California Is No Longer Golden

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California Arnold Schwarzenegger made the astonishing claim in Copenhagen in December 2009 that the Golden State is evidence we need not choose between a clean environment and economic growth because: “We’ve proved that over and over again in California.” (1) Dream words from a governor whose state is an economic mess. The Golden State has lost its luster. California ranks 48th out of 50 in business tax climate according to the Tax Foundation. Only New York and New Jersey scored lower than California. (2)

Some experts think California’s deficit will top $40 billion this year. Because of budget maladies, Standard & Poor has put the state on notice for a lowering of its credit rating, which is already the worst in the nation (tied with Louisiana). California has the fourth highest foreclosure rate in the country. Of the cities with unemployment rates exceeding 15 percent, nearly half are in California. (3) In 2008 alone, 47,000 more businesses died than were started in California reports the Orange County Register. (1) California remains in first place with the highest prices per kilowatt-hour when compared with its neighbors in the West, and 30 percent higher than the national average. (4)


All of this is not stopping California from leading the way in creating a new energy economy. An example is Assembly Bill 32 (AB 32), a Kyoto-type regulatory scheme to force California off fossil-based fuels. This bill directs the California Air Resource Board (CARB) to write strict regulations on reducing carbon dioxide and other so-called greenhouse gases to 1990 levels by 2020, and 80 percent below the 1990 level by 2050. The net effect of this law will be massive increases in electric power costs, transportation fuel costs, all goods that move by truck, and all services. Working with other agencies, CARB now controls vast reaches of life and business in California, from baking bread (yeast emits CO2 during the leavening process) and making wine (more CO2 from fermentation), to making and using cement. (4)

A recent study reports that AB 32 will cost California up to 1.1 million jobs, cost the average family around $4,000 annually, add nearly $50,000 a year to the average small business’s cost, and will result in a total loss of output of $183 billion. The study also finds that the total cost of regulation to the State of California is $493 billion, which is almost five times the State’s general fund budget, and almost a third of the State’s gross product. The cost of regulation will result in an employment loss of 3.8 million jobs, which is a tenth of the State’s population. (5)

It’s become clear to nearly everyone that the plan’s backers have underestimated its negative impact and exaggerated the benefits.

”Job Loss”

When AB 32 was signed in 2006, Schwarzenegger and his green supporters boasted that the regulations would steer California into a prosperous era of green jobs, renewable energy, and technological leadership. Instead, since 2007, in anticipation of the new mandates, California has led the nation in job losses. There are now 1.5 million Californians out of work. (6) California’s unemployment rate has now reached 12.6%, one of the highest in the nation. With jobs leaving the state, AB 32 is yet another burdensome regulation that will cause more businesses to relocate.

Yet, discussing AB 32, Schwarzenegger recently declared, “I recommend very strongly that we move forward