In a Meet the Press interview in March, Gov. Jerry Brown blasted the Trump administration’s threat to cut off funds to California if it becomes a “sanctuary state” for illegal immigrants. “We’re the innovation capital, high-tech, agriculture, $40 to $50 billion industry. You don’t want to mess with California, because you’re going to mess with the economy,” he said.
Brown echoed the talking points that Democrats often make here, as they tout the state’s high-tech economy as proof of the success of California’s economic model. But California’s leaders are conflicted. On one hand, they boast about the innovation that thrives in Silicon Valley, with its burgeoning internet-based businesses and the development of alternative energy sources and electric vehicles.
On the other hand, they hector those tech companies for the “creative destruction” they cause as they pioneer new methods of providing goods and services that displace old-school unionized businesses. They also complain about Google and other firms for creating so many high-paying jobs that it drives up the cost of housing, especially in the San Francisco Bay Area — never mind that the high prices are caused by the lawmakers’ slow-growth policies.
Such “cognitive dissonance” can be entertaining at times. For instance, earlier this summer the state Assembly passed a $3 billion subsidy for electric vehicles. As Business Insider reported, the measure “appears to be a Tesla bailout” given that this maker of high-end electric cars “will soon hit the limit of federal tax rebates,” which begin to expire after a manufacturer sells 200,000 electric vehicles.
The bill would have vastly expanded the size of the existing tax credit for electric vehicle purchases, thus making up for federal tax-credit reductions in the state where Tesla does most of its business.
That measure was shelved this month, but Brown and legislators this week agreed to a deal that would use some of the $1.5 billion in revenues from California’s cap-and-trade system to fund $2,500 rebates for EV purchases and help California’s ports upgrade to zero-emission equipment. But, as the Sacramento Bee reported, the measure as amended “would inject the state into an increasingly acrimonious union organizing campaign at automaker Tesla’s Fremont plan.”
It’s no surprise that lawmakers took the side of the union.
Under the deal, carmakers that want their vehicles to be eligible for those state EV rebates “would need to be certified by the state labor secretary ‘as fair and responsible in the treatment of their workers,’” according to the article. Translation: Unless Tesla gives in to United Auto Worker demands, it won’t be certified as “fair and responsible.” Without those tax credits, it will be a tougher road selling these electric vehicles, at least at a competitive price.
As a company that benefits from government subsidies, Tesla naturally has to put up with government edicts. But the latest deal brings to mind Ronald Reagan’s quip: “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Or in the case of California’s Legislature, subsidize the business into existence and then regulate it until it moves to Nevada. In 2014, Tesla opened its Gigafactory 1 outside Reno, where it will enjoy $1.25 billion in tax breaks from that state’s taxpayers.
Officials aren’t about to just let the market economy work things out on its own. And California officials, in particular, remain totally in the camp of the labor unions. Regarding that recent cap-and-trade deal, those subsidies for cleaner equipment at the ports “cannot be spent on automated cargo-handling equipment,” reported the Bee, because “increasing port automation has been a major concern of port workers’ unions.”
Are officials more concerned about cleaning up the air and getting control of climate change, which Brown has called an existential threat to the world as we know it? Or are they more concerned about protecting high-paid union jobs? The answer is obvious.
As I reported earlier this week, another union priority, Assembly Bill 1461, is now on the governor’s desk. Drafted by the United Food and Commercial Workers union, it would impose a new set of regulations on internet-based firms that deliver gourmet meals to a subscriber’s doorstep. The goal is to force these firms, which already are highly regulated by the state and feds, to be regulated by local health inspectors.
The legislation would require the people who pack these meal boxes for home delivery to obtain a food-handler’s card, proving that they are trained in handling meats and seafood. That sounds like a minor thing, except that state-certified food handlers must provide their contact information. The apparent result is to give unions access to personal information so that they can try to convince these workers to sign up for the union.
Lawmakers also passed a measure that would require private home health workers to divulge their cellphones and addresses to the unions. Another measure this session would ban counties from outsourcing many public services, which of course would drive up the cost of county services by forcing counties to hire full-time, highly pensioned government workers. That would slam the door on any number of cost-saving innovations.
Although stalled this session, the Legislature’s housing package does more harm than good by insisting on union wage rates on myriad new housing projects. Nothing passes these days unless the state’s politically muscular unions get something in return.
These kinds of Luddite-style labor protections are particularly nefarious when it comes to the Bay Area tech economy. The economic growth that Brown and others point to as evidence of the success of California’s economic model is really not a statewide phenomenon. “It’s not a California miracle, but really should be called a Silicon Valley miracle,” said Chapman University President James Doti, in the Orange County Register last year. “The rest of the state really isn’t doing well.”
New data from the U.S. Census Bureau confirms that point. The bureau this week released its latest statistics from its Supplemental Poverty Measure, which calculates the poverty rate using cost-of-living based adjustments. California continues to have the highest poverty rate in the nation, with more than 20 percent of Californians living below the poverty line.
So, yes, California remains a capital for innovation, but only until all the union work rules crush that one bright spot in the economy. Meanwhile, the rest of the state is becoming something of an innovation-free zone, given lawmakers’ ongoing efforts to saddle businesses with bone-crushing regulations and tax rates. If Brown really believes in innovation, he ought to worry less about federal funding and more about the way his union allies mess with the Golden State’s economy.