ABCs of California Business (updated 27aug14)

George Rebane

With the new gas taxes staring us in the face after the new year, you just can’t say enough about the socialist mindset that is driving out California businesses, causing them to expand elsewhere, and convincing outsiders to not to start new enterprises here.  The only exceptions that the socialists can point to are businesses who must be close to their California customer base.  The big deception that these self-serving politicians push is on the very ‘peehpul’ of whom they claim to be defenders.

While attracting and importing thousands of illegals and people without marketable skills to pack their voter rolls, the regulations and fees Sacramento adds daily do nothing for wealth creation, and everything to keep increasing the state’s population of indigents and welfare recipients.  The numbers tell the story.  According to taxfoundation.org, California is 48th in the State Business Tax Index, and at 11.2% has the 4th highest burden of state and local taxes.(more here, here, and here)

Today as the middle class depopulates the golden state, we will wind up with the double humped distribution on the wealth scale that is so common in third world countries with massive unemployment.  And given the leftwing leeches in the form of rent-seeking NGOs, the countryside is covered with propaganda urging us to work together with Sacramento to make California ‘green’ again – and that ain’t the kind of green that creates the kind of green that makes a difference.  Yes, rapidly becoming an old saw (here), but today truer than ever - Anywhere But California.

[25aug14 update]  The ‘What Recovery?’ t-shirts worn by the unemployed protesters at the just concluded central bankers’ big do at Jackson Hole underline what RR has been telling its readers for some years – we are in Depression2.  There is yet no recovery by any acceptable definition of the term.  (Please review the more arcane details in 'The Recovery Rigmarole'.)   A reader sent me the following graphic by Sentier Research that details how the country has been doing in the net worth department over the recent years.  Here’s what more of Depression2 data looks like.

All this makes mind boggling the legislation dished out by the double dummies in Sacramento to Californians who are doing their best to stay put and work to pull the state out of its much denied nose dive.

[26aug14 update]  Check out the new RoboBrain project of the National Robotics Initiative sponsored by the feds and major corporations.  This involves the assembly of a vast online knowledge base of things ranging from common sense to sophisticated probabilistic reasoning, all connected to the everyday life of humans.  It will be assembled in a format that is accessible to individual robots serving in various jobs in the home, office, and, more importantly, in service jobs like in restaurants and store clerks.

I include this item here because we are talking about the economy, businesses, and jobs.  It appears that the Japanese paradigm for robot assistants is gaining traction.  Instead of developing only new robotics systems to make things and perform tasks, robots that have the form factor of humans will make up one echelon of human replacements.  It is these robots that have a free form interaction with humans in their existing environment that will need to access RoboBrain in order to function usefully.

The growing impact of all this on systemic unemployment should be obvious to educators, politicians, and policy makers.  But it isn’t.

[27aug14 update] Depression2 for the record.  Today we learn from filed court documents that both ex-Fed chair Bernanke and ex-SecTreas Geithner both acknowledge that the financial meltdown that started this depression was historically the worst.  And we do have to recall that this was again an entirely government induced meltdown, as was the one that made the 1929 market crash into Depression1.  Here is a quote from the 27aug14 WSJ report on the matter.

Former Federal Reserve Chairman Ben Bernanke, a prominent student of the Great Depression, contends that the 2008 financial crisis was actually worse than its 1930s counterpart.

Mr. Bernanke is quoted making the statement in a document filed on Aug. 22 with the U.S. Court of Federal Claims as part of a lawsuit linked to the 2008 government bailout of insurance giant American International Group  Inc.

“September and October of 2008 was the worst financial crisis in global history, including the Great Depression,” Mr. Bernanke is quoted as saying in the document filed with the court. Of the 13 “most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.”

Former Treasury Secretary Timothy Geithner is quoted in the document offering a similarly apocalyptic assessment. From Sept. 6 through Sept. 22, the economy was essentially “in free fall,” he said.

Comments

[Walt]

With the new regs. even more "mom and pop" businesses will be going under.
( Small business.. the backbone of employment) The majority of general contactors will go tits up.It's just too expensive to replace perfectly good equipment that's outlawed by the state. Be it an on road truck, or an off road tractor.
When AB32 is fully in place, this house of credit cards called Ca. will come crashing down.
Then who will Ca. LIBS point the finger at? Well,, I happen to have a "finger" at the ready to hoist high when they try.

Ever hear of Ivanpaw solar power station? It now needs to burn NG to keep going. Something like 30% of it's output will be from GAS...
Once again solar proves it's not as great as the claims made.

