California Draggin’: Golden State’s Economy Hurts America
"As California goes, so goes the nation." Sadly, the aphorism is holding true as the Golden State's unemployment rate and bloated welfare rolls help slow the U.S. economy.
There is talk that John McCain actually has a chance to take California in November’s presidential election.
Don’t count on it.
Governor Arnold Schwarzenegger may have endorsed McCain for president, but his economic stewardship will likely be fatal to the Arizona senator’s chances of winning the Golden State.
California’s economy is performing so poorly that it is singlehandedly making the rest of the nation’s economy look worse than it really is.
Take just one measure, unemployment (Source: Bureau of Labor Statistics; the seasonally adjusted “sum of the states” unemployment rate of 4.92% varies from the nationwide rate of 5.0% because of differing data collection methods):
The Not-So-Golden State has almost 12% of the country’s workforce, but 15% of its unemployed. Without California, the nation’s unemployment rate would be almost 0.2% lower, and the press wouldn’t be obsessing about the supposed recession (or at least not as much).
Worse still, less than five years after California’s historic recall of sitting Governor Gray Davis and Schwarzenegger’s landslide election to replace him, the Golden State is once again in a serious self-inflicted budget crunch:
Unlike previous summer standoffs during [Governor Arnold] Schwarzenegger’s reign, the state this time could run out of cash. The latest projection is that the till could run dry in early September.
The governor wants to close a $15 billion budget gap by, of all things, convincing Californians to gamble more — a lot more:
Schwarzenegger last week called for the state, in essence, to borrow against future revenues generated by a massive expansion of the lottery. The state would receive $15 billion over three years from Wall Street investors and pay it back from lottery proceeds over 30 years. Lottery sales would have to double for the plan to work.
How did it come to this?
There are many reasons, but the state’s 12-year refusal to get with the program on welfare reform is certainly among the biggest.
The nation’s landmark welfare reform law went into effect in 1997. By any reasonable measure, it has been a resounding success. Nationwide, as of December 2007, the number of welfare recipients was 68% lower than 11 years earlier.
During the first six years of reform, welfare rolls came down in California at about the same rate as the rest of the nation. By the end of 2002, the number of families in the state on TANF, or Temporary Assistance for Needy Families (the new name for the deservedly stigmatized AFDC, Aid for Families with Dependent Children) was down 47%, compared to 52% for the rest of the country; total caseload was down 55%, compared to 57% for the rest of the U.S.
But California’s welfare rolls have for decades been twice as high, as a percentage of the population, as the rest of the country. The declines should have been even more dramatic, and weren’t.
Now the situation is getting worse. Despite having so much room for improvement, and a golden opportunity handed to him to do something about it, welfare rolls in California on Schwarzenegger’s watch have gone up, while the rest of the country has continued to enjoy significant declines.
Here are the raw year-end numbers of recipients and families on welfare in California and the rest of the country since 2002:
These graphs illustrate just how bad things are:
(Sources: ACF’s Office of Family Assistance for families and caseload; Census Bureau for population.)
Taking them one at a time:
- The percentage of residents on welfare in the Golden State is now more than triple that of the rest of the U.S. If it reflected the rest of the country, California would have 800,000 fewer people receiving welfare.
- While caseloads in the rest of the U.S. have dropped over 30% in the past five years, California’s has gone up about 6%.
- As a result, though it has only about 12% of the total U.S. population, California’s share of the welfare caseload has risen from 22% in 2002 to over 30%.
- There are more welfare recipients per family in California, and that number has crept upward in the past couple of years, perhaps indicating that California welfare mothers are bearing more children that those in the rest of the U.S.
Governor Schwarzenegger and his state were very fortunate during his first few years in office. The economic growth created by the Bush tax cuts came at just the right time. The state also received some lucky onetime windfalls, including the hundreds of millions of dollars founders and insiders at Google coughed up when they cashed in their stock options.
Unfortunately, it appears that the good fortune enabled the state to avoid serious expenditure reform in welfare, and surely other areas, which Schwarzenegger should have aggressively undertaken when he took office.
Now the party’s over. Because of that, the chances that John McCain will be partying over a November win in California are nowhere near as good as they should be.
Tom Blumer owns a training and development company based in Mason, Ohio, outside of Cincinnati. He presents personal finance-related workshops and speeches at companies, and runs BizzyBlog.com.
