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March 11, 2010

How the Campuses Helped Ruin California's Economy

By John Ellis

4409800624_179a583cf6.jpgAll across the country there were demonstrations on March 4 by students (and some faculty) against cuts in higher education funding, but inevitably attention focused on California, where the modern genre originated in 1964. I joined the University of California faculty in 1966 and so have watched a good many of them, but have never seen one less impressive that this year's. In 1964 there was focus and clarity. This one was brain-dead. The former idealism and sense of purpose had degenerated into a self-serving demand for more money at a time when both state and university are broke, and one in eight California workers is unemployed. The elite intellectuals of the university community might have been expected to offer us insight into how this problem arose, and realistic measures for dealing with it. But all that was on offer was this: get more money and give it to us. Californians witnessing this must have wondered whether the money they were already providing was well spent where there was so little evidence of productive thought.

The content vacuum with filled with the standby language of past demonstrations, and so there was much talk of "the struggle," and of "oppression," and---of course---of racism. "We are all students of color now" said Berkeley's Professor Ananya Roy, and a student proclaimed that this crisis represented "structural racism." (Why not global warming too?) Berkeley's Chancellor Birgeneau called the demonstrations "the best of our tradition of effective civil action." Neither Chancellors nor demonstrations are what they used to be. The nostalgia for the good old days surfaced again in efforts to shut the campus down by blocking the entrance of UC Berkeley and UC Santa Cruz. It didn't seem to occur to anyone that the old "shut it down" cry was somewhat misplaced when keeping it fully open was what the present demonstration was about, but then this was not an occasion when anyone seemed to have any idea of what they were trying to achieve.

One group at UCLA stumbled into the truth, though it was a truth they did not understand. At Bruin Plaza a crowd chanted "Who's got the power? We've got the power." In its context this was just another slogan of a mindless day, but the reality is that those people do indeed have the power, and routinely use it in a way that makes them the author of their own troubles. Let me explain.

Unemployment in California is still rising. It just went up from 12.3 to 12.5%, nearly three points above an already bad national average. This horrendous figure is the source of California's budget problem. The huge loss of tax revenue is compounded by greatly increased unemployment outlays. If we look at the few other states that have unemployment figures well above the national average, there are obvious explanations. Michigan is at 14.6 because employment in its major industry (automobiles) has collapsed. Nevada, at 13.0, is dependent on discretionary cash at a time when there isn't any. But California is too big to be dominated by one industry, and its plight can only be explained by the state's having grossly mismanaged its affairs.

In 2007 Raymond Keating formulated a Small Business Survival Index, which is a composite of various aspects of the climate for business in a particular state: business and personal taxes, regulations, mandates, and so on. In that index California ranked 49 among the 50 states. Rhode Island ranked just above California, and its unemployment rate is 12.7. At the bottom of the Index is D.C., and its unemployment rate is 12.1.

In the component parts of the SBSI index, California ranks worst of 51 (including D.C.) on top personal tax rates, worst on top capital gains tax rates, 42 on corporate taxes, 43 on health insurance mandates, 46 on electric utility costs, 47 on workman's compensation costs, rock bottom again on state gas taxes, 45 on state and local government five year spending trends, and 47 on state and local per capita government spending. It also ranks 49 among the states on the US Economic freedom index, and it has the highest state sales tax rate too: where some states have an income tax but no sales tax, and others have a sales tax but no income tax, California has both, AND it has the highest rates in both.

In short, California is a disaster for business. The state has piled up so many taxes, regulations and mandates that businesses are leaving the state. Just this week I learned that a spare part order for my Lennox fireplace is delayed because Lennox is moving this division of its business to Tennessee. Wealthy individuals are also fleeing the state to avoid the country's highest tax bracket. When both wealth and wealth creation leave the state, tax revenues leave with them.

