It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.
Charles Dickens, A Tale of Two Cities
Dueling opinion writers have taken to the pages of their respective journals to debate what’s happening in the Golden State. For Paul Krugman a California renaissance is on the horizon:
When the national housing bubble burst, California was hit especially hard, and the combined effects of the plunge in home prices and the economic downturn led to sharply reduced revenue. Once more there were gleeful pronouncements of imminent doom: California, declared one pundit after another, is America’s Greece.
Again, however, reports of the state’s demise proved premature. Unemployment in California remains high, but it’s coming down — and there’s a projected budget surplus, in part because the implosion of the state’s Republican Party finally gave Democrats a big enough political advantage to push through some desperately needed tax increases. Far from presiding over a Greek-style crisis, Gov. Jerry Brown is proclaiming a comeback.
while things don’t look nearly as rosy to California native Victor Davis Hanson:
We don’t know the full effects of the latest hikes in income, sales, and gasoline taxes, or the longer-term aftershocks from such a poorly schooled younger generation, or the ripples from looming bankruptcies among our cities, or the full costs of bailing out pension funds, or whether the fiscal assumptions of the budget really will result in a balance.
Millions of us will stay, but thousands of Californians who have enriched the state may not. Sadly, the California legislature operates on the principle that the climate, hip culture, and beautiful panoramas of California will always keep enough high-earners from leaving, and that Napa Valley, Silicon Valley, Central Valley agriculture, the gas-and-oil industry, our great research universities, and Hollywood will continue to thrive, even with the high taxes, ever more regulations, the failed public-school system, soaring outlays in social services, and problems from years of massive illegal immigration. It is as if the current generation of politicians can extract a premium for something that they did not create, but have done their best to destroy.
I think that RealClearPolitics’s Steve Malanga may have it right. There is more than one California economy and they are heading in different directions. After noting the city of Stockton’s municipal bankruptcy and Jerry Brown’s optimistic proclamation, mentioned in both of the posts above, he remarks:
The woes of California’s Central Valley, or its Inland Empire, where unemployment is about 12 percent, are similarly often obscured by the hotter, more appealing economies of places like Silicon Valley. It’s not surprising that the state’s two big municipal bankruptcies right now, in Stockton and San Bernardino, are located in the valley and the empire.
It’s clear where the policy initiatives come from in both states. Though California and New York have ample energy resources buried beneath the surface, each state has declined to pursue them, in the process missing out on the energy-led revival in blue-collar jobs we have seen in places like Texas, North Dakota, West Virginia and Pennsylvania. One recent study by the University of Southern California schools of engineering and public policy estimated that tapping California’s Monterey Shale, which stretches from Modesto in the north to south of Los Angeles, could generate more than 2 million jobs in California. Much of untapped potential is in places being left behind by the budding California recovery, like Stanislaus and Merced counties.
California is big enough and geographically diverse enough to generate a revival that still leaves behind whole swathes of the state. The state may already be there.
Is that what’s happening in California? Two distinct economies and populations that rarely see each other? Is that’s what’s happening in the United States more generally?
The fact that supports that view is the very large number of individuals who remain unemployed, underemployed, or who are so discouraged about their prospects that they’ve stopped looking. Their numbers run into the tens of millions. Contrast them with those in the financial sector and public employees, both of which groups are getting raises. Wall Street bonuses are higher than they were a decade ago, far outstripping Wall Street performance. Here in Chicago the CPS teachers were just awarded a raise substantially in excess of inflation and beyond anything that the performance of the Chicago Public Schools could possibly warrant. Divergence, indeed.