Migration Map Update

The Forbes U.S. migration map has been updated

California Exodus

Joel Kotkin: The Great California Exodus  - Allysia Finley

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.

As California Collapses, Obama Follows Its Lead - Joel Kotkin

Obama’s push to nationalize many of California’s economy-stifling green policies has been slowed down, first by the Republican resurgence in 2010 and then by his reelection considerations. But California’s politicians, living in what’s become essentially a one-party state, have doubled down on green orthodoxy. As the president at least tries to cover his flank by claiming to support an “all-in” energy policy, California has simply refused to exploit much of its massive oil and gas resources.

Does this matter? Well, Texas has created 200,000 oil and gas jobs over the past decade; California has barely added 20,000. The state’s remaining energy producers have been slowing down as the regulatory environment becomes ever more hostile even as producers elsewhere, including in rustbelt states like Ohio and Pennsylvania, ramp up. The oil and gas jobs the Golden State political class shuns pay around $100,000 a year on average.

Instead, California has forged ahead with ever-more extreme renewable energy mandates that have resulted in energy costs roughly 50 percent above the national average and expected to rise substantially from there. This tends to drive out manufacturing and other largely blue-collar energy users.

Over the past decade the Golden State has grown its middle-skilled jobs (those that require two years or more of post-secondary education) by a mere 2 percent compared to a 5.3 percent increase nationwide, and almost 15 percent in Texas. Even in the science-technology-engineering and mathematics field, where California has long been a national leader, the state has lost its edge, growing just 1.7 percent over the past 10 years compared to 5.4 percent nationally and 14 percent in Texas.

State Budget Troubles

Rhode Island: Athens of America? - Walter Russell Mead

Rhode Island is looking more and more like Greece, and not in a good way. That is one message of this important piece by Mary Williams Walsh in the New York Times. Years of blue social policy have wrecked local and state government finance in the country’s smallest state, and now the bills are coming due. Services are being cut to the bone and elderly retirees are losing money they thought was secure.

In Rhode Island, it is Democrats, not nasty union-hating Republicans, who are doing the dirty work. Democratic mayors are telling their unions that there isn’t any money — not because they are vicious corporate stooges who hate working people and want to see them suffer, but because There. Isn’t. Any. Money.

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Rhode Island politicians, government and union officials have done everything possible to conceal the true state of affairs from the voters, the bondholders, retirees and even themselves. Unrealistic assumptions about rates of return helped hide the ugly truth about the looming pension meltdown — and anybody who tried to raise the alarm about the coming crisis was hooted down as an enemy of the workers. Even now the true blue firing squads are assembling to shoot the messenger; Mary Williams Walsh can expect angry push back from a whole sector of American political life that thinks this whole problem will go away if we tax the rich, clap our hands and all say together, “I believe in government”.

But “objectively”, as our Marxist friends would say, the union leaders and their political chums were the worst enemies of the workers: they told state workers that their benefits were secure even as it became increasingly obvious that, as a matter of arithmetic, they were not.

Let’s be crystal clear about this. To tell a 50 year old pretty lies about the soundness of a pension plan is one of the most wicked and irresponsible things you can do without actually shedding blood; people who believe these phony promises will not make the extra savings, work the extra years or otherwise take steps to protect themselves until it is too late. Telling those pretty lies is exactly what Rhode Island’s establishment has been doing for some time; it is what Ostrich Party legislators, trade unionists, journalists and governors are still doing across much of the country.

AP Newsbreak: Brown to seek sweeping pension cuts - Juliet Williams

Gov. Jerry Brown will propose sweeping rollbacks to public employee pension benefits in California, including raising the retirement age to 67 for new employees who are not public safety workers and requiring state and local employees to pay more toward their retirement and health care, according to a draft of the plan obtained Wednesday by The Associated Press.

The governor will also propose Thursday a mandatory "hybrid" system in which future retirees would get their retirement from a guaranteed benefit and a 401(k)-style plan subject to market whims. For employees with at least 30 years of service, retirement benefits would aim to replace about 75 percent of an employee's salary through retirement funds and Social Security, according to the draft.

