As California and the nation face significant economic challenges, the new political mantra is “Jobs, jobs, jobs.” However, there is a tendency to look at jobs in isolation from other economic factors.
We must remember government exists on the “vig,” as Tony Soprano would say. The vig is short for vigorish, how much money a bookmaker or gambling establishment makes on a bet. Businesses create jobs and grow the economy, and government gets a “piece of the action,” not the other way around. In government, we often get it twisted. Allow me to take a few factors typically viewed in isolation and connect the dots.
I read in the Los Angeles Times that we have the highest gasoline prices in the country. How is it that a guy in Compton with an oil well in his backyard and a refinery down the street is paying more for gasoline than a guy whose nearest refinery is thousands of miles away? The regulators who created this disparity don’t care. We continue to pay for California’s own special blend of gasoline that, of course, costs more to produce, with little or no proven environmental benefit.
The California Senate recently debated a renewable portfolio standard for our electricity grid. We have some of the highest commercial electricity rates in the country for several reasons. First, we shift costs from residential ratepayers to commercial users in a shortsighted political maneuver. Second, we have more restrictions on the type of power we allow to be produced. This renewable proposal will add 15 percent to 25 percent to our electricity cost, which is already 53 percent higher than the national average.
As we trudge through the 2011 budget, it is painfully clear that we are going to make severe cuts to services we have taken for granted for years. The governor’s proposal calls for the total elimination of redevelopment agencies. I recently had a budget discussion with affordable housing advocates who explained why what they do is a core mission of government. The process of building a house in California can be lengthy and expensive, with some of the highest permitting fees in the country.
During the growth era of the Southern California economy, our dynamism propelled us forward. Many industries, particularly aviation and the movies, thrived in our Mediterranean climate. As businesses created jobs, the population grew and so did the economy. People with good jobs bought houses, cars and appliances, and traveled, bringing prosperity to many. More importantly, those cars, planes, homes and appliances were made right here. So what happened?
Last month, the national unemployment rate hovered around 9.5 percent, while Los Angeles County started the year above 13 percent. I submit that if your energy, regulatory and housing costs are among the highest in the country, job numbers will suffer. Others would argue that our costs are the result of sound public policy and the nation will catch up with us. But many of our regulations are the result of overzealous regulators who are accountable to no one.
In the case of gasoline, the federal government mandated that oxygenates be added to all gasoline. California went above and beyond the federal standards, mandating the addition of methyl tert-butyl ether. No other state took such an aggressive stance. After recognizing their folly, the California Air Resources Board reversed course and shifted to adding ethanol. The MTBE fiasco cost Californians billions and left us with polluted water; it also drove many smaller refineries out of business.
The California Manufacturing and Technology Association reported that the cost of actually making something in California is 23 percent higher than the national average. Excessive regulations further escalate this cost. I recently met with an executive of a cement manufacturing company; he applied for permits in Texas and California at the same time. It took nine months to open in Texas. It has been seven years, he has seen more than 25 agencies and to date has no permit in California.
In the first half of 2010 alone, the business climate drove more companies to move some or all of their business out of the county than in all of 2009. In my district, even the non-profit Race Track Chaplaincy of America left Inglewood’s Hollywood Park for Kentucky over the cost of doing business here. And when the chief financial officer of Bing Energy announced his company’s move to Florida, he proclaimed, “I just can’t imagine any corporation in their right mind that would decide to set up in California today.”
We also lead the nation in uncertainty. The fact is a business could act on a piece of legislation in one year and see it reversed the next. We are eliminating enterprise zones that companies used to decide where to locate and taking back such employment tools retroactively.
So let’s see – we have more regulations, higher taxes, higher electricity bills, more expensive housing, higher-priced gasoline and one of the highest unemployment rates. I see a pattern emerging here, and it doesn’t speak well for the future of California. A state that once made cars, airplanes and computer chips now makes virtually nothing and is saddled with a $26 billion deficit. This might be why, for the first time in more than 50 years, California did not gain a congressional seat.
With the dots connected, it’s painfully clear: We better start doing things differently if we want to revive our economy and recover the California dream.
Roderick D. Wright, D-Inglewood, represents the 25th Senate District.
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