The Golden State Shows Tarnish

GEORGE F. WILL

September 28, 1992|By GEORGE F. WILL

LOS ANGELES — Los Angeles. -- In June 1991, as California was in the throes of its annual budget war, a Democratic state legislator scoffed at the idea that the impending tax increase -- the largest in the history of any state -- would cause businesses to flee California. Oh sure, he said, ''They're going to take all those yachts from Newport Harbor and move them to Tonopah, Nevada.''

Try Tucson. That is where the Hughes company is taking 4,500 jobs. When considering relocation of its missile-building operation, Hughes compared Arizona and California regarding about 50 factors -- taxes, regulatory burden, utility rates, labor costs, housing, etc. -- and decided Arizona was superior in all but two categories.

Big economic battleships like Hughes (and the Southern Pacific Railroad, agribusinesses, Hollywood studios) built California. Now they are becoming as marginally important as, well, battleships. And many of them are innovative only at devising alibis for poor performance and wheedling subsidies from states.

Gov. Pete Wilson says, ''You need some 80 permits to get a business going in Los Angeles.'' That is a nuisance for a big corporation with lots of lawyers, but it is an incentive to go east -- to Tonopah or Tucson -- for the small businesses responsible for 85 percent of new jobs here.

A study by five California utilities says that in the last five years the state has lost 668 manufacturing plants or planned expansions. Governor Wilson says he has a sheaf of advertisements from states -- Utah, Oklahoma, Arizona, ''Hell, even Michigan; that's insulting'' -- attempting to lure California firms.

The fact of federalism is increasingly a force for conservatism. Competition between states to sweeten the business climate mandates government restraint and reform.

For example, Mr. Wilson has called a special session of the legislature in October to deal with the fraud-ridden workers' compensation system. Originally intended to help workers injured on the job, it now pays ''stress'' claims and makes ''stress-mill millionaires'' of many lawyers and forensic physicians. The system costs California employers $11 billion a year.

Hitherto, the system has been unreformable because of the lavish campaign contributions from those lawyers and doctors to career legislators. ''What's wrong with this state,'' says Governor Wilson, ''is addressed by term limits.'' Limits were voted for the state legislature in 1990 but will not bite until 1996.

There has been explosive growth of social spending. With 12 percent of the population, California has 26 percent of the costs of Aid to Families with Dependent Children; in 1964 one in 18 children under age 18 received AFDC payments, in 1988 one in six did. This has squeezed out infrastructure spending. Since 1970 the miles of highway lanes have increased by a paltry 15 percent. In the 1950s and 1960s 20 percent of that state budget went for infrastructure; in the 1980s, less than 5 percent. The result is millions of commuters creeping along in congestion, daydreaming about Arizona. Hence Governor Wilson's squeeze of spending on virtually all social programs.

In 16 of the 24 years from 1967 to 1990 California was governed by Ronald Reagan and his soul mate George Deukmejian. But in 1991 California got, in Wilson, a governor who would do something not done in 50 years: He made the 1992 general fund budget get smaller. A $10.7 billion budget gap was closed without new taxes.

Of course there may be ''trickle-down taxation'' as burdens are shifted from the state to cities and counties that may raise taxes. But this state, having lost 700,000 jobs since May 1990, is thinking that its taxes may build Arizona's economy.

The 1991 tax increase of $7 billion was, Mr. Wilson says emphatically, ''a mistake.'' California conservatives, already incandescent about George Bush's broken promise on taxes, pronounced Mr. Wilson politically dead. And the new budget of a thousand cuts may offend everyone else. But the field of California politics is littered with the bleached bones of those who underestimated the governor, an ex-Marine determined to govern in Sacramento the way no one will govern in Washington, where neither the Constitution nor conscience inhibits borrowing to pay bills.

In the eight years 1982 through 1990 Mr. Wilson won three thumping statewide victories -- twice for Senate seats and one for the governorship. Today his popularity is as low as you would expect it to be for the distributor of disappointments. But do not count him out of the 1994 gubernatorial race -- or the 1996 presidential contest.

The nation will get from neither of this year's presidential candidates anything like the pruning and reforming determination California is experiencing. So in 1996 America will be four years older and at least $1.2 trillion deeper in debt and may at last be in a mood for serious government.

George F. Will is a syndicated columnist.

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