In the one and only gubernatorial debate, Gov. Jerry Brown once again insisted that California has made a comeback – although he shied away from using the word. Has California really made an economic comeback? If so, who should get the credit – government or the people who did the work?
Politicians often take the credit for good news and don’t accept the blame for bad news. When it comes to economics, they claim they “created” jobs. When things are going poorly, they point at forces beyond their control.
In truth, politicians from neither party create private-sector jobs. They can put in place policies that foster job growth or hurt job growth. For instance, Republican President Dwight Eisenhower kept the top tax rates above 90 percent and endured three recessions. That was bad. President John Kennedy, a Democrat, advocated tax cuts, which produced record economic growth when they were enacted after his death. That was good.
The bad policies after 1967 of Democrat Lyndon Johnson, Republicans Richard Nixon and Gerald Ford and then Democrat Jimmy Carter hurt the economy. Ronald Reagan’s policies boosted the economy, increased labor force participation and lowered unemployment. George H.W. Bush policies hurt the economy and the Bill Clinton tax increase eventually led to the highest tax burden in our history and a recession his last year in office.
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George W. Bush cut tax rates and the economy recovered from the recession and 9/11. Forty years of growing regulations matched with Obamacare and other bad policies have led to a recent weak recovery and a weak economy under President Barack Obama.
In short, it isn’t the party that fosters economic growth – it is the policies.
Brown wants credit for an economic comeback. But have his policies really helped?
First, notwithstanding writer Bruce Maiman’s attempt in The Sacramento Bee to critique my comments about Brown’s policies, California hasn’t made the comeback Brown touts. The most accurate study, which takes into account cost of living, states that California is No. 1 in the country in poverty. Californians know that a dollar doesn’t go as far here as it does in most other states. Taking cost of living into account means taking reality into account – and by that measure, as Neel Kashkari points out, far too many Californians are suffering, and that is unacceptable.
California is No. 1 in poverty because so many are out of work or working part time. California continues to grow in population, but the job market is not keeping pace. While by the most narrow of definitions unemployment might be lower, every serious person understands that this is largely a result of the worst labor force participation rate since the Carter administration. Not every state is doing poorly. North Dakota has a labor shortage because of its policies.
To be sure, there are parts of the economy, such as the tech sector, that are doing quite well. Have Brown’s policies caused that, or did private initiative build it? The answer is the latter – and in many cases they succeeded in spite of Brown’s policies.
In the last four years, the cost of doing business in California has risen substantially – unless you received a special tax break from Brown. Tax rates, workers’ compensation costs and the costs of regulations have risen. Some of that is the fault of Gov. Arnold Schwarzenegger, but Brown has only made them worse.
Raising the cost of doing business can never lead to business comebacks, just as taking money from someone cannot make them richer. When government increases the price of doing business, that hurts business – it does not help business.
In short, Brown’s policies have helped business no more than George H.W. Bush’s tax increases or Eisenhower’s policies. Worse yet, by emphasizing the costly high-speed rail instead of water storage – by a factor of 27 to 1 – Brown is setting California up for future water shortages – and less water means fewer jobs.
As a Republican, I am pleased when people succeed. This Republican is not afraid to say when Republican policies have failed. I am also not afraid to say Jerry Brown should not get the credit for other people’s work, especially when his policies are hurting the comeback – not helping it. As Neel Kashkari said in the debate, the time for incrementalism is over. It is time for bold reform to put more Californians back to work.