Thursday, October 13, 2011

Milken Institute Cheers California's Lousy Economy

Yesterday, we wrote about the refusal of California's political and media classes to face up to the depths of the Golden State's troubles these days. Yet, as Steven Greenhut reminds us over at Cal Watchdog, it's easy to overlook the contribution that policy think tanks in the state make in reinforcing this denial. We've taken our hacks at the Public Policy Institute of California before, but it bears pointing out that the PPIC has done a great deal to softpedal the state's grim economy. Contrary to what these folks might have you believe, just because firms aren't moving their headquarters doesn't mean they're creating jobs here. Irvine's Joseph Vranich, who helps California firms expand and relocate elsewhere, can tell you that his business is booming. Now, Santa Monica's Milken Institute is getting in on the act, with a new study claiming that California is among the best in the nation at retaining highly skilled workers.

The release of the study coincides with an Institute-sponsored "State of the State" conference in Los Angeles today. This conference included appearances by the usual political hacks and crony capitalists (or, in the case of Gavin Newsom, both), as well as a one-on-one session featuring Jerry Brown and Michael Milken himself. (Brown apparently said that he wouldn't take a pension until he'd passed pension reform, then later admitted he was joking.) For us, the timing couldn't be worse, as the last thing the attendees need to be told about the economy is what they want to hear. The study argues that California remains an excellent place for highly skilled technology workers, and its conclusions call for increased public education spending. Yet most everyone who actually lives and works here could tell you that the real story is a lot more complicated than that.

Back in July, we (and Palo Alto economist Steve Levy) noted that California's economy was taking on a schizophrenic character: while some sectors, notably the tech firms of San Francisco and Silicon Valley, are showing robust growth, the recovery isn't pulling many other sectors along. Insofar as the Valley is looking for people with very specific sorts of skills, this explains why the good times there haven't translated into any sort of broader recovery in the state. Unemployment and poverty in California are as grim and as persistent as ever, and Sacramento remains determined to wage war on the private economy here. You can even argue (as we have) that the growth in the tech sector is largely a factor of Ben Bernanke's quantitative easing; the VCs on Sand Hill Road, after all, are usually near the front of the line any time the Fed decides to print a few hundred billion dollars into existence. We would also point out that high technology may face new hurdles once AB 32 goes into effect; it'll be much harder to operate things like server farms when the cost of power skyrockets. The point being that California's hostility to industry is not without consequences, and more are likely on the way.


  1. The ultimate irony is that California liberals who profess their compassion for the working class and minorities in reality support policies that are especially damaging to these two groups. I've actually drawn this out in speaking engagements to trendy environmentalists, causing no small discomfort in the room.