Critics of a free market economy are also critics of individual responsibility. Because they believe in higher taxes, centralized control, and absolute intolerance to other viewpoints, they find themselves reducing free market ideas to that of human flatulence.
At least the current governor of California--Jerry Brown--did this week.
The seventy-four year old was quite taken aback. He was asked by California media this week if Texas Governor Rick Perry's recent poaching expedition would matter much to the state's future. His reply was direct.
"It's not a serious story, guys. It's not a burp. It's barely a fart," replied Brown.
Maybe Governor Brown is just in just denial but Governor Perry's three fold plan appears to be working like a charm.
In the initial stage the Texas Governor voiced a personal public service announcement to the CEOs and gatekeepers in California's business leadership communities. He placed moderate advertising buys in San Francisco, Los Angeles, San Diego, and other specialty areas. The commercial created a firestorm of attention in the state and gained Perry additional earned media coverage.
He followed that up with a fact-finding mission and personal meetings with some of California's largest corporations. It should also be noted that he was invited to do so by some of California's elected leaders in Sacramento. It was this in-person visit that seemed to rile the California Governor's feathers the worst.
Lastly comes the elbow grease and follow-up with companies that had additional questions, and this appears to be where the real story lies.
Since governor Perry's return home--only days ago--the Greater Austin (Texas) Chamber of Commerce reports a definitive spike by inbound inquiries by California companies. And since the November elections--when California saw state tax increases passed (not even including looming federal tax and Obamacare increases)--businesses in the Golden State are investigating a move to a state that offers much lower regulatory hurdles and ZERO state income tax.
“We have had a spike of double or triple the amount of normal (business relocation) activity since the November election in California,” said Dave Porter, senior vice president at the Greater Austin Chamber.
Critics of Governor Perry's attempts to boost inbound business growth in his state dismiss the efforts out of hand.
Greg LeRoy, long time progressive, and now head of the liberal activist (and heavily pro-union and pro-green) "Good Jobs First" stated, "Interstate job piracy is not a fruitful strategy for economic growth." He argued that "poaching... amounts to a geographic reshuffling of existing jobs." (As opposed to new business activity.)
Recently numbers of governors are joining the open-poaching policy with fervor in a dispute that is raging first philosophically, but secondarily, economically.
Why else is it that states with the strongest economies are poaching from the states in deepest economic trouble?
Governor Walker of Wisconsin, Governor Scott of Florida, Governor Chris Cristie of New Jersey, Governor Daugaard of South Carolina, and Governor McDonnell of Virginia have all made direct plays for companies in California, New York, Illinois, Maryland, and Minnesota to relocate.
So while Governor Brown would like to dismiss the effort, and while leftist progressive think tanks inside the beltway claim a zero sum economic advantage, why would I still argue that poaching is good for the nation?
Significant reason number one: greater, more wide-spread fiscal accountability!
The idea of risk and competition scares progressives because there is no guarantee of "equal outcomes" (which are never actually equal, they only pretend to be.)
Governor Brown--in an already economically near-bankrupt state--could stand to lose massive tax generation from the mere number of employees that one to ten major corporations take out of state (not to even mention the corporate taxes involved.) This reality further hits the pocketbooks of the tax-payers he has promised to solve the economic woes of. If those companies leave he must find alternative solutions for balancing the cost of the state to do business which could mean: spending cuts.
The same for Maryland, Illinois, New York etc.
Significant reason number two: continued job development.
When a company saves money on regulatory costs and on taxes (which serve as a pure burden on the cost that is passed on to tax-payers--remember companies never pay taxes--their customers always do) they can create more jobs in the new location than they previously had in the higher regulatory and taxed region.
Poaching has multiple benefits most immediately for the states that are engaging in it, and long term for the states that are forced to admit that other states are beating them in the contest of ideas, revenues, economies, and contentment.
Governor Perry is right to not only brag about his state's economic growth, but he has a moral obligation to do all he can to expand it.
And while it may give Governor Brown a bit of gas, ultimately he will be forced to accommodate, innovate, or step aside.
It was one giant step for a man, and one giant leap toward fiscal sanity.
But the failed labor union recall of Wisconsin Governor Scott Walker was only a beginning. America needs a bunch more Scott Walkers, a whole lot more thoughtful, discerning voters – and we need California voters, in particular, to wake-up.
