California’s behavior today is reminiscent of the course charted by South Carolina in the nullification crisis of 1832.
It is often said that California foretells the nation’s future. If so, we should really be worried about the cost of living. Wednesday’s New York Times ran an article about California that was candid about the high cost of living there although opaque about the reasons for it. It recognized that in the last seven years the state has lost more than two million people over twenty five years old to other states. And the reasons for fleeing many give is the cost of living with the largest number going to Texas, a state renowned for a low cost of living.
This is a historic turnaround. California was famously the place to which Americans escaped—the place where dreams were realized and the living was easy. But today economists of all political stripes blame zoning and other regulations for running up the cost of housing. Other regulatory costs are high and California is bringing in a minimum wage of 15 dollars an hour for cities and rural areas alike, which will also drive up the costs of goods and services.
You wouldn’t get this kind of analysis from reading the Times’ article. It focuses on one matter alone that may drive more migration—the coming limitations on state and local tax deductions in the Republican tax bill, the only context in which it references California’s already high taxes, the responsibility for which is also not discussed.
The reporter really should cultivate a better sense of causation. Outside of quantum mechanics, causes happen before their effects. By his own account, people have been fleeing California for years before this change in the tax law was even on the horizon. By highlighting a coming tax provision unpopular with left-liberals rather than focusing on the long-term causes of California’s plight the New York Times is offering its readers the journalistic equivalent of comfort food.
To be sure, many who want to be in tech or in films will still go to California for the network benefits of those places. If they make it big, they can afford to pay the high cost of living. But that just shows that California is adopting the political economy of many cities that caters to the rich and to the poor, but squeezes the middle class.
And we should also remember that Hollywood and Silicon Valley were products of California’s golden age. It seems much less likely that these places would have been chosen today given their high costs. California is living off a first mover advantage that may dissipate with time.