California made major news this month, reclaiming a valuable economic marker and surpassing Britain as the fifth largest economy in the world. Its growth after the recession has accelerated under President Trump and even turned a modest surplus. However, the Golden State remains one of the most unequal in the nation. It has both billions of dollars in Silicon Valley and rampant homelessness. Its efforts to eliminate poverty instead accentuates it, and its tax system inadvertently aids those who are already wealthy. With the middle class leaving in droves, California society represents a modern feudal system of robber barons and the poor.
{mosads}Gross domestic product in California is now above $2.7 trillion, which represents just under 14 percent of the entire United States economy. The topline numbers are a bit misleading, as the state represents a similar 12 percent of the national population. California had the fifth largest economy in the world before the recession, falling seven spots by 2012, while growing at an anemic 0.1 percent. The state has long been fortunate to be the center of the booming technology sector. Part of the growth was due to a rapidly expanding real estate sector, which heavily assists wealthy residents. With the mega rich and upper class driving its economy, California leaves the rest of its population behind.
After factoring for costs of living, California is the poorest state in the union. An average of 14 percent of Americans live below the poverty line by census measures. Compare that with the 19 percent of Californians who live below the poverty line and the situation is clear. The census measures factor in housing costs and wellbeing with programs like food stamps and housing assistance. Altogether, the state government has made life for poor and middle class Californians nearly unbearable.
How? California renters pay an average of $1,440 per month, much higher than the national average of $1,010 per month. In 2015, more than 40 percent of Californians spent over 30 percent of their income on housing. Today, 29 percent of them spend over half their earnings on housing. Median home values, at $529,000, are more than double the national median of $239,800. Residents who can afford rent or a mortgage are on the hook for electricity rates burdened by green initiatives and regulation that grew 500 percent faster than the national average from 2011 to 2017.
“Not In My Backyard” development and construction restrictions mean that California cities are much more expensive for the poor, with Los Angeles having the highest proportion of income going towards rent in the nation. The state and its cities use environmental and zoning laws to restrict housing, which often disallows large scale development of apartments. The result? Less access for middle class residents.
From 2011 to 2016, California increased spending on administration at more than double that of teacher pay. Its public employee system disincentivizes government thrift and saddles taxpayers with debt that outstrips the national average. A private sector employee would have to save $2.6 million to receive the same retirement as a California Highway Patrol officer. On top of a burdensome state income tax, California has the highest sales tax in the country along with property tax rates that disproportionately punish the poor and lead to housing problems.
Traditional left wing prescriptions simply have not worked in the state, which an opinion column in the Los Angeles Times dubbed the “poverty capital” of the United States. Housing vouchers increase the cost of living. The number of those with no health insurance in California fell by more than half after the state expanded Medicaid, yet poverty remains near historic highs. California spends the third most per capita on welfare programs, yet its economy continues to fail the poor and middle class.
Despite having just 12 percent of the national population, California represents nearly a third of all Americans on welfare. Federal taxpayers shell out more than half of the $6.7 billion in the California Work Opportunities and Responsibility to Kids program. In Texas, 6 percent of families in poverty receive welfare. In California, the figure is 66 percent. Can you guess where the poverty rate is lower? Not California.
The combination of government overreach and ineffective programs creates a brutal dichotomy of very rich and very poor. California is the fourth most unequal state in the union with so many homeless who face diseases like typhus and hepatitis. The number of people living on the streets in California increased by nearly 14 percent to more than 130,000 in 2017. Mark Zuckerberg is worth $70 billion, while San Franciscans have an app that helps them track human feces on the sidewalk.
In many ways, California has long been an example for the rest of the nation. But the middle class conservatism that propelled national figures like Richard Nixon and Ronald Reagan is gone. It has been replaced with virtue signaling and policies by the wealthy that hurt struggling families. Both sides of the coin, from technology executives to families unable to pay rent, vote for Democrats that only make the problem worse.
The robber barons and artificially high real estate values in California brought its economy back to the fifth largest in the world. However, for the average person, Sacramento represents systemic political failure.
Kristin Tate is a libertarian writer and author of “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.