Despite Glowing Media Coverage, California Faces a Future Loaded With Problems

california budget la la laJerry Brown’s long political career will likely end in January 2019, when the 80-year-old’s second stint as California governor concludes. In the media’s eyes — and in his own mind — Brown’s gubernatorial encore has been a rousing success. His backers say that he has brought the state back, economically and fiscally, from the depths of the Great Recession, which hit California harder than it did the rest of the country. Brown has enacted an array of left-liberal policies, to the delight of progressives, and positioned California as a blue-state role model for the American future. A decade of phenomenal growth among Silicon Valley’s landmark companies has boosted the state’s image and helped restore its overall economy. Democrats hope that California will provide a template for reestablishing their appeal to voters nationwide.

But the state’s boom shows signs of leveling off: after growing much faster than the national average for several years, the economy, notes a recent report by the Los Angeles Economic Development Corporation, has now fallen to around the national average; the state is no longer generating income faster than its prime rivals such as Texas, Washington State, Oregon, or Utah. California Lutheran University forecaster Matthew Fienup suggests that the state’s economic growth could fall below national norms if current trends continue.

The growth that so impressed over the past five years has masked a multitude of policy sins, and as California’s economic engine slows down, the underlying problems are becoming harder to deny. People are moving out in greater numbers than they’re moving in. Rates of job creation — and the types of jobs being created — vary widely according to geography. The high-tech hubs of San Francisco and Silicon Valley have added tens of thousands of well-paying jobs during Brown’s tenure, but the rest of the state hasn’t done nearly as well.

Brown has put California on a fiscally unsustainable path. A disproportionate share of the funds paying for his ever-expanding progressive agenda derive from Silicon Valley’s capital-gains tax revenues and inflation of the state’s coastal real-estate prices. Any slowdown in the tech money machine or drop-off in property values could prove disastrous for Sacramento’s budget — California gets half its revenue from its top 1 percent of earners. According to Pew, this makes it the major American state with the most volatile finances. Both U.S. News & World Report and the Mercatus Center ranked California 43rd among the states in fiscal health. And that was during an economic boom.

Brown’s departure will also remove the last (if only partial) restraint on progressives in the state legislature, who largely do the bidding of California’s powerful public-employee unions and the green lobby. These forces will pressure the next governor to ram through even stricter environmental laws, more onerous labor regulations, and a single-payer health-care system. California’s teachers are even pushing for an exemption from state income taxes.

California was once ground zero for upward mobility. No more. During the new millennium, the Golden State has become increasingly bifurcated between a small but growing cadre of elite workers and a far larger pool of poorer families barely scraping by. Wide disparities have opened up between the ultrarich and a fading middle class. The Brown administration has largely ignored the state’s poor and struggling rural areas as it pursues its agenda of remaking California into a progressive paradise. The bill — socially, economically, and fiscally — is coming due.

Throughout much of the twentieth century, California was a population magnet, growing ever more economically vibrant as it attracted the ambitious and the entrepreneurial from other American states and from around the world. Now the state’s long-running population growth is leveling off. During the last decade, high taxes, rising housing costs, and constrained economic opportunity have sent many California residents in search of greener pastures. Domestic economic migrants are pursuing their American dreams in low-tax, pro-growth states like Arizona, Nevada, and Texas.

With fertility rates already below replacement, the state’s population growth fell below the national average for the first time last year. Only four states—Michigan, Ohio, Wisconsin, and Illinois—are attracting fewer newcomers per capita. Immigration won’t solve that problem—new arrivals from foreign countries have trended down over the past decade. Since 2010, Florida attracted international immigrants at a per-capita rate nearly 70 percent greater than California’s. Net domestic out-migration, which declined in the early years of the Great Recession, tripled between 2014 and 2017. Worse, according to a recent UC Berkeley study, more than a quarter of Californians are considering picking up stakes, with the strongest proclivity found among people under 50.

California is aging, too. The state’s crude birthrate (live births per 1,000 population) is at its lowest since 1907. Los Angeles and San Francisco ranked among the bottom ten in birthrates among the 53 major metropolitan areas in 2015. Between 2000 and 2016, San Francisco–Oakland and San Jose ranked 34th and 47th in terms of millennial growth among the country’s 53 largest metro areas. A dearth of young people would pose particular problems for an economy like California’s, long dependent on innovation, traditionally the province of younger workers and entrepreneurs. Seventy-four percent of Bay Area millennials are considering a move out of the region in the next five years. Since 2000, Los Angeles – Orange County has seen some of the nation’s slowest growth of 25- to 34-year-old residents; since 2010, it has remained substantially below the national average on this measure. The progressive narrative suggests that those leaving California are poor, poorly educated, or both. Yet according to the Internal Revenue Service, out-migrant households had a higher average income than those households that stayed or moved in; even the Bay Area is experiencing growing out-migration from increasingly affluent people. Though the new federal tax changes, which will limit state tax deductions, will likely not affect the wealthiest oligarchs and landowners, they could further accelerate the departure of the merely somewhat affluent.

The current climate contrasts sharply with the 1950s and 1960s, when Jerry Brown’s father, the late Edmund G. “Pat” Brown, pursued dynamic pro-development policies as California’s governor. During those decades, the state constructed new infrastructure that sparked growth in fields as diverse as high-tech, aerospace, fashion, agriculture, basic manufacturing, and entertainment. What was then a model freeway system connected California’s cities to new middle-income communities in the San Fernando Valley, the South Bay of San Francisco, Orange County, and along the spine of the San Francisco Peninsula, which morphed into what we now call Silicon Valley. Pat Brown’s administrations modernized and extended the state’s water-supply system and crafted a public university system that was the envy of the nation, if not the world. Describing Brown’s leadership in transformational terms, biographer Ethan Rarick called the twentieth century the “California century.”