[Russ Steele]

As the "going green" wind and solar power sources have proving to be unreliable and more costly, energy industries are looking for locations with lower cost more reliable energy. As Germany is learning, going green has produced great anxiety amongst the industrial giants across the country.

According to some reports the recent overhaul of the country’s complex renewable energy law has done little to alleviate uncertainty over future policy or assuage fears about German energy competitiveness. Some energy intense industries, especially chemical manufactures are looking at the US with it's declining fuel prices due to the surpluses created by fracking.

“Energy intensive industries in particular have lost confidence in the future of Germany as a business location,” said Thomas Mayer, a former chief economist at Deutsche Bank who now runs the Cologne-based Flossbach von Storch Research Institute. “I think this is a major issue that will burden German industry for years to come.”

California's environmental wackos have put a collar on the use of fracking in the state. German companies will not be looking to California as future development sites. In fact, energy intensive companies will be looking to follow the German lead in seek lower cost energy. That will be in the states with an abundance of low cost natural gas.

As in Germany, California's failure to secure reliable low cost energy sources for the states industry base will burden the state's economic growth for years to come.

Who knew that going green was going to cost so much? OK, so you have heard about it for years on this blog, but the folks in Sacramento were not listening or were choosing to ignore the obvious.

[Russ Steele]

From the update graphic, I think we can conclude that household net worth was highest during the George W. Bush Presidency and declined during the Obama Presidency? Right?

[Bill Tozer]

Never paid a health insurance deductible myself. But according to the notes on the graph above, key liabilities include expenses not covered by medical insurance is formulated into net worth. As Obamacare raises deductibles to play the shell game of "affordability", I can look into the crystal ball and see everybody on Obamacare just got hit with a liability and less net worth. Plus the graph goes not even include stagnet wages, less hours worked, rising costs of goods and services, nor does it mention my bottom line, aka, disposable income after taxes and bills are paid. Got milk? Need new tires? Wonder how many folks are buying stuff on the credit card....stuff like food and shoes and petro and PG&E and car insurance.

Of course under 0bama, the poor are worse off 5 years and 2 months since leading us out of the Great Recession which ended in June, 2009. What a guy! He fixed the problems, put the Great Recession in the annuals of history and got the Nobel Peace Prize all in his first 6 months. Amazing. Now we are finding out what he was been doing TO us for an encore.

[Bill Tozer]

Ah, more bad news. The CBO underestimated the revenue projected to come in from folks without insurance paying the penalty tax, or as the libs call it, The Shared Responsibly Payment. Of the 31 million without health insurance, only a few million are required to pay the non-compliance penalty tax.
Now Obamacare faces another 3 billion dollar shortfall just on the penalty tax revenue alone.
It is common knowledge that those who make so little that they are not required to file a tax return were exempt. Also those facing financial hardship such as filing for bankruptcy protection were also not required to pay the piper if they file for a hardship exemption.

So, what does this tell us about the economy in 2014? It tells us what Dr. Rebane already knows. That there are less people making enough chump change to even be required to file a income tax return than in the days leading up to making Obamacare the law of the land.

I am sick and tired out people worming their way out of paying their Shared Responsibility Payment. Hey, poor people, you owe us 3 billion clams for this year alone. Go down and sell your fluids at the Blood Bank or make some money picking aluminum cans out of gas station trash cans. It's OK in my book that you resist joining the ranks of the insured, but for heaven's sake, get off your sorry behinds and pay up. Why should the rest of us pay for your negligence. We pay for schools, libraries, and even fire-protection and parks we don't use, so you should be paying the Shared Responsibility Payment for something you don't use. Shake the old lady's purse out and shake the kids upside down and send in those pennies. Be patriotic and send Obamacare the 3 billion clams we are short on the penalty alone.

Come to think about it, before Obamacare all the projections were for an annual GDP growth of 4% in 2014, and then 5-6% by 2016 and perhaps higher by 2018-2020. hmmmmm. Now they project that 2% growth is the new normal and you get what you get and don't throw a fit. Shoot Howdy, this economy just won't allow Obamacare to not cost the taxpayer "one dime".
Gee Wally, having less workers is kinda of creepy.

[Account Deleted]

"U.S. stocks rallied on Monday, with the S&P 500 crossing 2,000 for the first time, lifted by a round of corporate deals and optimism that the European Central Bank would embark on further moves to stimulate the European economy."
Yea! More money printing - the actual economy isn't any better, it's just being stimulated. Great news!
Oh - and 'corporate deals'! (my emphasis) Wow - that'll put money in everyjoe's pockets.
Better be buying things of real worth, folks. I don't think gold will do it this time. It has no practical value beyond being used as a great surface plating for electrical contacts. Can't eat it or use it to protect yourself. The price can be easily controlled by govts and if you try to use it illegally, you are now outside the law and subject to robbery, blackmail or worse.
Pretty soon Argentina and Venezuela will look mild compared to what's coming. The Chinese are already used to following govt orders and a hard life. I wonder how most Americans are going to fare in the future?

