economy

After Decades of Historic Growth, California Switching to a Period of Chronic Stagnation

July 31, 2023 By Dan Walters 1 Comment

From its founding 173 years ago, California’s history has been dominated by one word: growth.

Its population grew from a few thousand to nearly 40 million, becoming by far the nation’s most populous state. Its economy grew to $3.6 trillion, the fourth largest in the world, and its $310.8 billion state budget is virtually the same as Russia’s.

But that was then and this is now. California’s indices of growth have hit a plateau.

The state’s population has been drifting downward for several years, and the state Department of Finance recently projected that it will remain virtually unchanged at around 40 million at least until 2060 – a radical change from earlier predictions that it would top 50 million by then.

The state’s labor force is likewise stagnant, according to the state budget’s projections, which explains why employers are having such great difficulty filling positions. Personal income is barely keeping up with inflation, while real, inflation-adjusted wages, the budget says, are declining.

The Department of Finance projects that state tax revenue will remain virtually unchanged for at least the next several years, leading to operating deficits for the remainder of Gov. Gavin Newsom’s second and final term.

Looking ahead, the old saying that demography is destiny comes into play.

A stagnant population has myriad social, political and economic impacts – some already evident – such as not having enough workers to fill jobs and California’s loss of a congressional seat for the first time in its history.

A non-growing population is an aging population with ever-fewer Californians of working age (18 to 64), and greater demands for health care and other services. Even the youngest members of the post-World War II baby boom generation are now close to retirement.

The net outflow of population vis-à-vis other states exacerbates the workforce dilemma even more, and a chronic lack of workers discourages employers from expanding operations with a negative effect on the overall economy.

California lost one congressional seat after the 2020 census because its population grew slower than the rest of the country. Over the next several decades, at least, California and other slow- or no-growth blue states, such as New York, will lose more seats to fast-growing red states such as Florida and Texas, and therefore more presidential electoral college votes.

California’s net loss in state-to-state migration patterns may already be a factor in the state’s projection of stagnant tax revenues. The state’s tax system is inordinately dependent on taxing the incomes of the state’s most affluent residents. The highest income 1% of Californians generate nearly half of income taxes, which are the lion’s share of overall revenues.

A fierce debate has raged in academic and political circles over whether there has been a significant flight of wealthy taxpayers from the state as marginal tax rates rose and the federal government sharply restricted their ability to deduct state taxes on the federal tax returns – the latter an issue now raging in Congress.

The debate gained new fodder recently when SmartAsset, a website devoted to economic issues, revealed that California and New York have the highest out-migration rates of taxpayers with incomes over $200,000 a year.

Click here to read the full article in CalMatters

Filed Under: Trending News Tagged With: California Politics, economy, Gavin Newsom

Carney on ‘Kudlow’: Silicon Valley Bank’s Failure Signals the End of the ‘Cheap Money Ecosystem’ Fueling CA Tech Start-Ups

March 12, 2023 By Rebecca Mansour 2 Comments

The “cheap money ecosystem” that fed the tech start-up culture has come to an end with the Federal Reserve raising interest rates to curb inflation, and the failure of Silicon Valley Bank might be the first domino to fall among California-based financial institutions, Breitbart Economics Editor John Carney said in an interview Friday with Fox Business host Larry Kudlow.

“The sudden implosion of Silicon Valley Bank (SVB) is sending shock waves through the financial system and the technology sector,” Carney wrote in Friday’s Breitbart Business Digest. “SVB plays a central role in the start-up economy of San Francisco. According to Bloomberg, it does business with about half of venture capital backed start-up firms in the U.S.”

“One of the problems [for SVB] was when money was so freely available to all these start-ups, they didn’t borrow a lot,” Carney told Kudlow. “So, they had a ton of deposits coming in and not a lot of opportunity to make loans out to people. I mean, yeah, you can lend money so people can buy a yacht or a fancy mortgage on some tech start-up billionaire’s fancy mansion, but they really had way too much money. So, they invested it in bonds. Bank of America I think has 25 percent of its assets in bonds, but this bank had over 50 percent of its assets in bonds.”

