Economy of California – Half Empty or Half Full?

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Nov. 7, 2003 Share this on FacebookTweet thisEmail this to a friend

The Milken Institute held its annual State of the State conference in Los Angeles last week. In panels on California's business climate, the crisis in healthcare, Asian trade and electricity policies, noted economists, state officials and business representatives discussed and often disagreed on how to characterize California's current economic circumstances.

Are we a power-house economic engine with a great future? Are we in serious decline with a government so dysfunctional we won't recover short of a revolution? Are we perfectly positioned to participate in the explosion of economic growth on the Pacific Rim? Are we having the same problems as other states or are California's problems fundamentally different and worse?

The same data was cited to support opposing views. For example, the massive influx of new immigrants expected in the next 20 years was characterized by some as a positive trend, supplying the human capital to fuel economic expansion. Others suggested it was a challenge…how will we build the infrastructure and afford the government services for under-skilled immigrants and what jobs will be here for them? Even the high cost of doing business was described as simply the flip side of the state's good quality of life – since many highly educated and qualified people are attracted to California, housing prices are therefore very high, requiring that high wages be paid.

Throughout the conflicting assessments, a common theme underscored all presentations – California's government has not been serving the state well. Partisan gridlock, the power of special interest groups, uncompetitive legislative seats and term limits were cited as reasons for our dysfunction. But beyond that, comments from speakers reflected wide disagreement about whether state policies matter much compared to the force of underlying economic business cycles. Some believe that California has such favorable attributes that it is well-positioned to come back from the recession and flourish. Another view is that California will struggle while other states boom unless politicians take proactive steps to address business climate issues such as workers' compensation, energy and excessive regulatory burdens.

In Sacramento, talk will soon turn to action as Schwarzenegger takes office and starts pushing his agenda for economic recovery. Legislators will either push back or respond to the “wake up” call of his successful recall campaign. Despite our differing viewpoints, everyone agrees the next months will be fascinating to watch and could define California's economy for years to come.
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