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24 Comments
1. Bill N:You’re asking Governor Schwarzenegger to take on and defeat the ultra-liberal San Francisco-Sacramento socialist machine? Pretty tall an order for a Hollywood action figure, don’t you think? I love it when a Republican takes the hit for failed Democratic policies! For those fortunate enough not to live here, the California legislature is solidly liberal, Democratic, pro-illegal immigrant and socialist. The governor can do nothing about that.
May 22, 2008 - 1:54 am 2. Tom Blumer:Bill N:
I understand, to a point. But he could use the veto pen and the bully pulpit more than he has. And I really don’t think he has even tried to attack the out-of-whack welfare situation.
May 22, 2008 - 3:37 am 3. BizzyBlog » Latest Pajamas Media Column (’California Draggin’: Golden State’s Economy Hurts America’) Is Up:[...] It’s here. [...]
May 22, 2008 - 3:40 am 4. ApplePie:I believe that you don’t account for the impact due to the vast amount of illegal aliens among people on CA welfare and out of work. California loves its sanctuary cities and open borders. (at least the city legislators & politicians do)
California’s welfare system is bloated with illegal immigrants with or w/o anchor babies, etc. California hospitals also feel the brunt and some have or are near bankruptcy.
I’m not an economist but it seems that until the US borders are secured and illegal immigration is controlled that those who choose to enter the USA illegally will continue to have a deleterious effect on the CA and other state’s welfare systems and economies.
May 22, 2008 - 5:10 am 5. David Thomson:California has also severely damaged the United States with its radical environmentalism. Many states follower the “leader.” I have gotten to the point where I am almost viscerally hostile towards just about anything coming out of California. Massachusetts and California may be two most destructive states in the union. I am just hoping that their deleterious influence will not ultimately harm Texas and some of the other rapidly growing areas of the South.
May 22, 2008 - 6:13 am 6. Pages tagged "california":[...] tagged californiaOwn a Wordpress blog? Make monetization easier with the WP Affiliate Pro plugin. California Draggin’: Golden State’s Economy Hu… saved by 12 others ScarredLALfan bookmarked on 05/22/08 | [...]
May 22, 2008 - 7:02 am 7. Michael Canzano:Illegals, their anchor babies and their incarcerated family members are responsible for more than fifty percent of the twenty billion dollar deficit. We press one for English and two for destruction of our Sovereignty.
May 22, 2008 - 7:34 am 8. Futbol Argentino Mexicano y espanol » California Draggin’: Golden State’s Economy Hurts America:The Bozos in Sacramento will not rest until we concede our Gaza Strip (the state of California) to the “Burrito Brigade”.
American Christian Infidel
Michael Canzano
[...] Draggin’: Golden State’s Economy Hurts America May 22, 2008 – 3:30 am | Colin Covert Escribio un articulo buenisimo hoyAqui hay un pedazo del articulo“As California goes, so goes [...]
May 22, 2008 - 8:00 am 9. Chris:Don’t be so hard on us out here in Kaaalliiifornia. In order to solve global warming and gay marriage, you have to break some eggs. The Bay Area just passed the first of what is sure to be many more draconian measures to fight the evil AGW. This is guaranteed to chase the few remaining manufacturing jobs out of the area and into Nevada and Arizona. So really, our socialist pol’s are doing the rest of the nation a favor, perhaps?
May 22, 2008 - 9:04 am 10. Dave:While California certainly has it’s problems (and believe me, living here I know all about the socialist spenders in Sacramento!) you’re complaining because we add 0.2% to the nation’s unemployment rate???
Give me a break!
California and it’s 7th largest economy in the WORLD (last time I checked) adds far, FAR more to the nation’s economy than it takes, or even gets back from the federal government.
If the FEDERAL government would do it’s job, build the fence and seal up the borders, California could well be on it’s way to doing what it needs to do to address it’s problems…but it is being overrun and Washington does little if anything to help. Repubs know getting tough on illegals doesn’t help in a state they already feel is lost, and Dems don’t want to “offend” a highly reliable source of votes, both here and on the national level.
So California is left to muddle through problems that could largely be helped by tough FEDERAL immigration policies…something you conveniently forgot to mention.
May 22, 2008 - 9:07 am 11. Tom Blumer:Apple Pie and Dave:
Space kept me from commenting on illegal immigration in the body of the column, so I will now.
The other major illegal immigration states (AZ, FL, TX, and NM) don’t have welfare utilization rates that are very different from the rest of the US. In fact, TX and FL are way BELOW the national non-Cali average of 1.02%.
