California’s Looming Economic Crisis
Last week’s sharp decline in the stock market has many Californians worried about whether the decline is a sign of an imminent recession. Like predicting the next earthquake, we wonder, “Is this a big one?” Thankfully, markets have now recovered, but most economists still believe a recession is long overdue. If it weren’t for the massive deficit spending by the federal government, we might be in dire straits right now.
The Impact of High Living Costs
A strong push for pro-taxpayer and pro-business policies now can lessen the pain of the inevitable recession later. Unfortunately, California politicians refuse to adopt policies that would protect the state from fluctuations in the national economy. For example, California’s reputation for being expensive is more than just an opinion. This is true. California’s cost of living ranks third among all states, according to a recent Forbes report based on publicly available data.
In all of these categories, California seems to be in a league of its own. Consider energy costs. July energy price data from the California Center for Jobs and the Economy reveals California’s ridiculous energy costs: No. 1 in residential electricity prices, No. 1 in commercial electricity prices, No. 1 in gasoline costs and No. 1 in diesel costs.
The Challenge of High Energy Costs
High energy costs, high living costs, and high taxes combine to stifle economic growth. Final data for the first quarter of 2024 show that starting in 2024, California’s economy will grow at an annual rate of 1.2%, the lowest level since the fourth quarter of 2022. How do California’s most notable rivals rank? Idaho is up 5%, Nevada is up 4.4%, Texas is up 2.5%, and Florida is up 3%.
The Exodus of Taxpayers
As if the dismal GDP numbers weren’t enough, another report from the California Legislative Analyst on the outflow of immigrants provides further evidence that the state may soon be stripped of its “gold.” Just two weeks ago, the LAO reported that “the number of taxpayers moving out of California increased each year in 2020 as the pandemic began.” Recently released IRS taxpayer data for 2021 and 2022 show that this trend is continuing, with annual net migration to other states almost doubling since the outbreak began.
California’s political elite, especially Governor Gavin Newsom, believes they can continue to convince California voters that all is well. But as John Adams famously said, “Truth is a stubborn thing.” If politicians don’t face the facts now and begin to recognize that the state is on an unsustainable path, the inevitable economic downturn will force more people and businesses to leave the state.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
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