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A report last year by the Stanford Institute for Economic Policy Research said that retirement funds for 2.6 million California teachers, state workers and university employees together faced long-term gaps of over $500 billion. The California Public Employees' Retirement System has $75 billion in unfunded future pension liabilities, and the state is on the hook for an estimated $51.8 billion in unfunded retiree health care costs.

The Economy - September 2011

California Employment at Record Low - Christopher Palmer

The percentage of working-age Californians with jobs has fallen to a record low, and employment may not return to pre-recession levels until the second half of the decade, according to a research group.

Just 55.4 percent of working-age Californians, defined as those 16 or older, had a job in July, down from 56.2 percent a year earlier and the lowest level since 1976, the Sacramento- based California Budget Project said in a report released late yesterday.

California’s 12 percent unemployment rate in July, the nation’s second-highest after Nevada, compared with 9.1 percent nationwide. The most-populous state lost 1.4 million jobs during the recession that began three years ago, and has gained back only 226,800, or about 17 percent, according to the report.

Senior IMF Economist Expects Hard Default For Greece. Soon. - ForexCrunch

The Greek government says any more steps will only deepen the recession and make things even worse. The debt trap is quite clear at this stage.

These complications triggered not only the aforementioned expectations for a hard default, according to WSJ:

“I expect a hard default definitely before March, maybe this year, and it could come with this program review,” said a senior IMF economist who is keeping close tabs on the situation. “The chances for a second program are slim.”

A hard default means a messy one. A default that is not controlled could have a serious domino effect: it can push banks to bankruptcy (such as French banks, that are highly leveraged), and it can send bond yields of other countries much higher. A hard default for Greece also seriously endangers .

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All in all, the bailout mechanism secures only one thing: a crisis on every inspection. Last time, it ended with a reshuffle of the Greek governments, fresh austerity measures and violent protests on the streets of Athens.

Zero Jobs 101 — the Psychology of Alienating Employers - Victor Davis Hanson

Zero jobs last month — a net change of zero job growth? It was just announced that last month’s unemployment is still above 9% — despite the nearly five trillion dollars in Keynesian pump-priming, the near zero interest rates, the expanded unemployment and food stamp support, and the government takeovers and subsidies of businesses. There is a scary sort of deer-in-the-headlights look about Obama and Biden that is quite disturbing, as if they are thinking, “This was not supposed to happened to us. Geithner, Goolsbee, Orszag, Romer, Summers assured us that all this borrowing would turn things around — but they are all gone or leaving, so now we are alone? What to do?

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Here is the lament I heard: the near $5 trillion in borrowing in just three years, the radical growth in the size of the federal government and its regulatory zeal, ObamaCare, the Boeing plant closure threat, the green jobs sweet-heart deals and Van Jones-like “Millions of Green Jobs” nonsense, the vast expansion in food stamps and unemployment pay-outs, the reversal of the Chrysler creditors, politically driven interference in the car industry, the failed efforts to get card check and cap and trade, the moratoria on new drilling in the Gulf, the general antipathy to new fossil fuel exploitation coupled with new finds of vast new reserves, the new financial regulations, an aggressive EPA oblivious to the effects of its advocacy on jobs, the threatened close-down of energy plants, the support for idling thousands of acres of irrigated farmland due to environmental regulations, the constant talk of higher taxes, the needlessly provocative rhetoric of “fat cat”, “millionaires and billionaires,” “corporate jet owners,” etc. juxtaposed, in hypocritical fashion, to Martha’s Vineyard, Costa del Sol, and Vail First Family getaways — all of these isolated strains finally are becoming a harrowing opera to business people.

Despite enormous opportunity for many cash-rich firms to take advantage of the down cycles (low interest, plentiful potential employees, discounted prices, etc.), they are taking a pass, almost as if to collectively sigh, “This bunch doesn’t like me much and I’m going to hunker down, hoard my cash, and sit out the next year and a half until they are gone.” And the administration’s efforts to counteract these symbols and impressions by courting a high-profile, hyper-capitalist Warren Buffett, or a GE CEO Jeffrey Immelt have proven even more ironic: the former calls for higher taxes that his firms seek to avoid, or targets his post-mortem wealth to (more efficient?) private foundations that rob the Treasury of billions in lost inheritance taxes, or knows higher taxes won’t much matter to his tens of billions in net worth; the latter’s firm paid no 2010 U.S. income taxes on many of its profits and outsourced jobs overseas.

