Recently, I wrote an article stating that our national political discussion has moved beyond philosophy. Many voters think that government has lost any semblance of common sense when it comes to spending. Economically, the discussion lacks common sense as well and there is no place where that is more evident than California. So much so that, in my view, the election of Jerry Brown and Barbara Boxer – along with Barack Obama – will lead to unemployment north of 16%.
Now, the prediction business is, of course, fraught with danger – but not looking ahead is a worse crime in my view. Two years ago, I said that the economy would be bad for 6 years if Obama was elected. I said that because the markets understood then and know now that a big government agenda was not the cure that was needed. They intimately understood what Ayn Rand said years ago that “the cure that is always offered . . . is more of the same poisons that caused the disasters.” Sure enough, the same poisons have been tried for the last two years and the consensus among the fair minded is that the US economy will be bad for years to come.
One overlooked reason for the national trouble ahead is what government has done to the California economy. The California economy has been crippled because its #1 industry, agriculture, has been crippled by environmental policies that have placed the fate of an imported bait fish over the needs of farmers, employees and families. By shutting off the water supply to farmers, government is strangling Central Valley farming which is why locals state that “Water = Jobs.” But the effect hardly stops there. California is over 16% of the national economy. So the real equation is “Water = Farming = Jobs = the California Economy ≈ National Economy.” Put another way, you cannot cripple the California economy and expect the National economy to recover. All combined, Jerry Brown, Barbara Boxer, the Democrat controlled Congress and Barack Obama will only makes things worse.
A re-elected Barbara Boxer will unrepentantly push for ever more environmental regulations (like Cap and Trade) with no more remorse than she is showing today for California farmers. An elected Jerry Brown will not only double down on that bet but will also sign on to tax increases in an attempt to solve the budget crisis. Combined with Obama’s coming tax hikes, Brown’s tax hikes will further starve California’s already economically famished economy because Californians are already short on cash. That will lead to even worse deficits as the California economy sinks even further. Beyond that, as I wrote not long ago, Brown will roll back the worker’s comp reforms which were key to California’s economy comeback in 2004 and 2005.
Already ranked 50th in some surveys and nearly as low in others as a place to do business, the increased taxes and regulations which the Killer B’s (Boxer, Brown & Barack) will impose on California can only hurt the prospects for employment. Keep in mind that California is Facing an “underemployment rate” somewhere around 25%. That tells you that nearly 25% of the work force either has no work or is vulnerable. The Killer B’s tax/regulatory combination, in conjunction with the national slow down ensured by the Obama tax increase, could easily push California’s unemployment rate to 16% or more, i.e. move 3 1/2% more people from underemployed to unemployed.
Of course, it does not have to be so. We could elect people who will try the exact opposite policies, i.e. people that understand that the key to recovering jobs is the same key to achieving economic recovery: lowering the costs to doing business in California. The Killer’s B’s will never understand that. The only question is whether California voters will.