The Decline of California

A blog about business and economics.
May 14 2012 10:22 AM

The Decline of California

1337005331526

Duncan Black writes that California succeeded as a high-tax, high-service state but is going to fail as austerity transforms it into a high-tax low-service state.

I think this gets the relationship between population growth and service mix wrong. When I look at California's historical population growth trajectory and current real estate dynamics, what I see is a state that managed to provide a high level of public services on a relatively modest tax burden thanks to a rapidly growing population. That works through several mechanisms. One is that if you have a large number of people who move to your state as adults after having gone to school elsewhere, you can maintain a high ratio of currently working taxpayers to kids enrolled in school. Another is that if you have a rapidly growing population, then you have a high ratio of currently working taxpayers to retired public sector workers drawing pensions. Once population growth slows, a much higher share of your public employee compensation is going to retirees who aren't actually providing any services. Last, a growing population supports a lot of new infrastructure building. Texas, which is the new California in terms of population growth, has excellent roads with low taxes by continually adding to its stock of taxpayers.

Advertisement

I'm reasonably certain that California's deteriorating public services aren't really driving the declining population growth. That's because if you look at someplace in California where it would be nice to live—Santa Monica, say, or Palo Alto—it turns out to be incredibly expensive. All the best land is occupied and the people in those communities don't want it to get filled up with more density and California's environmental legislation gives them powerful tools with which to block new residents.

Part of the price the state needs to pay for this induced slowdown in population growth is a downshift to a much less desirable tax/service tradeoff. But it would certainly be possible to open the floodgates to construction in Silicon Valley and all along the coast, which would bring in a huge flood of new tax revenue and create the possibility of lower tax rates and return to more generous levels of public expenditure.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

History

Slate Plus Early Read: The Self-Made Man

The story of America’s most pliable, pernicious, irrepressible myth.

Rehtaeh Parsons Was the Most Famous Victim in Canada. Now, Journalists Can’t Even Say Her Name.

Mitt Romney May Be Weighing a 2016 Run. That Would Be a Big Mistake.

Amazing Photos From Hong Kong’s Umbrella Revolution

Transparent Is the Fall’s Only Great New Show

The XX Factor

Rehtaeh Parsons Was the Most Famous Victim in Canada

Now, journalists can't even say her name.

Doublex

Lena Dunham, the Book

More shtick than honesty in Not That Kind of Girl.

What a Juicy New Book About Diane Sawyer and Katie Couric Fails to Tell Us About the TV News Business

Does Your Child Have Sluggish Cognitive Tempo? Or Is That Just a Disorder Made Up to Scare You?

  News & Politics
History
Sept. 29 2014 11:45 PM The Self-Made Man The story of America’s most pliable, pernicious, irrepressible myth.
  Business
Moneybox
Sept. 29 2014 7:01 PM We May Never Know If Larry Ellison Flew a Fighter Jet Under the Golden Gate Bridge
  Life
Dear Prudence
Sept. 30 2014 6:00 AM Drive-By Bounty Prudie advises a woman whose boyfriend demands she flash truckers on the highway.
  Double X
Doublex
Sept. 29 2014 11:43 PM Lena Dunham, the Book More shtick than honesty in Not That Kind of Girl.
  Slate Plus
Slate Fare
Sept. 29 2014 8:45 AM Slate Isn’t Too Liberal, but … What readers said about the magazine’s bias and balance.
  Arts
Brow Beat
Sept. 29 2014 9:06 PM Paul Thomas Anderson’s Inherent Vice Looks Like a Comic Masterpiece
  Technology
Future Tense
Sept. 30 2014 7:36 AM Almost Humane What sci-fi can teach us about our treatment of prisoners of war.
  Health & Science
Bad Astronomy
Sept. 30 2014 7:30 AM What Lurks Beneath The Methane Lakes of Titan?
  Sports
Sports Nut
Sept. 28 2014 8:30 PM NFL Players Die Young. Or Maybe They Live Long Lives. Why it’s so hard to pin down the effects of football on players’ lives.