Just a decade ago, California was the place to be.  The state looked economically unstoppable.  It had a technology boom.  It was attracting the best and the brightest to create whole new industries.  It has great weather.  California looked to be the future and a land full of riches.

But then something happened.  It didn’t happen all at once, but it happened.  California had a terrific economic surplus–investments there seemed to return greater returns because it was located in California.   California politicians worked to redistribute that surplus to other parts of the population, because, hey, there would always be more–more business investment, more jobs, and more growth.   California raised taxes to pay higher wages to governmental unions on the notion that the “investment” would yield results or for fairness sakes.  California believed that it could regulate businesses to get better outcomes for society.  These are all great goals to have.

But eventually, California lost its luster.  Other states began competing with California for its technology and defense jobs.  They worked to become more conducive to business.  They lowered their taxes and worked to make their governmental services more competitive and efficient.  For many businesses, California is no longer the “must be” place, for many others, California is no place to do business at all.  So the growth has slowed, and California is now stuck with an unsustainable welfare state dependent on high taxes that businesses are less willing to pay than before. 

A better blog than this one points out the similarities between California and Wisconsin–including the out-of-control spending and borrowing.

http://www.marketplacemagazine.com/blogs/blog2.php/2009/05/26/replace-california-with-wisconsin-and

There is a notion out there that Wisconsin doesn’t have to compete–that we can afford to tax businesses and make things more difficult for them because we have a “high quality of life” and other such nonesuch.  We do have a high quality of life.  But make no mistake about it–states compete and there are other states that are able to offer a similar quality of life for less.