California: Easy to Love, Impossible to Do Business In
California is beautiful. Many parts have great weather. There are a lot of smart people there and some good schools. Both my kids live there right now, though it is really expensive given the state and local governments' propensity to take many steps to limit the supply of housing.
But it is simply impossible to do business in. Every single legislative session brings a series of new time-consuming and expensive regulatory requirements. Despite California having some of the best recreation spots in the world, we have systematically reduced our business in California by 50%, and I have a moratorium in place on accepting new business (I won't even look at RFP's and proposals to avoid being tempted.) I wrote about this process a number of times, including here.
This week, Hans Bader covers this ground and more in his article about businesses fleeing California to places like Texas.
It does not surprise me that service industries, particularly those that provide high-margin services to the wealthy, stay in California -- service businesses have to be close to their customers. But it always blows me away when I see anyone manufacturing in California. Why? Move over the border into Nevada or Arizona or Mexico and costs go down a lot without any real increase in logistics costs. California does not even want you there -- I am convinced they achieve most of their environmental goals merely by chasing folks over the border, exporting these issues rather than solving them.
:-)
"CA pays more than it receives from the Feds . . . " This is an often claimed statistic, but it is misleading. I looked at the studies that are used to support this claim. Apparently, the studies do not include social security and welfare payments. The studies that do include these transactions conclude that CA actually receives quite a bit more that it pays to the Federal government.
Another thing that is not often mentioned is the trickle down effect in reverse. When Moonbeam drives various companies out, the restaurants and other retail/service supporting businesses dry up, so in the now half-empty office parks, eventually the nearby hourly jobs that are left go down rapidly in wages, since there is an oversupply of people who need **ANY** job and will take any wage. So now those stopgap, 'stepping stone' jobs which paid $15-$19 hour 4-5 years ago pay $10-$11.
Not true
California GDP grew 3.8% in 2015. Growth continued in 2016 with the third quarter at an annual rate of 3.3%. California's GDP is about $2.28 trillion. Over the last five years, California GDP grew 17.2% Per capita GDP also outpaced the national average.