California Economic Summit Misses the Mark (Widely)

On Thursday and Friday the California Economic Summit was attended by 400 people, including many elected officials.  The discussions centered on three goals:

• One million acre feet of water supply each year
• One million more homes
• One million more skilled workers

According to the conference materials, “today’s complex challenges require integrated solutions – with multiple agencies tapping multiple funding sources to do together what they cannot do alone.”  One of those efforts is to create new finance districts to fund those “integrated” approaches.

Whenever people discuss new “finance districts,” you can be certain that what they are really talking about is new, creative ways to increase taxes on Californian’s to pay for bureaucratically heavy new programs that are designed to “fix” our problems.

The concept of creating service districts to provide general services such as infrastructure are of course important aspects of self-government.  They have been around for a very long time.  We used to call them “cities”, those agencies that used to build streets, provide water, protect citizens and other mundane, but necessary things.  Where did they all go?

Of course, city governments continue to provide those services.  (Back 100 years ago they even ran the school systems.)

In fact, each of the three goals mentioned above are already covered by one or more public agencies already.  But we digress.

The fact that this “economic” summit never dealt with underlying economic factors, but instead upon new government approaches, is a clear example of why these problems haven’t been addressed.  Government is incapable of solving most of them or just flat out refuses to solve them.

California hasn’t built any real water infrastructure since the 1960’s, even with numerous water bonds passed over the last few decades.  Local water agencies have successfully built new facilities, but they have become harder to permit and are usually met with significant opposition from environmental organizations.  Some of these environmental organizations have even attempted to remove existing storage infrastructure such as Hetch Hetchy Dam.

Housing prices continue to increase beyond nearly half of all Californian’s abilities to afford them.  This is driven by two factors, a lack of housing construction and falling incomes for working Californians caused by the change from higher paying production jobs in manufacturing to lower paying and lower skilled jobs in the growing services economy.

The goals of the California Economic Summit relate to these issues, unfortunately they really do not address them.

As a clear example, acquiring one million acre feet of new water supplies every year is completely unrelated to developing new regional approaches with new finance mechanisms to fund them.  The State of California already has the ability to bond for these projects.  Local governments such as water agencies also have funding mechanisms already in place for infrastructure.  They are not built simply because the State of California chooses not to build them, and local agencies have their hands tied by environmental regulations and litigation allowed under state laws.

California’s housing situation exists because building houses in California is made overly expensive by the same environmental laws that burden water projects, as well as over-regulation and over-taxation at both the state, regional, and local level.  Government programs, such as the now dissolved Redevelopment Agencies and their requirement that 20 percent of redevelopment funds build low-income housing failed to perform because cities truly didn’t want more low income housing.

California’s growing income inequality between rich and poor, and its disappearing middle class doesn’t exist because of a lack of skilled workers.  We can import as many H1B workers as we need, which is what Southern California Edison and Disney just did when they replaced higher paid Americans with lower paid H1B Visa holders that they imported from overseas.

Manufacturing and other higher skilled jobs have left California as a result of California’s high tax rates, regulatory burdens, and higher costs.  We can train a million workers, which we already do by the way in our overly expensive university systems (which is another story altogether) and it won’t cause one business to open here.  Businesses can just as easily attract our trained and educated people and import them to other states where they can pay them less and those employees can afford a higher standard of living.

So while all the discussion of better cooperation, integrated approaches, and other bureaucratic-speak is nice, it will do little to change the underlying economic barriers that the State of California and her leaders choose to ignore.