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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ...  (More)

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California is Now the 5th Largest World Economy in Terms of GDP

Uploaded: May 8, 2018
By itself passing Great Britain is no big deal--we could as easily be 1% larger or smaller and in any event India will eventually rise to number 5.

Nor as we all know, the economic growth in California has brought housing and traffic challenges and has not benefited everyone equally.

web link

But there are some important takeaways.

One is that California's economic growth is no longer primarily tech and the Bay Area though they remain important. Recently Southern California and the Sacramento region have seen strong job growth.

Port, airport and tourism activity are posting record levels. The entertainment industry is strong. Tech is expanding in Southern California and San Diego, Warehousing jobs are surging, many in lower income areas.

Two is that the state's economic growth has occurred after high bracket income taxes were increased and permit caps and fees were instituted to reduce green house gas emissions and, at the same time, housing costs surged. The implication is that despite these actions firms and individuals continue to find California attractive as a place ti live, work and innovate,

None of this minimizes the challenges, they will catch up with us if not addressed soon, And that includes the fact that the boom has created special challenges for low and middle income families.

The third implication is that the state faces a new and unnecessary economic threat--that of trade disruptions and resulting higher prices and restrictions on immigration.

I continue to think that one of our most attractive competitive attributes is a generally welcoming attitude--to people from all over and of varied religious and sexual preferences. It is one of the things i like most about being a Califorian.
Community.
What is it worth to you?

Comments

Posted by Sanctimonious City, a resident of Barron Park,
on May 9, 2018 at 10:39 am
Sanctimonious City is a registered user.

Congratulations!

A few other nice rankings for the readers. California is also is the following:

Top 5 highest in taxes
Top 5 highest percentage of population on government subsidies
Top 5 in prison spending
Bottom 5 housing affordability
Bottom 10 in education
Bottom 10 in fiscal stability
Bottom 5 in urban air quality
Bottom 5 in utility costs
Bottom 5 in road quality

Hard to put lipstick on this oinker. Liberal progressive policies over the last 30 years have increased inequality, decreased quality of life and put California on an accelerated path going from first to worst across a wide spectrum of measures.


Posted by Historian, a resident of The Greenhouse,
on May 10, 2018 at 11:38 am

All the problems listed above (bad roads, underfunded schools, fiscal stability) are all the results of Prop 13 from 1978.

Web Link

Voters in 1978 wanted stuff but didn't want to pay for it - and left us with the dumpster fire that we have today.


Posted by @Sanctimonious Poster, a resident of Another Mountain View Neighborhood,
on May 10, 2018 at 10:33 pm

If you hate California as much as it seems from your post -- WHY haven't you moved? After all, there must be a place where you would be happier -- Hayden Lake, Idaho, to give but one example...


Posted by Resident, a resident of Midtown,
on May 11, 2018 at 5:13 am

I don't really understand the point of this article. Sounds like another thinly veiled anti-Trump attack. Especially the line: "the state faces a new and unnecessary economic threat--that of trade disruptions and resulting higher prices and restrictions on immigration"

In my view, and it has nothing to do with racism, we have companies like Google and Facebook inviting people from all over the globe and concentrate in one place that doesn't have the roads/housing/space to accommodate them.
Cyberspace and profitability is valued over living space and quality of life. There is an imbalance between cyberspace and living space. Small apartments and extreme density is their proposed solution. This is the essence of globalism.

Our liberal politicians are so worried about "racism" whereas in this day and age, we barely have a racist crisis as much as we have an income inequality crisis esp. in California so at least we can agree on that..


Posted by Ademir Martins, a resident of another community,
on May 11, 2018 at 10:46 am
Ademir Martins is a registered user.

A couple of friends were in California a few days ago and brought good news. I'm thinking of living in Los Angeles, but for now it's just plans.


Posted by stephen levy, a resident of University South,
on May 11, 2018 at 11:20 am
stephen levy is a registered user.

It is not anti-Trump to disagree with his policies. That is his distorted view.
Yesterday Phil Gramm wrote in the WSJ about how bad the Trump trade policies are.

And today Senator Tommey wrote the same in a WSJ op ed.

Many Republicans as well as others think his trade and immigration policies are harmful.

and it is certainly especially true for California whatever your politics as we have many jobs related to trade and distribution of traded goods in Southern California and around the state.

One point of the data and statements from economists is that the recent gains are widespread in terms of state geography with Southern California and Sacramento now slightly outpacing the Bay Area in job growth though that is a recent development.

So our strong economic gains in recent years are far more than Facebook and Google and the tech economy.

