The Incredible Shrinking California Dream

Our economy is booming. So why are so many Californians finding their futures elsewhere?

Every week in this space, we sift through California's morass of politics and policy news, separating the consequential from the irrelevant or merely ridiculous. Occasionally, however, a story bubbles to the surface that overshadows the rest of the week’s headlines to the extent that we can’t even manage to see anything else.

This week, the Los Angeles Times published one such 2,658-word gut punch, digging into the continued flight of California businesses to other states and the increasingly uncomfortable arithmetic behind the phenomenon.

<READ THE STORY>

To be fair, hand-wringing about the California Exodus™ has been a favorite pastime for decades, even as the state’s now-$4.25 trillion economy has surged into fourth place in the world (Entschuldigung, Deutschland!). The unfortunate wrinkle in the story is that more businesses are leaving than arriving. If you want a median-level home, you can cut your cost in half by finding one in Texas. Our electricity prices are about twice the national average, so that ain’t great… Oh, and there’s this:

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No wonder nearly 230,000 more Californians moved out of state than folks moving in last year.

Think for just a second about this sorry state of affairs. The richest state in the richest country on earth has managed to make ordinary prosperity the almost exclusive province of the wealthy and well-connected. This is profoundly, categorically, morally and ethically not OK.

Which brings us to…us.

NCC was conceived around a straightforward proposition. We feel like California's extraordinary economic success doesn’t mean much if ordinary Californians can’t participate in it. Over and over, we’ve called attention to the fact that our state has no shortage of grand ambitions, but we seem remarkably indifferent to the cumulative costs of pursuing them.

The Times story paints the picture with painful precision.

The immediate concern with businesses ditching the Golden State is that they take their jobs and tax revenue with them. To be clear, this is very bad! But the more consequential loss is the deterioration of the economic ladder to the middle class that Californians have enjoyed for generations.

Our rip-roaring tech sector spins up wealth like a robot Rumpelstiltskin on ‘roids. It cannot, by itself, sustain a broad middle class. That requires a diverse economy with opportunities for normal people. You know, the ones without engineering degrees, who have never sweated a VC pitchdeck, don’t have a trust fund, and aren’t asking you to ideate over a Cornish hen.

When manufacturers, logistics companies and smaller employers decide that the California trade no longer pencils, guess which rungs on the “jobs ladder” disappear? We’ll give you one try. The consequences compound like cruel interest. As career pathways shrivel up, people bail on the project altogether, shrinking the tax base. This squeezes those who remain even harder in order to fund schools, roads, emergency services and basic government functions. At a certain point, people look up and think, “Does it have to be this way?”

At the macro level, shiny headline numbers often conceal a brittle economy perched precariously on the back of a narrow set of super-profitable industries. Don’t believe us? Find a Detroiter to talk to.

Rocketing housing costs produce their own grotesque feedback loop. Struggling workers demand higher wages to afford daily life. Employers get slammed with higher labor costs, which forces them to either raise prices or relocate. Housing prices continue their inexorable march to the sun. Inevitably, Sacramento responds with another well-intentioned intervention, frequently accompanied by fresh compliance costs.

At some point, the cure starts looking an awful lot like the disease.

The Times story recounts the experience of an Oakland child-care professional who wanted to buy a home and establish a business serving children with special needs. Unable to afford the opportunity, she left the state. “The move was incredibly bittersweet,” she said.

Yeah, for us too, just without the “sweet” part.

Think about it for a minute. California desperately needs childcare. We practically worship at the altar of small businesses. We long for more middle-income homeowners. Here, embodied in a single person, were all three. Our collective contribution was to make her ambitions financially impossible.

The final score of this zero-sum game was North Carolina one, California zero.

Most states couldn’t dream of the kind of advantages we enjoy. That's what makes our present trajectory so infuriating. The natural resources and strategic geography are still there. The talent is incontrovertible. Our higher ed system is an embarrassment of riches. We have the finest burritos on the planet. The problem is that we’ve constructed an increasingly elaborate system of obstacles between those assets and the people hoping to leverage them in order to build a better life for themselves and their families.

A $4.25 trillion economy ought to offer more than bragging rights.

It should offer a future.

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