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Outside the Beltway: California Dreamin' Up Ways to Avoid Economic Disaster

Posted By Mike Brownfield On January 11, 2010 @ 4:25 pm In Ongoing Priorities | Comments Disabled

California, the land of sunshine, surfing, soaring unemployment and ballooning deficits, may be making moves to strip itself of one of its most costly and draconian environmental regulations: the cap-and-trade carbon tax. Meanwhile, the City of Los Angeles is turning to private industry for help in digging out of a financial hole.

As reported in The Wall Street Journal [1], California Assemblyman Dan Logue started a campaign to suspend the state’s Global Warming Solutions Act, which The New York Times calls the “nation’s furthest-reaching global-warming law.” [2] It was designed to reduce the state’s carbon emissions and is set to take effect in 2012. However, all indications are that the law would have devastating effects on the state’s already dismal economy.

From The Wall Street Journal [1]:

This feel-good law to reduce the state’s carbon footprint was enacted with great hoopla by the Democratic legislature and Republican Governor Arnold Schwarzenegger in 2006 when the state’s economy was growing and the jobless rate was 5%. The law requires that starting in 2012 the state must ratchet down its carbon emissions to 1990 levels by 2020. The politicians and green lobbies told voters this energy tax would create jobs—the same fairy tale many in Washington are repeating today.

Now the jobless rate is 12.3%, 2.25 million Californians are unemployed, and the state government is broke. So Republican Assemblyman Dan Logue has begun collecting signatures for “The Global Warming Solutions Act,” a ballot initiative that would suspend California’s cap-and-trade scheme until the unemployment rate falls below 5.5%. He’s aiming to get it on the November ballot.

According to The Wall Street Journal, recent studies have predicted [1] that implementing the cap-and-trade legislation “could easily exceed $100 billion” and would cost the average household $3,857 per year. Logue’s Web site says the legislation will cost small businesses $49,691 per year, lead to a loss of 1.1 million jobs, and “result in a total loss of output of $182.649 billion.”

In other words, the environmental law would create an entirely poisonous business environment.

Regulations abound in California. The Wall Street Journal cites a study by the Governor’s Office of Small Business Advocacy which estimates that “the direct cost of current California regulation is $175 billion, or nearly twice the size of the state general fund budget and about $134,000 per small business each year.”

Los Angeles, too, is recognizing the cost of regulations (not to mention budget deficits and plunging revenue.) The Wall Street Journal reports [3] that the city could face a $1 billion budget deficit in two years and is currently suffering a 12.6% unemployment rate (it has lost 150,000 jobs since 2008.) Now, the city’s mayor is turning Austin Buetner, a private-equity executive, to help make the city “more business friendly.” The Wall Street Journal says Beutner “faces a daunting task.” [3]

Los Angeles business owners have long complained they are trapped in a tangle of regulations and taxes that make doing business in the city difficult and expensive. In a November survey of Los Angeles business owners, 74% characterized the city as unfriendly to business.

“We have a city government that thinks last about the effects of laws and regulations on the business community, and how [those laws and regulations] affect businesses staying in Los Angeles and new business coming into the city,” said David Fleming, founder of the Los Angeles County Business Federation, an association of business chambers that conducted the survey.

Extreme environmental regulations are costly and crippling to the economy? Deficit spending can cause fiscal catastrophe? Maybe California’s woes should be a message to Congress.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/01/11/outside-the-beltway-california-dreamin-up-ways-to-avert-economic-disaster/

URLs in this post:

[1] As reported in The Wall Street Journal: http://online.wsj.com/article/SB10001424052748703580904574638153342723572.html

[2] The New York Times calls the “nation’s furthest-reaching global-warming law.”: http://greeninc.blogs.nytimes.com/2009/12/31/california-climate-law-faces-opposition/

[3] The Wall Street Journal reports: http://online.wsj.com/article/SB126316896876124009.html

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