[Walt]

Scott. Bullets and beans, and don't forget toilet paper( new gold) will be the common currency, with water a close second.
Give it time if Progressivism isn't halted. Think of it as a "civilized" Mad Max concept.
And people joke about the preppers. ( Sign on the compound gate " We told you so")

[Don Bessee]

You are so right (and I mean that in a conservative way too!) This new Federal monitoring of web speech that funds a Move On dot org to be the filter for the Govmt. makes NSA just ant other thing. Make wise choices on your commodity choices. Don't go millennium bug crazy. Since I am moderated into the real world by the pelline site. Here is what they will never post about their newest post; What a hoot, Firth endorses Firth. What's next, Doris wards letter to the editor? Shouldn't this be a Scoop like Dollar General? Oddly you missed the existing permit for the Little Valley location in your Self Proclaimed SCOOP? Second post upon moderation; Of course its awaiting moderation, this is a Shame site. Not purple but only filtered Blue.' Should we all do this to unmask his failure as a journalist, sorry his newest failures? Would that be OK Dr. R?

[George Rebane]

DonB 1106pm - Go for it. But my suggestion is to focus on his ideas; his form factor has received sufficient treatment in these pages ;-)

[Account Deleted]

I don't really see a Mad Max type of future - just a lot of govt wage and price controls, shortages, long lines, some rioting here and there (that's already been going on for decades), dismal prospects for young folks and a kind of early 50's sad British style socialism. The uber-wealthy and well connected will still be fine, the upper middle class will get whacked big time, and the poor will shuffle from one line to the next. Movement from one income class to the next will all but cease - that's for sure. If you think it can't happen, open a history book and check out any world power from as far back as you wish. The reasons for decline are there for all to see. You can't keep putting it on the credit card.

[Bill Tozer]

I wish I could copy and paste on this I-pad instead of this laborious finger typing. OK, here it goes. The Fed Reserve banks of NY, Atlanta, and Philly all released there business surveys and all released surveys say the same thing: 0bamacare will harm economic growth to the tune of 5% GDP. Basically covers manufacturing and business hiring. About 3% plan to hire more, 18% plan to hire less, add more part timers, and all say it will add 10% costs this year and a lot more next year to keep an employee. Across the board 3% say more hiring, 18-21% say no more hiring of newbees except part timers and cutting hours of existing full timers. More farming out as well. Fed surveys are on line.

If that is not enough, a fourth Fed governor released it's finding Monday saying the same thing. I can only read them and weep. Full employment first????, then growth??? Surely you jest, ass wipes. Growth will not follow without the consumer consuming and part timers ain't going to be consuming much neither will folks who live off gobberment meat and potato assistance.
Anyone care to argue with the 4 Fed Governors' surveys despite all the green sprouts withering under the scorching heat? No wonder not one single conservative voted for this job killer/growth killer. Alas, woe am I.

[Brad Croul]

Bill,
"I wish I could copy and paste on this I-pad instead of this laborious finger typing. "
You can copy/paste on an iPad.

[Brad Croul]

Re: Depression2
If you throw out the 2005 "bubble bar" in the graph, 40% of households saw net worth increases over the period. Is that similar to the Depression1?
By not mentioning the period of 2011-2014, you are choosing to ignore much of the "good news". That said, I am not saying everything is all hunky dory.

The below-linked Bloomberg headline is more positive,

http://www.bloomberg.com/news/2014-03-06/household-worth-in-u-s-rose-by-2-95-trillion-in-fourth-quarter.html

[Russ Steele]

Brad@08:58AM

The Bloomberg article does not give a break down by social structure. Was all the gain in the upper class, or spread across all classes? Consider this:

From 2000 to 2012, American workers as a whole had a tough time, as population grew much faster than new jobs and many people gave up looking for work. There was one major exception: jobs paying $100,000 to $400,000 (in 2012 dollars).

This is what I call America’s new prosperous class. Many of these workers have an advanced degree. They no longer struggle, but they continue to work because their wealth is far from adequate to support their lifestyles.

The number of prosperous-class jobs soared to 10.8 million, an increase of 2.1 million since 2000. That is almost 10 times the growth rate of jobs paying either more or less.