How has this happened? As everyone knows by now, California has a dysfunctional legislature. Already in 2003---well before the current national crisis, and when the national unemployment rate was only 5.9%---California was bankrupt, and spending was so out of control that a Governor was recalled. The legislature enacts every politically correct whim that comes into its head, loading on one mandate and regulation after another. Cap and Trade could not pass nationally, but the California legislature proudly passed its job-killing global warming bill.

That is why the state now has a budget crisis of staggering proportions, and why university students are seeing those large fee hikes. But why is the California legislature so irresponsible, not to say goofy? Well, California is extremely rich in state university campuses: the UC and CSUC systems alone amount to 33 campuses, about a third of them mega-campuses of 30-35 thousand students, with another 10 around 20,000. The mega-campuses completely dominate the Assembly districts they are in, and their large concentrations of students and faculty skew the district electorate not just to the left, but to the devoutly politically correct but hopelessly unrealistic left. Virtually all of them routinely send Democrats to Sacramento. College towns with more modest sized campuses play their part too, but mega-campuses make their districts so one-sided that in the last election UC Berkeley's Assembly seat had no election even though it was vacant: the Democratic nominee still ran unopposed. Where there is real competition between the parties the two sides keep each other honest and realistic, but when Assembly seats are so inevitably left that there is no contest, there is nothing to stop the side that has automatic electability from sliding into fantasy. Those districts provide the margin that allows an immature leftism that has lost contact with reality to control the state legislature and ruin the business climate of the state.

The irony here really cries out for attention: a large state university system needs a free market economy that hums along in top gear so that the revenue needed to support it can be generated. But California's two unusually well developed state university systems provide enormous local voting power in many Assembly districts for a bitterly anti-capitalist ideology that sabotages the California economy. The campuses are shooting themselves in the foot. The power that those students and faculty chanted about is indeed theirs, and if they used it to elect sensible assemblymen and state senators their problems would be solved by the healthy business climate that would result. The votes that they actually cast are the source of their troubles.

Only one idea for solving the funding crisis was floated on March 4. It was to repeal the state's requirement that taxes can only be raised by a two thirds vote, so that taxes can be raised yet again and more money made available to the campuses. In other words, let's make the funding crisis even worse, by driving out of California even more wealth and wealth creating capacity, and raising the unemployment level even more. "California is not a tax-heavy state," said Assemblyman Joe Coto, whose office is right next door to San Jose State University, which enrolls 31,000 students. And that raises the question: how much longer will the California citizenry want to support a system of higher education that keeps its legislature stuck on stupid? It's not a question for this state alone.

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John Ellis is President of the California Association of Scholars, and a Professor Emeritus at the University of California, Santa Cruz




Comments (25)

Anonymous:

If the UCs and CSUs were, in some way, controlling the state legislature, you would really think that they would be pulling ahead of other portions of state government in funding, but this not the case.

Richard Aubrey:

In the Sixties, I knew Linda Evans--not the Hollywood Linda Evans. I knew the Weather Underground Linda Evans and some of her friends.
What impressed me was the complete lack of knowledge of and interest in how the world actually works.
They were in a stage of arrested development.
As far as I could tell, they were stuck in that stage of childhood where they had only to throw a tantrum and all was made right.
If they didn't like something, it was cosmically, universally, irremediably, inexcusably wrong.
Tantrums were called for.
Since the adults had the power to fix anything, the adults' failure to fix what The Kids didn't like had to mean the adults liked it that way; cosmically, universally, irremediably, inexcusably wrong. That meant the adults were equally evil and nothing was off the table dealing with such evil.
Nice to know some things haven't changed.
As one observer noted of a demo, one person speaking was a fifth-year women's studies major and another was a twenty-nine year old grad student. Both are categories our society desperately needs--they think.

jeanneb:

Count me among the FORMER California businesses. Santa Barbara was so wonderful, but I couldn't survive in the business climate.

My business involved a spray paint booth. When burdensome new regulations went into effect, I prepared procedures to implement them. It filled 3 5-inch binders. I called the state inspector and asked him to review them. He did. He even signed his authorization that we were in compliance.