The Economy - August 2011 (part 2)

Labor Force Participation Rate Drops To 63.9%, Lowest Since January 1984 - Tyler Durden

... the labor force participation rate, and the reason why the general unemployment rate declined to 9.1%, just dropped to 63.9%, the lowest in 16 [ed. 26] years, or matches the participation rate from January 1984.

Capitol Journal: U.S. budget ax hangs over California - George Skelton

The dirty little secret is that California's current state budget is not $85.9 billion, the size of the much-debated, deficit-plagued general fund. You've got to add in the special funds ($34.2 billion) — much of them fed by fees dedicated for specific purposes — plus bond money ($9.4 billion). That totals $129.5 billion, but it still ignores federal dollars.

The real state budget includes an additional $79.2 billion in federal largesse, representing 38% of total state spending. This brings the grand total to $208.7 billion.

So the state of California is getting a nearly $209-billion spending program while putting up less than $130 billion itself.

Texas Business Climate

The Lone Star Jobs Surge - WSJ Editorial

What explains this Lone Star success? Texas is a big state, but its population of 24.7 million isn't that much bigger than the Empire State, about 19.5 million. California is a large state too—36.9 million—and yet it's down 11,400 jobs. Mr. Fisher argues that Texas is doing so well relative to other states precisely because it has rejected the economic model that now prevails in Washington, and we'll second that notion.

Mr. Fisher notes that all states labor under the same Fed monetary policy and interest rates and federal regulation, but all states have not preformed equally well. Texas stands out for its free market and business-friendly climate.

Capital—both human and investment—is highly mobile, and it migrates all the time to the places where the opportunities are larger and the burdens are lower. Texas has no state income tax. Its regulatory conditions are contained and flexible. It is fiscally responsible and government is small. Its right-to-work law doesn't impose unions on businesses or employees. It is open to global trade and competition: Houston, San Antonio and El Paso are entrepôts for commerce, especially in the wake of the North American Free Trade Agreement.

Rick Perry vs. Jean-Jacques Rousseau - Roger Kimball

Here’s an statistic worth pondering: 45 percent of net U.S. job creation in the last two years comes from Texas.

Yes, Texas: the state that is the poster child for right-wingery, the state with no state income tax whose population is growing at about 1000 per day (see a connection?) while bankrupt behemoths like California are bleeding jobs and people.

Companies Leaving California in Record Numbers - Mark J. Perry

California currently ranks #49 among U.S. states for "business tax climate" (Tax Foundation) and #48 for for "economic freedom" (Mercatus). It shouldn't be any surprise then that companies are leaving the "Golden State" in record numbers this year (see chart above) for "golder pastures" and more business-friendly climates in other states.

From Joe Vranich:

"Today, California is experiencing the fastest rate of disinvestment events based on public domain information, closure notices to the state, and information from affected employees in the three years since a specialized tracking system was put into place. Out-of-state economic development officials are traveling through the state to alert frustrated business owners and corporate executives to their friendlier business climate versus California's hostility toward commercial enterprises.

More Trouble in Paradise

SCOTUS Makes It Official: California A Failed State - Walter Russell Mead

Let there be no mistake: when you produce so many criminals that you can’t afford to lock them up, you are a failed state. Virtually every important civil institution in society has to fail to get you to this point. Your homes and houses of worship are failing to build law abiding citizens, much less responsible and informed voters. Your schools aren’t educating enough of your kids to make an honest living. Your taxes and policies are so bad that you are driving thousands of businesses away. Your management systems must be fouled and confused to the max for you to create something so dysfunctional, so wildly beyond your means, that the Supreme Court of the United States (wisely or foolishly is another question) starts to micromanage your jails.

California used to be the glory of this country, the dream by the sea, the magic state. Now it produces so many criminals it can’t pay to keep them locked up.

California Taxes

Golden State blues - George F. Will

“Californians already labor under sales-tax rates usually reserved for states without income taxes (at 8.25 percent, the nation’s highest) and sharply progressive income-tax rates usually reserved for states without sales taxes (the state’s top rate is 10.55 percent, and it doesn’t allow you to deduct your federal taxes, as some states with income taxes do).”