Specifically (recipients as of 12/31/07, pop as of 7/1/07):
- AZ — 1.2% (79K, 6.34 mil)
- FL — 0.4% (79K, 18.3 mil)
- TX — 0.4% (128K, 29.3 mil)
- NM — 1.7% (33K, 2.0 mil)
It would take more investigation, but it could be AZ and NM may be as high as they are because of the situations on Indian reservations.
So if it is indeed the case that large numbers of illegals are getting welfare benefits in Cali, it’s because Cali is not taking steps to prevent them from getting on the rolls that other states apparently are.
There is also the fact, which I confirmed late last year, that Cali supplements federal welfare benefits with its own, and is one of few states to do so (maybe the only one?). That changes the equation of whether it’s worth it to get into the workforce in favor of staying at home and doing nothing (or working under the table if you can get away with it).
Keep in mind that we’re only talking about “welfare” (TANF), and not Food Stamps or any other forms of assistance.
I agree that the Federal government has not done its job to keep illegals out.
May 22, 2008 - 10:49 am 12. Jeff:It would be interesting to find out how much government assistance illegal immigrants are drawing. Furthermore, I’d like to see how this compares with the amounts qualifying legal residents receive and also the amount of taxes both groups are paying.
Texas has no income tax but has a retail sales tax and a significant property tax rate. AZ has a retail sales tax exceeding 8% in addition to an income tax. Those illegals that are working, are likely to be at an earning threshold below that which would require them to pay income taxes in any case. The idea that illegals do not contribute to state revenues would not seem to hold any water unless they don’t pay rent and don’t buy retail.
May 22, 2008 - 11:43 am 13. AhCalifornia:When I was growing up in California in the 90’s, it was common for my friends parents to file for divorce so that the mother/children could claim benefits, including welfare and section 8 housing, while the mother worked under the table, and the father worked a normal job and lived at home. The government paid for housing, food, and clothes, allowing the family to pocket the parents wages. Out of my sports team of 30 some guys, I knew of 5 families that did this.
May 22, 2008 - 11:48 am 14. Bill N:Jeff: They live 10-20 to a house, work at day jobs, paid in cash which is sent to Mexico, and buy only food, which is not taxed, so I’d say that, yeah, they don’t pay rent, income taxes or sales tax. What’s left? Us, holding the bag!
May 22, 2008 - 12:56 pm 15. The Bad Economic News « Tai-Chi Policy:[...] The Fed sees the economy worsening. I wonder what would happen if they looked at the country disregarding California (why California? Because California hasn’t been reforming their welfare!). Glenn Reynolds is [...]
May 22, 2008 - 1:02 pm 16. Dave:Tom-”So if it is indeed the case that large numbers of illegals are getting welfare benefits in Cali, it’s because Cali is not taking steps to prevent them from getting on the rolls that other states apparently are.”
Uh…agreed, but welfare benefits are just ONE slice of the pie that Californians must “foot the bill” for illegal immigrants. Hospital/medical care paid by counties with state help, added education costs, added police and state correction facilty expenses, not to mention child health and nutrition programs not part of regular “welfare rolls”…
ALL these and more (including the one you mention about California supplementing federal welfare benefits with its own) contribute to the budget mess we find ourselves in.
Don’t get me wrong though. I’m not blaming the illegal migrant for California’s problems. I lay the blame squarely in Sacramento, with a healthly regard of indifference from Washington.
May 23, 2008 - 6:44 am 17. Boghie:Dave,
There was a time when California was rich. A time when the Libs could almost legitimately claim that we should ‘pay our fair share’ toward the poor and impoverished and all that – to include citizens of other countries.
That is why California adds to Federal benefits.
Kindof an odd death spiral. Basically, the additional benefits increased the burden on those paying the bills while simultaneously – and temporarily – inflating the costs of basic necessities.
And, we were so rich that we could afford fuel reformulations that reduced smog pollutants by almost ½ of 1 percent. Anyone remember Katrina. One of the affects of Katrina was a summer without reformulated fuel. Oh, the horrors. That fuel reformulation increases our costs by about 0.30/gallon if I remember. Taxes increase it over average by another large and growing chunk.
Now, the rich have moved, or are moving, to the Nevada side of Lake Tahoe.
But, the illiterate poor are still flooding in.
And, the Libs don’t see it
Caught.
May 23, 2008 - 7:15 pm 18. Tom Blumer:Dave — So when does McClintock declare for governor and hope that Feinstein isn’t interested?
