The American Interest
Analysis by Walter Russell Mead & Staff
California's Hollow "Comeback"

“Two years ago they were writing our obituary. Well, it didn’t happen. California is back.” So said Gov. Jerry Brown in his State of the State address last month.

Despite 9.8 percent unemployment and a mass exodus of businesses to friendlier states, many in the media have been reporting a recovery for California. The WaPo is the latest to chime in:

The innovative engines of growth along the Pacific Coast have roared back to life. Also, the state’s housing market is no longer the anchor on growth that it was for several years: Prices bottomed out in 2012 and began to rise, construction permits are up, and contractor hiring is accelerating. […]

[I]n the Bay Area . . . high-tech start-ups are increasingly sprouting and expanding across San Francisco and bulldozers are rolling again in the millionaire bedroom communities east of Oakland.

If the California Comeback narrative is borne out, a balanced budget, shovel-ready construction jobs, and a booming tech industry will restore the Golden State’s reputation as a land of fortune and opportunity.

But we remain skeptical. After all, it’s not the highly paid Bay Area tech geeks we were worried about—Silicon Valley is already rich and dynamic enough to survive California’s state’s crushing taxes and regulations. Hollywood will probably be fine as well. But these two industries only employ a small portion of California’s 38 million people, and the picture begins to look much worse the farther you travel from San Francisco or L.A.

As the WSJ notes, unemployment rates are alarmingly high in certain areas (25 percent in the Imperial Valley), and California has the nation’s highest poverty rate despite being the wealthiest state. And as non-tech, non-entertainment businesses flee the state’s regulatory environment things are likely to get worse. Meanwhile, California’s powerful green lobby has managed to stymie the development of oil and gas projects that could provide high-paying jobs.

We’re as interested as anyone to see how California’s “turquoise” experiment works out, and we certainly hope it works out well. But until the lives of California’s poor and chronically unemployed actually start to improve, we’ll refrain from declaring a “comeback.”

Published on February 22, 2013 8:01 am