Those tax levels are surely related to these demographic facts: Between 2000 and 2010, Los Angeles gained fewer people than in any decade since the 1890s, and Los Angeles and the San Francisco Bay Area have the slowest growth rates since the end of Spanish rule. For the first time since 1920, the Census did not award California even one additional congressional seat.

Government Spending

Inevitability of a Default in Greece - Floyd Norris

A Greek debt restructuring — a polite term for default — is unthinkable, according to the Greek finance minister.

“It would have a tremendous cost, with no benefit,” the minister, George Papaconstantinou, said in an interview on Greek television. “Greece would be out of markets for 10, 15 years.”

To financial markets, and to many other observers, it is more than thinkable. It is very close to a sure thing. When, how, and how messy it will be are open to question.

Thoughts on a Surreal Depression - Victor Davis Hanson

The combination of 2 billion Indians and Chinese in the world marketplace, exporting cheap goods, has meant fewer jobs for Americans and far more material playthings now accessible to every stratum of society. Again, easy credit, combined with little shame or penalty in defaulting on what one owes, has allowed a superficial parity with the upper-middle class. Massive government transfers and relaxed eligibility have ensured households thousands of dollars in entitlements and subsidies. We have printed $5 trillion since 2009, and borrowed $1.6 trillion just this year. And the huge influx of easy government cash shows here.

Cash wages have meant augmented entitlement money and are competitive with those who are formally employed and who pay 30% of their money in payroll, health care, and federal, state, and local income tax deductions. The result is an odd sort of poverty, in which superficially the unemployed and poor to the naked eyed are almost identical to the upper middle classes.

The CAP Act - Bob Corker

The only real way to place America back on a path to solvency is by imposing what amounts to a fiscal straitjacket. To that end, colleagues from both sides of the aisle and both houses of Congress have joined me in offering the CAP Act, legislation that, for the very first time, would establish an across-the-board, binding cap on all federal spending. A real cap on spending tied to a percentage of gross domestic product is a responsible way to impose fiscal discipline and achieve smaller government while incentivizing lawmakers to pass policies that promote economic growth. The CAP Act would result in $7.6 trillion less spending over ten years, fundamentally change the way Washington does business, and finally put America on a trajectory toward fiscal sanity.

Tuition Bubble

Financial land of perpetual bubbles - Dr. HousingBubble

This is where the cost of college is really pronounced. In 1980 the typical California household would be able to finance 17 bachelor’s degrees at a UC with one year of household income. In 2000 that number had dropped to 5. Today it is only enough to purchase one bachelor’s degree at the UC system. Now keep in mind we are looking at the cheaper public option partially backed by the state of California. You have other institutions in SoCal like USC that charge over $50,000 per year. Without a doubt higher education is in a bubble more so in the private sector.

Part of the reason for the bubble is similar to what we saw in the housing market. Banks and their government backed supporters work in cahoots to increase liquidity in these markets which helps to create a casino like environment. Initially this starts out slow and ends with option ARMs that have no way of being paid back even though they are made on large ticket items. We now know how the bubble pops with housing but how does it look when it bursts in higher education? The option ARM or subprime equivalent in higher education is the for profit institutions. I’m sure you can find a handful that are strong but many simply operate as a clean setup to extract as much government and private loans from students without producing any measurable results. I know many will say that education is more than just the amount of money you will earn once you graduate. I agree. However, you do not need a multi-million dollar football team to help you read Cicero, Dostoevsky, Kafka, or even Hemingway. You can do that for free at your public library. College in many cases is about making solid contacts and working in a stimulating environment while learning to think critically. What has changed from 1980 to 2011 that has made it so much more expensive? Are professors 20 times better at teaching calculus or derivatives in 2011 than they were in 2008?

State Deficits

The Tao of Jerry - William Voegeli

Californians can take scant comfort from the prospect that a blue-state meltdown may start elsewhere. (Illinois, for instance, appears to have dug itself into an even deeper hole.) No matter which other states have it worse, California faces years of austerity. According to a report issued in November 2010 by the Legislative Analyst's Office (LAO)—California's counterpart to the Congressional Budget Office—the state's general fund is heading for a $20 billion shortfall every year until 2016, as far ahead as LAO cares to project. Since LAO does not expect general fund revenues to exceed $100 billion until 2015, these deficits would be more than one-fifth of the state's budget for half a decade.