Kudlow noted that when the yield curve inverted, these bonds incurred a negative return.

“They’re losing money,” Carney agreed. “And at the same time, all these start-ups who are depositing so much money there are now withdrawing it because they don’t have access to free money anymore. So, they’re withdrawing it just to pay their bills. So, you’re having the deposits go down. They have to sell into a market where they are actually producing real losses, not just mark to market losses.”

“That is what sparked the panic basically,” he continued. “Earlier this week, [SVB] announced something like a $2 billion loss on their assets. And people said, ‘I better get my money out quickly.’”

“Now the FDIC stepped in to avoid an old-fashioned run on the bank,” Kudlow said.

The bank went into receivership on Friday when the California Department of Financial Protection and Innovation shuttered it, and the Federal Deposit Insurance Corporation (FDIC) issued a statement guaranteeing the accounts of all insured depositors. However, as Carney told Kudlow, this will not be reassuring to the depositors of the reportedly 93 percent of SVB deposits that are uninsured.

“There are people who are at risk of losing their deposits at least on paper,” Carney said.

All of this has been exacerbated by the Federal Reserves’ rate-hiking fight against inflation, which has signaled the end of the cheap lending low interest rate monetary policy that fostered Silicon Valley start-ups, Carney explained.

“I think we’re going to see a lot of the California-based financial institutions get into trouble because they were so dependent on this very cheap money ecosystem that was feeding start-up culture and is no longer there,” he said.

“What happens to the start-up culture now that there’s no cheap money or there’s no cheap, cheap money?” Kudlow asked. “[Are] they’re going to have trouble getting loans?”

“Absolutely,” Carney said. “They’ll have trouble getting loans and have trouble raising money because if you can get five percent on a treasury bond, why are you trying to get 10 percent on a very risky start-up? You’re not going to do that. You might as well just double down on leverage and get a treasury. So, I think that they’re going to have a lot of trouble being able to continue to raise money. And we’re going to see a lot of the start-ups start to tilt over.”

Kudlow asked Carney about the risk that this bank failure will spread beyond SVB.

“I think there’s a high risk that it spreads,” he said. “People are right now looking at every other bank, not the big banks—the JP Morgans, Citigroups, Wells Fargos, they’ll be fine.”

“The banking system is extremely well capitalized,” he added. “And so, I don’t think we’re on the verge of a financial crisis. But I do think we’ll probably have a couple more bank failures ahead of us.”

Click here to read the full article at BreitbartCA

Filed Under: Trending News Tagged With: banking, economy, FDIC

Biden Opts to Redefine ‘Recession’ Rather Than Beat It

July 30, 2022 By Daniel J. Flynn 3 Comments

Apparently it’s not a recession unless Biden cronies say it is.

What everybody thought constituted a recession no longer does.

The Bureau of Economic Analysis announced that gross domestic product (GDP) fell by 0.9 percent in the second quarter. This follows a 1.6 percent contraction in the first quarter.

Recession, right?

Well, heretofore two consecutive quarters of a shrinking economy meant recession. But our betters in the Biden administration ~~gaslight~~ enlighten us into seeing not the downturn before our eyes but an apparition of expanding economies past. Redefining recessions matters when they occur on the watch of Democrats at the levers of power who soon will face an angry electorate.

Since the Biden administration could teach a masterclass in spin but would fail Economics 101, the White House expends considerable energy on solving this terrible problem, this terrible problem of recalcitrants stuck on the idea that an economy in recession, well, recedes.

Whoever imagined that recession meant receding GDP never talked to National Economic Council Director Brian Deese. The Chip Diller of the Biden administration told CNN on Sunday that “in terms of the technical definition” two straight quarters of a contracting GDP actually is “not a recession.” He informed, “[The] technical definition considers a much broader spectrum of data points.”

Phew. For a minute it looked as though the twin terrors of Stagflation that plagued the Carter years now also would bedevil the Biden presidency. Good to know the real issue involves merely educating Americans that they do not know what they know and do not experience what they experience. Why did not Jimmy Carter think of this first?

