Sunday, May 13, 2012

The Great California Exodus -- Absolutely Nothing About the Bakken

North Dakota to Texas Renaissance Zone

I don't know whether it would be better to call this a "zone" or a "corridor." Or perhaps "the energy backbone of the nation." For now, I've settled on "zone."


May 15, 2012: Kansas participating in the energy renaissance

Later, 3:45 p.m.: The reader added another link; see comment noting that when California's population grew by 10 million, the number of tax filers increased by 150,000 

Original Post

I posted a stand-alone story on the huge California deficit/budget crisis earlier this weekend.

A reader sent me a link to a great WSJ article that was published back in April. Generally I would just link that article to the original post (which I did) and leave it at that.

But it is such an incredibly good article, I will post the link here, encouraging others to read it. (There's an added benefit: at the top of the page at the link, there's a story on Jamie Dimon at JP Morgan. With the recent news about JPM it's interesting to see what was written about JPB a month ago.)

Back to the linked article.

Almost every paragraph of that article could be highlighted, so I will have to pick and choose a few choice paragraphs.

"I've known Jerry for 35 years, and he's smart, but he just can't seem to be a paradigm breaker. And of course, it's because he really believes in this green stuff." [Repeat: "he really believes in this green stuff."]

In the governor's dreams, green jobs will replace all of the "tangible jobs" that the state's losing in agriculture, manufacturing, warehousing and construction. But "green energy doesn't create enough energy!" Mr. Kotkin exclaims. "And it drives up the price of energy, which then drives out other things." Notwithstanding all of the subsidies the state lavishes on renewables, green jobs only make up about 2% of California's private-sector work force—no more than they do in Texas.

Of course, there are plenty of jobs to be had in energy, just not the type the new California regime wants. An estimated 25 billion barrels of oil are sitting untapped in the vast Monterey and Bakersfield shale deposits. "You see the great tragedy of California is that we have all this oil and gas, we won't use it," Mr. Kotkin says. "We have the richest farm land in the world, and we're trying to strangle it." He's referring to how water restrictions aimed at protecting the delta smelt fish are endangering Central Valley farmers. 
According to the Tax Foundation, California has the 48th-worst business tax climate. Its income tax is steeply progressive. Millionaires pay a top rate of 10.3%, the third-highest in the country. But middle-class workers—those who earn more than $48,000—pay a top rate of 9.3%, which is higher than what millionaires pay in 47 states. [My wife keeps asking me why we don't move to California; need I say more?] [Note: income tax, property tax, and possibly the highest state sales tax in the country.]

And Democrats want to raise taxes even more. Mind you, the November ballot initiative that Mr. Brown is spearheading would primarily hit those whom Democrats call "millionaires" (i.e., people who make more than $250,000 a year). Some Republicans have warned that it will cause a millionaire march out of the state, but Mr. Kotkin says that "people who are at the very high end of the food chain, they're still going to be in Napa. They're still going to be in Silicon Valley. They're still going to be in West L.A."
On a percentage basis, the number of rich folks in Napa, Silicon Valley, and West LA, are an inconsequential minority in the big scheme of things. My hunch is there are fewer rich folks in NSVWLA than there are illegal immigrants in California.

By the way, the A-list actors in West LA no doubt claim another state as their legal residence; they have multiple houses (homes?), and it's not easy calculating number of days someone "lives" in a given state for residency purposes.

Third, and music to my ears:
Mr. Kotkin lists four "growth corridors": the Gulf Coast, the Great Plains, the Intermountain West, and the Southeast. All of these regions have lower costs of living, lower taxes, relatively relaxed regulatory environments, and critical natural resources such as oil and natural gas.

Take Salt Lake City. "Almost all of the major tech companies have moved stuff to Salt Lake City." That includes Twitter, Adobe, eBay and Oracle. [I did not know that. I'm sure naysayers will tell me they knew that, and it's no big deal.]
Music to my ears? I now refer to the Great Plains as the "North Dakota to Texas Renaissance Zone."


  1. If the truth was known you could add Minnesota.

    With North Dakota and South Dakota next door it hides many of the states economic problems. Our unemployment would be worse but for a lot of border jumping to find employment keeping Minnesota's unemployment problem not "too bad"

    1. To add a little more "color" to the California story, I should have also noted this story:

      Emphasis to paragraph 2.

      "From the mid-1980s to 2005, California's population grew by 10 million, while Medicaid recipients soared by seven million; tax filers paying income taxes rose by just 150,000; and the prison population swelled by 115,000."

    2. Those are amazing statistics. Hmmm. Wow.