Elon Musk is not alone in his frustration with the way California treats businesses. But he makes the news, and the announcement that SpaceX is abandoning plans to build rockets in Los Angeles and will instead make them in Texas and Florida is another high-profile setback for the state. One wonders if Sacramento and the local halls of government will ever acknowledge how they’ve mismanaged what was once a promised land.
Musk’s SpaceX didn’t cite a reason for walking away from the Port of Los Angeles location, where it was to assemble its Starship rocket. But it doesn’t have to post a list of grievances on the door of the capitol. California’s hostility toward business is well known. Executives would rather not expand into the state, innovators are increasingly reluctant to launch startups here, and international companies that have been located, and sometimes headquartered, in California for decades have left.
Musk was openly critical of California’s hostility toward business when he threatened last month to move his Tesla plant out of the state because Alameda County officials told him he couldn’t restart production without government approval after it had been shut down due to the pandemic. The standoff was eventually settled, but Musk made his point about the state’s anti-business attitude.
California might not miss the loss of a single facility that hadn’t yet begun to produce. But one wonders how long the state can sustain the steady loss of businesses, possibly as many as 13,000 from 2008 to 2016, because of the tax and regulatory environment, and bear the exodus of multitudes of its most productive citizens because they can no longer afford the housing prices and governments’ ravenous claim on their earnings.
In 2018, according to federal census data, roughly 190,000 more people left than moved in, the second straight year the state lost more to relocations than it gained. Last year, more than 500,000 Californians left for Texas. No matter where they settle, former Californians can find online support groups, says CalMatters, where they’re free to “complain about their former state, or even their new one, while still maintaining that they’re glad they left.”
Many flee for reasons beyond housing costs and taxes. They’re weary with the litter, a festering homeless problem, meddling policymakers and now a lockdown that extended beyond the stay-at-home orders issued by other governors.
Not all want to cross the state line. Some are content to move to more open areas where they don't have to endure big city governments’ increasing indifference to the middle and working classes, and are exposed to municipal policy failures that make those same cities hard to live in. A recent report in SF Gate reports wealthy buyers are in a “mad rush” to leave San Francisco. One of the favored destinations is Lake Tahoe, as “the prospect of living out of the city on an alpine lake while maintaining a career is appealing for a new generation of young buyers.”
Many of the California “emigres” are workers following the jobs they have with companies that have relocated. But who would be surprised if, in the not-too-distant future, people leave because jobs are drying up? When a large company such as Charles Schwab or Mitsubishi shifts to a better business environment in Texas or Tennessee, other companies are adversely affected.
“You don’t just lose the jobs from the company that’s moving, you lose the jobs at their suppliers. Five hundred jobs can turn into 2,000,” said the late David Sparling, a professor at the University of Western Ontario.
There is also a “pervasive ripple effect” that harms nearby businesses when large companies are driven away by smothering public policy.
“Not only does each corporation create thousands of jobs, but the business is a critical part of the local economic foundation,” writes author Kristin Tate.
Images are tarnished as well when cities and states bleed companies and residents. California’s growing reputation as an exhausting place to do business and call home — “California is becoming an increasingly difficult place to live and work,” says a Texas Realtor happy to welcome refugees — makes it a less-inviting destination for relocations, and business expansions and startups.
It’s an indictment of the political leadership at all levels that companies and residents continue to run from what was once the land of opportunity. Policymakers should be fully committed to making California great again, but there’s little appetite for that. They inexplicably think it’s still great now.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.