Yes there is a downside to the growth until our housing and transportation improvements catch up as they are beginning to do.

But the burden on lower income families is about housing costs as state and local wages at the low end are higher than elsewhere and growing faster than middle and high wage jobs though that too is a recent trend as a result of minimum wage increases and a tight labor market.

Finally for every company that adds jobs there are workers who take those jobs and "vote with their feet" to work and live in California.

I am interested as one poster suggested to hear why all the complainers still live here.

And today with the revised budget we are talking about how to allocate the added revenues between helping homeless residents, rebuilding the safety net, helping higher education and maintaining adequate reserves.

We do need to address public employee retirement benefits and make Medical not just widely available but a more efficient system.

Still a budget surplus and renewed credit rating are good news, not bad.


Posted by stephen levy, a resident of University South,
on May 11, 2018 at 1:00 pm
stephen levy is a registered user.

I have now had several objections to the posts by sanctimonious city and resident. While I think they are both off base and have portions that are wrong and off topic, they do not rise to the level of deletion.


Posted by Curmudgeon, a resident of Downtown North,
on May 14, 2018 at 12:55 pm

"While I think they are both off base and have portions that are wrong and off topic, they do not rise to the level of deletion."

RISE to the level of deletion, or SINK to same? That is the question.

Be that as it may, since they went through all that trouble to sully themselves in public, you made a good call.

But watch that anti-Trump thing. In many countries, like North Korea, appearing anti- [fill in appropriate superlative here] Leader gets one in serious trouble. There are many in the Republican Base who want the same here.


"By itself passing Great Britain is no big deal..."

Wow. It's now no big deal to pass what had been the most famous and haughtiest biggie of them all in its day. There's a lesson for contemporary California crowers there.


Posted by Warehouse Willy, a resident of Another Palo Alto neighborhood,
on May 14, 2018 at 1:13 pm

Agree with Historian - so many of the complaints about issues that accompany the thriving CA economy could have been addressed already were it not for the corporate/commercial giveaways embedded in Prop 13.

One small 'nit': where and why were the "Warehousing jobs" comment from? Not the linked NYT article that I saw. Also: while most jobs are obviously a positive, am just curious why these were highlighted.

And: Apple's $229 billion in revenue was five times as much as Wyoming (!).

Yeah, being in CA sure sucks.

;)



Posted by stephen levy, a resident of University South,
on May 14, 2018 at 1:20 pm
stephen levy is a registered user.

The warehousing comment was to reflect that all the gains were not in the Bay Area or tech related.

Some of these jobs are Amazon distribution centers and some are related to distributing imports that come through LA area ports.


Posted by Annette, a resident of College Terrace,
on May 14, 2018 at 1:33 pm
Annette is a registered user.

Stepeh Levy wrote:

"None of this minimizes the challenges, they will catch up with us if not addressed soon . . . "

"Yes there is a downside to the growth until our housing and transportation improvements catch up as they are beginning to do."

I am delighted to read your acknowledgement that the challenges will catch up with us, but I think we have been caught. Driven anywhere lately? Or had anyone at PAF comment on the scarcity of housing?

As for housing and transportation improvements "catching up as they are beginning to do", where is the evidence of that? I am aware of some new laws and some plans that might take us in that direction, but your comments suggest that some real progress has been made. Can you provide specifics? Nothing I hear from PAF, BARF, certain PA Council Members, and Senator Weiner suggests that we have started to catch up. To hear them tell the story, our only option is to build more and densify despite the obvious stress on required infrastructure. If we are in fact catching up, maybe we can back off on some of the densification-oriented plans and instead make some progress on sorely needed infrastructure improvements. We should get around to that at some point, don't you think?


Posted by Annette, a resident of College Terrace,
on May 14, 2018 at 1:34 pm
Annette is a registered user.

Make that Stephen Levy wrote . . . sorry for the typo.


Posted by Train Fan, a resident of Hillview Middle School,
on May 14, 2018 at 4:36 pm

Historian wrote:
"All the problems listed above (bad roads, underfunded schools, fiscal stability) are all the results of Prop 13 from 1978."


This is not even remotely true. Observe...

'"Personal income in California â€" an approximate measure of the size of the state's economy â€" has grown at an average annual rate of 6.3 percent since 1979," Taylor's 2012 report says. “Over the same period, revenue from the 1 percent property tax rate has grown at an average annual rate of 7.3 percent."'

(source: Web Link )

And that's just since 2012; it may be higher than 7.3% as a byproduct of the increase in property values over the past 5+ years.

