Watkins: California’s budget surplus thanks to stock market, not Brown
California is adding jobs faster than the national average, and the state has a budget surplus for the first time since the dot-com bubble burst in 2000. That’s led to some glowing national press for Gov. Jerry Brown, including a Rolling Stone article that called his budget turnaround a “miracle.”
Bill Watkins, director of the Center for Economic Research & Forecasting at California Lutheran University, is not as impressed.
“The reason the budget is balanced is that the S&P went up almost 30 percent last year. California’s tax system is so reliant on wealthy people that if they do well, the state does well. … So far, what Brown’s done really well is constrain everyone who wants to give [the surplus] away, but the fact is, it’s the stock market that’s doing it,” Watkins said Thursday, during a discussion of the economy hosted by Pacific Western Bank at Spanish Hills Country Club in Camarillo.
Earlier in the day, CERF released its quarterly economic forecast for the state and the nation. Watkins and his team predict slow growth in both jobs and economic output. In California, they project gross domestic product to grow at annualized rates of between 2.7 percent and 2.9 percent in 2014, and just above 3 percent in 2015. Job growth in the state should be a little under 2 percent over the next two years.
“Job growth is good, but it’s not what we should be doing,” Watkins said during Tuesday evening’s discussion. “It’s a very low rate. … We should compare ourselves to our potential, and that should be over 3 percent job growth.”
In an interview after the event, Watkins said the outlook for most of the tri-county region is similar: a persistently slow recovery. It’s possible, he said, that Ventura County has reached “peak jobs” and will never recover to pre-recession totals.
“We’re changing. It’s becoming more and more like Santa Barbara every year,” he said, referring to Ventura County’s aging population, slow-growth politics and economic inequality.
East Ventura County
East Ventura County is a different story. The Conejo Valley has weathered the recession particularly well, with unemployment far lower than the surrounding region and local governments that never suffered any budget crises.
In a word, Watkins said, Thousand Oaks and Westlake Village are “fine.”
Watkins’ interlocutor and interrogator at Spanish Hills was Tim Gallagher, president of the public relations firm The 20/20 Network and a former editor and publisher of the Ventura County Star. Gallagher asked Watkins 20 questions about the economy and what Watkins would do to fix it.
Watkins’ prescriptions included more immigration and less regulations, themes he has emphasized in his research and commentary for years.
“I wouldn’t worry about taxes, though they are very high, if we get the regulatory requirements right,” he said. “California is a wonderful place. People would rather live here than, say, Amarillo.”
One of California’s most harmful regulations, he said, is Assembly Bill 32, the state law targeting carbon emissions.
“California is an incredibly efficient economy already in terms of carbon,” Watkins said. “Reducing an extra ton of carbon in California is very expensive. Reducing a ton of carbon in China is very cheap and easy. Carbon is international, so we’d be far better off to tax ourselves half the cost of AB32 and use it to send California companies to China to clean up their power plants.”
Watkins said he’d also like to see major revisions to the California Environmental Quality Act, the law that requires in-depth study of the environmental impacts of almost any significant development project.
Gallagher joked that Watkins’ opinions on regulation and the environment would anger the MSNBC viewers in the audience, and his pro-immigration views would rile up the Fox News crowd.
“Immigrants are a big contribution to America,” Watkins said. “An immigrant is not a random draw from the donating population. The people who migrate are the people who are willing to take changes, leave their family and their homeland. They take risks, and they start businesses at an amazing rate.”
