Going East

National Review, July 20, 1992 by John Kurzweil

A LONGTIME FRIEND, and 35-year resident of California called recently from his new home in Oregon. Last fall he had announced he was fed up and had to move. Not far, just out of California--a place that for him and many others has lost whatever made him want to live here for so long.

Examples of California's productive sector packing up and moving away are becoming difficult to avoid. Senator John Seymour recounts a recent conversation he had with Idaho Senator Larry Craig. Seymour discussed the various woes besetting the Golden State, expecting to hear a similar sad tale from his colleague.

"But he was optimistic and upbeat," Senator Seymour said, distressed. "In spite of all the talk about how tough the times are, Larry pointed out that thirty new businesses had set up shop in the northern Idaho city of Coeur d'Alene in the past year alone. Of those thirty, he was pleased to tell me, 27 came to Coeur d'Alene from California."

He was pleased to tell me. It's this infernal gloating that makes it all so bizarre. Since long before It's A Gift, the 1934 film in which W.C. Fields makes escaping New Jersey to become owner of an orange ranch near L.A. seem like dying and going to heaven, California has been the golden treasure at the end of America's rainbow. And now it is regularly forsaken for places like Coeur d'Alene, Grants Pass, and Salt Lake City.

Bear in mind that California's population is not shrinking. The real story is that per-capita income in California grew only 1.3 per cent last year, well below the 2.1 per cent national average, while Arizona (2.5 per cent), Oregon (2.4), Washington (3.5), and Utah (3.9) all surpassed us. The state Department of Finance reports that while California needs 250,000 new jobs each year to keep up with population growth, nearly 700,000 jobs have been lost since May of 1990. That's 5 per cent of all the jobs in the state gone in two years.

And matters will likely grow worse before they improve. The California Business Roundtable found in a recent survey that one in four manufacturers here plan to move some or all of their business across state lines. "A median of 50 current jobs will be lost per relocation and 50 new jobs per expansion," the Roundtable concludes. "Most of the plans include the loss of both white- and blue-collar jobs."

People who can't leave seem to want California to leave them. A non-binding referendum appeared on the June primary ballot in 31 of the state's 58 counties asking: should California be split in two? Twenty-seven counties-- mostly rural, thinly populated, and presumably tired of being tied to the sagging economies of the state's big cities--said yes.

Why go? The reasons are plentiful.

Crime: In 1989, according to the FBI, Nevada suffered 625 violent crimes per 100,000 people. In Arizona it was 600; in Oregon, 519; in Washington, 472; in Utah, 259; and in placid Idaho, a mere 255. In California? 978.

Taxes: The most recent figures available from the U.S. Department of Commerce are for the 1989-90 fiscal year, so they do not reflect Pete Wilson's $7 billion tax increase passed last year. Even so, they rank California 10th among states in per-capita revenues collected. When individual and corporate income taxes--the taxes that do most to discourage productivity-are considered alone, California moves up to 7th.

Housing Costs: The 1991 Statistical Abstract of the United States gives the following numbers for housing costs "for a mid-management standard of living" in selected cities, with 100 as the national average: Phoenix, 98.7 (that is 1.3 points cheaper than average), Portland, Oregon, 111.1, Salt Lake City, 82.3, and Spokane, 94.4. Los Angeles weighs in at a robust 211.3, while San Diego waddles by at 216.1, making it second on the entire national list.

Regulation: I asked Ohio University's Richard Vedder, who has done extensive research on state-level public-policy questions, including a study of California tax policy, about the regulatory burden facing businesses here compared with other states. He said, "I think California is awful in that regard, but I couldn't prove it." How, for instance, do you calculate the cost of the additional three or five years the Coastal Commission or some other government agency may require before issuing a permit? When Cypress Semiconductor Corporation, for instance, wanted an awning over an employee entrance at its headquarters, the San Jose Planning Department took 12 months to issue its approval, and then told the company it must have a concrete foundation to make the "structure" earthquakeproof. Two new Cypress subsidiaries, including a major manufacturing operation, were recently established--in Austin, Texas.

There is plenty more: a legal system that seems to have been designed to drive businesses into bankruptcy; a workers' compensation system that ranks 5th in the nation in costs to employers, but 44th in what it pays out to workers; $20,000 to $40,000 in costs for fees and permits added on to the cost of new housing in California; and a state legislature that, tangled in special-interest politics, pursues its own narrow agendas.