President Biden doubled down on promoting public relations over sound economics on Thursday by claiming that “we’re not in a recession” according to the economists he respects and by boasting of a deal struck in the Senate that raises taxes, or, as the president put it, forces the wealthy and “the largest corporations in America to pay their fair share.” While common sense suggests to not raise taxes during a recession, Biden insists he does not do this because no recession exists.

The New York Times and the Washington Post quickly spread the gospel according to Joe Biden and Brian Deese.

Paul Krugman warned in the Times that “it would be foolish to declare that we’re in a recession even if Thursday’s number is negative and the first-quarter number isn’t revised upward.” Best, he explained, to wait for the word from “the people who actually decide whether we’re in a recession.”

What people? The American people who make up the market? Well, no. It turns out just eight professors.

Writes Krugman of the National Bureau of Economic Research:

Since 1978 the N.B.E.R. has had a standing group of experts called the Business Cycle Dating Committee, which decides — with a lag — when a recession began and ended based on multiple criteria, including employment, industrial production and so on. And the US government accepts those rulings. So the official definition of a recession is that it is a period that the committee has declared a recession; it’s an expert judgment call, not a formula.

Will this “lag” last beyond November, and did these experts vote for Joe Biden?

“The eight economists on the committee are among the most respected in their field,” the Washington Post maintains. “Some have served in Democratic administrations, but past members have also included GOP appointees.”

Past members, huh?

Current members include James Stock, who gave at least $1,000 each to Barack Obama, Hillary Clinton, and Pete Buttigieg. He sent $2,800 to Biden’s 2020 campaign. David Romer, who also sits on this council of elders, donated $5,600 to Joe Biden in the last presidential cycle. His wife, Christina Romer, chaired the council of economic advisors during the Obama administration before becoming part of this elite eight.

What the committee lacks in balance it makes up for in transparency, right?

Reports the Washington Post:The committee’s meetings are not publicized. They’re held in a closed-door conference room on the third floor of the Cambridge, Mass., office building where NBER is headquartered. They don’t meet on a fixed schedule: Board Chairman and Stanford economist Bob Hall is responsible for calling the meetings. During long periods of consistent economic growth, the board can go years without having anything to discuss, and therefore, it might hold no meetings. It wouldn’t even confirm when past meetings have happened.

Who knows? Maybe the NBER board will vote that America really is experiencing prosperity unmatched by the 1920s, 1960s, and 1980s combined. Such a proclamation by eight professors would really show the shrinking stock market, rising consumer prices, and declining productivity that happy days are here again.

Americans find their country in a recession. Americans find those who do not find their country in a recession in the Twilight Zone.

Click here to read the full article in the Spectator.org

Filed Under: Top Stories Tagged With: Biden, economy, Inflation

One Indicator Shows California’s Recovery Is Incomplete

December 14, 2021 By Kerry Jackson 3 Comments

Despite assurances that California’s economy is a treasure to behold – “We are world-beating in terms of our economic growth,” says Gov. Gavin Newsom – the post-pandemic recovery has a gaping hole in it. State unemployment is the highest in the country.

Federal data for October show that the jobless rate improved from September’s 7.5% to 7.3%. That puts the state in a last-place tie with Nevada, and far off Nebraska’s best-in-the-nation 1.3%.

Texas and Florida, rivals in many ways, posted far better numbers in October, 5.4% and 4.6% respectively.

The Bureau of Labor Statistics also reports nine of the 15 metropolitan areas posting the highest jobless rates in the country are in California. This includes the Los Angeles-Long Beach-Anaheim metropolitan area statistical area, which has an unemployment rate of 7.1% – 373rd in a list of 389 metro regions.

Newsom can brag about California “dominating in every category,” and being home to the “fastest growing companies, the most influential companies in the world,” as he did at October’s California Economic Summit.

But an economy that has a jobless rate as high as this state’s isn’t fully healthy, a fact that hasn’t gone unnoticed. The Public Policy Institute of California’s November survey found that 52% expect bad times ahead, while only 47% expect good times. Four months earlier, the outlook was just the opposite: Only 44% expected bad times ahead, while 54% thought the future looked good.

