Opinion | Is California a Good Role Model?

By Thomas B. Edsall

Depending on how you look at it, it’s one of the richest states or one of the most unequal.

Thomas B. Edsall

By Thomas B. Edsall

Mr. Edsall contributes a weekly column from Washington, D.C. on politics, demographics and inequality.

Should I stay or should I go?CreditCreditGetty Images

Conservatives argue that California’s liberal politics have failed. They point out that by one key measure the state now has the highest poverty rate in the nation and they argue that its liberal minimum wage and restrictive housing codes have more than a hundred thousand people homeless, more than a million unemployed and millions more stuck on the bottom rungs of the socioeconomic ladder.

Liberals see a dynamic California where wealth generated by Hollywood and an immigrant-rich high tech industry, in concert with a top university system, has fueled a politically dominant Democratic coalition of Hispanics, Asians, blacks and whites steadily moving millions of people up from where they started.

“This is a topsy-turvy debate,” Jonathan Rodden, a political scientist at Stanford, told me by email. “The left celebrates California’s rapid growth while turning a blind eye to its inequality. The right decries poverty and inequality while discounting rapid economic growth.”

The dispute raises three basic questions.

Does multicultural California, firmly under the political control of the Democratic Party, a state that taxes and spends at higher rates than most of the country, represent the future of the nation? In California, both the sales tax and the tax rate applied to the wealthy are the highest in the nation; per capita state and local spending are the sixth highest. At the same time, the $2.7 trillion California economy is the fifth largest in the world, behind the United States, China, Japan and Germany, but bigger than the United Kingdom or France.

Can the contemporary Democratic Party in California fairly address the divergent interests of an exceptionally affluent high-tech elite and a diverse population that is 39.1 percent Hispanic, 37.2 percent white, 15.2 percent Asian and 6.5 percent African-American?

Are the huge disparities in income, education, housing and wealth inevitable in a state that is simultaneously home to hugely profitable high-skill industries and a surging minority population, many of them low-skilled immigrants?

Conservatives, especially in essays published in the Manhattan Institute’s City Journal, have led the charge, but some of this criticism also comes from the left and center.

In a City Journal article from July, “The Hollowing-Out of the California Dream,” Joel Kotkin writes:

Its political leaders and a credulous national media present California as the “woke” state, creating an economically just, post-racial reality. Yet in terms of opportunity, California is evolving into something more like apartheid South Africa or the pre-civil rights South.

Kerry Jackson, a fellow at the Pacific Research Institute, a conservative think tank based in California, summed up the thrust of his winter 2018 City Journal essay in its title, “California, Poverty Capital: Why are so many people poor in the Golden State?”

Jackson writes:

California state and local governments spent nearly $958 billion from 1992 through 2015 on public welfare programs, including cash-assistance payments, vendor payments, and ‘other public welfare,’ according to the U.S. Census Bureau. Unfortunately, California, with 12 percent of the American population, is home today to roughly one in three of the nation’s welfare recipients.

Michael Shellenberger, the president of Environmental Progress, a group that supports nuclear power and challenges the tenets of the traditional environmental movement, noted that by some measures “the Golden State is also number one in poverty and inequality in America.”

Writing in Forbes in May, Shellenberger argued that “California isn’t just the least progressive state. It’s also the most racist.”

These attacks have prompted angry retorts in some quarters.

Manuel Pastor, a sociologist at the University of Southern California, sharply disputed the allegations of racism in the Kotkin and Shellenberger essays. Pastor shot back in an email:

The notion that California has become like apartheid South Africa is over-the-top rhetoric. Consider whether as an immigrant you would like to be in a state that fully cooperates with ICE or one that has passed a “California Values Act” that has us labeled a “sanctuary state.” Consider whether you want to be in a state that is cutting back on education — say, Arizona, until the recent teachers’ strike — or one that has a Local Control Funding Formula that is now directing more money to districts and schools with more English learners, poor children, and foster youth.

Kevin Drum, a writer at Mother Jones, wrote in January that “California Is Doing Fine, Thank You Very Much”:

There’s a whole cottage industry on the right dedicated to the proposition that California is a hellhole. Why? Because California is the most liberal state in the nation, and the existence of a high-tax, high-service state that nonetheless has a great economy is an affront to their principles. And yet, California’s economy is doing fine.