Property tax revenue in California has outpaced personal income AND inflation. California government agencies are not underfunded with property taxes due to prop 13...AT ALL.



In particular, I'm calling out the claim Prop 13 affects "fiscal stability" as particularly egregiously false. On the contrary, property tax revenue is the most reliable source of tax revenue for government agencies in California.

Observe, from the California Legislative Analyst's Office (LAO), a nonpartisan fiscal and policy advisor: (see section "Revenue Stability": Web Link )


It is a MYTH that prop 13 reduces property tax revenues for California agencies.


Posted by resident, a resident of Adobe-Meadow,
on May 15, 2018 at 9:59 am

I don't get the reference to Phil Gramm of the WSJ. Philip Graham, married to Katherine Graham was the publisher of the WHS and committed suicide ages ago. He was manic- depressive but medicine did not catch up back in the day. He was a great fan of Eisenhower. He talked Kennedy into having LBJ as the VP. As to the current reference to our GDP the FANG companies are putting their cash offshore. The only qualifier being used is their stock market value. And their use of H-1B visas is to a subcontractor who farms the people out. If they are not an actual employee of the company with a SSN then they are not contributing to Social Security / FICA and the company matching amount. They are screwing the state and the government.


Posted by stephen levy, a resident of University South,
on May 15, 2018 at 10:08 am
stephen levy is a registered user.

Phil Gramm in the WSJ article is the former Republican Senator from Texas


Posted by resident, a resident of Adobe-Meadow,
on May 15, 2018 at 11:32 am

Thank you - I am reading Katherine Graham's Personal History which is relative to the Washington Post. And the newspaper business is hot and heavy with intrigue and political ambitions. Make no mistake about that. And she was writing at a time of JFK, MLK, Bobby, Vietnam. LBJ loved her and Phil until Vietnam when the paper started to challenge the rationale for being there. That put a skid on the personal relationships and political support. Moving forward Willie Brown in his article in the SFC Sunday said that the D party needs to stop with the anti-T rhetoric because people are not interested in "Anti-Trump" as a political positon. People want real answers to what we are doing and what is being proposed. And T's ratings are going up because we are harnessing the national economy. As to the entertainment industry watch the credits at the end of a movie -you will see the Georgia Peach - aka Atlanta is the place movies are being shot. CA has priced itself out of the market. Our goal now is to restore CA to a time of "Normal" when Tom Bradley was the Mayor of LA. Willie Brown was the Speaker of the Assembly then mayor of SF. Both gentlemen born in Texas then on to CA and college / law school. Everyone had a job because we had military bases and manufacturing. Take those away and you now have a truncated economy - maybe using a stock market quote but not jobs in the CA. Try to shore up Mr. Brown's image but we are in trouble.


Posted by Anon, a resident of Another Palo Alto neighborhood,
on May 15, 2018 at 12:14 pm

The size of the California economy is interesting regarding the importance of our collective voice. But, "growth" for its own sake often means growing inequality. The people at the top of the economic pyramid benefit, but, the well-being of the people at the bottom is too often ignored.


Posted by Warehouse Willy, a resident of Another Palo Alto neighborhood,
on May 15, 2018 at 1:19 pm

Mr Levy just informed @resident that she/he was referencing the wrong Mr Graham, in fact he was revering to the Gramm of Gramm Leach Bliley fame. She must be very impressed with the book. Try the recent movie about her for entertainment.

The concern trolling for "the D party" is always amusing - please continue. And with the framing about the sudden meteoric rise of the economy (no such thing, compare any 15+ year chart,) and Trump's sudden amazing popularity (again - not; one of the most unpopular presidents in history.)

Always good to get a koolaid sample from the far side - thanks again!

From Gallup: (forgive the formatting)
Donald Trump's Presidential Job Approval Ratings - 43-52, net -9 disapproval
Approval rating Dates
Most recent weekly average 43 May 7-13, 2018
Term average to date 39 Jan 20, 2017-present
High point, weekly average 45 Jan 20-29, 2017
Low point, weekly average 35 four times, last on Dec 11-17, 2017

GALLUP
Donald Trump's Presidential Job Approval Ratings -- Historical Comparisons
Average for U.S. presidents 53 1938-2018
Average for elected presidents' 6th quarter 57 various

-----

Mr Levy: thanks for the warehousing response. One would assume warehousing would always be strong in CA due to the numerous ports of entry and manufactureing. Nice to hear it's rising as well. Higher imports these days?