May 23, 2008 - 7:33 pm 19. BizzyBlog » California Draggin’: Its Basket-Case Economy and Bloated Welfare System Are Holding Back the US Economy:[...] This was originally posted at Pajamas Media on Thursday under the title “California Draggin’: Golden State’s Economy Hurts [...]
May 24, 2008 - 5:33 am 20. Will Becker:All this should tell us something, since California is the most liberal state in the nation.
May 25, 2008 - 5:08 pm 21. FormerCalifornian:I used to be on welfare in California. I had to live in California because the terms of my divorce forced me to do so. I tried to work, but because I had to provide transportation for the kids to schools in my ex-husband’s neighborhood, getting a day job was impossible. If I could have afforded an illegal alien housekeeper and a reliable car, I could have gotten a decent job and been self supporting, but I was so broke that I could NOT get together enough money to put the pieces together. When I finally got HUD housing benefits, it was a dream come true. I had a really nice apartment for next to nothing, welfare, food stamps, free medical and dental, and no child care costs. By that time, I had finished school, but the combination of severe mental depression and FEAR of giving up HUD housing by earning too much money made me nervous about getting a job at all. I actually followed all the rules for all the benefits that I received, but I knew many who were cheating (renting out bedrooms, boyfriend living in, working under the table, etc.) IMHO, the gov’t needs to have a fraud squad, with rewards for informers, to police the HUD housing benefit. If they started prosecuting the people who are cheating, the “ineligible” would give up their benefits, and the waiting list for HUD housing benefits would shrink (which would mean that HUD housing benefits would be available sooner for people who are going through a divorce, or whose house has burned down, etc.) Where I am living now, I think the waiting list for HUD housing is about a month or two, so someone here could get a job, and if they got fired or downsized, they could go back to HUD housing. Without fear of giving up a “too good to be true” gov’t benefit, the decision-making process for single mothers and others would be a whole lot more straightforward.
The single mothers I knew who lived on benefits definitely had a nicer lifestyle than those who worked. For instance, on HUD housing, the size of your apartment is determined by your family size, and you could live in whatever neighborhood you wanted, while working mothers not eligible for HUD housing usually got the smallest possible apartment permissible, oftentimes with mother and child sharing a one-bedrooom, one bath, because the mother was paying the whole cost out of her own pocket. I knew single mothers who were NOT trapped in California, and could have left for better opportunities in other states, but they would NOT leave because the welfare benefits made them so comfortable. If the benefits had been time limited, a lot of these women would have moved. There was no reason for them to live in high-cost California, as they were not working, and had no prospect of getting a good job at any point in the future.
Also, in So. Ca. when I lived there, before I became eligible for HUD housing, I tried to get a cheaper apartment, but there weren’t really any. In nice neighborhoods you had to have a good credit rating and tenant history to get a nice apartment. In bad neighborhoods, you didn’t need either, and once you were “in” you could break every zoning regulation under the sun. For that reason, the nasty apartments in bad neighborhoods were only about 15% cheaper than the ones in nice neighborhoods and good school districts, even though they were smaller, older, and dirtier. If it had not been for the endless stream of arriving illegals, the apartment rents would not have been so outrageous, and there would have been fewer people dependent upon HUD housing.
I must say that even I am somewhat shocked by AhCalifornia’s tale of couples getting divorced in order to collect benefits while remaining in the work force. I never saw anything that blatant. I was surrounded by divorced women with young children, who received little or no child support and who were not employed (and usually had not completed college) at the time of the divorce. When the judge ordered them to stay in the “seven southern counties” they simply didn’t have any great options.
May 26, 2008 - 10:41 am 22. Brenda:The Gov. promised us that he was financially conservative and socially liberal. What happened to the finacially conservative part? I hope McClintock does decide to run. He has my vote.
May 27, 2008 - 9:46 pm 23. Whitehall:McClintock is running for Congress from a district in the NE part of the state. Fred Thompson is organizing fund raisers for him.
I was hoping the McClintock would run for Senate but Arnold has his eye on that job.
Besides, McClintock has a legislature background. He was very impressive in the recall debates and would have been a more rigorous governor.
We really need him on the state budget fights!
May 28, 2008 - 12:26 pm 24. Mace:What do you expect from a state controlled by Socialists???? Wait until the greenhouse gas legislation kicks in – most of the citizens will be on welfare.
Jun 7, 2008 - 6:49 am