And that's the good news. "We believe that our projections probably understate the magnitude of the state's fiscal problems during the forecast period," the report says. The picture would have been even bleaker if LAO had factored in the billions of additional dollars California must devote each year to fulfill pension and health care obligations to public employees who have retired or will in the future. (When and how the state will pay for those promises, and whether it will bend or break some—these were too murky for the agency to quantify and forecast.) LAO does estimate that the unfunded liabilities for these obligations amount to $136 billion. California's "long-term fiscal liabilities—for infrastructure, retirement, and budgetary borrowing—are already huge," the report states. "By deferring hard decisions on how to finance routine annual budgets of state programs to future years, the state risks increasing further the already immense fiscal challenges facing tomorrow's Californians."

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The planted axiom is that higher taxes—California's are already among the highest in the nation—will get the state through the recession and recovery without further reductions or reorganizations of its public sector, hastening the happy day when things can go back to normal. The long-term structural deficits that appear endemic in the blue-state model of high taxes, big government, and strong public employee unions all argue, however, that "normal" is the problem. Americans are endorsing this proposition with the articles they write and the bonds they sell but also, more importantly, by decisions about where to build lives and enterprises. The first results from the 2010 census, released in December, show that the population of Texas, a state with no corporate or individual income tax, grew twice as fast as the nation's overall population between 2000 and 2010. California grew at the national rate, meaning that for the first time since 1850, the census will result in no additional California seats in the House of Representatives. (New York will lose two House seats; Illinois and New Jersey will each lose one. Texas adds four.) More generally, as Michael Barone has calculated, 35% of the nation's population growth since 2000 took place in the nine states that have no income tax, which together accounted for only 19% of the nation's total population at the beginning of the decade.

State Budgets

Economists: State, local pension funds understate shortfall by $1.5 trillion or more - Peter Whoriskey

The pension funds for state and local workers in the United States are understating the amount they will owe workers by $1.5 trillion or more, according to some economists who have studied the issue, meaning that the benefits are much costlier than many governments and taxpayers thought.

Doubts about government pension accounting have been voiced by analysts for years, but with shortfalls in state and local pension plans exacerbated by the recession, the push to refigure pension fund shortfalls has gained political momentum.

The trillion-dollar gap arises from the government method of accounting, which several experts say significantly underestimates the cost of future pension payments.

Farewell, My Lovely - Tim Cavanaugh

At press time, California was being governed under a state of economic “emergency” declared by Brown’s predecessor, Arnold Schwarzenegger, in light of a staggering $28 billion budget shortfall expected in the next 18 months.

It gets worse. Medium-term unfunded liabilities for government employee pensions are pegged by the Legislative Analyst’s Office at $136 billion—and that’s a lowball figure. Legislative analyst Mac Taylor acknowledges in his current fiscal outlook report that the estimate leaves out billions in funding shortfalls at the pension funds for public school teachers and University of California employees. In the next 10 years, taxpayers will most likely be on the hook for somewhere between $325 billion and $500 billion. (Over the past five years, state revenues averaged $94.5 billion per year.)

How did this happen?

California’s state and local governments employ somewhere between 1.5 million and 2 million workers, representing 4 percent to 5 percent of the state’s total population. When they retire, all of those employees are contractually entitled to generous pension benefits—so generous that, collectively, they can’t be paid even by a pension system that ladles out more than $20 billion a year and is one of the largest investment pools on Wall Street.

Public Employee Unions

Watershed Moment in Wisconsin - Roger Kimball

Obama is so keen to preserve and nurture public sector unions because they are the lifeblood of the contemporary Democratic Party. To an astonishing extent, the unions are the government in many locales. They elect officials and then sit down to bargain with them over their salaries and benefits. Since they are essentially bargaining with themselves, they generally make out quite nicely. It’s a corrupt and ultimately unsustainable practice. Sooner or later, as Margaret Thatcher observed about socialism, they will run out of other people’s money. Many of us believe that day is nigh, but the unions and their enablers apparently have calculated that there is at least a little more ruin they can inflict.