Posted by Curmudgeon, a resident of Downtown North,
on May 18, 2018 at 12:48 pm

"Personal income in California an approximate measure of the size of the state's economy has grown at an average annual rate of 6.3 percent since 1979," Taylor's 2012 report says. “Over the same period, revenue from the 1 percent property tax rate has grown at an average annual rate of 7.3 percent."

What's the big mystique about decimal places in percentages? I see them everywhere. Does a dot-number buy erudition, or are uninformed authors stroking their egos, or do they think their readers are impressionable simpletons, or is it some combination of the above?


Posted by Train Fan, a resident of Hillview Middle School,
on May 19, 2018 at 11:42 am

Curmudgeon wrote:
"What's the big mystique about decimal places in percentages?"

OK..."mystique" is an unusual choice of wording, but I'll tackle this.

Let me introduce you to a word: "compounding". Compounding even small differences (like...say...one half of one percent), makes a huge difference over long timeframes: like the ~40 years since Prop 13 passed.


Let's do some math to illustrate the impact of even a 0.5% increase in tax revenue:

Current annual property taxes on a median-valued home in CA: $3,237 (source: Web Link )

* What would that look like if $3,237 increased @6.5%/yr over 40 years?:

6.5% increase on an initial 3237 over 40 years = $40,190.83

* What would that look like if $3,237 increased @7%/yr over 40 years?

7% increase on an initial 3237 over 40 years = $48,472.32


By the 40th year, the revenue is $8281/year higher...due only to a 0.5% increase in revenue.

Compound that ~$8300/year over the property taxes for all of California and...yea...a 0.5% difference with compounding turns into a significant amount of additional revenue.


Government agencies in the State of California have no excuses for any alleged tax revenue constraints. Collectively, these agencies get a tremendous amount of tax revenue. Attempts by pro-tax activists to argue otherwise don't jive with basic math.


Posted by P, a resident of Adobe-Meadow,
on May 20, 2018 at 3:21 pm

Fix the commercial loophole in Prop 13.


Posted by resident, a resident of Adobe-Meadow,
on May 25, 2018 at 10:53 am

So every one is an expert with an agenda. Now we have an individual who wants to split the one state into three states. Everyone is trying to figure out how to add jobs which report to a government agency to boost their retirement funds. And they will say anything and do anything to ensure their job and retirement fund. That is where our state is now. And the numbers on the retirement fund for the government are always caged in murky outcomes. We are at a main transition period in which a large number of workers are retiring and the next batch of workers are moving up to assume those jobs. No wonder we have disgruntled people - what ever their personal plans were may be in danger. Trying to harness the government is like herding cats - no desire if personal profit is at stake. CA appears to have a higher number of people in that category which is dragging the government down. And of course their only approach is to tax anything more - people, property, and business to support personal ambition. It is like sticky notes on their foreheads.


Posted by Artistic Fantasies, a resident of Downtown North,
on May 25, 2018 at 1:36 pm

Quite the rant. Hope it felt good. But once you started out with the 3 state fantasy, it safely framed the rest of the message for the rest of us.

Once again, folk moan and groan about the great state of CA (sometimes with facts, frequently not) and it all comes down to this: if you want a 'low' government state (with newly minted massive state budget deficits!) move to Kansas.

Whoops! The largest employer in Kansas City? The Feds.


Posted by resident, a resident of Adobe-Meadow,
on May 26, 2018 at 10:36 am

Graduation time - college grads across the country are now trying to emerge into the labor market. This generation of students has been on their computers since running around in diapers. And many now have student loans they have to repay. Parents have invested in their college educations and are happy that the students made it through. Now they have to find jobs which are commensurate with their majors in college.
Meanwhile our local tech companies are bemoaning that they need to import H1B people due to the "lack of trained individuals". So get to the real problem here -the cost of doing business in the state and US. If any company hires a US citizen they are responsible for having a competent HR and Accounting Department that is subject to state and federal audit for compliance on deductions for FICA and SDI and matching funds. And if they are competing for a federal contract they will be audited on that set of requirements. They can make that choice or subcontract to a vendor who consolidates H1B people and takes care of that - no requirement for the tax issues since they are typically foreign companies (Ex: TATA). At some point here the public needs to realize that our students are on the losing end of this situation. And the press has signed on to the narrative concerning this issue. Compounding this is the UCSF system which just layed off their IT people and outsourced their jobs to a foreign company. Lots of outcry on that topic. So the trade-offs are your children who you have put through college and adult workers in the IT business vs the outsourcing of labor both within the US and foreign to US. Tesla is starting to run into a giant mess on that topic due to lack of equivalencies of worker benefits - another penny in the pocket of the US companies.


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