Legendary California journalist Dan Walters recently pointed out that eight of the 10 states with the lowest unemployment rates in October were red states, and nine of the 10 states with the highest jobless rates were blue. It’s a sharp reminder that public policy plays a substantial role in joblessness.

“It could just be coincidence, of course, but maybe those red states with low unemployment rates have regulatory and tax policies that encourage job-creating investment and maybe California and the other blue states with high jobless rates are perceived as being hostile to business,” he says.

Walters was being charitable. Taxes and regulation always impact job numbers, and both are uniquely heavy burdens for California businesses. Regulation stifles innovation, which promotes job growth, and we know taxes negatively affect employment because lawmakers say as much when they hand out tax breaks to companies expecting them to put people to work.

Lockdowns also figure in the state’s high jobless rate. Many businesses that were forced to close never reopened, and some that did still aren’t operating at full capacity. By October, the state had regained only a little more than two-thirds of the 2.7 million jobs that were lost due to the lockdowns.

California policymakers have come to think they can do whatever they want, and the hard work of previous generations that built this state will save them from the negative economic consequences that spin off their plans. It doesn’t work that way, though. There’s too much garbage in, garbage out in Sacramento.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

This article first appeared in the Pacific Research Institute

Filed Under: Top Stories Tagged With: California, economy, taxes

Public Nuisance Lawsuits Could Compound Cloudy California Economic Forecast

December 7, 2018 By Whit Peterson 4 Comments

Today, the sun is shining on the California economy, with unemployment at a record low. Our state is the fifth largest economy in the world with more billionaires than anywhere else in the country. State government is also doing well. Governor Brown inherited a $26 billion deficit upon entering office. Today, the state has a surplus of nearly $16 billion. This is good for businesses and good for the California families they support.

But there’s no guarantee those sunny days will last. In fact, many economists predict the dark clouds of recession in California’s future. Recessions are always particularly troubling for California because of our high reliance on wealthy taxpayers for revenue. Austerity could be on the way, as well as tough times for California businesses in a slower economy.

Another storm cloud looms on California’s horizon as well. California cities are increasingly considering filing so-called “public nuisance” lawsuits against manufacturers, alleging that manufacturers contribute to climate change and are at least partially responsible for sea level rise and wildfires. High-profile cases brought by San Francisco and Oakland have already been dismissed, as has a lawsuit brought by New York City. However, mayors and public officials in other California municipalities and in states like New York, Colorado, Rhode Island, Maryland and Washington continue to threaten manufacturers with lawsuits labeling them as public nuisances, seeking to both make political statements and score financial paydays.

California’s major cases aren’t out of the woods yet either. San Francisco and Oakland are appealing United States District Judge William Alsup’s dismissal of the case, with the cities’ opening brief due to the Ninth Circuit by December 10. Judge Alsup ruled, as did his counterpart in New York City’s case, that the problem of climate change is best addressed by the legislative and executive branches.

Fortunately, a number of California mayors are standing firm against these misguided lawsuits. Those include Irvine Mayor Don Wagner, who has publicly opposed climate litigation and noted that the courts are poor choices for handling climate policy decisions. Wagner has been joined by Huntington Beach Mayor Mike Posey, who warned in California Political Review that public nuisance lawsuits could eventually target municipal governments themselves and argued that working alongside manufacturers, not suing them, is the best way to achieve economic goals and job growth. La Habra Mayor Tim Shaw echoed this idea, stating that municipalities should refrain from filing frivolous climate lawsuits since mayors need to make it easier, not harder, for businesses to create more jobs.

These mayors and others, of course, have real reason for concern. California is hemorrhaging both people and businesses already. A November U.S. Census Bureau report says the Golden State has had 142,932 more residents exit to live in other states than people arriving from other states. This outflow is 11% higher than in 2015 and was second nationally only behind the New York and New Jersey area. Businesses are exiting too. Carl’s Jr., a longtime California icon, has relocated to Nashville. Toyota said goodbye to Torrance and will completely relocate its U.S. headquarters to Dallas in the coming weeks. Joining Toyota in Dallas is Jacobs Engineering Group, which is moving its $6.3 billion firm from Pasadena. Add to that growing list Nissan North America, Jamba Juice, Numira Biosciences, Chevron and Kubota Tractor and it’s easy to see why continuing to target manufacturers with lawsuits is a losing choice for the California economy.

