California is at a crossroads. The state that was once a symbol of American innovation, opportunity and progress has become the poster child for the growing chorus of sages proclaiming America’s decline.
National problems are magnified in California. Unemployment in the United States is at 9.5 percent; in California it is 12.3 percent. The state also boasts the fourth highest foreclosure rate in the country for 2010. Economists warn that if the federal government continues to run record deficits, debt will become unsustainable; in California it already has — the state has the lowest credit rating in the nation and a cost of debt lower than such developing countries as Lebanon, Uruguay and Kazakhstan.
Still, these problems do not necessarily spell doom for the Golden State. It remains a world center of culture and creativity, one of the biggest economies internationally and the home of an extensive physical and human capital. However, the self-perpetuating crises of a lagging economy and a structural budget gap threaten to render the state’s downward spiral irreversible if not dealt with properly.
USC students should be paying attention to these problems. Not only does nearly half of the student body come from California, but nearly three quarters of alumni have historically ended up living in California. How much economic opportunity we enjoy in the future depends on choices made by political leaders today.
The upcoming gubernatorial election should be of serious consideration on campus, particularly each candidate’s economic plan. Unfortunately, neither candidate can be distinguished as the clear-cut choice.
At first glance, the question of who has better economic credentials seems obvious. Democratic nominee and current Attorney General Jerry Brown has far more experience, having already served as California’s governor. However, Republican nominee Meg Whitman made her name as chief executive officer of EBay Inc., one of California’s most successful Internet companies. Whitman is a businesswoman who understands the nuances of today’s increasingly complicated global economy.
Further, the biggest challenge facing the next California governor —balancing the budget — is one best taken on by somebody with a private-sector mentality. Brown’s history in California politics would certainly make him more skilled at navigating the entrenched interests in Sacramento, but Whitman can rightly contend that today’s budget problems were caused by an inability of the state government to say no to those very interests and what we need now is a governor who can ignore them. It was precisely the Jerry Brown style of politicking that led to the current mess, and there is no reason to suspect that he would govern any differently the second time around.
If elected, Brown promises to continue California’s disastrous policy of putting major tax or spending decisions to a public referendum, one of the main reasons why the state’s revenues never match its expenditures. It seems that only someone from the private sector like Whitman is capable of implementing the systemic change needed to correct the deficit.
Whitman’s policy proposals are also impressive. They center around sensible changes that could spur economic growth and reduce the deficit without disastrous consequences for key service deliveries like schools, prisons and maintenance.
Whitman’s plan focuses on three main goals: create jobs, cut government spending and improve education. Although her jobs plan does involve cutting taxes, the specific taxes that she has singled out make up only a small part of California’s revenues and are likely to spur growth if eliminated. She plans to eliminate the $800 tax required for new start-ups, the tax on manufacturing equipment that is present in only two other states and provide tax credits aimed at encouraging research, development and investments in new technology. Her proposal to change the state’s mandated depreciation schedule in a way that encourages businesses to buy newer equipment is one that could only have come from someone with a private sector background.
To cut expenditures, Whitman proposes implementing a strict spending cap tied to California’s gross domestic product — a necessary step. Further, she plans to bring a private-sector style of financial management to government with the establishment of a central financial management system that would eliminating some bureaucracies and streamlining others.
Finally, Whitman is giving education the attention it deserves.
In contrast, Brown has surprisingly few policy proposals designed to spur growth, increase revenues or cut spending. According to his website, only one of his top 10 priorities -— clean energy jobs plan — is relevant to economic growth and despite clean energy’s merits as an investment for the future it remains a relatively small industry today. Additionally, only pension reform addresses California’s budget gap -— that alone will not be enough.
Instead, Brown seems intent on taking advantage of the anger generated by the economic crisis to address injustices perpetrated by big business. Admirable as this goal may be, achieving it will mean little if California’s government has to declare bankruptcy.
All this seems to indicate that Whitman is California’s wisest choice. However, there is still a third factor to consider: governing style.
Whitman seems to equate the position of governor with that of CEO. Her approach is to treat California like a corporation but this misses the crucial insight that the budget problem is persistent because its roots are as political as they are economic.
Brown, on the other hand, is all politics. He has been criticized for lacking precise policy plans but this reflects his understanding that the next governor’s range of policy options will be shaped by other realities, most of which we are still unable to predict.
In addition to doing the simple math of balancing the budget, the next governor will need to be able to react quickly to crises sure to come, navigate the hallways of Sacramento and address social issues like immigration and crime — all while taking measures to spur economic growth in both the short and long term.
To do this, the next governor will need to be creative, contrarian and willing to take unorthodox steps to put California ahead of the curve again. This is the area where Brown excels — a man who once insisted that his staff not repair a hole in the rug on the floor of the governor’s office so that he could use it to deny requests for money, he speaks often of “re-founding” California if elected.
While it is easy to mock Brown for responding to requests for specifics about his economic plan by saying, “The process is the plan,” in truth the response illustrates Brown’s understanding of not only the constraints facing California’s governor, but the necessity of fundamentally changing the way that California does business. Unfortunately, Whitman has yet to show evidence of the same type of thinking.
It is hard to vote for a candidate with no defined economic plans when the next year or two are likely to determine California’s post-crisis path. However, it also seems that Brown is willing to take bolder, more creative steps than his opponent.
Ideally, either Whitman will adopt some of Brown’s creativity or Brown will emerge with a clearer, more definitive economic vision. In the weeks leading up to the election, voters should watch each candidate closely to see if either of these developments materialize. If neither does, Californians will have a tough choice to make.
Daniel Charnoff is a senior majoring in international relations (global business).