These reforms sparked a long economic boom not only on the California coast but also in the state’s massive interior. In those days, the region had political clout, as Republicans and Democrats competed for votes in Fresno, San Bernardino, and Kern Counties. Today, the California heartland tilts Republican but has lost its influence, as political and economic power has consolidated around deep-blue Silicon Valley and San Francisco.

Like his father, Jerry Brown is a liberal Democrat, yet he has worked overtime to undermine much of Pat Brown’s pro-growth legacy. With the cooperation of a compliant state legislature dominated by liberals, Brown has increased taxes, instituted polices making energy much more expensive in California than in neighboring states, pursued regulations causing housing costs to rise to unprecedented levels, and positioned California as a safe space for illegal immigrants. Brown’s policies embrace the values not of aspirational California but those of its wealthy coastline residents. From water and energy regulations to a $15 minimum hourly wage, Brown’s agenda reflects the ultraliberal political predilections of the Bay Area. That’s where Brown himself lives, as do many of the state’s political elite, including Lieutenant Governor Gavin Newsom and U.S. senators Dianne Feinstein and Kamala Harris. The rest of the state has been pushed to the political margins and keenly feels its powerlessness. “We don’t have seats at the table,” laments Richard Chapman, president and CEO of the Kern County Economic Development Corporation. “We are a flyover state within a state.”

Though widely praised by left-wing think tanks and progressive foreign governments, Jerry Brown’s policies have unquestionably exacerbated income inequality in California. According to the Social Science Research Council, California now has the highest levels of income inequality in the United States. In the last decade, according to the Brookings Institution, inequality grew more rapidly in San Francisco than in any other large American city; Sacramento ranked fourth on this measure. California is home to a disproportionate share of the nation’s wealthiest people, including four of the 15 richest on the planet. Yet more than 20 percent of Californians are considered poor, adjusted for housing costs. That’s the highest percentage of any state, including Mississippi. According to a recent United Way study, close to one in three California families is barely able to pay its bills. Los Angeles, by far the state’s largest metropolitan area, has the highest poverty rate of any large region in the country. In the 4 million–strong Inland Empire, a population nearly as large as metropolitan Boston suffers one of the highest poverty rates among the nation’s 25 largest metro areas.

Graphs by Alberto Mena
Graphs by Alberto Mena

Between 2007 and 2016, according to an analysis of Bureau of Labor Statistics data, the Bay Area created 200,000 jobs paying better than $70,000 annually, but high-wage jobs dropped both in Southern California and statewide. The number of blue-collar jobs, some of which pay well, has dropped by 500,000 since 2000 and by more than 300,000 since the Great Recession. Minimum-wage or near-minimum-wage jobs accounted in 2015–16 for almost two-thirds of the state’s new job growth, according to the California Business Roundtable—and the new $15 minimum-wage law, set to phase in over the next half-decade, will hurt such entry-level employment, research suggests.

The number of high-paying business- and professional-services jobs is now growing at a rate considerably lower in Silicon Valley and San Francisco, moreover, than it is in rising boomtowns such as Nashville, Dallas–Fort Worth, Austin, Orlando, San Antonio, Salt Lake City, and Charlotte. Most other California metro areas, including Los Angeles, are doing far worse when it comes to job growth in this area. The Inland Empire saw a 7 percent loss of such jobs between 2015 and 2016. As for tech jobs, between 2015 and 2017, San Francisco and San Jose added 23,000 jobs in the science, technology, engineering, and mathematics (STEM) fields, for a growth rate of 4 percent and 7 percent, respectively. But the greater Los Angeles area, by far the state’s largest urban center, gained only 6,500 STEM jobs, for a growth rate of just 2 percent, well below the national average. Even worse, the Riverside–San Bernardino area added barely 900 STEM jobs, for a growth rate of about 2 percent.

Blame some of this weakness on the Brown administration, for putting the squeeze on the state’s business community. Brown’s aggressive stance on energy and climate issues—unrealistic renewable-energy mandates and reduction targets for fossil-fuel emissions—has placed California at war with industries such as home building, agriculture, and manufacturing, says economist John Husing. California’s industrial electricity rates are, as a consequence, twice as high as those in Nevada, Arizona, and Texas—the states that have emerged as California’s main competitors for business and residents.

Much of California’s overall job growth—40 percent—during the last decade has been concentrated in the prosperous Silicon Valley and Bay Area, which account for about 20 percent of the state’s population. The majority of the state’s population lives outside the Bay Area and, generally speaking, the farther you go from there, particularly inland, the worse the economic situation gets. Among the nation’s 381 metropolitan areas, notes a recent Pew study, four of the ten with the lowest share of middle-class residents are Fresno, Bakersfield, Visalia–Porterville, and El Centro. Three of the ten regions with the highest proportion of poor people were also in California’s interior. Southern California has lagged its northern rivals, too, leaving whole swaths of the region in poverty.

Many Californians living in the inland areas had hoped that the coastal boom would spill eastward, as skilled workers headed out in search of more affordable living. That’s how it had always worked before. In the 1980s and 1990s, middle-class Californians flooded out of the costly coastal urban centers and into the interior counties, running from Riverside to the Central Valley adjacent to the Bay Area. That flood, though, has slowed to a trickle. Prior to the 2008 housing crash, the Inland Empire annually gained as many as 90,000 domestic migrants, largely from the coast; in 2017, a mere 15,000 relocated.

Housing costs are a likely cause of this slowdown in domestic migration. Since 2009, Inland Empire house prices have increased at a higher rate than that of Orange County, according to data from the California Association of Realtors and the National Association of Realtors. Not that housing is remotely affordable on the coast: a median-priced house in Atlanta, Dallas–Fort Worth, or Houston is between one-half and one-third the cost in the Bay Area or Los Angeles.

Indeed, at their current rate of savings, many young Californians will take 28 years to qualify for a median-priced house in the San Francisco area—but only five years in Charlotte, or three years in Atlanta. And California millennials can’t look to higher salaries to relieve the housing pressure, since, on average, they earn about the same as their counterparts in far less expensive states such as Texas, Minnesota, and Washington. Small wonder that, for every two home buyers who came to the state in 2017, five homeowners left, notes research firm Core Logic.

