Our View: Headed for the exits

The state’s Democrats have long downplayed the argument by Republicans that the state’s punitive tax and regulatory climate is sending jobs to other states. Yet a new report, by the Milken Institute on behalf of the California Manufacturing and Technology Association, confirms that high-paying manufacturing jobs are heading elsewhere in droves.

“California has been progressively losing more of its manufacturing employment, particularly high-value-added manufacturing, to other states such as Oregon, Texas, Minnesota, and Washington,” according to the report. “To analyze California’s comparative manufacturing competitiveness, case studies using data from 2000-07 were conducted on California and seven other ‘peer manufacturing’ states. Together, these seven states were home to 2.7 million manufacturing jobs compared with California’s 1.5 million manufacturing jobs in 2007. The peer states added more than 62,000 manufacturing jobs since 2003, while California lost 79,000 manufacturing jobs during the same period.”

The institute reported on some obvious points. California has a reputation as being unfriendly to business. California’s neighbors are actively recruiting businesses from our state with tax breaks and targeted incentives. Those who dispute this state’s hostility to business are in denial. California’s dominant political party believes that this is such a wonderful place that no one will leave, but those who believe as much forget that warm weather and beautiful scenery aren’t enough to make a business flourish. High taxes make it tough to remain competitive with goods manufactured in other parts of the country and the world.

The institute found that California had by far the highest corporate taxes among its peer group of manufacturing states and well above the national average. It found that the cost of government in California was well above other comparative states. It reminded readers that solid manufacturing jobs have always been a bedrock for entrance in the middle class – something this state’s self-described defenders of the poor seem to forget, as they increase government spending on programs, yet chase out the types of good-paying jobs that had traditionally been available to immigrants and the working poor.

However, the institute’s recommendations are a mixed bag. We agree with its call for streamlining the regulatory process, given that the endless changes and complications here make it difficult for businesses to follow the many rules. We also agree with improving coordination between the myriad agencies that regulate California businesses. But we oppose its proposals for various public-private partnerships to promote manufacturing and fund research and other endeavors.

We believe that manufacturing can once again thrive in California if policy-makers rediscover the beauty of the marketplace. They should reduce regulatory hurdles, lower taxes and let manufacturing businesses make their own way. As the report explains, “California has a wide gap between its capacity for ingenuity and entrepreneurship and its ability to efficiently commercialize innovation in manufacturing.” In other words, this state is home to great ingenuity and entrepreneurship. The government simply needs to get out of the way.