Unintended Consequences: California Style


There are some good things in California.  For example, I can think of two:

1.  California Pizza Kitchen

2.  That little corner store on Inter-State 8 East just before you hit the Arizona line.  How can’t you like the last thing in California?

But seriously, California must be a nice place to live.  It HAS to be, or so many otherwise sensible people wouldn’t live there.

But that doesn’t mean business find it a nice place to live.

California is consistently ranked last or next to last on “Economic Freedom” scales or on “Business Friendly States” reports that come out each year.  And for good reason.  The state is highly regulated and its laws impose undue penalty on business as it tries to conduct business.

Consider the story of a young entrepreneur trying to set up his business:

This year, I finally generated income from my business and decided to open a bank account in California to safeguard it.

Talk about being naive.

I registered my Delaware-headquartered business in California, which took two months. Just when I thought I was ready to open an account, I next had to apply for a California business license. The state estimated that the time to complete this process would be four months.

The Rational Republican tried to simply open a bank account in the state where he lives.  The entire process, including registering the business would take 6 months.

Do you know what happens when businesses are faced with this type of heavy handedness? via {If you don’t read Mark Perry you HAVE to start}

Today, California is experiencing the fastest rate of disinvestment events based on public domain information, closure notices to the state, and information from affected employees in the three years since a specialized tracking system was put into place.

  • From Jan. 1 of this year through this morning, June 16, we have had 129 disinvestment events occur, an average of 5.4 per week (see chart above).
  • For all of last year, we saw an average of 3.9 events per week.
  • Comparing this year thus far with 2009, when the total was 51 events, essentially averaging 1 per week, our rate today is more than 5 times what it was then.

Our losses are occurring at an accelerated rate. Also, no one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year.

2 words – Incentives matter.

And in California’s case, they really REALLY matter.  Because guess what those businesses leaving the state represent?  Jobs.  And tax revenue.  And economic activity.

Advertisements
5 comments
  1. Alan Scott said:

    It’s funny how liberals defend California and attack Texas . I watched Rachael Madow cherry pick statistics as she slammed Texas because Gov. Perry is talking as if he could enter the Presidential field . She kept dancing around the relatively low unemployment rate in Texas .

    • pino said:

      It’s funny how liberals defend California and attack Texas .

      I agree.

      Except it’s kinda not. Because by ignoring the consequences of their decisions, they feel entitled to enact them on even larger and grander scales. It’s just one boondoogle after another.

      And the hard part? It’s all done in the name of “public good”. How can you argue that a business should have to demonstrate that they are going to provide safe healthy jobs that consider the environment and the dignity of all people? It’s a hard concept to overcome. For sure.

  2. California beats Texas on two fronts that I can see: climate and recreational opportunities (no skiing/snowboarding in the Lone Star State). Other than that, the advantages are all to TX. If my DH got a job in his field in Houston, it would probably pay about half what he’s making now in S.F. but the cost of living would be about a quarter. So our family’s purchasing power would increase dramatically. It sure is tempting…too bad our house is worth less than what we paid for it so we’d lose much of our down payment if we sold.

    • pino said:

      California beats Texas on two fronts that I can see: climate and recreational opportunities (no skiing/snowboarding in the Lone Star State).

      To be sure, there is a lot to like in California. Weather certainly has to be chief among them.

      it would probably pay about half what he’s making now in S.F. but the cost of living would be about a quarter.

      Yes, I agree. The land use restrictions in California are insane. Another example demonstrating what regulation can do to harm the lives of people.

      It sure is tempting…too bad our house is worth less than what we paid for it so we’d lose much of our down payment if we sold.

      And that’s the killer. I certainly hope you are able to get some positive equity back and soon. Good luck CW.

  3. Alan Scott said:

    Crimson Wife ,

    I wish you good luck . I believe that your state will continue to sink because the public employee unions and the Democratic Party have a death grip on power . If you get any temporary up spike in property values that allows you to get out with your skin , you might be wise to run , don’t walk to flee your state . You may get that as Gov. Brown is talking like a neo Republican and as California is more reliant on taxes from the “rich” than almost any other state . In spite of Obama, the rich are doing better and California did have a higher than expected tax receipt recently .

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: