The Great California Exodus

[paramount]

http://online.wsj.com/article/SB10001424052702304444604577340531861056966.html

A leading U.S. demographer and ‘Truman Democrat’ talks about what is driving the middle class out of the Golden State.

Mr. Kotkin, one of the nation’s premier demographers, left his native New York City in 1971 to enroll at the University of California, Berkeley. The state was a far-out paradise for hipsters who had grown up listening to the Mamas & the Papas’ iconic “California Dreamin'” and the Beach Boys’ “California Girls.” But it also attracted young, ambitious people “who had a lot of dreams, wanted to build big companies.” Think Intel, Apple and Hewlett-Packard.

Now, however, the Golden State’s fastest-growing entity is government and its biggest product is red tape. The first thing that comes to many American minds when you mention California isn’t Hollywood or tanned girls on a beach, but Greece. Many progressives in California take that as a compliment since Greeks are ostensibly happier. But as Mr. Kotkin notes, Californians are increasingly pursuing happiness elsewhere.

Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.

The scruffy-looking urban studies professor at Chapman University in Orange, Calif., has been studying and writing on demographic and geographic trends for 30 years. Part of California’s dysfunction, he says, stems from state and local government restrictions on development. These policies have artificially limited housing supply and put a premium on real estate in coastal regions.

“Basically, if you don’t own a piece of Facebook or Google and you haven’t robbed a bank and don’t have rich parents, then your chances of being able to buy a house or raise a family in the Bay Area or in most of coastal California is pretty weak,” says Mr. Kotkin.

While many middle-class families have moved inland, those regions don’t have the same allure or amenities as the coast. People might as well move to Nevada or Texas, where housing and everything else is cheaper and there’s no income tax.

And things will only get worse in the coming years as Democratic Gov. Jerry Brown and his green cadre implement their “smart growth” plans to cram the proletariat into high-density housing. “What I find reprehensible beyond belief is that the people pushing [high-density housing] themselves live in single-family homes and often drive very fancy cars, but want everyone else to live like my grandmother did in Brownsville in Brooklyn in the 1920s,” Mr. Kotkin declares.

“The new regime”—his name for progressive apparatchiks who run California’s government—”wants to destroy the essential reason why people move to California in order to protect their own lifestyles.”

Housing is merely one front of what he calls the “progressive war on the middle class.” Another is the cap-and-trade law AB32, which will raise the cost of energy and drive out manufacturing jobs without making even a dent in global carbon emissions. Then there are the renewable portfolio standards, which mandate that a third of the state’s energy come from renewable sources like wind and the sun by 2020. California’s electricity prices are already 50% higher than the national average.

Oh, and don’t forget the $100 billion bullet train. Mr. Kotkin calls the runaway-cost train “classic California.” “Where [Brown] with the state going bankrupt is even thinking about an expenditure like this is beyond comprehension. When the schools are falling apart, when the roads are falling apart, the bridges are unsafe, the state economy is in free fall. We’re still doing much worse than the rest of the country, we’ve got this growing permanent welfare class, and high-speed rail is going to solve this?”

Mr. Kotkin describes himself as an old-fashioned Truman Democrat. In fact, he voted for Mr. Brown—who previously served as governor, secretary of state and attorney general—because he believed Mr. Brown “was interesting and thought outside the box.”

But “Jerry’s been a big disappointment,” Mr. Kotkin says. “I’ve known Jerry for 35 years, and he’s smart, but he just can’t seem to be a paradigm breaker. And of course, it’s because he really believes in this green stuff.”

In the governor’s dreams, green jobs will replace all of the “tangible jobs” that the state’s losing in agriculture, manufacturing, warehousing and construction. But “green energy doesn’t create enough energy!” Mr. Kotkin exclaims. “And it drives up the price of energy, which then drives out other things.” Notwithstanding all of the subsidies the state lavishes on renewables, green jobs only make up about 2% of California’s private-sector work force—no more than they do in Texas.

Of course, there are plenty of jobs to be had in energy, just not the type the new California regime wants. An estimated 25 billion barrels of oil are sitting untapped in the vast Monterey and Bakersfield shale deposits. “You see the great tragedy of California is that we have all this oil and gas, we won’t use it,” Mr. Kotkin says. “We have the richest farm land in the world, and we’re trying to strangle it.” He’s referring to how water restrictions aimed at protecting the delta smelt fish are endangering Central Valley farmers.

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Zina Saunders
Meanwhile, taxes are harming the private economy. According to the Tax Foundation, California has the 48th-worst business tax climate. Its income tax is steeply progressive. Millionaires pay a top rate of 10.3%, the third-highest in the country. But middle-class workers—those who earn more than $48,000—pay a top rate of 9.3%, which is higher than what millionaires pay in 47 states.