The very next week a different inspector determine one of our spray nozzles didn't comply. Despite the pre-approval, we were given no chance to correct the problem. The state fined us $10,000 and filed felony charges against us. We met with the agency, including the director. We even met with the governor. They all told us the same thing:

When the law was written, the legislature failed to include any prodedure for removing charges. Once charged = guilty.

That was the straw for me. No one can survive in such an anti-business environment. So I moved to the Gulf Coast. California lost 11 good-paying jobs. And down here, I get the same job done with 9 people. (And they all speak English!).

Bob Loblaw:

The students and administrators may feel like they "have the power" and that they should be a spending priority but to be blunt - if you want more of my money then I want a say in how it is spent. First - more instruction oriented and less administrative spending. Second - I only want my money to go to specific programs - maths and sciences, health care, education, engineering, computer/technology. No more for history majors, womens' studies majors (or for that matter most of the "studies" programs). If you want to study Keats and Byron - great - but find someone else to pay for it. My guess is that the protesters largely come from the latter population.

Adam Sullivan:

John -

As painful as your criticisms may strike many, you are only scratching the surface:

+ Aren't we in an information age? California should be leading the way in mass education delivered via an electronic infrastructure. Post graduate and continuing education should be cheap and broadly available. All the parts are there.

+ These mega campuses have unjustifiably large carbon footprints and will foster carbon burning regardless of what happens on campus due to commuting by students and faculty. Again, our first class electronic infrastructure could be better leveraged here as well - why do we have textbooks? Why so many parking lots? Why so many buildings that have to be lit, heated and cooled?

tehmachine:

The saying "Ignorance is curable, stupid is forever", seemingly does not apply in Calif..When the solution to the States' financial woe is "More of the same failing policies"; there's something amiss with the educational system. How else to explain the mindset of application of extreme liberal policy with the expectation that things will be different this time. The mindset of "then a miracle occurs" (as in the producers won't leave for a better financial enviroment) is delusional at best. The states' response to finding itself in a financial hole seems to be "Dig deeper, faster"

Tom Holsinger:

I disagree with Professor Ellis. IMO our legislature reflects the opinions of a majority of California voters, and the voters have not been hurt badly enough, yet, to admit that they are the problem.

Note also that the UC/CSU budgets (especially UC's) have become targets for raids by the legislature. It does appear that UC is being de facto privatized. This is not a bad thing for Republican legislators. Due to the overwhelming partisan bias of those employed by UC/CSU, reductions in the funding of UC/CSU can only benefit the Republican party.

At the same time reductions in state funding of UC/CSU allows Democratic legislators to divert that funding to other special interests. I.e., UC/CSU are so one-sided in supporting the Democrats that they can be safely taken for granted, and their funding diverted to other interests whose loyalty, and willingness to share with deserving Democratic legislators, is more dependent on current receipt of public funds.

Bob, English majors no longer study Keats and Byron. They study whiteness and discrimination against people of color. Who cares about those dead white men ?

RKV:

"California is not a tax-heavy state." We're number 9 of 50, and 17% above the national average. So the Assemblyman's statement is patently untrue, and as noted above the regulatory state adds additional burdens on top of taxes, which are not included in the data below. http://www.statemaster.com/graph/eco_tot_tax_bur-total-tax-burden-per-capita

Banjo:

You didn't mention the 3,500 people a week who are voting with their feet. Many of them are retired government workers unwilling to have their fat pension checks subjected to onerous California taxes.

Thomass:

An opinion columnist (Barone or Will) quipped the campus situation was similar to the Johnny Got His Gun anti war movie. California (including these campuses) Got its Liberalism. Then proceeded to shoot itself in the foot with it....

