A report issued earlier this year from California’s Office of Legislative Analyst “California’s High Housing Costs: Causes and Consequences,” cites the following statistics: “Today, an average California home costs $440,000, about two–and–a–half times the average national home price ($180,000). Also, California’s average monthly rent is about $1,240, 50 percent higher than the rest of the country ($840 per month).”
It’s actually much worse than that. Anyone living on California’s urbanized coast, from Marin County to San Diego, has to laugh at the idea that a modest home can be found for anywhere close to $440,000, or a decent rental can be found for anywhere close to $1,240 per month. In most urban areas within 50 miles of the California coast, finding a home or a monthly rental at twice those amounts would be considered a bargain.
These prohibitive costs for housing are mirrored in California’s unusually high costs for electricity, gasoline, water, and, of course, California’s unusually high taxes. The cost of living in California is one of the highest in the nation – along the coast, it’s probably the highest in the nation. For this reason, it’s completely understandable that California’s state and local government unions perpetually agitate for higher pay and benefits for their members. But they’re leaving everyone else behind.
The problem with the oft-repeated mantra “teachers, nurses, police and firefighters need to be able to live in the communities they serve” ought to be obvious. Nobody can afford to live in these communities, unless they’re either very wealthy, or they’re early arrivals whose mortgages are paid off and whose children have graduated from college. Otherwise, if they live on the California coast in a decent home, they’re in debt to their eyeballs.
This is a failure of policy, and the worst possible response is to exempt public sector workers – the most powerful voting bloc in California – from the consequences of these policies. Because the most enlightened public policies that union leadership might advocate – all unions, public and private – are not to raise pay and benefits for their members, but to lower the cost of living for everyone. And the way to lower the cost of living for everyone is to permit competitive development of land, energy, water and mineral resources.
Along with permitting private interests to compete, California needs to change how public money is invested. California’s biggest infrastructure project in decades is the high speed rail project, which was originally sold to voters as costing $9.5 billion. According to a 10/24/2015 report in the Los Angeles Times, here are the latest projections:
“After cost projections for the train rose to $98 billion in 2011, vociferous public and political outcry forced rail officials to reassess. They cut the budget to $68 billion by eliminating high-speed service between Los Angeles and Anaheim and between San Jose and San Francisco.”
The LA Times report goes on to describe how High Speed Rail is again over-budget. If it’s ever built, it’s likely to cost approximately $100 billion. Using an online mortgage calculator, you will see that a 5.0%, 30 year fully amortized $100 billion loan will require total payments per year from taxpayers of $6.4 billion. That’s over $1,000 per year from each of California’s taxpaying households. Don’t count on ridership revenue to help pay capital costs – it is highly unlikely ridership will even cover operating costs.
The opportunity here, however, is that California’s high speed rail project may never be built. Because one of the conditions of the project is attracting a percentage of matching funds from private investors, and these commitments are not pouring in. Unions who are currently fighting for high speed rail will need to find new projects to support. Regardless of what you may think about unions, as long as they have the political clout they’ve got, their support for new projects could be good, if they modify their criteria.
California’s unions need to support competitive resource development and they need to advocate public/private investment in revenue producing civil infrastructure that passes an honest cost/benefit analysis. These policies would not only lower the cost of living, they would create millions of jobs. The problem with high speed rail isn’t that it doesn’t create jobs, the problem is it destroys more jobs than it creates. High speed rail would be a parasitic economic asset dependent on taxes and subsidies to exist, while not even making a dent in California’s overall transportation challenges.
Unions in California need to return to the core ideals of the labor movement, which is to care about ALL working families. And if they care about those ideals, they will make hard political choices. They will take on California’s super-sized environmentalist lobby, along with their powerful friends, trial lawyers and crony green capitalists. They will challenge the biased studies that claim California cannot solve its land, energy, water and transportation challenges without what is essentially rationing. They will recognize that policies that create artificial scarcity only empower the rich and the privileged. They will participate in a new dialogue aimed at identifying measured and decisive ways to unlock California’s abundant resources; aimed at identifying infrastructure projects that are financially viable enough to attract private investment. They will get out of their comfort zone, confronting old allies, and finding new friends.
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Desalination Plants vs. Bullet Trains and Pensions, April 7, 2015
Raise the Minimum Wage, or Lower the Cost of Living?, March 31, 2015
An Economic Win-Win For California – Lower the Cost of Living, December 3, 2014
Reinventing America’s Unions for the 21st Century, September 2, 2014
How to Create Affordable Abundance in California, July 1, 2014
California’s Green Bantustans, May 21, 2014
Public Pension Solvency Requires Asset Bubbles, April 29, 2014
Pension Funds and the “Asset” Economy, February 18, 2014
Exclusive Interview with Joel Kotkin, January 4, 2014
Bipartisan Solutions for California, October 27, 2013