The unaffordability of homes has had an impact on businesses. Many of California’s biggest non-tech employers have moved their headquarters out of the state in the last five years or are in the process of doing so. In 2014, for example, Toyota announced that it would move its North American headquarters from Torrance to Plano, Texas, just north of Dallas–Fort Worth. The main reason, according to economist Albert Niemi, Jr., of the Southern Methodist University Cox School of Business, was housing costs for 6,500 Toyota workers. Pasadena’s Jacobs Engineering also shipped 700 headquarters jobs to less expensive Dallas–Fort Worth. Occidental Petroleum left Los Angeles for Houston in 2014. Glendale-based Nestlé decamped for Rosslyn, Virginia, in 2017. Amgen, the world’s largest biotech firm, will shift much of its workforce from pricey Ventura County to cheaper Tampa, Florida.

A reduction in the supply of new housing has driven prices upward. New single-family construction in the Inland Empire has dropped to one-third of prerecession levels. California’s statewide rate of issuing building permits—for both single- and multifamily housing—remains well below the national average, particularly compared with prime competitor states, such as Texas. Los Angeles is the nation’s second-largest metropolitan area but ranked sixth largest in new home construction in 2017, building fewer than half the number of new homes built in Dallas–Fort Worth and lagging behind even smaller Austin and Denver.

What’s causing California’s housing crunch? Misguided progressive policies that have slowed housing construction are at least partly to blame. Construction firms, for example, must pay “prevailing wages” when undertaking some new housing projects, raising building costs by as much as 37 percent. Recent new subsidized “affordable” units in the Bay Area cost upward of $700,000 to complete. Urban theorists and planners promote government-enforced “density” requirements on new developments, ignoring data that show high-density construction to be as much as five times as costly per square foot as low-density construction. Those costs make it harder for developers to profit from housing construction, and hence less likely to build, and when they do build, the higher price tag gets passed on to residents. Rent control now enjoys widespread support, but it, too, discourages new housing construction.

California’s dramatic demographic shift has added its own problems to the housing crisis. Since 2010, California’s white population has dropped by 270,000, while its Hispanic population has grown by more than 1.5 million. Hispanics and African-Americans now constitute 45 percent of California’s total population. Almost a third of the state’s Hispanics and a fifth of its African-Americans live on the edge of poverty. Incomes have declined for the largely working-class Latino and African-American population during the economic boom, as factory and other regular employment has shifted elsewhere.

Many minorities in proudly multicultural California live in deplorable housing conditions, with a rate of overcrowding roughly twice the national average. Los Angeles County, with a population more than 50 percent Latino or African-American, has the highest level of households with “severe overcrowding”—defined as at least 1.5 persons per room—of any major metropolitan area in the U.S. Some 25 percent of Los Angelinos, according to a recent UCLA study, spend half their income on rent—another unfortunate metric in which the city comes out on top. And things aren’t looking as though they will improve for many young blacks and Hispanics anytime soon; the state’s poor education system has not served them well, with California’s eighth-grade reading scores ranking among the nation’s worst.

At least those in overcrowded dwellings have a place to live. Even as homelessness has been reduced in much of the country, roughly one-quarter of all homeless people in the nation live in the Golden State, and the numbers are rising. California’s homelessness problem is in part a product of a benign climate, but soaring housing costs are doubtless playing a role as well. Los Angeles County has roughly 55,000 homeless people, up 23 percent since last year. San Francisco, the darling of the tech economy, now has 7,500 homeless people, essentially 160 per square mile. The problem is spreading to traditionally affluent areas like Orange County and Silicon Valley, now site of some of the nation’s largest homeless encampments.

The only way to ensure a just and sustainable California future lies not in giving Sacramento more power but in reducing regulations, allowing localities to control their own fates, building more housing along the periphery, and embracing reasonable standards on environmental controls. According to the Energy Information Agency, since 2007 California has reduced emissions by 10 percent, below the national average of 12 percent; for all its ambitious green laws, the state ranks a measly 35th in emissions reduction. Tougher environmental regulations simply push people’s carbon footprint to other states, where, because of harsher climates, per-capita emissions tend to be higher. Rather than trying to vamp as the leader of a visionary nation-state, as Brown has done recently on trips to Western Europe, Russia, and China, California’s next governor can meet the still-ambitious environmental goals of the Obama administration without doing too much additional damage to the state’s beleaguered middle class.

Last year saw the first signs of a middle-class pushback. A handful of largely Latino and inland Democrats—some backed by the state’s residual energy industry—killed Brown’s attempt to force a 50 percent reduction in fossil-fuel use by 2030, a measure that, opponents alleged, would have necessitated gas rationing. Millennials—faced with diminishing prospects for good jobs and homeownership—could break with progressives and demand a change. They might begin to ask the uncomfortable questions that Californians must answer if they are to avoid bankruptcy: Do we update our water systems, pave our roads, fix our bridges, hire cops, and improve schools—or continue to pay for some of the country’s most lavish green incentives and other costly progressive measures? One recent survey suggests that young people are less likely to identify as “environmentalist” than previous generations. They could conceivably turn to an unconventional figure, like independent gubernatorial candidate Michael Shellenberger, a maverick who threatens to disrupt the status quo by removing barriers to middle-class growth and reviving the Pat Brown legacy.

California needs to recapture the dynamics of upward mobility in a state that once epitomized it. Those of us concerned about a better future for the next generation have reason to be discouraged. But with all California’s resources and its culture of innovation, a way can be found to restore the state’s once-proud reputation as incubator of aspirations and fulfiller of dreams.