So California, meet Wisconsin. It’s the state where voters chose a Governor who, despite claims to the contrary, is neither “destroying workers’ rights” nor “killing democracy.” Governor Walker has brought government labor costs in-line with private sector labor costs, and in so doing is saving the state from fiscal collapse. Wisconsin chose wisely – and California, so can you.
I’m emphasizing “the voters” here because statesmen and women don’t operate in a vacuum. We, the people can affirm and encourage elected leaders to do the right thing, or we can encourage our leaders to be reckless and self-serving. In November of 2010 Californians rejected a candidate for Governor who pledged to do much of what Scott Walker has done, and instead elected a Governor who is bought and paid for by labor unions.
The fact that California Governor Jerry Brown has recently succumbed to telling the media “no, we’re not like Greece” should be a serious warning sign. Yet California’s plight could likely be different, had voters there been more like voters in Wisconsin.
It was the fall of 2010, and Democrat Jerry Brown was running against Meg Whitman, a mega-successful business executive and Republican gubernatorial nominee. Whitman had correctly and honestly identified a main source of California’s revenue hemorrhage – the ever-expanding benefits and retirement pensions of government employees – and had campaigned on a promise to “reign-in” such spending.
Brown, on the other hand, pledged to “get honest” with Californians about the state budget fiasco, but also to support “working Californians” (which is code talk for “unionized government workers”), and largely dodged the issue that Ms. Whitman had courageously raised. As Meg’s message began to get traction, the government employee’s unions offered-up all the more cash to Brown’s campaign - and Brown gladly accepted.
By the time the first gubernatorial debate was completed, media attention was mostly focused on aesthetics rather than substantive policy ideas. Jerry was “charming” and “warm” in the debate, and “really connected” with the audience; Meg was “cold” and “distant.” Shortly thereafter, the National Organization of Women endorsed the 72-year old white, male (and perennial government employee) Jerry Brown, over the 53-year old female, accomplished business executive and would-be governor Whitman. On Election Day Brown ended up winning by a 13% margin.
Later in November after the election, several members of the California legislature – a combination of both Republicans and Democrats – enjoyed an all-expenses-paid trip to Hawaii, funded with “donations” from a variety of public utility companies, and the California prison guards’ union. Not surprisingly, one of the first “accomplishments” of Governor Brown after he took office in 2011 was to negotiate and sign a new prison guard’s union contract which now allows guards to cash in un-used vacation and sick time at their highest rate of pay when they retire.
Governor Brown’s maneuver provided a nice payback to a government employees’ union that had “invested” over $2 million in his campaign. But what is mutually gratifying for Governor Brown and the prison guard’s union is not good for the rest of California- the new union contract added a minimum of an additional $600 million in un-funded liabilities, to a state that at the time was already sinking in nearly $10 billion of government debt.
And there’s more. Despite the state’s debts, and despite class cutbacks and continuous tuition increases at California’s two publicly-funded university systems, the University of California’s “Board of Regents” nonetheless voted $140 million in faculty salary increases. In the California State University system (the “U.C.” and the “CSU” systems operate separately), university presidents recently voted themselves pay raises. And despite his year-and-a-half of warnings about a lack of funding for K-12 education (most of which is unionized in California), Governor Brown’s latest budget nonetheless adds an additional 13% to K-12 expenditures.
Whether it’s spending increases on college faculty, unionized law enforcement officers, road crew workers or public school teachers, Governor Brown’s fiscal priorities all point to the same objective: providing salary and benefits increases to government employees who mostly vote with his Democrat party.
Brown’s proposed means of paying for the increased government spending is much the same as President Obama’s – raise taxes on “rich people.” California has the worst government bond rating in the nation (the S&P is threatening another downgrade), and for the 7th year in a row the Golden State was recently voted by America’s CEO’s to be the most “un-friendly” state for business in the nation. Yet Governor Brown and his party remain undeterred. ?
After years of this same kind of self-serving, vote-purchasing public policy, Wisconsin chose a different course in 2010 and re-affirmed that direction last week. California, you can chose differently, too – but are you awake? And do you care?
Either that, or teachers and cops will be laid-off, and the people of California will suffer.