Yes, by harming the economy with their ideology they are making their own favorite programs impossible to fund

Boyd:

In this - http://pajamasmedia.com/richardfernandez/2009/11/01/bows-and-flows/#more-6569 - post the blogger Richard Fernandez makes the case that, "In recent years management literature has talked extensively about the �servitization of the products� The modern economy no longer produces �things�. It produces intangibles called services. Insurance, banking, government, tourism, retail,... and, I would add, " fifth-year women's studies majors". He asks the rhetorical questions, "Why have we become so indifferent to counterfeits? So willing to accept the clever facsimile for the ostensibly real?", and answers, "In part because perceptions are now such a big part of the economy that for so long as perceptions appear to be OK, then the economy must be �OK�."

My answer to this is played out in these demonstrators - people so consumed with perception over substance that those who produce an actual thing are now considered expendable. It is the perception that the people who make possible the University system have wealth that somehow exists outside the reality of a pampered educated class. A welth that needs no attention. A wealth that can be simply confiscated. A wealth that doesn't really come from any actions that are vital to the publics existence thus making it acceptable for us not privileged enough to be part of this University elite to be slowly but surely enslaved to the power of a State run amuck. The economy is not OK and all the preening phony �60�s nostalgia isn�t going to make it so.

As Fernandez point out these folks must, "Stay away from the truth unless you absolutely positively have to". The truth is that the things they need to operate (money) has run out. Put more simply, you want me to support your fantasy life-style? No, I won't do that and you can't make me. You want class warfare? Bring it on. Reality will always eventually trump perception.

Tim Starr:

I was going to say that Leftism is nothing more than a cargo-cult, but then I realized that at least cargo cults didn't sabotage the industrial societies that made the cargo in the first place.

Stevio:

Nice to see there are still SOME people at UC Santa Cruz capable of thinking straight. I graduated from Santa Cruz with a degree in Economics in the 1980's -- my recollection was that it felt like we (Econ students) were the only rational people on campus.

Of course as a professor Emeritus the professor is free to say what he wants - he'll be shunned at faculty wine tastings and generally be treated like your crazy old uncle - but there will be no threat to his position. He will just be increasingly "marginalized" (to use a term so popular with the "social justice" crowd).

Too bad none of the rank and file professors have the huevos to step up and say something.

Public Sector Union:

We will drink the life's blood of a state for as long as it can afford us. Once it decides it can no longer support us in the style to which we are accustomed, we move on to another.

California has been very, very good to us. So far. The golden state is getting a bit anemic lately, so give it another 5 or 10 years. It's not our fault. A girl's gotta live.

Toads:

California's economy has to converge with that of Mexico, in terms of prosperity.

That outcome is unavoidable.

Toads:

California would be even worse off if not for the large, successful, and taxpaying Asian community.

But guess what? They are leaving too. And taking Silicon Valley with them.

Marty Murphy, Brooklyn, NY:

Mike K. better read the small print on the bottom of his referenced chart: "Per capita tax burden in US dollars, does NOT include LOCAL and FEDERAL tax (my caps)."

This represents a very important omission and a threat to the validity of his argument. When I figure my total household tax burden, I include Federal, State, City, FICA, Medicare, and property taxes.

I have not completed my taxes for 2009, but my total HH tax burden for 2008 was 28.8%. I do not include sales taxes and public fees that are really taxes, because I don't track them. But they are probably enough to bring my total HH tax burden over 30%.

Burberry, a relatively young brand in the field of fashion, never short of innovation and novelty. It is well known for his iconic Burberry check scheme, which is manifested in almost all areas of fashion. However, this skin and small chain Designer Replicas Handbagscompletely different style of their agreement.

Bizarre... I just came across your site by looking for 'financial spreadbetting' on Bing. But I can't see any articles on that topic on here?

StaticKlingon:

Raise the voting age to 30. People don't mature properly in our current society.

“Never waste a minute of your precious life by squandering it thinking about people you don’t like”

It's incredible how varied a range of views one finds on the Internet. I may not agree with everything you say, but it does compel you to maybe settle back and re-think your own bias and habits. So thank you for that.

I could go after viewpoints I disagree with, however I do not search the absence of the criticism of these with whom I dont agree.

Wow! Thank you! I always wanted to write on my blog something like that. Can I include a fragment of your post to my site?

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