Tech backlash roils San Francisco politics

San Francisco, CA, USAThe Seattle City Council’s interest in imposing an unusual “head tax” on large employers based on their number of employees won international headlines this month after giant online retailer Amazon protested by freezing a plan to add 1 million square feet in office space in the city. After proponents associated with Seattle unions and progressive groups agreed to cut the levy from $500 per employee to $275, the measure won unanimous council approval, and Amazon – which has about 45,000 employees in the Seattle area – resumed planning for its expansion. But business groups remain upset about the levy, which may be the target of a signature-gathering campaign for a ballot measure rolling back the fee.

While it hasn’t got nearly the attention, the same tensions between wealthy tech employers and local interest groups – which see the employers as hurting quality of life by increasing congestion and by making housing costlier – are playing out in the June 5 San Francisco mayor’s race. It’s being held to fill the vacancy created by Mayor Ed Lee’s death from a heart attack on Dec. 12. Lee’s death was lamented by tech executives who called him a key to San Francisco’s emergence as a world tech capital.

That sentiment is far from universal. A May 15 Business Insider analysis by Melia Robinson that was featured on the San Francisco Chronicle website was headlined “San Francisco is fed up with Big Tech, and residents are begging the next mayor to do something about it.”

Leading mayoral candidates critical of tech’s effects

It’s difficult to be confident who’s leading the mayor’s race since San Francisco is one of a handful of cities to use a top-three ranked voting system in which a candidate who doesn’t get a majority in the initial tally can still win based on her or his second- and third-place votes. But the consensus top three are all liberal to very liberal Democrats by national, if not San Francisco, standards. They are Board of Supervisors Chairwoman London Breed, who would be the city’s first African-American woman mayor and has the support of former Mayor Willie Brown’s business-friendly coalition; Supervisor Jane Kim, who would be the city’s first Korean-American mayor and is a mostly beloved figure among local progressives; and former state Sen. Mark Leno, who would be the city’s first openly gay mayor and who also runs well to Breed’s left.

Breed, who was deposed as acting mayor by progressive supervisors earlier this year, seems to want the most limited policy changes aimed at tech workers. She has backed limits on short-term rentals by companies like Airbnb and wants to cap the number of ride-hailing vehicles at any given time, and perhaps put restrictions on food deliveries as well.

Kim wants tech companies to improve pay and benefits for lower-rung workers so they can live in the city. She says companies subcontract services for janitorial and cafeteria work so they can avoid responsibility for the poor quality of life for those hired. She has expressed interest in requiring Uber and Lyft to pay a per-rider fee.

Leno wants to impose hiring rules on city tech companies to force them to hire city residents. He says this hiring shouldn’t just be for blue-collar positions but for administrative and sales jobs. He has also called for tech firms and their employers to “invest” in the city by committing to improving its lifestyle for those beyond the wealthy.

Some warn tech firms shouldn’t be taken for granted

The only Republican in the race – business consultant Richie Greenberg – and business groups say that mayoral candidates shouldn’t take tech companies for granted. They note that the city’s tech boom may have peaked in 2016, with exploding housing costs hurting San Francisco more than the broader Bay Area-Silicon Valley tech region in general.

But this point of view is a tough sell going into June 5’s voting. Perhaps the best example of this is a deal orchestrated in 2011 by then-Mayor Lee with the support of Supervisor Kim to revitalize the rough Tenderloin and Mid-Market districts west of downtown by giving a six-year break on city payroll taxes to companies located there. This was meant to keep Twitter’s headquarters from moving out of the city and to attract new tech firms to the area.

The proposal was widely seen as a smart way to maintain San Francisco’s tech momentum in 2011. In 2014, business groups hailed the agreement for keeping Twitter and for creating 13,000 jobs and generating much more revenue for the city than the sums lost because of the tax break.

But that same year, a San Francisco Chronicle analysis noted that the deal was seen by many residents as a sign of the city caving to business pressure – and it has emerged as a reason for progressives to question Kim’s bona fides.

This article was originally published by CalWatchdog.com

Tech Oligarchs and the California Housing Crisis

Silicon ValleyLet them pay.

Silicon Valley tech oligarchs are concerned about housing in California.

Let them pay.

Housing prices in the areas of their shiny new tech campuses are skyrocketing to unaffordability for many of the longer term residents and are raising the price of housing for their employees.  As the pro-developer LA Times had to admit, “The housing crunch, particularly acute in Bay Area cities such as San Francisco and San Jose, is a problem that the tech industry helped create by attracting well-paid new workers who can outbid longtime residents.”

So let them pay.

The tech oligarchs are not interested in rent control or rent stabilization ordinances to protect the longtime residents.  They’re not funding efforts to repeal the Costa Hawkins and Ellis Acts, which restrict the ability of cities to rent-stabilize apartments.  They want the housing crisis to be solved by taking zoning control away from cities and by allowing developers to run riot without any municipal controls, under the misguided notion that by building enough luxury housing, affordability will “trickle-down” to the peons.

And so the tech oligarchs are funding “Yimby” (“Yes in my back yard”) pro-developer groups which support Sacramento-mandated levels of density, engineered to maximize profits, overriding the individually crafted General Plans of distinctive communities throughout the state.  Those who see through the true nature of these AstroTurf groups have perceptively tweaked “Yimby” to “Wimby” (“Wall St. in my back yard”).  Not surprisingly, these tech oligarchs and their Wimby/Yimby puppets are the loudest voices in support of Sen. Scott Wiener’s SB827, which would allow indiscriminate densification throughout the state, using “mass transit” as an alibi.  (“Mass transit” as defined by Wiener is a bus four times an hour during rush hour.)

One of the tech CEO’s who is a major donor to one of Yimby groups recently said, “Technology companies have such insane margins that they’re one of the few sectors that can continue to be viable in this environment.”

Of course, tech employees outbidding existing residents, who are priced out of the market, is a major cause of displacement.  Despite some cosmetic changes to the bill as an afterthought to blunt criticism, SB827 cannot avoid all the impacts of gentrification and displacement in its mission to address the needs and desires of the tech oligarchs.

Let them pay.