Still, the issue in Madison is not just the future of public-sector unions. In my view — it’s one thing I agree with FDR about — they should once again be declared illegal, as they were in all states until the 1960s (currently about 40 percent of government workers are unionized). No, important as the fight over public-sector unions is, that battle is only one aspect of a much larger battle: the battle over the fate of individual freedom in a neo-collectivist age. As I said above, Obama has done us the great service of dramatizing the stark choice that faces us. At least since LBJ and his preposterously misnamed “Great Society” programs, the United States has been lurching down the collectivist path. The government has intruded itself in one aspect of life after the next, always with ruinous results. It is ironic, I suppose, that a crossroads should be reached in Madison, Wisconsin, a city named for that great patron of limited government James Madison. “The powers delegated by the proposed Constitution to the federal government are few and defined,” Madison wrote in Federalist 45.

Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.

The Means of Coercion - James Taranto

In any case, it seems to have escaped Krugman's and Drum's notice that the Wisconsin dispute has nothing to do with corporations. The unions' antagonist is the state government. "Industrial unions are organized against the might and greed of ownership," writes Time's Joe Klein, a liberal who understands the crucial distinction. "Public employees unions are organized against the might and greed . . . of the public?"

The "labor movement" in America has increasingly come to consist of people who work for government, not private companies. As the BLS notes, the union-participation rate for public-sector workers in 2010 was 36.2%, vs. just 6.9% for private-sector workers.

There is a fundamental difference between private- and public-sector workers. A private-sector labor dispute is a clear clash of competing interests, with management representing shareholders and unions representing workers. In the public sector, as George Will notes, taxpayers--whose position is analogous to that of shareholders--are usually denied a seat at the table:

Such unions are government organized as an interest group to lobby itself to do what it always wants to do anyway - grow. These unions use dues extracted from members to elect their members' employers. And governments, not disciplined by the need to make a profit, extract government employees' salaries from taxpayers. Government sits on both sides of the table in cozy "negotiations" with unions.

Collective bargaining in the public sector thus is less a negotiation than a conspiracy to steal money from taxpayers. The notion that this is "in the economic interests of the middle class" for government employees in Wisconsin and elsewhere to get above-market wages and extremely lavish benefits is just laughable. Sure, government employees are "middle class," but so are the vast majority of taxpayers who don't enjoy the special privileges that come from owning the means of coercion.

The Rubicon of Wisconsin - Charles Krauthammer

In the private sector, the capitalist knows that when he negotiates with the union, if he gives away the store, he loses his shirt. In the public sector, the politicians who approve any deal have none of their own money at stake. On the contrary, the more favorably they dispose of union demands, the more likely they are to be the beneficiary of union largesse in the next election. It’s the perfect cozy setup.

To redress these perverse incentives that benefit both negotiating parties at the expense of the taxpayer, Walker’s bill would restrict future government-union negotiations to wages only. Excluded from negotiations would be benefits, the more easily hidden sweeteners that come due long after the politicians who negotiated them have left. The bill would also require that unions be recertified every year and that dues be voluntary.

Recognizing this threat to union power, the Democratic party is pouring money and fury into the fight. Private unions have shrunk to less than 7 percent of the working population. The Democrats’ strength lies in government workers, who now constitute a majority of union members and provide massive support to the party. For them, Wisconsin represents a dangerous contagion.

Hence the import of the current moment — its blinding clarity. Here stand the Democrats, avatars of reactionary liberalism, desperately trying to hang onto the gains of their glory years — from unsustainable federal entitlements for the elderly enacted when life expectancy was 62 to the massive promissory notes issued to government unions when state coffers were full and no one was looking.

Obama’s Democrats have become the party of no. Real cuts to the federal budget? No. Entitlement reform? No. Tax reform? No. Breaking the corrupt and fiscally unsustainable symbiosis between public-sector unions and state governments? Hell no.