Most astonishing is how much of the overall increase in wages earned by the 153.6 million people with a job in 2012 went to this narrow band of very well paid workers: Just 7 percent of all jobs pay in this range, but those workers collected 76.9 percent of the total real wage increase.

- See more at: http://marginalrevolution.com/#sthash.f2nWLCWI.dpuf

[Todd Juvinall]

Russ, I was told your critic from NC, the "bigboy" has dug up a column you wrote a few years ago about the farters market. I think he might be desperate. LOL!

[Walt]

Your right Scott,, " Mad Max" is a bit of a stretch. How bout a real world " Atlas Shrugged"? That pretty much sums up your take on things.

[Bill Tozer]

Brad, I can copy and paste, but what about links? No URL, no GUI to copy

[Brad Croul]

Bill, I copy/pasted the Bloomberg link in my above post. Is that the type of thing you are trying to do?

[Bill Tozer]

Yep, Brad. Have done it once, but can't seem to do it again. Like the Fed's report, Forbes, etc. I can copy headlines or words on a page, but haven't a clue where the links are. Using Yahoo as home page via Safari......Something work gave me all loaded up with unlimited apps and stuff I don't use so "beggars can't be choosers". Took the computer to the dump.

[George Rebane]

BillT 1239pm - the link (URL) to any web page is in the address bar of your browser. Just select and copy that, then paste it into your comment.

[George Rebane]

Re more incoming on Depression2, I call your attention to the 27aug14 update to this post.

[Keen Observer]

George,

I agree with your thoughtful analysis and sources cited above, but it is entirely incorrect to suggest that both the '29 and current depression are exclusively the fault of big government. In fact, post 1929, financial regulations were put in to place to prevent another widespread market crash. But throughout the 90's and into the 2000's, crafty lobbyists supported by the highest echelons of the banking sector dismantled these regulations, largely through a combination of monetarily fueled subterfuge and outright lack of understanding by government regulators. The truth of the matter is that Wall Streets' modern shenanigans are so deviously complex (even to those schooled in such arts), that traditional government regulators are no longer competent enough to make decisions on how to keep Wall Street in check.

To compensate for this, Uncle Sam has no other choice but to hire ex-Wall Streeters to set the regulations, whom have "skin-in-the-game" and no set of morals. This regulation conundrum has led to an unbridled and immoral class of financial hegemons utilizing the system to garner unimaginable riches, at the plight of the global marketplace. I invite you to partake in this article:

http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405

Although almost all of Rolling Stone's writings are left-wing garbage, it is hard to argue with the excellently sourced writings of Matt Taibbi (no longer with Rolling Stone) on the subject of financial market shenanigans.

Make no mistake, I am almost always anti-regulation, I support laissez-faire capitalism, and am probably the most libertarian person (on all spectrums) that writes on this blog. But the unchecked power of the financial market titans needs to be reined in, otherwise, this will destroy our capitalist marketplace much sooner than any Progressive policy. In fact, the progressive policies put in to place in a POOR and unintelligent effort to remedy our economy were enacted by Roosevelt and Obama, both in response to market meltdowns that occurred when beneficial financial regulations were redacted during Republican Presidencies (Hoover and Bush).

[George Rebane]

KeenO 1220pm - Good points. First, the cause of Depression1 has been widely understood (including by Bernanke) as having resulted from the nostrums that Hoover and the Fed put in place limiting (actually cutting off) the cash supply to banks which needed cash beyond reserves to make loans to faltering businesses that needed added debt capital to continue post-1929 operations. FDR made it worse by declaring bank holidays to keep people from withdrawing their savings, and thereby causing the complete loss of confidence in our banking system. Recall that nothing worked to halt Depression1 as attested by SecTreas Morgenthau in 1939 when unemployment was as it had been in 1933.

Regardless, I come from the school that does not give government a pass just because special interest lobbyists do what they are paid to do. If govt passes laws so complex that it no longer can interpret them or their impact without input from obviously biased lobbyists, then they have already gone off the rails, and the ensuing catastrophe is govt's fault. No elected representative or unelected bureaucrat can point a finger and say 'The dibbil made me do it.' Dodd-Frank, Obamacare, California's AB-32 are just recent examples of lobbyist crafted legislation that allows the electeds and their mindless agency minions to then raise their hands and claim innocence.

I invite you to join me in not cutting them slack on this, and instead insist that they competently do the job they have sworn to do and for which they collect a regular paycheck.

[Keen Observer]

George,

We largely agree, but some regulation can be beneficial when other regulation is just downright laughable (AB32, Obamacare, and even Dodd-Frank, all great examples). The legislation that Hoover put into place may have limited cash supply, but it also fostered big banks' ability to grab cash (through "investments") from all walks of life and corners of the globe, which resulted in a "too many eggs in one basket" financial situation. When this occurred and the large financial bets went sour, this nearly destroyed world markets twice.

