There was a recent story about a computer chip equipment making company, Novellus, pulling up stakes and deciding to move out of California. Its CEO, Richard Hill, cited among other things the high living costs. The CEO of Novellus painted California not only as being too "pricey" (which forces it to pay its employees more in salaries) but also cited the ongoing California governent's budget crisis as making California a bad place to do business.
Businesses don't like to operate in an unstable environment.
Novellus is typical of many more companies in this regard. California is poised for not only draconian cuts in state services for its people, but it is also poised for a major exodus of its businesses. The one-two punch of out of work people no longer being able to buy anything and the instability of the business climate will ensure that the business exodus will accelerate, the longer this crisis goes on in Sacramento.
I find the Republicans' citing new taxes as the reason for their obstructionism in fixing the budget really hypocritical and ironic. They love to blame California's relatively high income tax and sales tax as the most important factor in forcing business out of California. Statistics actually show that California is nowhere near the top of the list of states with the highest aggregate tax rate (including property tax, sales tax and other types of taxes). Yet the GOP has successfully convinced the California public that its tax load is unbearable and that businesses base their decision to stay in California or leave it mainly on the amount of taxes the state collects. The other villain they love to point to are the number of social safety net users who are sucking the life, as they would have it, out of California. Never mind the billions on tax havens, write offs and subsidies that the State gives upper income people and the many deductions and tax credits even middle income people get. Entitlements for the over-privileged rich are 'good for business' but children, the elderly, the disabled and the unemployed are a class of 'greedy, selfish, fraudulent parasites' that need to have their (in the words of Governor Schwarzenegger, "cadillac entitlements' pared down. Actually, California does spend the bulk of what it spends on the social safety net on medicaid and the amount each recipient of either Welfare or Medicaid gets is smaller than many other states. California has a bigger population than most and so it spends more on its needy than most other states. But it is FAR from a 'cadillac' safety net, as anyone who has ever tried to use it can attest. It is hard to get on it and staying on it and satisfying State requirements and not being kicked off for the slightest reason they can find, is even harder.
It is ironic because Republicans they use the 'overtaxed' and 'blood sucking bums' bogeymen to sell their excuse for continuing to generate the BUDGET CRISIS. Yet they never ever will consider any other ways to raise revenue which eliminate many loopholes left in place by Proposition 13 and many more which have been written into tax law over the years by lobbyists for the large corporations and special interests.
Schwarzenegger also uses the politics of division and blame to target teachers, schools, workers' unions and any other groupt that the right wing considers "liberal enemies".
GOP obstructionism and demagoguery are a big part of companies like Novellus' decision to move. In fact, Republicans have gone a long ways toward destroying California's business environment with their causing the issuing of IOUs, layoffs, shut down state and local facilities and other collateral damage to ADD to the already severe recession driven plant closings, retail store closings and losses now occasioned by the prospect of wasting billions in higher interest rates that the state will have to pay as its credit turns to junk.
New and ongoing construction projects will stop. The state won't be able to borrow enough money to run its many operations.
Schwarzenegger gets on TV and blames poor people for the mess. But the budget crisis going on and on is HIS and his party's fault. They don't help with their stonewalling and divisive pitting of one segment of the population against another by their demagoguery. Their rejection of all new ideas that don't fit their mantra and rigid 'free market' (junk market) ideology.
So, yes, ironically the GOP is doing a LOT to generate the exodus of business from California.
Moderate California budget writers have floated or offered many options but Republicans have stubbornly held out and taken everything else OFF THE TABLE. Any budget deal continues to be elusive because the state's broken constitution allows the GOP grandstanders to hijack the whole government until their demands are met.
This is what, more than any potential increase in taxes, is running off business because what business needs is stability. And what business needs, if it doesn't find it, it will move elsewhere to find if it has to.
Who wants to stay in California with a future as apparently dismal as here? Other business surely won't relocate to a wasteland and a state that can't take care of its governing obligations in a timely and reasonable manner and which can't get its act together.
California is sinking economically like a rock because of the hard times from the downturn and the mortgage crisis, made worse by the budget crisis and 15 percent of the workforce being laid off or without work not spending money to keep existing businesses afloat. It is sinking because its dysfunctional government pays its workers, its vendors and its public obligations with IOU's but
still pays its lawmakers THEIR salaries: the very ones who have done so much to make this mess!
What business wants to operate in a house of pain with constant turmoil, an uneducated populace, a slashed infrastructure, a high crime rate, run down cities due to gutted budgets for police, a tinderbox due to lack of fire personnel, as well as shortages all the time of power and of water due to lack of planning and mismanagement? The expanding army of the unemployed who can't buy anything from businesses also can't pay any taxes because they have no jobs, and then they end up COSTING MORE in social services (what's left of them).
Who wants to stay in a state that is descending into a future of chaos with a shut down infrastructure and a skeleton crew running a state with a dilapidated school system gutted by savage budget cuts, where California's children move back home to their parents or turn to a life crime or drug abuse because there are no jobs and no schools for them to create their own future with?
Is it any wonder businesses like Novell are moving? The budget gap will grow ever worse as revenues shrink and costs of shoring things up skyrocket. The longer Californians stupidly insist on ever more tax cuts and what they will get for their shortsigntedness is a greatly expanded misery index and an ever increasing downward spiral.
Misery breeds more misery and so on. People who can't spend or work, local businesses that go under and big companies that have to move. Life in a hot box and a drought ridden state burnt up in wildfires that devastate the State's pristine wildlife areas and water shortages caused by short sighted officials who couldn't manage the states' natural resources correctly.
The whole thing snowballs. It is a classic deflationary cycle. Where does it stop? Another Great /Depression like the 1930's until people wake up and get rid of the state constitution that allows these destructive naysayers to hold the state hostage? The draconian economic destructiveness of cut-cut-cut-and-nothing-else that is the hallmark of the Republicans, is what, much more than the supposed 'tax-happiness' of the Democrats is what destroys our business environment. The GOP still hasn't learned that an economic downturn it is not the right time to make drastic cuts. It only makes the downturn worse.
This is what helped Herbert Hoover exacerbate the downturn in the late twenties and early thirties. It is a deflationary spiral. That in turn undercuts businesses' bottom lines and they end up outsourcing to stay afloat and maintain their profit bottom line. It is a lose-lose zero sum game that does nobody any good, but the Republicans continue to want to play it. How about some new thinking.
I'm not advocating tax and spend but what good is borrowing at junk bond ratings and closing all the state facilities and rationing everything from medical care to water and destroying allbusiness? What good is slashing the social safety net only to end up paying exorbitant costs to fix the ensuing damage? What good is "no new taxes' holding up a budget only to pay higher junk credit interest rates? What good is this GOP generated mess that damages California's reputation and infrastructure? What good is the long, hot budget summer that creates instability, and which, way more than taxes drives businesses out of California?
The rest of the country had better take notice. If California goes down, so will the national recovery and so will Obama's reforms. That is what the GOP wants. To ruin Obama and discredit the needed national reforms. The name of the GOP's game is stymie, blame shift and then finger point when they succeed in putting a turd in the national punch bowl and running us over the cliff when the downturn lasts for a decade or more like it did in Japan. Meanwhile, foreigners like the Chinese won't come here to loan money for our borrowing and they won't bring businesses here or want our dollar if we become like a Third World country with no ability for them to get a return on their investments.
As California goes, so goes the nation.