Gov. Pete Wilson’s term in office has coincided with the worst slump in the history of the California economy. Between July, 1990, and the end of last year, California lost about 600,000 jobs; over the same period, the rest of the American economy added more than a million and a half jobs. Wilson claims, of course, that the California recession wasn’t his fault. The truth is that he hasn’t mattered, not having done much—although you can bet that he would be claiming credit if the state’s economy were thriving. But the real question for voters is whether Wilson has what it takes to lead California back to enduring prosperity.
To be an effective economic leader, a governor must have three qualities. First, he or she must be a realist—someone who can both face the facts and be honest with the voters. Second, the governor must understand the state’s economy—really understand it, not spout ideological slogans that have little to do with business reality. Finally, we need a governor who has a plan for the state’s future, and who shows some faith in the ability of Californians to turn their economy around.
After four years of Pete Wilson, we have plenty of evidence on which to judge him on these essential qualities. He simply doesn’t pass muster. Start with the problem of realism. Wilson has spent his whole term governing a state with a slumping economy, yet until a few months before the election he behaved like a man who believed that the problems would disappear if he kept his eyes shut. For example, when Wilson was inaugurated, it was already obvious to governors across America that the end of the Cold War would mean sharp cutbacks in defense industries, and most states with large defense-related employment had already started to plan for the transition. But Wilson vetoed efforts to provide assistance for defense conversion; he even vetoed efforts to set up task forces to study new uses for military bases. Not until September, 1993, did he sign a plan to aid defense conversion.
Or consider Wilson’s budgets. Year after year, he has sent down budgets that pretend to be balanced, when everyone knows that they are really deeply in deficit. This year he has done it again. His latest budget is “balanced” with such gimmicks as claiming billions of dollars of federal aid he knew he wouldn’t get. As state treasurer, Kathleen Brown demanded Wilson take an honest approach: Admit there is a deficit and establish a plan to balance the budget over several years. But Wilson prefers to offer fiscal fantasies and to pay the price—a lower credit rating, and higher costs for state financing, than California deserves or can afford.
Even more important than Wilson’s unwillingness to face reality is his skewed vision of the California economy. Ask Wilson and his advisers what is wrong with the state’s business climate and they have only one answer, repeated over and over again: “High taxes and excessive regulation.” Now, nobody would deny that the burdens of taxes and regulations plan an important role in business decisions about where to locate. Never mind that the overall burden of taxes in California can be controlled only by a governor with a realistic plan for spending cuts, which Brown has and Wilson does not, or that governors aren’t just supposed to complain about regulations. They are supposed to propose plans to reduce the red tape, which Brown has and Wilson hasn’t. The larger point is that taxes and regulations are only part of what makes for a good business climate, and Wilson doesn’t seem to understand this point.
After all, what was the basis of California’s past prosperity? Was it a government that did nothing but build prisons? Of course not. California’s prosperity was built on the foundation of superb public services—on the nation’s best school system, from kindergarten through to its great public universities; a system of roads, ports, water supplies, that was the wonder of the world. Those are now wasting assets. Today, most surveys find that the quality of basic education in California is below the national average and that the quality of infrastructure is in the bottom third of American states. And most surveys of business find that it is this deterioration in the quality of public services, not taxes and regulations, that is the main deterrent to adding jobs in California. It will be hard work to restore the quality of public schools and services in California, especially when everyone except the governor is willing to admit that the budget is deeply in deficit. Still, as a first step, the governor must understand that the quality of public service matters. Wilson doesn’t understand this. Brown does.
Of course, if we slash education far enough and let the quality of our infrastructure deteriorate enough, we won’t have to worry about immigration from Third World economies—we’d already be a Third World economy ourselves.
And this brings us to the final point about Wilson: his lack of a vision for the state. If there is one overwhelming characteristic of the Wilson Administration, it is its negativism—its unwillingness to do anything for the state economy except under overwhelming political pressure. If a big company threatens to move some jobs out of the state unless it gets a special tax break, the Wilson Administration snaps to attention. But if someone like Kathleen Brown proposes a modest, sensible set of tax incentives for the new small businesses that are the state’s best chance for future job growth, the idea is dismissed as too expensive.
For a sitting governor, Wilson has been astonishingly willing to bad-mouth his own state. In 1991, he declared that California’s business climate “stinks”; in 1992, he said, “I believe in merchandising California, but you can’t sell a bad product.” But he was the governor; why didn’t he propose anything to change the situation?
There is a political method to Wilson’s negativism. Clearly, his strategy is to deny as many of the state’s problems as he can, blame the rest on his predecessors and hope that nobody notices the bankruptcy of his position until after the election. Let’s not let him get away with it. Kathleen Brown has a sound, written plan to turn California’s economy around. I join more than 50 California economists, including my two Nobel laureate colleagues at Stanford—Kenneth Arrow and William Sharpe—and hundreds of business leaders across California in endorsing Kathleen Brown’s economic plan.
Originally published, 10.23.94