Explaining Southern California's economy

Gov. Brown's veto means that borrowing is more important than state services

Gov. Jerry Brown just vetoed a measure that would have forced him to debate whether so-called "trigger cuts" will kick in if the state runs short on its revenue goals this year. As the LA Times PolitiCal blog notes: "If those taxes don't materialize, up to $2.5 billion in cuts would occur automatically, including the option for local schools to reduce the academic year by up to a week." 

What Brown wants is for the state to retain its capability to borrow at historically low interest rates. This is from the governor's press release:

"I am vetoing a third bill that would have undermined investor confidence in California by altering the budget’s mechanisms for automatic trigger cuts. The trigger mechanisms were adopted when I signed the budget and were essential to improving our credit standing. Indeed, our no-gimmick, on-time budget was the reason S&P assigned its highest rating to the short-term notes sold this past week—the first time that’s happened since 2007,” said Governor Brown.

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Visual Aid: Cheap stuff from China is getting...more...expensive

 

This chart is from a Federal Reserve Bank of New York analysis of why Chinese imports to the U.S. are moving up in price. For some people — those who have issues with the flood of inexpensive Chinese goods that have hit our shores in recent years — this is good news. Stuff made right here at home will now stand a fighting chance!

However, you have to look at the trend more broadly. For one thing, rising import prices mean that Chinese wages are also rising, a generally beneficial thing for a country trying to lift much of its population out of poverty. That's the positive. But there's also a negative, on our side of the equation: The last thing Americans probably need right now is for inexpensive goods they've gotten used to being inexpensive — from clothing to electronics — becoming pricier. This could cause reluctant consumers to become more reluctant. We don't need that, given that a lack of demand is preventing our economy from recovering fast enough. It's also keeping employers from hiring.

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The 'Millionaire Tax' in Southern California

President Obama has come out swinging, as the USA struggles to get its financial act together. A nearly $500 billion jobs bill has now been followed by a proposal to raise taxes on Americans making more that $1 million a year. Those on the left love the idea; those on the right have labeled it class warfare. In an effort to invoke an extremely rich dude who has strongly advocated that rich people pay more in taxes, Obama has taken to calling it the "Buffett Rule," after billionaire investor Warren Buffett.

I just want to know how much money it would bring in. And at a local level, roughly how many people in Southern California would get hit with the new tax, in the event that it actually gets passed. This isn't Kansas, after all — if you live in or around Los Angeles and San Diego, you are in a major millionaires region. In 2009, the Los Angeles metro area had almost 234,000 millionaires, according to statistics cited by the LA Times. I figure LA has even more now.

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Reportings: Grocery strike; Netflix screw-up; Jerry's veto

Still no grocery strike in Southern California. But you have to wonder why the union and the big chain stores — Albertsons, Ralphs, and Vons — couldn't figure out how to resolve the problems with a jointly administered health care fund before now. VoiceofOC.org provided a blow-by-blow back in June, explaining how the fund was allowed to rapidly move from surplus to looming deficit. (VoiceofOC.org)

 

Speaking of which, the LA Times thinks a strike now would be a very bad move for the chains: "Today, Ralphs, Vons and Albertsons have fewer stores in Southern California, and fewer employees. Albertsons has closed 67 locations since the 2003-04 strike and worker lockout. Ralphs has closed 48 stores, and Vons and Pavilions are down 47." (LAT)

 

Netflix CEO Reed Hastings' solution to the epic screw-up of raising prices on subscriptions: The smaller DVD-by-mail business will now be spun off into a new company, Qwikster, presumably allowing Netflix to restore its brand. How long did it take to think up that new name? (NYT)

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Visual Aid: Southern California lagging in metro GDP growth

This chart is disturbing. It's from the Bureau of Economic Analysis and it summarizes percentage change in real GDP growth for U.S. metropolitan areas from 2009 to 2010. Have a gander at the lower left hand corner of our fair mainland (not Alaska and Hawaii). That large area of middling and lower-than-middling improvement is SoCal. In fact, the entire state managed a feeble performance — with the obvious exception of that little bit of overachieving dark blue: Silicon Valley.

For contrast — and tale of two years — here's the 2009 chart:

Source: BEA

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