; Houstonians often brag about how they survived the ‘80s bust, wearing those hard times as a badge of honor.

To be sure, Texans can be obnoxiously arrogant about their state, and have a peculiar talent for a kind of braggadocio that drives other Americans a bit crazy. But they are also our greatest regional asset, the one big state where America remains America, if only more so.

This piece first appeared at Forbes.

Cross-posted at New Geography and Fox and Hounds Daily

Economic Growth: Why SoCal is Slow and Go

ECONOMICS POLITICS-In this information age, brains are supposed to be the most valued economic currency. For California, where the regulatory environment is more difficult for companies and people who make things, this is even more the case. Generally speaking, those areas that have the heaviest concentration of educated people generally do better than those who don’t.

Nothing more illustrates this trend than the supremacy of the Bay Area over Southern California in the past five years. Since the 2007-09 recession, the Bay Area has recovered all of its jobs, as has San Diego, but Los Angeles-Orange and the Inland Empire, although improving, lag behind.

Overall, the San Jose and San Francisco areas boast shares of college graduates at around 45 percent, compared with a 34 percent average for the 52 largest U.S. metropolitan areas. The San Diego area clocks in at 34.6. In comparison, the Los Angeles-Orange County area has roughly 31 percent college graduates while the San Bernardino-Riverside area has the lowest share of four-year degrees – 20 percent – of any large region in the country – this is worse even than backwaters like Memphis, Tenn., and Birmingham, Ala.

Dividing this region by counties shows Orange County well in the lead, with 37.6 percent college-educated, well above Los Angeles County’s 30 percent. 

Recent Trends – To see where these metrics are headed, Mark Schill, an analyst with the Praxis Strategy Group was asked to identify the share growth of bachelor’s degrees in the country’s largest metropolitan areas during 2000-13. The share of the adult population with college educations rose by 6.8 percent in San Jose and 6.4 points in the San Francisco-Oakland region. Some regions did better, including Boston, Pittsburgh, Grand Rapids, Mich., Baltimore, New York and St. Louis. All these were considerably above the national average increase of 5.2 percent.

In contrast, most areas of Southern California have shown more meager growth in their educated workforces. Los Angeles, overall, enjoyed a very average increase of 5.2 percent. San Diego, despite its high-tech reputation, notched a 5 point jump while the Inland Empire increased by 3.8 points, one of the lowest performances in the country. The biggest gainer in the Southland was Orange County, where the share of educated workers grew by a healthy 6.3 percent. 

Whither young, educated workers? – The picture, particularly for the Inland Empire, is not totally bleak. In a recent survey conducted by Cleveland State University, there have been some promising developments in the growth of younger educated workers. This key cohort, notes researcher Richey Piiparinen, appears to follow a very different path than do older educated workers, with many seeking out careers in less-expensive locales.

Indeed, looking at educated growth among 25-34-year-olds from 2010-13 finds that the most rapid expansion is taking place in unlikely places, such as the areas around Nashville, Tenn., Orlando, Fla., and Cleveland, all which experienced increases of roughly 20 percent or more. This is better than twice the growth rate in such noted “brain centers” as San Jose and San Francisco, which were around 10 percent, and New York at 9 percent. The Los Angeles-Orange County area saw a similar increase.

The reasons for these surprising, and somewhat encouraging results, particularly for the Inland Empire, may vary. One thing, of course, is the low base from which the area starts. After all, until the past decade, the employment profile of the Inland Empire favored manufacturing, logistics and construction, all fields not dependent on large contingents of highly educated workers.

Another critical factor may well be price, as we saw in our surprising findings on millennials. Simply put, many of the areas attractive in the past to educated workers have become extraordinarily expensive – as demonstrated by San Francisco-based writer Johnny Sanphillippo – while some more affordable locales have become “sweet spots” for younger educated people, particularly as millennials enter their family formation years. 

County, city breakdowns – The Southland, of course, is a vast region, and even every county contains hosts of cities that are very different from each other. In terms of counties, the biggest gains – albeit from a smaller base – took place in the Inland Empire, notably Riverside, which saw a 93 percent jump in its educated population since 2000. Orange County saw a 37.6 percent gain, ahead of Los Angeles’ roughly 36 percent gain.

More intriguing, and revealing, is the distribution of college degrees by city areas. Here, the supremacy of a few areas is very clear. In three Southland communities, more than 60 percent of the adult populations have college degrees: Santa Monica, Newport Beach and Irvine. Yorba Linda, Pasadena and Redondo Beach all boast rates close to, or above, 50 percent.

Obviously, these towns are something of outliers in the region. Los Angeles, by far the region’s largest city, has roughly 31 percent of its adults with college degrees. Many communities do far worse, most of all, Compton, where less than 6 percent have four-year degrees. Hesperia, Southgate, Lynwood and Victorville have educated percentages under 10 percent.

Adjacent communities sometimes have radically different rates of education. Santa Ana, for example, abuts Irvine, but has an educated population of barely 12 percent. And while some areas have shown meager growth in their share of educated residents, several areas have seen double-digit percentage increases, including Burbank, Yorba Linda, Rancho Cucamonga and Santa Monica. 

Implications – As the Southland economy evolves, it makes sense to look at those areas most likely to have more of the educated workers that high-end industries need. These increasingly are clustered in a few places, such as Irvine, Newport Beach, Rancho Cucamonga and Costa Mesa, that are both suburban in form but tend to have better schools than much of the region. These areas also tend to have lower-than-average unemployment rates. Educated people tend to migrate, for the most part, to areas where others of their ilk are concentrated, and often where their children have the best chance at a decent education.

These statistics and trends suggest that our leaders, in education and politics, need to focus on reality. It is dubious that many communities throughout the Southland will develop large shares of educated people in the immediate future. Indeed, given the quality of public education throughout most of the region, it seems almost inevitable that much of the region will lag in terms of skills well into the next decade.

This means that local leaders cannot expect to duplicate in the near future the success of places like Boston, the Bay Area, or even Pittsburgh. Instead, there needs to be a two-pronged attempt to address this issue. One is to boost preparatory and higher education throughout the region, which will allow for Southern California to better compete at the highest-end of employment.

But the other strategy, not to be discounted, is a full-scale commitment to skills training for those unlikely to earn bachelor’s degrees. This also means taking measures allowing the industries that would employ such workers – largely manufacturing, logistics, medical and business services – to flourish, so this training will have rewards. The Southland’s already large educated population is one key to its future, but finding a decent work environment for those without a four-year degree merits equal, if not greater, emphasis.

This article was originally published on CityWatchLA

(Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study,The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA. This piece was posted most recently at newgeography.com.)