And Democrats want to raise taxes even more. Mind you, the November ballot initiative that Mr. Brown is spearheading would primarily hit those whom Democrats call “millionaires” (i.e., people who make more than $250,000 a year). Some Republicans have warned that it will cause a millionaire march out of the state, but Mr. Kotkin says that “people who are at the very high end of the food chain, they’re still going to be in Napa. They’re still going to be in Silicon Valley. They’re still going to be in West L.A.”

That said, “It’s really going to hit the small business owners and the young family that’s trying to accumulate enough to raise a family, maybe send their kids to private school. It’ll kick them in the teeth.”

A worker in Wichita might not consider those earning $250,000 a year middle class, but “if you’re a guy working for a Silicon Valley company and you’re married and you’re thinking about having your first kid, and your family makes 250-k a year, you can’t buy a closet in the Bay Area,” Mr. Kotkin says. “But for 250-k a year, you can live pretty damn well in Salt Lake City. And you might be able to send your kids to public schools and own a three-bedroom, four-bath house.”

According to Mr. Kotkin, these upwardly mobile families are fleeing in droves. As a result, California is turning into a two-and-a-half-class society. On top are the “entrenched incumbents” who inherited their wealth or came to California early and made their money. Then there’s a shrunken middle class of public employees and, miles below, a permanent welfare class. As it stands today, about 40% of Californians don’t pay any income tax and a quarter are on Medicaid.

It’s “a very scary political dynamic,” he says. “One day somebody’s going to put on the ballot, let’s take every penny over $100,000 a year, and you’ll get it through because there’s no real restraint. What you’ve done by exempting people from paying taxes is that they feel no responsibility. That’s certainly a big part of it.

And the welfare recipients, he emphasizes, “aren’t leaving. Why would they? They get much better benefits in California or New York than if they go to Texas. In Texas the expectation is that people work.”

California used to be more like Texas—a jobs magnet. What happened? For one, says the demographer, Californians are now voting more based on social issues and less on fiscal ones than they did when Ronald Reagan was governor 40 years ago. Environmentalists are also more powerful than they used to be. And Mr. Brown facilitated the public-union takeover of the statehouse by allowing state workers to collectively bargain during his first stint as governor in 1977.

Mr. Kotkin also notes that demographic changes are playing a role. As progressive policies drive out moderate and conservative members of the middle class, California’s politics become even more left-wing. It’s a classic case of natural selection, and increasingly the only ones fit to survive in California are the very rich and those who rely on government spending. In a nutshell, “the state is run for the very rich, the very poor, and the public employees.”

So if California’s no longer the Golden land of opportunity for middle-class dreamers, what is?

Mr. Kotkin lists four “growth corridors”: the Gulf Coast, the Great Plains, the Intermountain West, and the Southeast. All of these regions have lower costs of living, lower taxes, relatively relaxed regulatory environments, and critical natural resources such as oil and natural gas.

Take Salt Lake City. “Almost all of the major tech companies have moved stuff to Salt Lake City.” That includes Twitter, Adobe, eBay and Oracle.

Then there’s Texas, which is on a mission to steal California’s tech hegemony. Apple just announced that it’s building a $304 million campus and adding 3,600 jobs in Austin. Facebook established operations there last year, and eBay plans to add 1,000 new jobs there too.

Even Hollywood is doing more of its filming on the Gulf Coast. “New Orleans is supposedly going to pass New York as the second-largest film center. They have great incentives, and New Orleans is the best bargain for urban living in the United States. It’s got great food, great music, and it’s inexpensive.”

What about the Midwest and the Rust Belt? Can they recover from their manufacturing losses?

“What those areas have is they’ve got a good work ethic,” Mr. Kotkin says. “There’s an established skill base for industry. They’re very affordable, and they’ve got some nice places to live. Indianapolis has become a very nice city.” He concedes that such places will have a hard time eclipsing California or Texas because they’re not as well endowed by nature. But as the Golden State is proving, natural endowments do not guarantee permanent prosperity.

[Jazzman]

I thought about posting this as well. I don’t know enough about US political history to know what an “old fashioned Truman Democrat” is, but if I hadn’t read that, I’d have labelled him as a tree-hugger bashing Republican. Whatever the reasons for the exodus which seem well documented, and are probably to do with the tax climate and business environment, his explanations seem like a personal hankering for the past, which boils down to a shift in values that he hasn’t got to grips with. I think a lot of what he says is probably true, but how do you marry an increasingly left wing political agenda with an environment that tolerates the super wealthy. That seems contradictory to me, and I wonder if he is confusing left wing politics with environmental issues and bureaucracy. The fact they often cohabit the same space doesn’t make them the same. I do agree with his comments on housing and prices, but he left out important references to the bubble and bail outs, so again it seems like he’s forging tenuous partnerships in waging a war with a personal agenda. I like him!

