California

As Judge Approves Stockton Bankruptcy, Krugman Praises California Comeback

The good times are here, y'all!

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Does the air on Planet Krugman have higher levels of nitrous oxide than Earth's? I always find myself trying to hold back giggles reading Paul Krugman's columns. When last I touched on him, Krugman was weirdly blaming Hostess' failure on the decline of union power and influence, even though union power most assuredly contributed to the company's downfall.

Now, Krugman wants to tell us what we can learn from California's comeback. Yes, he has bought into that narrative, while at the same time accusing the rest of us of buying into a narrative that the state is going to hell:

Without political opposition, California will no doubt soon be as successful as Detroit!

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.

Needless to say, the usual suspects are still predicting doom — this time from the very tax hikes that are closing the budget gap, which they say will cause millionaires and businesses to flee the state. Well, maybe — but serious studies have found very little evidence either that tax hikes cause lots of wealthy people to move or that state taxes have any significant impact on growth.

Well, I'm sure there's some other explanation for the map below, showing the extent of migration from California to other states that have lower taxes. The migration figures from the census end at 2000 (the blue arrows). The state's population was the same by the end growth was modest through 2010, though, and California failed to gain any new Congressional representation:

Red: 1955-1960. Blue: 1995-2000.
Source: U.S. Census

I'm also sure there's some logical reason why immigrants have actually begun spurning Los Angeles that reflects positively on the state, somehow, though I can't think of anything at the moment. Immigrants avoiding your biggest city is one of the top indicators of economic recovery, right? Krugman makes brief mention of California's environmental climate, but oddly, fails to make the connection between environmental regulations and lack of available growth options.

Krugman, like the New Republic, claims the destruction of the state's Republican Party as a source of obstruction is leading to this progressive moment where California will return to its shining glory:

The point, however, is that these problems bear no resemblance to the death-by-liberalism story line the California-bashers keep peddling. California isn't a state in which liberals have run wild; it's a state where a liberal majority has been effectively hamstrung by a fanatical conservative minority that, thanks to supermajority rules, has been able to block effective policy-making.

And that's where things get really interesting — because the era of hamstrung government seems to be coming to an end. Over the years, California's Republicans moved right as the state moved left, yet retained political relevance thanks to their blocking power. But at this point the state's G.O.P. has fallen below critical mass, losing even its power to obstruct — and this has left Mr. Brown free to push an agenda of tax hikes and infrastructure spending that sounds remarkably like the kind of thing California used to do before the rise of the radical right.

There are a lot of what I would call strange omissions if David Dayen hadn't made the same omissions at the New Republic.  Krugman casually dismisses conservative claims that California public employees are overpaid without providing any counter-evidence. Like Dayen, he makes absolutely no mention of the state's pension crisis, which is getting bad enough that the California Public Employee Retirement System is now willing to acknowledge its existence. Those new taxes Krugman declares will move California back in the right direction will in all likelihood end up being used to pay pensions instead. Brown's budget actually doesn't say that much about infrastructure. He's going to release a five-year plan later this year. I can only hope that Krugman isn't counting Brown's ludicrous high-speed rail project as infrastructure. And as the Reason Foundation recently noted, California is actually one of the only states whose highway infrastructure hasn't improved in the past 20 years.

California's economy has its own response to Krugman's column. Today a judge ruled the City of Stockton is eligible for bankruptcy protection.