Is California a Ruined Economy?

California high debt unemployment meme

California high debt unemployment memeCourtesy of Ryan Fournier, with over 45,000 likes and 16,000 retweets. It was also shared by some large Facebook pages like Liberty Hangout, with over 3,700 shares. This meme claims California suffers from a myriad of economic and government-caused woes inflicted by Democrats. Some have merit, but others are misleading or outright false. Here’s the breakdown.

Highest Debt

This claim is technically true, but misleading. California does have the highest state debt, at $153 billion, but it also has the highest population. By a lot. With 39.5 million people, their population is more than 10 million than the next closest, Texas, at 28.3 million. All things being equal, we would expect their debt to be the highest.

If we look at the more relevant statistic, debt per capita, California is not the highest. Massachusetts and Connecticut lead, with over $11,000 per person. California is in the middle of the pack, 34th, at $3,850 per capita. Tennessee has the least debt, at $911 per person.

Note: only state debt was factored in here, not state and local. Since local debts vary widely, and residents aren’t responsible for neighboring community debts, it doesn’t seem to be a relevant metric for comparing states. However, even if we include state and local debt, California is still not highest.

Highest Unemployment Rate

This claim is false. According to the BLS, Alaska has the highest unemployment rate, at 6.5%, while Hawaii is the lowest at 2.2%. California is in the middle of the pack, tied with 6 other states at #32, with a 4.1% rate. This is slightly above the national rate of 3.7%, but still quite low by any historical standard.

Highest Income Tax Rates

This claim is true. As of 2018, California has the highest top income tax rate of all states, with a top rate of 13.3%. This only kicks in above $1 million, but the lower brackets are also quite high:

  • 12.3% above $550k
  • 11.3% above $330k
  • 10.3% above $275k
  • 9.3% above $54k

The next highest is Hawaii, with a top rate of 11% above $200k. Beyond that, no state has a bracket above 10%, and only Minnesota and Oregon are above 9%. Seven states have no income tax (WA, TX, NV, AK, FL, SD, WY).

Highest Corporate Tax Rates

This claim is false. As of 2018, Iowa has the highest corporate rate, at 12%. California’s is 8.84%, putting it behind 7 other states (Iowa, Pennsylvania, Minnesota, Alaska, Illinois, New Jersey and Maine). Wyoming and South Dakota levy no corporate income tax.

Most Regulations

This claim is false, but not far from the mark. It’s difficult to determine which state has the most regulations, or most regulated economy, as regulatory impact is often more about “quality” than quantity. Certain regulations have much more impact or carry more burden than others on the economy.

The Cato Institute issues a comprehensive report ranking each state on freedom, which factors several different areas, from economic to social freedom. In the area of regulation, California ranks 48th. Not the worst, but close to it. Only New York and New Jersey rank worse. Regarding regulations, the report says:

California is one of the worst states on land-use freedom. Some cities have rent control, new housing supply is tightly restricted in the coastal areas despite high demand, and eminent domain reform has been nugatory. The state even mandates speech protections in privately owned shopping malls. Labor law is anti-employment, with no right-to-work law, high minimum wages, strict workers’ compensation mandates, mandated short-term disability insurance, stricter-than-federal anti-discrimination law, and prohibitions on consensual noncompete agreements. Occupational licensing is extensive and strict, especially in construction trades. The state is tied for worst in nursing practice freedom. The state’s mandatory cancer labeling law (Proposition 65) has significant economic costs. California is one of the worst states for consumers’ freedom of choice in homeowner’s and automobile insurance. On the plus side, there is no certificate-of-need law for new hospitals, there have been some moves to deregulate cable and telecommunications, and the civil liability regime has improved gradually over the past 14 years.

Welfare Recipients

This is true, but misleading. California spent $43.9 billion last year on welfare programs, the next closest was New York at $20.5B. However, again we must acknowledge that California has a significantly higher population than any other state, and would be expected to have more welfare recipients and spend more on welfare programs. The more relevant metric is per capita.

If we look at the various means testing programs, California is not the highest per capita. There are currently almost 12 million enrolled in Medicaid and CHIP there, which is about 30% of the population. Looking at the rest of the country, this ties them with West Virginia, while New York, Louisiana and New Mexico all have a higher percentage. New Mexico is the highest, with 35%.

As for food stamps (now called SNAP) California fares substantially better. According to the Center on Budget and Policy Priorities (CBPP) 10% of California residents received food stamps, which was actually better than the national average of 13%. In fact, only 12 states had lower percentage of population receiving food stamps. New Mexico and Louisiana were again the worst.

Highest Homeless Population

This claim is true. According to the United States Interagency Council on Homelessness, California has over 134,000 homeless, which is far more than any other state and almost 25% of the entire national homeless population. New York does beat out California in a homeless per capita basis, but this is outweighed by a simple and stark difference. Only 5% of New York homeless are unsheltered, while a whopping 75% are in California. This means the higher number of homeless in California is also exacerbated by them living on the streets. This impacts other residents far greater not only on an aesthetic level, but also brings health dangers like the recent typhus outbreak.

Note: this homeless statistic comes from a “single night in January” study done by the Department of Housing and Urban Development. It’s widely cited and seems sound, but it should be understood it took only a one day snapshot, and isn’t a comprehensive tally of the entire homeless population.

Conclusion

This meme has 2 true claims, 2 true but misleading and 3 false ones. In the mad world of memes this isn’t terrible, but certainly not an example worth sharing.