The Political Economy of Government Employee Unions - Thomas J. DiLorenzo

Thus, when government bureaucrats go on strike they have the ability to completely shut down the entire "industry" they "work" in indefinitely. The taxpayers will complain bitterly about the absence of schools and garbage collection, forcing the mayor, governor, or city councillors to quickly cave in to the union's demands to avoid risking the loss of their own jobs due to voter dissatisfaction. This process is the primary reason why, in general, the expenses of state and local governments have skyrocketed year in and year out, while the "production" of government employees declines.

Day of reckoning on pensions - LA Times Editorial

The housing bubble and subsequent Wall Street collapse wreaked havoc on the nation's retirement savings, as many pension funds and 401(k) plans suffered losses of 30% or more. State and local governments are now facing huge unfunded pension liabilities, prompting policymakers to scramble for ways to close the gap without slashing payrolls and services. But a new report from the Little Hoover Commission in Sacramento makes a more troubling point: Many state and local government employees have been promised pensions that the public couldn't have afforded even had there been no crash.

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A bipartisan, independent agency that promotes efficiency in government, the Little Hoover Commission studied the public pension issue for 10 months before issuing its findings Thursday. Much of the 90-page report is devoted to making the case that, to use the commission's blunt words, "pension costs will crush government." Without a "miraculous" improvement in the funds' investments, the commission states, "few government entities — especially at the local level — will be able to absorb the blow without severe cuts to services."

The problem is partly demographic. The number of people retiring from government jobs is growing rapidly, and longer life expectancies mean that a growing number of retirees will collect benefits for more years than they worked. But the report argues that political factors have been at least as important in driving up costs, starting with the Legislature's move in 1999 to reduce the retirement age for public workers, base pensions on a higher percentage of a worker's salary and increase benefits retroactively. The increases authorized by Sacramento soon spread across the 85 public pension plans in California.

Compounding the problem, the state has increased its workforce almost 40% since the pension formula was changed and boosted the average state worker's wages by 50%. Local governments, meanwhile, raised their average salaries by 60%. Much of the growth came in the ranks of police and firefighters, who increased significantly in number and in pay.

Business Climate

California taxes away jobs while Texas adds them - Mark Hemingway

In 2008, 70 percent of all the jobs in the country were created in Texas. In 2009, all of America's top five job-creating cities were in Texas.

More recently, "Texas created 129,000 new jobs in the last year -- over one-half of all the new jobs in the U.S. In contrast, California lost 112,000 jobs during the same period," according to "Texas vs. California: Economic growth prospects for the 21st Century," a new report by the Texas Public Policy Foundation released in October.

Texas is home to 64 Fortune 500 companies -- more than any other state in the union. (California has 51 and New York has 56.) For five years in a row, Texas has topped Chief Executive magazine's poll of the best state to do business.

Meanwhile, California is ranked dead last in the Chief Executive's survey. California state treasurer Bill Lockyer even went so far as to pen a Dec. 20 op-ed in the Los Angeles Times denying "the claim that we have a hostile business climate."

So why are businesses flocking to Texas and fleeing California? Well, as a recent headline from The Economist put it, in California "They paved paradise and put up the parking taxes."

Texas has no personal income tax. With a top rate of 10.3 percent, California has the third-highest state income tax after Oregon and Hawaii.

The tax advantage goes much deeper. The Tax Foundation cites California as having the 33rd highest corporate income tax topping out at 8.8 percent -- much higher than Texas' modest 1 percent gross receipts tax on business.

California's capital gains tax is the highest in the country, whereas Texas levies no tax on capital gains. California's sales tax is the second highest in the nation and its energy taxes are the highest in the country.

And as California's taxes have gotten higher, the state's revenue has become more unstable.

Census Observations

Census: Fast growth in states with no income tax - by Michael Baron

First, the great engine of growth in America is not the Northeast Megalopolis, which was growing faster than average in the mid-20th century, or California, which grew lustily in the succeeding half-century. It is Texas.

Its population grew 21 percent in the past decade, from nearly 21 million to more than 25 million. That was more rapid growth than in any states except for four much smaller ones (Nevada, Arizona, Utah and Idaho).

Texas' diversified economy, business-friendly regulations and low taxes have attracted not only immigrants but substantial inflow from the other 49 states. As a result, the 2010 reapportionment gives Texas four additional House seats. In contrast, California gets no new House seats, for the first time since it was admitted to the Union in 1850.