[bearishgurl]

Y-a-a-a-w-n … Ironically, as I was going through bookshelves in my study last week to see if I could gather a pile to donate, I ran across this keeper (circa the “gulf war malaise”):

[img_assist|nid=16133|title=Special Issue – Time Magazine|desc=|link=node|align=left|width=447|height=600]

[img_assist|nid=16134|title=Table of Contents November 18, 1991|desc=|link=node|align=left|width=436|height=600]

This issue has been debated over and over again for the last 30 years or so.

I decided to open it up and read the interview with then Gov Pete Wilson and the chapter on “Environment” called Gobbling up the Land. Even back then, in an era when nearly every single proposition/referendum was summarily rejected by state voters, our PTB practically all over the state found Big Development and their backroom bribes just too tempting to pass up from the time of this printing forward.

Piggs complaining that there are too many gov’mt workers and too many workers vested in defined benefit pensions need only to look to your local elected officials who voted in CFD after CFD in multiple layers radiating out from city cores but all, of course, in need of continuing “services.” Thus, we now have before us the hellish nightmare of urban sprawl (much of it currently “underwater” and otherwise “distressed”).

Wilson was extremely troubled by the exodus of producing taxpayers from CA and the entrance of immigrants (with little resources of their own) in their place. He lambasted conflicting Federal laws which state both that an illegal immigrant is ineligible for any government services/benefits and ALSO that ALL resident children are legally entitled to a public education, no matter what their immigration status. He talked about CA public school teachers having to take on many more roles for this population than they were hired for. In a nutshell, he stated the relentless influx of new immigrants and their children and the refusal of voters to pay more taxes would eventually cause the state’s residents to wrestle with some very difficult decisions. Wilson’s prognostications have sadly now come to fruition.

There are so many things in the OP’s article that Kotkin pointed out that I think are terribly skewed but I’ll just stick with his “young family being priced out of coastal RE” argument and his “entrenched native” counter-argument.

I think the “real” problem with the vast majority of “young families” today making good money but complaining about where they have to live and what they have to live in is that they have much greater housing expectations than transplants who first moved here 20+ years ago. These young parents are no longer willing to live in a “starter home” in a “starter neighborhood” or even a well-established “working-class” or “retired” neighborhood. They want new construction <5 miles from the beach for their first house straight out of the gate! The vast majority of “entrenched CA natives” have in the past and are living today in much, much less than what a “newcomer” expects, ESP if they have “inherited” their parents home and have decided to make it their principal residence. Very few CA residents actually send their kids to private school. It is a small fraction of children overall, in the single digits. I can’t understand how worker-bee newcomers to CA would be focused on that, what with all their other relocation and job concerns. Private school is not a necessity.

“Young families” who made good wages in the 70’s and 80’s simply bought a home near relatives (if they had any here) and sent their children to public school without further ado. I myself worked alongside these employees with young families for many years and was in this demographic myself. Even the “professionals” I worked with bought homes in Spring Valley, El Cajon, College area, Chula Vista, Escondido, etc and sent their kids to public school and there were very few zone and interdistrict transfers issued back then. They did NOT expect to buy their first home in Coronado or La Jolla!

Kotkin even states a Utah family making $200K today would likely have to send their child to public school! What is he “lamenting” here, exactly?

Because of CA’s unchecked urban sprawl of the last 20 years, many new residents are now thoroughly confusing themselves with a plethora of housing choices all over the map, which have caused their housing expectations to soar thru the roof!

Kotkin would do well to jog his memory a bit back to ’72, when he was likely living in a rat-infested 2 br Berkeley walkup with 3 other guys or his first 1150 sf Oakland “bungalow” in ’78 (where he lived when his first child was born, lol), and ask himself if HIS expectations as a newly-minted college graduate and new parent were the same as those similarly-situated residents of today.

[EconProf]

Klotkin is a highly respected demographer, his data are peer-review tested, and his dismal picture of CA’s future is worth considering. That he is an old-fashioned democrat critical of the triumph of looney-leftist CA politics makes him especially interesting.
He harkens back to the good old days in CA–supposedly the fifties and sixties–which upsets many who mock that period as so unhip compared to now. But the fact is that it is only in those decades that CA was the magnet for ambitious and adventuresome people and businesses from all the other states. In those decades our education system sparkled, our water and highway systems expanded, and sfr houses were priced at the national average. Klotkin documents well how all these trends have reversed. He could have added that there existed real policy debates then between the two parties, and solutions were hammered out. Now the left owns the state: governorship, Assembly, Senate, newspapers, universities, etc.
Thank goodness people can vote with their feet. They have alternatives and are exercising their choices. Klotkin explains why, and the article deserves a full read.

