In the New York Times last Thursday, Thomas Edsall had a piece titled “Is California a Good Role Model?” The piece summarized different views from pundits on the right and left as to the future prospects for California as it continues and adds to a growing menu of the latest progressive policy prescriptions — highest in the nation state income tax rates, highest in the nation sales tax rates, aggressive energy policies to address “climate change,” and so forth. A fair summary is that the right-side pundits chided California for having highest-in-the-nation inequality and poverty rates, while the left-side pundits responded that it also had strong economic growth.
I actually wrote a post on exactly this subject way back in February 2013, titled “Let’s Start A Pool On How California Will Do Over The Next Five Years.” That post began by describing three of the then-recently-enacted progressive policy favorites (highest-in-the-nation tax rates going up to 13.3% on incomes over $1 million, intentional increasing of electricity prices via a cap-and-trade system, and the high speed rail project). Would those things knock California off its high growth pedestal? You may be surprised with my take at the time:
I'm certainly not predicting an imminent collapse for California. The consequence of making yourself way out of line in taxes and costs is not rapid collapse, but slow relative decline.
Before getting more specifically to the case of California, let me illustrate what I mean by “slow relative decline” by describing the case of New York. . . .Read More