Economic issues loom for new Calif. governor
It has the LOS ANGELES — highest concentration of billionaires in the country. It exports more computers than any other state. It is the nation’s largest producer of agriculture products by far: More than $6 billion in dairy products alone last year.
California is an economic powerhouse — now the fifth largest economy in the world after surpassing the United Kingdom in total output earlier this year.
But this state may be facing a financial reckoning at the very moment that Jerry Brown is stepping down as governor: a possible recession coinciding with deepening concerns about its fiscal stability. His two potential successors — Gavin Newsom, the Democratic lieutenant governor, and John Cox, a Republican business executive — have significantly less experience than Brown, a fixture in California for nearly half a century and through five national recessions.
California is now on the verge of putting one of the world’s largest economies in the hands of a relatively untested governor.
The ability of Brown’s successor to navigate California through challenging fiscal times could be critical to assuring both the state’s continuing economic durability and its outsize contribution to national prosperity.
“So goes California, so goes the U.S.,” said Christopher Thornberg, the founding partner of Beacon Economics, a consulting firm in Los Angeles.
“It is far and away a dominant source of job growth in the U.S.”
A severe lack of affordable housing has fueled concern by business and political leaders of a labor shortage, because there will be no place middle-class people can afford to live. “We are going to have a 2-million-person gap in about 20 years,” said Anthony Rendon, the Democratic speaker of the state Assembly. “I can see that getting bigger if we can’t figure out the housing crisis.”
Policies embraced by President Donald Trump — including tariffs on Chinese goods and a crackdown on unauthorized immigrants — could be harmful to this state’s economy, home to a vast network of farms already struggling to find field workers, and to the nation’s two largest ports.
The tax bill enacted by Congress is raising the cost of living for many homeowners by limiting the deductibility of state and local taxes, which are high in California, though some have done better under the new code.
A drive to repeal a gas tax, on the ballot this fall, could undercut Brown’s ambitious effort to rebuild roads and bridges and blast a hole in the next governor’s budget.
And by nearly every account, a national recession is overdue. Another economic downturn could be especially devastating to this state, with a tax system heavily reliant on high-income wage earners. The last one resulted in the loss of 1 million jobs across the state.
“Jerry Brown has warned of the chances some headwinds on the economy coming down the pike are pretty high — we are not prepared for that,” said Austin Beutner, a former Wall Street investment banker and deputy mayor of Los Angeles, who is the superintendent of the Los Angeles school district.
“We haven’t modernized the tax base and reformed the property tax system. We haven’t done the hard work to make sure if there is a change or a correction, the resources are there to do the things the state has to do.”