There's a similar lesson in the fact that Florida gains two seats in the reapportionment and New York loses two.

This leads to a second point, which is that growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.

Altogether, 35 percent of the nation's total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.

California in Decline

Two Californias - Victor Davis Hanson

Here are some general observations about what I saw (other than that the rural roads of California are fast turning into rubble, poorly maintained and reverting to what I remember seeing long ago in the rural South). First, remember that these areas are the ground zero, so to speak, of 20 years of illegal immigration. There has been a general depression in farming — to such an extent that the 20- to-100-acre tree and vine farmer, the erstwhile backbone of the old rural California, for all practical purposes has ceased to exist.

On the western side of the Central Valley, the effects of arbitrary cutoffs in federal irrigation water have idled tens of thousands of acres of prime agricultural land, leaving thousands unemployed. Manufacturing plants in the towns in these areas — which used to make harvesters, hydraulic lifts, trailers, food-processing equipment — have largely shut down; their production has been shipped off overseas or south of the border. Agriculture itself — from almonds to raisins — has increasingly become corporatized and mechanized, cutting by half the number of farm workers needed. So unemployment runs somewhere between 15 and 20 percent.

More of the Same in California

California's Budget Blues Get Deeper - Brian Doherty

Read the whole thing and follow the links.

In a little more than month, the state of California lost over $6 billion in ground on its latest budget. With the deficit now thought to be $25.4 billion, Gov. Schwarzenegger calls a special session of the legislature to start on December 6.

Some Assembly Democrats think this is a political gimmick--what's changed in the 5 weeks since they last approved a budget that could make things better?--and their biggest priority is something that would make the deficit bigger, not smaller--reversing a Schwarzenegger line item veto of $256 million worth of day care.

California Suggests Suicide; Texas Asks: Can I Lend You a Knife? - Joel Kotkin

In the future, historians may likely mark the 2010 midterm elections as the end of the California era and the beginning of the Texas one. In one stunning stroke, amid a national conservative tide, California voters essentially ratified a political and regulatory regime that has left much of the state unemployed and many others looking for the exits.

California has drifted far away from the place that John Gunther described in 1946 as “the most spectacular and most diversified American state … so ripe, golden.” Instead of a role model, California has become a cautionary tale of mismanagement of what by all rights should be the country’s most prosperous big state. Its poverty rate is at least two points above the national average; its unemployment rate nearly three points above the national average. On Friday Gov. Arnold Schwarzenegger was forced yet again to call an emergency session in order to deal with the state’s enormous budget problems.

California Budget Deficits

How to Save California: Outlaw Public Employee Unions - John Yoo

The one change that he said could restore the state's fortunes wasn't lowering taxes, cutting spending, or eliminating excessive regulations -- though these were all important. He said there was a deeper root cause: the power of the public employees unions. According to Wilson, public employee unions trigger a destructive dynamic. Public employee unions take money from their members and use them for partisan political purposes. They pressure government officials to cut them sweetheart deals, especially through things like job protections and pensions, that don't show up on the bottom line for years. They create a larger and larger interest group that demands more government spending and higher taxes, which drives out private entrepreneurship and swells their ranks even more. Reduce the power of the public employee unions, and you lower the size of government, reduce the costs of the state, and fix the looming pension problem.

U.S. Migration Map

The forbes.com U.S. Migration Map is a great resource for quickly assessing the net migration into and out of counties in the U.S.

Compare, for instance, Los Angeles County, CA (Red lines indicate outward migration. Black lines indicate inward migration.)



with Travis County (Austin), TX.

California - June 2010

America as Texas vs. California: Who’s Moving Where Edition - Ryan Streeter

Texas’s low-cost, liberty-loving atmosphere has become an attractive alternative to California’s oppressive public sector and dysfunctional policy environment. No amount of heart-melting vistas, celebrity sightings, or traipses through wine country can make up for what almost appears a strategic attempt by one of the nation’s largest states to drive businesses and productive people away.

Thanks to an interesting interactive map at Forbes.com, we now can see some visual evidence of the trends we have been discussing. The map shows county migration in the United States in pictorial form. Black lines show inward migration to a county, and red lines show outward migration. The thicker the line, the higher the volume.