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Restoring California Competitiveness: Let My People Go!

By Lucy Dunn, President and CEO, Orange County Business Council
This blog originally appeared in the California Political Review.

California was a place originally known for its opportunities, beauty, wilderness, open roads, Gold Rush mentality, freedom, and innovation. Eureka, the state’s motto, means “I have found it!”  But this place of dreams is now the land of wishful thinking: a consummate nanny-state of over-regulation, command and control.  From the profoundly and absurdly huge ideas (saving the planet from climate change while China and India march to a different tune) to the silly (mandating fitted sheets in hotel rooms).  And we’re so over-regulated, that I guarantee, right now, you are breaking some California law this very minute.  (Did you install your CO2 monitor required in every home July 1? No? $200 fine is on its way.)

Where unemployment at over 12% is one of the highest in the nation–two million people out of work–the state’s bond ratings flirt with junk status, and private investors are wary of a constantly changing and uncertain regulatory environment.  Where governors from other states proactively seek and invite the relocation of our best businesses.  And what’s to stop business from leaving? California has ranked 49th or 50th on numerous national lists as the worse place to do business for the last several years.  According to Dun & Bradstreet, 2,565 businesses with three or more employees have relocated to other states since January 2007 and 109,000 jobs left with those employers.

How can we restore California’s competitiveness?

With less.

Less government, less regulation, less mandate, less taxes.  We need to “let my people go!” as Moses would say.

One of the most difficult challenges posed by legislators to the weary regulated community is to name which offending regulations to change.  There are so many—each individually and independently approved with such good intentions—but piled one on top of the other, have produced a morass of laws and prohibitions that stifle investment, strike fear into the hearts of small business start-ups, and ultimately kill jobs before they’re even offered.

How many folks lost the opportunity for employment because—instead of hiring–thousands of hotels must now buy replacement fitted sheets for flat sheets?  Yes, that’s the law now proposed.

Let my people go.  Let my people work.  Simply, until businesses can predict with relative certainty what regulations they will be subjected to, (and litigated) and what their tax burden will be, at all government levels, they will not invest or grow or hire.  If business isn’t investing, growing or hiring, the state isn’t receiving tax revenues.  If business isn’t investing, growing or hiring, public employee pensions like CalPERS aren’t earning fair returns on their portfolio, entirely invested in stocks, bonds, mutual funds, real estate:  in BUSINESS!  The more elected leaders forget these time-honored facts, propose more taxes to fund government, or favor the flavor of the day in eco-thought without regard to economic benefit, the more this state will sink into a black hole of red ink.

To return California to economic competitiveness, every regulator at every level must do one thing now:  any proposed regulation must be subjected to an independent economic impact analysis.  What laws will it affect?  What jobs will it create/destroy/impact?  What other departments or agencies have competing or conflicting regulations?  What is the true cost/benefit analysis?  How does this relate to competing/complicit federal regulations?  You get the picture.

The independent economic impact analysis must be paid for by the agency or lawmaker proposing the law.  Don’t have funding to do this?  Don’t propose the regulation.  The economic impact analysis must be done by an outside, independent company—not by the lawmaker or agency in-house.  This analysis must be on the same level of sophistication as a CEQA environmental impact report for a proposed real estate development project, including formal public review, peer review and comment processes.

Southern California Association of Governments (SCAG)—the metropolitan planning organization for two-thirds of the state’s population—recognized this year that planning for future growth meant nothing without a strong economy.  Earlier this year, under the work of seven economists, developed its first ever Southern California Economic Recovery and Job Creation Strategy (www.scag.ca.gov) concentrating specific recommendations to expand the region’s economic base and increase the flow of funds driving the regional economy.  Fundamental to the strategy is the maxim that “stronger economic growth will help every community.”

To their members’ credit, SCAG approved this strategy unanimously.  190 cities and counties–with the strong support of the business community–threw down the gauntlet with job-creating action strategies that include:

(1) Oppose new legislation that negatively impacts jobs in the private sector;

(2) Support legislation that allows agencies…the flexibility to finance early delivery of project and at the same time create jobs;

(3) Eliminate or reduce regulations that inhibit expedited project delivery; and

(4) Require new state regulations be accompanied by an independent economic impact analysis…Any legislation considered to significantly impact jobs would be opposed;

This is outstanding work that recognizes California’s return to competitiveness begins with jobs that result from less government.  The State has both the need and wherewithal to develop a comparable strategy to create jobs, stimulate the economy, reduce regulations, and ultimately increase California’s competitiveness. Let my people go.


Posted on July 19, 2011

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