Richard Florida, director of the Martin Prosperity Institute at the University of Toronto, argued in an email that California is better described as a crucial proving ground in a country undergoing exceptional structural change in its economy and demography.

“I think warts and all that California remains a bright spot and innovative force in the US political economy,” Florida told me by email:

I am not sure these are California problems. They are symptoms of the more general structural transformation of the economy and the bifurcation of the labor market into a small share (say 33 percent) of knowledge jobs and a much larger share of low wage service jobs (say half).

California, Florida noted, “leads on just about every measure I’ve seen of innovation (patents, start-ups etc.) and talent (college grads). So the nature of its economy produces this kind of divide.”

The actual economic data can be used to make the case for either side.

The state has prospered and economic mobility is relatively high. At the same time, if Democrats’ top goals are to reduce poverty, lessen inequality, get a roof over everyone’s head and close the education gap, the party has a long way to go.

Let’s look at the plus side first. Take per capita personal income, which grew nationally from $4,218 in 1970 to $51,631 in 2017, according to the St. Louis Federal Reserve. In California, over that same period, income grew significantly more, from $4,966 to $58,272, in real dollars, unadjusted for inflation.

In recent years, California has ranked among the top ten states in terms of economic growth, far outpacing national growth. From 1977 to 2017, California’s real gross domestic product increased by 77.7 percent. During the same period, the national gross domestic product grew by 58.9 percent.

One of the most important measures is economic mobility — the ability to ascend the ladder. On this measure, California does relatively well, ranking 14th in the nation, according to a 2014 study by the Stanford Center on Poverty and Inequality.

“The odds of reaching the top fifth of the income distribution for children who are born in the bottom fifth in California is just over 10 percent,” Nathaniel Hendren, a professor of economics at Harvard and one of the study’s authors, said by email. “There are not many states with higher rates of this measure of upward mobility.”

Hendren and Matthew Jacob, who both conduct research at the Equality of Opportunity Project, provided The Times with mobility rates for all 58 California counties. The equality project is run by Hendren, Raj Chetty, an economist at Harvard, and John Friedman, an economist at Brown.

What stands out is the concentration of high rates of mobility in Democratic areas of the state.

Of the 26 California counties with higher than average levels of mobility, 18 — with a total population of 11-and-a-half million — voted for Hillary Clinton over Donald Trump, most by decisive margins. Eight high-mobility counties, with a total population of roughly 891,000, voted for Trump.

In another measure of economic opportunity, CollegeNet ranked colleges and universities across the nation last year on a “social mobility index” based on the income of students’ families, tuition levels, graduation rates and early career salaries. 16 of the top 25 are in California.

On the negative side of the ledger, California has the highest poverty rate in the nation, 20.6 percent based on the census measure most widely preferred by experts, the Supplemental Poverty Measure. It includes calculations of the cost of such basic resources as food, clothing and utilities, and, most of all, housing, which is very high in California.

Hilary Hoynes, a professor of economics at Berkeley, pointed out that California’s number one ranking does not reflect exceptionally low wages at the bottom.

“It is very clear that it is housing costs that drive up poverty in California,” Hoynes said by email. Using another poverty measure

where the poverty threshold is constant across all parts of the United States, California is an average poverty state. With the Supplemental Poverty Measure that adjusts the poverty threshold at the state level using housing costs, California is a very high poverty state. This doesn’t mean there isn’t a problem, but it tells you the problem is not wages and incomes — at least relative to the rest of the United States — but instead is about the cost of housing.

Homelessness by any standard is a severe problem in the state.

According to the federal Department of Housing and Urban Development, California ranked second only to New York for the share of its population that was homeless in 2017, 34 people per 10,000, compared with New York’s 45, with a national average of 17. California ranked first in the percentage of unsheltered homeless, at 68.2 — far higher than such other warm climate states as Nevada 58.4, Hawaii 52.6 and Mississippi 48.8.

Now let’s take a look at inequality. There are a number of ways to measure inequality, and California does not do well according to any of them.

In a July 2018 report, the Economic Policy Institute, a liberal think tank, ranked the states on the basis of the ratio of the average income of the top one percent to the average income of the remaining 99 percent. California came in seventh, with New York, Florida and Connecticut ranked highest on inequality.