[flyer]

As “entrenched incumbents,” per Mr. Kotkin, our family has been in the “Golden State” for generations, and, yes, it has changed tremendously in both positive and negative ways.

Yet, even if everything Mr. Kotkin says is true or comes to pass, no one we know seems to be interested in giving up the California lifestyle for one of the more “practical” locales.

I’ve visited all of the alternative locations he mentioned, and, even if I was just starting out in life, it would be very difficult for me to consider any of them, for many, many reasons.

I also understand the decision to leave the state is probably valid for the financial welfare of many families.

It has been clear for many years that many young people who were raised in CA will never be able to afford to stay here, or to buy homes here once they are out of their parent’s homes, and that faction is growing daily.

On the opposite end of the spectrum, many who have worked here for their entire lives, will never be able to afford to retire here. So, many of Mr. Kotkin’s points are well taken.

Yet, if one has only one life to live, you do want to ask yourself how and where you really want to spend those precious few years.

[barnaby33]

Too many people, not enough resources. Fairly simple in my mind. All we are left to argue is apportionment.
Josh

[desmond]

One thing that I have seen change over the years as a native Californian is the old “California laidback lifestyle” has long been forgotten even as a cliche. If you lay back in CA you will be trounced and passed over by the millions that have ended up here. CA is still a great place to live, is it worth working so hard you rarely get to enjoy it? I think it is better to actually be able to enjoy things in life without working ourselves to death in the short time that we are here.

[paramount]

I agree desmond.

BTW, as most know it’s not as if California has a shortage of people anyway.

[EconProf]

[quote=barnaby33]Too many people, not enough resources. Fairly simple in my mind. All we are left to argue is apportionment.
Josh[/quote]
Actually Barnaby, California does not use efficiently what it already has. We have huge deposits of natural gas and oil, but environmental wackos prevent us from developing it. We cut off water to Central Valley farmers, idling thousands of acres and farmerworkers in order to save the Delta Smelt. Our electric rates are 50% higher than the national average due to Prop 32, which is scheduled to really bite in the next few years. Other examples abound, but we have done it to ourselves.

[Coronita]

[quote=desmond]One thing that I have seen change over the years as a native Californian is the old “California laidback lifestyle” has long been forgotten even as a cliche. If you lay back in CA you will be trounced and passed over by the millions that have ended up here. CA is still a great place to live, is it worth working so hard you rarely get to enjoy it? I think it is better to actually be able to enjoy things in life without working ourselves to death in the short time that we are here.[/quote]

Desmond,

The issue though really isn’t just california. It’s the entire world.

* The entire world is smaller, it’s inherently more competitive, competing for resources… Twenty years ago, globalization wasn’t nearly as pronounced as it was before. Now people here compete not only with each other but abroad.

* In the U.S., while a lot of innovation still is happening and going to happen, the opportunities that are available these days to our younger generation are far fewer than probably your generation (I’m assuming you’re baby boomer or more..Sorry, but you said you had a kid that already graduated and working)…A lot of the stuff invented/assumed is from big corporations because they control the means and inventions and with deep pockets to both governements and W.S. to secure funding and legal teams to rightfully or wrongfully defend/squash ideas.

A kid born these days, call it a silver spoon or what not… These days, if you’re kids aren’t born with a significant financial seed, it’s really tough for them to make it on their own… I don’t consider my household poor, but I do need to watch where my money goes. Although my parents gave me a huge seed, I don’t have a trust fund or inheritance of money/resources to tap into that can allow me to kick back and do nothing.. Not saying there’s anything wrong with it, or that it’s something that I want… It’s just how it is…So I have different starting point that someone else. The saying that you need money to make money is true, especially in this country at this particular time, and depending on social/economic/cultural demographics, a lot of the outcome depends on, well timing, effort, and luck….

* We as a society have gotten more spoiled and want to spend more of our money on resources/things we really don’t need beyond the basic necessities of life. So as a result, we are slaves to the new materialism…Especially in Southern California.

[desmond]

Trounced and passed over…………

[Coronita]

[quote=desmond]Trounced and passed over…………[/quote]

Sorry desmond, I’m hope it’s not personal. And it’s just my opinion. But to your point, CA isn’t exactly a cheap state here anymore either… Partly because of all the taxing and spending going on in our local government. It’s getting absurd… again imho.