While one might expect Ayn Rand toting, latte quaffing tech masters-of-the-universe to thumb their noses at concepts like “Community” and “Livability,” especially if they stand in the way of their G-d given rights to profiteer, this position is not as easy to reconcile with the self-styled persona of Sen. Scott Wiener, representing some of the most liberal parts of San Francisco.  It’s downright odd that someone who by rights should be thumbing his nose at the 1% (or in this case, the 1% of the 1%) is freely regurgitating Reaganomic trickle-down talking points; but Wiener, whose largest donor base comes from developers and the real estate lobby, seems to be going the extra mile in making a fair bid to be known as Sacramento’s patron saint of crony capitalism.

Wiener and his cabal of self-styled progressives act as if the “law of supply and demand” is not a variable and disputable economic or sociological principle – or as if induced demand doesn’t exist in a flexible market – but is some kind of immutable natural law, which would put Newton and Kepler to shame.  To have those closer to Marx suddenly embracing Mundell and Laffer is the kind of cognitive dissonance which ordinarily causes heads to explode, and, quite frankly, I’m not sure that hasn’t been the case here.

And yet, considering the tech corporations’ “insane margins” and considering Sen. Wiener’s proven lack of squeamishness when it comes to taxing ordinary Californians (gas tax, anyone?), he should have no problem looking to corporations for major funding to solve the housing crisis which they, in no small part, helped to create.

But then again, the key phrase about Sen. Wiener’s lack of squeamishness when it comes to imposing taxes seems to be “ordinary Californians.”  He has demonstrated he doesn’t have a problem with that, but taxing the “insane margins” of the tech corporations is probably not regressive enough for him.  Ordinary Californians simply can’t spread money around Sacramento the way the oligarchs can.  So when Wiener says, “It’s about damn time that the tech sector started to engage in housing policy,” it sounds perforce like he’s looking towards future campaign donations rather than actual housing solutions.

It also looks like Wiener is less concerned with the implications of increasing income inequality, which plays a major role in the housing crisis.  Rather than try to deal with the problem of income inequality which the tech oligarchs are creating, Wiener and his Yimby cronies attempt to deal with a symptom of income inequality instead of its actual cause.  Let’s tackle housing, not the income inequality creating the housing crisis; and let’s put a target on single-family housing, which can generate untold profits if we upzone it, by labelling it as “racist.”

One would hope that Wiener, whatever wing of whatever party he belongs to, would be interested in dealing with the issue of income inequality, but this is the same guy who said: “I could care less how much money developers make.”  Of course not.  Should we really be surprised that the by-right upzoning of his bill represents one of the single largest wealth transfers from the public to the private sector in California history?  Should we be shocked that Wiener and his self-righteous cronies are doing nothing to address the growing income disparity of ordinary Californians with the tech oligarchs and their “insane margins”?  Is it really surprising that he won’t even begin to think about how all that money he is gifting to developers could be used to help build subsidized affordable housing, for example?

Let the developers pay, too.

One of the many built in fallacies and policy errors within SB827 is its attempt to use mass transit as an alibi to densify.  Public transportation should serve the needs of urban planning, not the other way around.  If Wiener wants to look for causes of the housing crisis to fix, then he should – as the LA Times did – draw the nexus between massive job creation and increased housing demands.  And policy should be determined accordingly.

Consequently, in addition to doing a better job taxing the “insane margins” of tech companies, no massive projects should be approved under CEQA until and unless a concurrent solution for the accompanying housing impacts are dealt with.  This would mean eliminating statements of “overriding considerations” which allow agencies to effectively not have to deal with housing impacts.  It would also mean that the tech corporations would be asked to step up and take responsibility for the problems they are creating, as they create them.

Let them pay.

If, as a result, tech companies threaten to move to Merced or Modesto or Fresno or Victorville – or out of state, for that matter – let them. Economic justice demands not caving to all the demands of the corporate oligarchs.  Economic development needs to be spread throughout the state and throughout the country and encouraging economic development in struggling areas is a good thing.  If the jobs magnet is creating the housing crisis, then part of the solution should lie in job creation in areas in which housing is abundant and affordable.  Instead of trying to cram everyone into a few megalopolises, while the tech oligarchs live in their dachas on massive landed estates, we should literally be working to spread the wealth and share in the “insane margins.”  As much as I love California, I’d also love to see new life breathed into Detroit and other rust belt cities, for example.

At some point we’re also going to have to consider the ultimate implications of the spirals of growth that Wiener and the oligarchs are assuming should be the natural state of things.  Now is as good a time as ever.  The notion of never-ending growth is the very definition of unsustainability.

My guess is that not bending over backwards to kiss the collective tochuses of the oligarchs would be bad for the collective treasuries of the reelection campaigns of a good number of Sacramento politicians, but standing up to the tech corporations and demanding a fair share of their “insane margins” is good policy which would actually make a difference in providing real solutions to our state’s housing crisis.  This is just another reason why we need to embrace the principles of subsidiarity and devolve power from the special interest puppets in Sacramento.

Additional measures to solve the housing crisis include:

  • Repealing the Costa-Hawkins and Ellis Acts, thereby untying cities’ hands and allowing them to implement more effective rent stabilization measures.
  • Bringing back redevelopment agencies, which Sacramento abolished in a massive money-grab, in order to focus on creating affordable housing.
  • Giving cities more leverage in negotiating with corporations for fair-share public benefits, including housing.
  • Empowering cities and local agencies through subsidies to create more subsidized affordable housing; solving the pension crisis (as well as wasteful Sacramento spending) and devoting the resources created in the process to housing.
  • Acknowledging that top-down, one-size-fits-all mandates are not suitable for a state as diverse and wide-ranging as California, instead encouraging regional cooperation and individualized solutions which respect the unique DNAs of California’s diverse communities.