In a separate analysis of state level inequality, Zippia, a job search website, ranked states using the Gini coefficient based on data collected by the census from 2010 to 2016. (The Gini coefficient is a gauge of economic inequality ranging from 0 to 1.0, with 0 representing perfect equality and 1.0 representing perfect inequality.) Using this measure, California ranked fourth highest in income inequality, behind New York, Connecticut and Louisiana.

Immigration and out-migration trends also point to increasing bifurcation by income and education. California has been losing residents to other western states, including Texas, Arizona, Nevada and Oregon. In a February 2018 report, the state Legislative Analyst’s Office found “from 2007 to 2016, about 5 million people moved to California from other states, while about 6 million left California.”

Families with children headed by adults with a high school education led the charge out of the state, many of them unable to afford California’s high housing costs. Dominating those coming into the state were those with high incomes and college-educated 18-to-35 year olds.

What to make of the conflicting statistics? I went back to Jonathan Rodden, who argued that both the strengths and weaknesses of California are less political than structural.

“The industries in which California excels — e.g. the knowledge economy in the Bay Area and entertainment in Los Angeles — benefit from tremendous agglomeration economies. Certain firms and workers in these sectors find it very difficult to locate anywhere else,” Rodden told me.

What Rodden calls “California’s locational advantages in technology and entertainment” empower the state

to get away with levels of taxation that might cause capital flight in a state based on more traditional manufacturing. Moreover, knowledge economy firms are unlike traditional manufacturing firms in that they have stronger demands for active government involvement in things like intellectual property protection, urban infrastructure, and investment in science and education.

The result? “A mix of high taxes, rapid growth and high inequality.”

Kenneth Miller, a political scientist at Claremont McKenna College, described California as “a paradox.” On the one hand, Miller wrote, the state

is succeeding on many dimensions — job growth, personal income, state revenues, and more — but failing on others. It ranks top in the nation on the Census Bureau’s supplemental poverty measure and homelessness measures. Its high housing and other costs are also forcing many working and middle class residents to exit for other states.

Miller was unwilling to assign blame, but his comments revealed both concern and regret:

California is not yet as socially and economically stratified as South Africa or Latin American countries, but one does feel the growing divide between the highly educated, wealthy, upper class and the growing underclass, while the formerly dominant middle class hollows out.

When people talk about the future of the country, the most commonly cited states are California and Texas. The two states have some similarities: in Texas, whites, at 42 percent, are no longer the majority, soon to be overtaken by Hispanics (39.4 percent). Texas and California have gone back and forth in terms of competition for job creation and economic growth.

In terms of taxing and spending, however, they represent very different choices, California higher on both counts, Texas lower.

Conservatives prefer the Texas model, of course — in large part because it has the sixth-lowest per capita tax burden in the nation. Spending by state and local government is 12th lowest.

Ultimately, voters will make the decision of whether the nation follows the California or the Texas model. A key factor is demography, especially the slow but steady decline in the number of white voters and the rising share of the electorate made up of minorities. Polls consistently show that nonwhites are more supportive of social spending — the California model — than whites are.

This year, the Texas model is revealing the potential vulnerability of its white base of support. Polls currently show Ted Cruz, the incumbent Republican Senator, holding only a slim lead — 3.2 percent — over Beto O’Rourke, his Democratic challenger. For O’Rourke to even be threatening Cruz may signal long-term potential for the California model.

California may presage America’s political future in another sense.

“The Democrats are essentially an urban party, which means they are a coalition of low-income service workers and high-income knowledge-economy workers,” Rodden told me. That means “they are simultaneously trying to be the party of San Francisco and the party of Scranton.”

In California, Rodden continued, “the policy demands of high-income professionals in Silicon Valley will often be in tension with those of low-income service workers,” mirroring the built-in tension nationally between upscale well-educated Democrats and the disproportionately minority poor who make up a crucial part of the coalition.

At the moment, the Democratic coalition in California is — relatively speaking — a smooth running machine. But over time, both in state and out of state, as Rodden put it, “the solidarity of Democrats in San Francisco with those in Scranton may become tenuous.”

The fragility of that alliance is what left an opening for a candidate — and a president — like Trump.

I invite you to follow me on Twitter, @Edsall.

Follow The New York Times Opinion section on Facebook and Twitter (@NYTopinion), and sign up for the Opinion Today newsletter.

Thomas B. Edsall has been a contributor to The Times Opinion section since 2011. His column on strategic and demographic trends in American politics appears every Thursday. He previously covered politics for The Washington Post.  @edsall