So says Governor Jerry Brown, as he seeks to convince Californians that they should vote themselves higher taxes. The Golden State’s circumstances are dire, yet Jerry Brown is facing the crisis with an approach that’s nearly forty years old. He was saying this same thing – leveling these same threats - back in 1978.
We’ll go back to the 70’s in a moment, but first let’s put California in its current context. Despite how anybody feels about our 31st state, California should be regarded as an economic epicenter and a spectacular place in the world. It is, after all, home to the highest mountain in the contiguous forty-eight states (Mount Whitney), the lowest valley (Death Valley), “Surf City, U.S.A.”(Huntington Beach), Apple Computers, Mattel Toys, The World Champion San Francisco Giants, eBay, Legoland, Cisco Systems, the most fertile farmland in the world (the San Joaquin Valley), Twitter, Hollywood, three U.S. Presidents (Richard Nixon by birth, and Herbert Hoover and Ronald Reagan by “adoption”), Mitsubishi Motors of North America, and – for better or worse – Facebook.
This is to say that California can be and should be a place of robust economic opportunity across multiple sectors. Yet tax-and-spend-and-regulate politicians like Brown have had a stranglehold on the state for the past twenty years or so. And while capital has been leaving, productivity has been slumping, and tax revenues have been declining, Governor Brown and company have continued their same failed policies.
Brown was sworn in to his third term as Governor in January of 2011. At his first State of the State address, he announced that his plan to solve California’s dreadful fiscal problems would involve both cuts in government spending, and – if California voters approved – tax increases.
This seemed very reasonable. Very practical. Very “bi-partisan,” if you will. And indeed Governor Brown brought about some modest cuts in government spending: he eliminated taxpayer funded mobile telephones and vehicles for some government workers (most of us in the private sector don’t get “free” mobile telephones and cars from our employer anyway, but this had apparently become standard operating procedure for privileged government employees in California).
But Brown then went about spending millions of more non-existent tax dollars on certain unionized government employees. For example, in April of 2011, knowing very well that California’s budget deficit was headed upwards of $15 billion or more, Brown nonetheless approved a new contract for the California Prison Guard’s union, which now allows guards to accrue unlimited numbers of un-used paid vacation days each year, and then cash-in the un-used vacation time when they retire.
So why placate the prison guard’s union at a cost of an additional several hundred million dollars, even as the private sector is shrinking? Because Jerry Brown owed them big time – the prison guard’s union, alone, had contributed over $2 million to his 2010 campaign coffers.
As for the California legislators, they’ve spent the past four years ignoring the national recession, as well as their own state fiscal crisis. Instead, they’ve been focusing on such high-minded things as banning the sale of caffeinated beer; raising taxes on “sugary soda drinks (too bad if you’re a beverage vendor);” requiring all public school children to be taught “Gay History,” regulating the density of kid’s baseball bats; requiring that all underage minors wear a helmet while skiing; banning the sale of shark fins (these are an Asian delicacy, but to heck with the restaurant owners – the sharks are endangered); establishing an official California “Parks Make Life Better” month; banning the sale and distribution of plastic grocery bags; requiring the use of a fitted sheet, instead of a flat sheet, on hotel beds; and implementing a statewide sales tax on internet-based commerce.
Governor Brown and his California Democrat party have behaved as though the private sector economy will always produce, no matter how law makers abuse businesses and taxpayers. If the government runs out of money, then threaten to fire teachers and cops – that always puts voters in the mood to authorize even higher taxes. Governor Brown is playing this game now, just as he did nearly forty years ago.
The year was 1978. In the midst of the Carter-era stagflation, and after years of tax increases, Californians were about to pass a statewide ballot initiative known as “Proposition 13,” which sought to freeze local property tax rates. A young, forty-year-old Jerry Brown traveled the entire state (at taxpayer expense, of course) warning that if property taxes were not permitted to rise on a regular basis, teachers would be fired, schools would close, and police and fire services would dwindle.
Brown was in his first term as Governor, and I was in the eighth grade. I remember very well the scare tactics in my public school, and Brown’s fear and loathing on the nightly tv news. Yet Californians were un-daunted by his threats - with a record-high 70% of the electorate voting, Proposition 13 won in a landslide in June of that year.
Will Brown’s ’78-styled fear campaign work in November? It may very well, but it won’t fix the problem. Higher taxes or not, California’s government must abandon the tax-and-spend-and-regulate cadence – before the party’s over.