Rather than running to the courthouse in pursuit of a failed legal strategy that will do nothing to help the environment, public officials should join with manufacturers in addressing the problem of climate change. This approach is already producing results. For example, Bloomberg reported last year that the five biggest energy manufacturers reduced their emissions by an average of 13% between 2010 and 2015, outpacing the U.S.’s 4.9% reduction over the same time span. Overall, manufacturers have reduced their emissions by 10% while increasing their overall value to the economy by 19% over the last decade. That progress is commendable.

Manufacturing is too critical to the California economy to continue threatening it. More than 10% of the state’s total economic output and about one in twelve workers depends on California’s $300 billion plus manufacturing sector. With businesses already fleeing high taxes and a less-than-welcoming business environment, the time is now to work toward productive solutions that both help the environment and protect manufacturing jobs. If California wants to avoid a gloomy economic future, local leaders must say no to public nuisance lawsuits that jeopardize manufacturers and the jobs they provide to hard-working Californians.

Whit Peterson is Director of Government Affairs, Greater Irvine Chamber

Filed Under: Top Stories Tagged With: Airport, economy, Huntington Beach

The “California Miracle” Economy Is a Fantasy

November 4, 2018 By Richard Rider 6 Comments

Democrats and their MSM allies have been touting California’s “miracle comeback” from the recession. They love to reference 2015 statistics – the SINGLE year when CA did quite well compared to the other states. But as we’ll see below, three things are apparent:

1. 2015 was an aberration.

2. Since 2105, CA has slipped back into its moribund economic performance that has become the norm in the Golden State.

3. By just about any metric, CA is doing less well than the majority of the other states. Too often a LOT less well.

California’s unemployment rate (September, 2018) has improved significantly this year. Yet we are now tied for 32nd – with a 4.1% unemployment rate. The national unemployment rate is 3.7%. The CA unemployment rate is 12.5% higher than the average of the other 49 states.

It gets worse. Using the lagging yet arguably more accurate U-6 measure of unemployment (includes involuntary part-time workers), CA is the 5th worst – 9.2% vs. the national rate of 8.1%. The national U-6 not including CA is 8.0%, making CA’s U-6 15.7% higher than other states. Remember: The federal standard used to count a worker as “employed” is working ONE hour per week. CA is indeed the “gig economy.”

Another factor to consider: This past year the number of Californians in the work force (employed and unemployed) remained stagnant – essentially a zero net increase in our Golden State pool of workers. Meanwhile the national work pool grew 0.5%. With no increase in workers, our CA unemployment improvement appears better than it really is. If our work pool had grown at the national rate, we’d have a considerably higher unemployment rate.

Yes, the number of California jobs has grown these past 12 months. But the average job growth in the other 49 states is more than TRIPLE the rate of California’s jobs growth.

But wait – California has the 5^th largest economy in the world! Aren’t we doing great compared to the other states? Short answer: no.

Longer answer: CA is a huge state with a HUGE population — over 38%% more people than the second most populous state of Texas. And CA has an uber-HIGH cost of living. Based just on GDP, CA does indeed rank as the 5^th largest economy in the world. But adjusted for population (per capita) and cost of living (using the “Missouri” COL index in the URL below), CA ranks lower than all but 13 U.S. states.

Stated differently, if one took the GDP of an aggregation of randomly selected states whose total population roughly equaled California’s 40,000,00 people, and adjusted for those states’ cost of living, then they would likely have the 5th largest economy in the world — if not higher!

Liberals love to denigrate Texas, a “backwater state” which supposedly can’t keep up with the California juggernaut. Sadly for progressives, facts prove them wrong.

In the report below, there’s a comparison of job growth by state from September 2017 to September 2018. California jobs grew 81,100. But TEXAS jobs grew 251,500. Soooo, even though CA has a population that’s 38.6% larger than Texas, the Lone Star State created over TRIPLE the number of jobs that CA produced. As a percent of population, CA ranks a dismal 37^th in the percent of job growth compared to the other states. And BTW, the population of Texas is growing over TWICE as fast as CA – and has been for years.

Another disheartening fact: Since the start of the recession (September 2007), the predominant CA job growth above pre-recession levels has been in low paying occupations. The top three dominating occupations – with the job growth in excess of 2007 levels, and the average salary:

Food Service *** 350,000 *** $22,000
Health Care *** 340,000 *** $66,300
Social Assistance *** 305,000 *** $19,100

Moreover, four occupations have failed to gain back all the jobs lost since 2007. All four are in high paying industries:

Logging and mining: $116,300
Construction: $67,700
Finance and Insurance: $123,100
Manufacturing (worst hit): $92,900

Of course, no discussion of California’s economy is complete without considering California’s sky-high cost of living – and the resulting hardship on the poor – the folks that the Democrats supposedly care so passionately about. California’s real (“supplemental”) 2017 poverty rate (the new Census Bureau standard, adjusted for the COL) is still easily the worst in the nation at 19.0%. We are 43.9% higher than the average for the other 49 states. Texas is 14.7%. The CA poverty rate is 34.6% higher than Texas.

Here’s a thought: The median Texas household income is 13.5% less than CA. But adjusted for COL, Texas’ 2015 median household income is 29.3% more than CA.

If the progressives still feel compelled to tout California, perhaps they should boast about the Golden State’s homeless rate – easily tops on the nation. Maybe they DO love the poor – and that’s why they produce so many of ’em in our “Workers’ Paradise”!

To see a more periodically updated, annotated set of facts comparing CA with the other states – using 35 criteria – check out my dreary online fact sheet.

This article was originally published by the Flash Report

Filed Under: Top Stories Tagged With: economy, poverty

Bay Area Has Become World’s 19th Largest Economy

July 13, 2018 By Chriss W. Street 1 Comment

The Economic Institute reported this month that the Bay Area would be the 19th-largest economy in the world, if it were a country, after growing at the fifth-fastest rate of any nation since 2014.

The Bay Area’s nine counties — including San Francisco, Alameda, Contra Costa, Marin, Napa, Sonoma, San Mateo, Solano and Santa Clara — consistently grew faster than the U.S. over the last 20 years. With a GDP of $748 billion at the end of 2017, the Bay Area’s economy now exceeds that of Switzerland and Saudi Arabia.

The Bay Area’s rate of growth, at 4.3 percent compounded from 2014 through 2017, was also about two and a half times faster than the 1.7 percent growth of the United States. Due to that persistent growth advantage, the Bay Area’s GDP per capita is almost $80,000, versus less than $55,000 in GDP per capita for the nation as a whole.

Bay Area employment grew slower than the U.S. economy from 2008 to 2011, but has recently ramped up. The fastest Bay Area job growth sectors in the Bay Area were healthcare. up 26 percent; professional and scientific professions, up 25 percent; accommodation and food industries, up 17 percent; and information technologies, up 14 percent.

Bay Area median wages in 2017 were the highest in the nation at $52,100, versus $50,300 for Boston and $39,800 for Los Angeles.

The Economic Institute credits the Bay Area’s highly educated population as a key competitive advantage. With a metropolitan area national high of 46 percent of resident adults over the age of 25 with a college bachelor’s degree, the Bay Area’s average educational achievement towers over the 31 percent average for the U.S.

Although the Bay Area is often referred to as Silicon Valley, the economy is broadly diversified, compared to New York, which is heavily concentrated in financial services and consumer goods. In addition to tech companies, the Bay Area is home to leading companies in financial services, consumer goods, and other sectors.

This article was originally published by Breitbart.com/California

Filed Under: Top Stories Tagged With: Bay Area, economy, san francisco

Biden Opts to Redefine ‘Recession’ Rather Than Beat It

One Indicator Shows California’s Recovery Is Incomplete

Public Nuisance Lawsuits Could Compound Cloudy California Economic Forecast

The “California Miracle” Economy Is a Fantasy

Bay Area Has Become World’s 19th Largest Economy

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