The tech oligarchs’ dystopian vision has been brilliantly exposed by urban scholar Joel Kotkin, who has discussed the implications of densified urban living for workers and plebeians, who are regarded by the tech corporations and the politicians who serve them at best as modern-day serfs.  In attempting to deny the importance of quality-of-life issues (except for themselves) or any concept of living in a community with real community character (because they are believers in profit über alles), the oligarchs and their politicians are dehumanizing the very people they are supposed to serve and who have made them rich.  To them we are only widgets, stats or marks.

Let them pay.

Even if they’re not so good at logic or policy, Yimby groups seem to be talented at chanting.

So here’s a new one for them.  In the spirit of the classic scene in “The Bad News Bears in Breaking Training,” the Yimbys who are truly interested in real housing solutions might want to consider a new chant, directed at the developers, the tech corporations and their “insane margins”: “Let them pay!  Let them pay!  Let them pay!”

ice-mayor of Beverly Hills

Tim Draper says he has signatures needed for third try to break up California

Billionaire venture investor Tim Draper on Thursday said he has the signatures he needs to put his initiative to break up California into three states before the state’s voters.

Draper said in a press release that he has gathered about 600,000 signatures for his “Cal 3” initiative that would divide the country’s most populous state into three new ones: Northern California, Southern California and California.

Los Angeles would be in the new California. The farmland and forested areas, along with San Francisco and the Silicon Valley technology hub, would be turned into the two other states.

The signatures on the Cal 3 petition have yet to be certified, so it isn’t officially on the ballot yet.

This is Draper third attempt to split California into multiple states: His earlier efforts to split the state into six new ones failed in 2014 and 2016. …

Click here to read the full article from the Silicon Valley Business Journal

Dianne Feinstein Blocks Self-Driving Car Deregulation

Dianne FeinsteinSenator Dianne Feinstein (D-CA) smacked down her former Silicon Valley allies this week by blocking a federal deregulation that would have expedited the testing of self-driving cars.

Feinstein, as a 25-year California Democrat incumbent and the ranking minority member of the Senate Judiciary Committee used her prerogative to block the “AV START Act,” which would have set up a friendly federal transportation regulatory structure to circumvent local restrictions for testing autonomous (self-driving) cars on America’s public roads.

Proponents of the bill thought they had bipartisan Congressional and White House support to expedite passage, due to the all-out efforts from hundreds of lobbyists representing 64 Silicon Valley companies, including big venture capital back start-ups and tech giants such as Alphabet, Apple, Tesla, and Uber.

Intel and Strategy Analytics presented an economic white paper in support of the federal takeover that forecast autonomous vehicles would generate $4 trillion from ride-hailing and $3 trillion from delivery and business logistics by 2050.

An analysis of U.S. Patent and Trademark Office data presented by L.E.K. Consulting revealed that American companies since 2007 have filed over 2,118 autonomous vehicle technology patents. Many filings are for Lidar laser sensors, vehicle-to-vehicle communication, image processing, computer vision, and advanced driver-assistance.

With a similar bill unanimously passing the House of Representatives in September, the Senate version was introduced on September 28 and moved through the Senate Committee on Commerce, Science, and Transportation on November 28.

For her first 24 years in the U.S. Senate, Feinstein was viewed as a tireless advocate for Silicon Valley tech initiatives. But on November 1, Feinstein, threatened Silicon Valley executives that Congress would do something about foreign interference in elections through social media, if the tech industry failed to act.

Feinstein told general counsels from Facebook, Google, and Twitter at a Senate Hearing: “I must say, I don’t think you get it.” She argued that tech company platforms were responsible for foreign powers being able to use cyber-warfare during the 2016 presidential election to sow conflict and discontent all over the country.

Democrat Silicon Valley Congressman Ro Khanna told the San Jose Mercury News that the 85-year-old Feinstein, as the oldest member of the U.S. Senate, does not represent progressive values on key issues including privacy, encryption, “Medicare for All,” and the new innovation economy.

Feinstein was also humiliated at the California Democrat Party Convention in late February, when she only received endorsement support for a fifth term from 37 percent of delegates; while California State Senate majority leader Kevin de León won 54 percent.

It is unclear if Senator Feinstein deliberately retaliated against Silicon Valley and its social justice warrior fellow travelers for failing to support her re-election effort. But Feinstein did rally several senior Democratic Senators, who now claim self-driving car technology is too unproven for a national roll-out through a federal takeover.

Feinstein’s opposition to allowing national driverless car tests carries extra Congressional weight, since the State of California has allowed testing on public roads since September 2014.

What had seemed like at least an easy victory for Silicon Valley now is rated at just a 32 percent chance of enactment, according to Skopos Labs.

This article was originally published by Breitbart.com/California

Without housing fix, Silicon Valley will falter

Silicon ValleyThree times in the past 18 months, prominent journalistic organizations have questioned whether Silicon Valley has peaked. Leading off the bad-mouthing was the hometown San Jose Mercury News, which reported in September 2016 that tech growth had slowed in the area compared with other regions and noted that Santa Clara County was down nearly 21,000 tech jobs from its 2000 peak.

That was followed by the London Guardian reporting in May 2017 that start-ups were increasingly likely to fail as the tech venture-capital model struggled, and by Bloomberg News reporting in September 2017 that the high cost of housing was leaving thousands of jobs unfilled.

This month, the Silicon Valley Competitiveness and Innovation Project, which is headed by the San Jose-based Silicon Valley Leadership Group, released a report on the region that was at least as bleak as the media accounts. It said Silicon Valley was still thriving and a global leader – but that it was unlikely to maintain its status as the U.S. pace-setter in creating tech jobs unless housing construction sharply increased, to end the upward spiral in rent and mortgage payments. A modest tract house can fetch more than $1 million in San Jose and triple that in wealthier suburbs. Rental costs, even in less affluent neighborhoods, are among the nation’s highest.

“The gap between job and housing growth is large and widening,” stated the report, which defined Silicon Valley as including the city-county of San Francisco, Santa Clara County and San Mateo County.