I don't cut government or their overpaid and underwhelming minions any slack, I just suggested (in the first sentence of my previous post) that big government was not "exclusively" the cause of either Depression. Our current banking system is broken, and the power centralization that has grown over the years and currently exists makes it unreasonable to think that another market crash will not occur, or that any meaningful change will occur. On the other side of the coin, Government cannot regulate a market that it doesn't or can't understand, no more than a 9-5 secretary with a Liberal Arts Degree can repair the automatic transmission on a new car.

The only reliable solution then would be to foster self-reliance and responsibility amongst the people, and this is where my Libertarian philosophies come into maturity. As a person, if you choose to subscribe to the ranks of big government or big business, then you have no reason to complain when either of these fails you. Own your poor judgement/support and move on. Rather then follow the subscriptions or viewpoints of others (Democrat, Republican, etc..), I suggest that people actually take responsibility and become informed of your own rights (property, liberty, etc..), and make life and financial decisions that aren't exclusively dependent on the decisions of others.

As I have said before, the concept of "self-reliance" can be a powerful tool to keep in check both big government and big business, as neither can survive and exploit the populace when people are more independent, informed, and responsible for themselves.

[Gregory]

The Mexicans are coming! The Mexicans are coming!

Interesting poll released yesterday by Pew... a full third of Mexicans asked said they'd move to the US if they had the means to do so, equally split into groups that would do it only if legal, and those who would do it illegally.
http://www.pewglobal.org/2014/08/26/mexican-president-pena-nietos-ratings-slip-with-economic-reform/

The immigration question is at the very bottom.

[Bill Tozer]

Breaking news! The bidding war is over at last. Despite Jerry Brown's herculean effort to keep them here and promised streamlining of the year long process of EIRs and even suspending parts of the California Clean Air Act in addition to assuming liabilites for non compliance with CARB and Agenda 21, Tesla Motors has chosen the Great State of Nevada for the sight of its new battery manufacturing facility. Goodbye 6,500 jobs.

Looks like Silicon Valley is maturing and tired of shouldering the burden of 1/3 of the nation's welfare recipients. Even millions in tax breaks for the evil corporation was not enough. Anywhere But California wins out again.

[RL Crabb]

Lots of crowing from the locals today over Tesla's moving to Reno. Yeah, it's good for our area, but the trend that sent them there isn't positive. There are and will be many more jobs exported to other locales farther away from our tiny corner of the universe.

[Gregory]

The Tesla battery megafactory is good for Reno. It's possible the workers in Reno may occasionally visit Truckee or western Nevada County, buying dinner, maybe soiling some sheets or even buying a copy of The Union, but it won't really measurably anything we do here.

SOME Truckee residents will apply for jobs, and after cap and trade causes gas to skyrocket, they'll be able to buy gas in NV, a win-win. Those who, like Frisch, profess to believe in manmade (as opposed to Mann made) global warming, will move to within electric bicycle distance.

I don't blame them choosing to be just out of reach of the Steven Frischs on this side of the border, not to mention avoiding the tax on inventory California levies every year. The other shoe to drop is that they want a few billion dollars of tax concessions to help get the thing built.

[Gregory]

I just cracked the code for the site of the new battery plant... that Reno-Tahoe Industrial Park 15 miles east of Sparks, which itself is NE of Reno... is in an area also known as Mustang.

As in the adjacent "Mustang Stag Ranch", one of the more celebrated brothels in Nevada. Travel to the new plant is going to be good for business. More bang for the buck? What's the travel expenses code for a [service deleted]? Can I deduct mine? Can a vendor pick up the tab?

Someone's ship has come in.

[Gregory]

The Mustang Ranch is literally closer to the Tesla site than Grass Valley is to Nevada City. Ride em', cowboy.

[Walt]

And a new customer who goes through plenty of batteries. A new "testing proving grounds"?

[Walt]

Now we know why Nev.. The only Lithium mine in the country.

[Brad]

Gregory, good catch! I thought the Mustang Ranch was somewhere else - I didn't know it was freeway close to I-80. Now we know the 'real' reason why the execs didn't choose the other sites!

[fish]

Posted by: Brad | 04 September 2014 at 07:38 PM

No Tesla exec worth his salt would visit! I'm sure they prefer a much higher level quality of service provider.

[RL Crabb]

It's a progressive wet dream...Keep all the dirty work on the Nevada side and and take the clean money on the California side.