[bearishgurl]

[quote=flu][quote=desmond]One thing that I have seen change over the years as a native Californian is the old “California laidback lifestyle” has long been forgotten even as a cliche. If you lay back in CA you will be trounced and passed over by the millions that have ended up here. CA is still a great place to live, is it worth working so hard you rarely get to enjoy it? I think it is better to actually be able to enjoy things in life without working ourselves to death in the short time that we are here.[/quote]

Desmond,

The issue though really isn’t just california. It’s the entire world.

* The entire world is smaller, it’s inherently more competitive, competing for resources… Twenty years ago, globalization wasn’t nearly as pronounced as it was before. Now people here compete not only with each other but abroad.

* In the U.S., while a lot of innovation still is happening and going to happen, the opportunities that are available these days to our younger generation are far fewer than probably your generation (I’m assuming you’re baby boomer or more..Sorry, but you said you had a kid that already graduated and working)…A lot of the stuff invented/assumed is from big corporations because they control the means and inventions and with deep pockets to both governements and W.S. to secure funding and legal teams to rightfully or wrongfully defend/squash ideas.

A kid born these days, call it a silver spoon or what not… These days, if you’re kids aren’t born with a significant financial seed, it’s really tough for them to make it on their own… I don’t consider my household poor, but I do need to watch where my money goes. Although my parents gave me a huge seed, I don’t have a trust fund or inheritance of money/resources to tap into that can allow me to kick back and do nothing.. Not saying there’s anything wrong with it, or that it’s something that I want… It’s just how it is…So I have different starting point that someone else. The saying that you need money to make money is true, especially in this country at this particular time, and depending on social/economic/cultural demographics, a lot of the outcome depends on, well timing, effort, and luck….

* We as a society have gotten more spoiled and want to spend more of our money on resources/things we really don’t need beyond the basic necessities of life. So as a result, we are slaves to the new materialism…Especially in Southern California.[/quote]

I don’t think today’s parents have to be “rich,” per se, and throw tens of thousands at their kids to help them launch if they don’t have it. I think to succeed in life today, a young person needs a work ethic and also the good sense NOT to indulge in student loans, credit cards and auto loans in their college years. This involves financial discipline and money-mgmt skills which are NOT skills that very many young people of today have, due to being overindulged by parents. Sometimes the solution is working their way through college. This is especially doable if they have a partial scholarship or grant.

If young adults today manage to bury themselves in debt early on, they will very likely be financially crippled for many years, thus unable to pay rent and live independently. This is true even if they land a good entry-level position with benefits because most of their salary will have to be deployed to debt service and the rest of their life (marriage/children) put on hold. Those who marry without retiring their student loan debt make their debt their new spouse’s problem, often end up deferring it due to “life happening,” and the debt grows instead of shrinks. At the age of 40+, those who took deferrals are often STILL burdened by college debt. This situation doesn’t help the couple buy a house and the non-indebted spouse grows tired and resentful of the problem, which could have been avoided entirely by better college planning.

Nothing has changed over the last few decades in this regard, except that college students can now borrow enough on a student loan to “subsidize their lifestyle” both on and off campus. In the past, colleges were paid directly for tuition, fees, bookstore, dorm and meal ticket, etc by the lender, grantor or scholarship fund and the student never saw any cash. Also, a college student of 20 years ago didn’t have a multitude of credit cards literally thrown at them on campus. However, I think this practice has stopped in recent years.

I think it’s the decisions that young people make for themselves that primarily determine how “successful” they will be down the road. LOTS of students whose educations have been funded by wealthy “benefactors” (parents/grandparents and other relatives) have never even used the (expensive) degrees they earned. Many of these “silver-spoon-fed” students ended up taking jobs unrelated to their major in order to be on their own. Some of the jobs they took didn’t require any college at all! And some of these “well-funded” students ended up working only PT after college or never worked in their entire lives due to being supported by someone else. Again, I believe work ethic DOES matter on whether you will be successful in life…moreso than having a college degree and/or wealthy parents.

[desmond]

[quote=flu][quote=desmond]Trounced and passed over…………[/quote]

Sorry desmond, I’m hope it’s not personal. And it’s just my opinion. But to your point, CA isn’t exactly a cheap state here anymore either… Partly because of all the taxing and spending going on in our local government. It’s getting absurd… again imho.[/quote]

Sorry for what? All I said was the California “laid back” lifestyle was gone. You proved my point and went overboard (not laid back) on some tangent that I did not really read. Surfs up………..

[sdrealtor]

Not in the Los Padres forest

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