Many of the key findings were based on comparisons of where Silicon Valley stood in 2010 versus 2016. The study noted there was a 29 percent increase in payroll jobs during that span, but only a 4 percent increase in total housing units. As more people were forced to commute to Silicon Valley, the average commute lengthened by 18.9 percent over the six years.

“An average Silicon Valley commuter now spends 72 minutes commuting per day, round trip. This figure has grown marginally since last year and remains second only to the commute time of New York City workers, who spend 74 minutes commuting,” the report noted.

Region’s population fell despite economic boom

Silicon Valley saw another negative landmark in 2016. Despite a booming economy, the report cited U.S. Census Bureau population estimates showing the region had a slight decline in population.

The downbeat report came as no surprise to one former Silicon Valley resident: Santa Cruz attorney Kate Downing, who resigned from the Palo Alto Planning and Transportation Commission and moved from the city in 2016 because her family could no longer handle Palo Alto’s housing costs. She told the San Francisco Chronicle, “We’re just not building enough housing. More correctly, cities are not permitting developers to build enough housing. … I think more affordable housing would have kept us in Silicon Valley.”

Lawmakers from the region have had some success in trying to make it easier to build homes in California. State Sen. Scott Weiner, D-San Francisco, was the lead author of a bill enacted in 2017 that limits cities with bad records on new housing from preventing new projects that meet basic zoning rules.

This year, Weiner and co-authors Senator Nancy Skinner, D-Berkeley, and Assemblyman Phil Ting, D-San Francisco, have introduced Senate Bill 827. With exceptions, it would make it far easier to build small apartment-condo buildings up to 85 feet in height within a half-mile of a transit center.

This article was originally published by CalWatchdog.com

California had 77 of the country’s 100 most expensive ZIP Codes for home sales last year

A year-end report from real estate database PropertyShark has confirmed what every Angeleno already knows: California is a really expensive place to live.

The analysis, which surveyed the priciest ZIP Codes in the country based on median home sales prices, found that California holds 77 of the 100 most expensive spots, including five in the top 10.

New York came in with the second most ZIP Codes at 19. No other state had more than two.

Topping the list of most expensive ZIP Codes was 94027 in Atherton, Calif., a Silicon Valley city full of tech executives, which had a median sale price of $4.95 million, according to the data.

The 10013 ZIP Code of New York, home to the high-priced luxury condos of Tribeca in Manhattan, saw a median price of $4.1 million. In Miami Beach area, the 33109 ZIP Code the median was $4.052 million. …

Click here to read the full story from the L.A. Times

Bring the disruptive entrepreneurship of Silicon Valley to California politics

Berlin, Germany, March 19, 2014. Hy! Summit - Image by Dan Taylor. www.heisenbergmedia.com

California has been a one-party state for longer than most memories will allow. For four decades, with the brief exception from 1995 to 1996, when the GOP held the state Senate by two seats, the California Legislature has been the exclusive kingdom of Democrats. The last Republican moment of clout was 1969-70, when Ronald Reagan was governor and the party held both the Assembly and the Senate. Three GOP governors have been elected since, but only six Republicans have held statewide office since 1998, while Democrats have occupied 23.

The congressional delegation is a reflection of the statehouse. Both senators are Democrats, and voters sent 39 Democrats to the House. Only a little more than a quarter of California voters are registered Republicans, so it’s hardly a surprise that the Democrats exercise such dominance.

This single-party regime, however, has led to a destructive public-policy agenda, along with inattention to pressing needs. The state’s political class has advocated vanity projects such as Governor Jerry Brown’s costly and needless high-speed rail plan; neglected a tangle of transportation infrastructure that is now going to cost $52 billion to repair; failed to address effectively a housing crisis that drove the cost of homes out of reach for many; fed a public-employee pension plan threatening to bankrupt the state; and created a tax structure that is pushing out the middle class. California’s governing party now proposes to force a single-payer health-care system on residents and promotes unyielding regulation on business and development, impeding job creation. Progressive leadership in Sacramento and at the local level is obsessed with “resisting” the Trump administration and fighting climate change.

California’s single-party rule has damaged the state to the point that it hasn’t been able to escape unflattering comparisons with its neighbor to the south. “Forty years ago, Mexico was a one-party dictatorship . . . hobbled by slow growth, soaring inequality, endemic corruption and dead politics,” writes demographer Joel Kotkin. “California, in contrast, was considered a model American state, with a highly regarded Legislature, relatively clean politics, a competitive political process and a soaring economy. Today these roles are somewhat reversed.”

When one party has such a dominant political position, destructive public policy is not the only problem. Corruption has fewer hurdles when members of the ruling party believe that they stand above the law. Democrats recently passed new rules governing the timing of recall elections solely to protect one of their members, State Senator Josh Newman, who is facing a recall. But corruption in California Democratic politics is not new: Rod Wright, Leland Yee, and Ron Calderon were all elected Democratic legislators who thought their party’s power gave them license to break the law. Two wound up in federal prison, the other in the Los Angeles County jail.

The political status quo deserves to be disrupted in California, though it’s unlikely that anyone from the ranks of elected Republicans can break the Democrats’ grip on power. What’s needed is someone who would effectively and unapologetically oppose the agenda of the majority party but who is also an outsider; whose appeal is cross-partisan; who understands Silicon Valley, which has immense political strength; and who is sympathetic to the cause of attracting more business and capital to areas outside of the tech center.

Three years ago, Republican Neel Kashkari, a former Goldman Sachs investment banker who didn’t align fully with establishment Republicanism and had never held elected office, shook the political foundations a bit when he ran against Jerry Brown. Kashkari took only 40 percent of the vote, but maybe he was the Goldwater candidate who laid the groundwork for another, who will truly rock California politics.

Peter Thiel is no stranger to disruption. The PayPal cofounder supported Donald Trump in 2016, spoke at the Republican National Convention (where he announced that he is proud to be gay), and worked on Trump’s transition team. He’s been part of one of the most convulsing events in U.S. political history. “Like Trump,” Michelle Cottle wrote in The Atlantic just before last year’s election, “Thiel himself takes great pride in being a disruptive force. He favors revolutionary ideas and people with big plans for blowing things up and remaking the world.”

Thiel has said on multiple occasions that he is not running for governor next year, though there were indications early in 2017 that he might enter the race. If he were to run, he could be the candidate who would break the Democrats’ political stranglehold, the force who could revive the moribund California Republican Party sufficiently for it to challenge Democratic dominance. But even if Thiel decides not to seek the governorship, it’s clear that the Golden State needs someone equally willing to challenge conventional thinking and promote a new approach to the major fiscal, economic, and development questions that California faces. The alternative is more of the same.

Thousands still forced from homes by flooding in California tech hub

As reported by Reuters:

The mucky water flooding a section of San Jose in Northern California forced officials on Wednesday to widen the area under mandatory evacuation orders, with about 14,000 people barred from returning to their homes following drenching rains.

San Jose, a hub of high-tech Silicon Valley, suffered major flooding on Tuesday triggering evacuation orders when Coyote Creek overran its banks, swamping the Rock Springs neighborhood. Water at some sites engulfed the entire first floor of residences while in other places it reached waist-high.

Officials said the city of about 1 million residents has not seen a flood approaching this magnitude since 1997.

The gush of water inundating San Jose flowed down from the Anderson Reservoir, which was pushed to overflowing by a rainstorm that pounded Northern California from Sunday to Tuesday, officials said. …

Click here to read the full article

California’s Government Unions are the Most Powerful in the U.S.

The Commonwealth Foundation, a think tank based in Pennsylvania, has recently released a study entitled “Transforming Labor – A Comprehensive, Nationwide Comparison and Grading of Public Sector Labor Laws.” It ranked every state in terms of the relative power of public sector unions. California, along with tiny Maryland, were the only states that got an F.

public-sector-labor-lawsIf you view the map presented in the Commonwealth study, there is a strong correlation between states controlled by the GOP vs those controlled by Democrats. Nearly all the Democrat controlled states with large urban populations get D grades, with the notable exceptions of Florida (C), and Texas (A). We can perhaps learn something from the outliers – why did Texas get an A and why does Montana get a D? But California is in a class by itself.

When performing this analysis, the studies author, Priya M. Abraham, created a checklist called “State Labor Comparison” that provides criteria for grading each state. California failed in every category:

(1) Is collective bargaining legal for government workers?  –  Yes.

(2) What items may be negotiated in collective bargaining?  –  Salaries, Hours, Pensions, Fringe benefits, Other terms.

(3) How are unions certified?  –  Mandatory card check, Optional card check.

(4)  Do unions have a right to exclusive representation of workers?  –  Yes.

(5)  Are there provisions for union release time?  –  Yes, by law.

(6)  Are there union membership opt-out windows?  –  Written in union contracts.

(7)  Are union contract negotiations open to the public?  –  May be closed.

(8)  Is binding arbitration required during collective bargaining impasses?  –  Yes, for some.

(9)  Is there paycheck protection?  –  No.

(10)  Right to Work?  –  No.

(11)  Legality of public worker strikes?  –  Legal for some.

Most everyone understands the obvious consequences of California’s status as the most enabling state in the U.S. for government unions. By the time most people read this, there is a good chance that Democrats will have captured a super-majority in the state legislature, allowing them to raise taxes at will. Also obvious, decades of increasing political control by government unions has lead to a state judiciary that consistently favors government unions. This happens not only in nearly all cases involving pension reform, but also in those cases addressing education reform. For example, the recent ruling against the Vergara plaintiffs who, gasp, wanted to reform the union work rules that have nearly destroyed public education in California.

There’s a deeper corruption, however, that is less obvious but even more consequential, and that is the effect union controlled government has on California’s business and financial communities. Corporations that want to do business in California understand that all legislation goes through the unions for approval. All of it. So they make deals, and implicit in any deal is that the union agenda – more government pay and benefits, more government employees, and more taxes and borrowing – is never challenged by the business community.

The financial sector also must adapt, and they’ve outdone themselves. In lieu of pension reform or proper bond oversight, financial firms make billions investing money for the union-controlled government pension funds and underwriting government bonds. For any partner at a financial firm in California to advocate pension reform would be financial suicide. They do what they’re told, or they go out of business.

The high-tech community in the Silicon Valley is probably the most tragic example of how government union power has corrupted an industry. A nefarious convergence of interests has evolved between government unions, utility companies, and high-tech entrepreneurs, to create artificial scarcity of land, energy and water. Hiding behind overstated environmentalist concerns, they have imposed de-facto rationing on Californians. This enables tax revenue that might have been used for infrastructure to instead go to paying government worker salaries and feeding the pension funds. At the same time, it takes the utility rate hikes that might have financed additional infrastructure and feeds it to Silicon Valley “entrepreneurs,” who develop expensive “green” energy solutions, along with systems that eventually will mandate every major household appliance be internet enabled, connected to smart meters, and capable of charging punitive rates if a consumer, for example, runs their clothes dryer at the “wrong” time.

If one refers again to the map showing public union power by state, another correlation becomes clear – union power, generally, is concentrated in states with the highest costs of living. California is again champion in this respect. Artificial scarcity has rendered prices in California for land, energy and water among the highest in the nation. State and local taxes are also among the highest in the nation. California is Exhibit A for how public unions and elite oligarchs have combined forces to create challenges for ordinary people that amount to outright oppression.

If the 2016 election will be remembered for anything, it will be remembered as a time of populist awakening. Americans in unprecedented numbers have registered their discontent with a system they consider rigged. But not once in what was one of the most visible national elections in American history did anyone, anywhere, identify the root cause of government overreach and capitalist corruption:  Government unions.

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

This piece was originally published by the Flash Report.