California in Danger: Why the Dream is Dying and How We Can Save It

 Click the bear to download the report.

Click the bear to download the report.

Executive Summary

California today is frequently held up as a progressive model for the rest of the United States. In 2011, California had a $27 billion budget deficit. Today, it has a $19 billion budget surplus. In 2012, Californians voted to raise income taxes, particularly on the wealthy, to increase funding for under-performing schools. The state is a renewable energy leader. And its leaders are standing up to President Donald Trump on everything from immigration to marijuana to offshore oil drilling.

But a closer look reveals deeper problems. California is the most expensive state for housing in the country after Hawaii, and today is suffering from one of the most severe homelessness crises in its history. In the face of a housing shortage, Millennials, renters, and employers are fleeing the state. High housing prices siphon away from the productive economy $140 billion annually. At the state and local level, Democrats and progressives have responded by mandating and extending subsidies for low-income housing. But not only are the subsidies and mandates inadequate to meet demand, they also serve to make housing more expensive for the middle-class. 

California’s high cost of living is a major factor behind the state having the country’s highest rate of poverty and inequality. When the cost of living is taken into account, California still spends less on K-12 education than all but four other states. California’s income taxes are high but so is it’s sales tax, which is regressive, while property taxes are low and disproportionately burden new and young homeowners. While the operating budget is in surplus, the state is leaving its young with a $366 billion public pension and health care debt.

In truth, California is neither progressive nor a model for other states. What’s behind California’s high cost of living are tax, regulatory, and other policies that are regressive and parasitical. Well-financed NIMBY (Not In My Back Yard) activists and a small minority of labor unions defend exclusionary laws that prevent homebuilding, in both cities and suburbs. Public employee unions maintain retirement benefits far larger than those received by most private sector workers (and taxpayers). And well-connected energy companies win large state contracts which contribute to rising electricity rates and air pollution.

California maintains its reputation as a progressive leader by greenwashing the scarcity and brownwashing the exploitation created by state policies and interest groups. NIMBYs insist they are protecting the natural environment as they prevent greater urban density and promote cattle ranching, which threatens the biodiversity of California’s oak woodlands. Gov. Brown deploys apocalyptic rhetoric regarding climate change as his administration shuts down the state’s largest single source of low-carbon energy. And state officials defend immigration as they maintain and defend a system of semi-indentured servitude for immigrants.

California has routinely reformed its government in the past and must do so again today. This begins with a vision of a high-productivity and high-wage economy. The coming autonomous vehicle (AV) revolution could destroy many jobs but also create many others, particularly in California, where Silicon Valley is a major actor in automation. This AV revolution also creates significant opportunities for new housing and reductions in carbon emissions through a transition to electric and fuel cell vehicles at a cost far lower than Gov. Brown’s proposed railroad.

Under this plan, California would

— Curb corruption with a New Sunshine Act that requires transparency into government contracting, permitting, regulating and other activities, and break up the corrupt California Public Utilities Commission (CPUC);

— Build abundant housing by up-zoning all cities and suburbs to allow modestly taller buildings, and by closing the loophole in the state’s most important environmental law (CEQA) that allows interest groups to file expensive and frivolous lawsuits anonymously and repeatedly;

Create high-paying jobs in advanced manufacturing, biotech, and innovative agriculture by leveraging the state's research universities and community colleges in partnership with new and modernized industries and capturing scale-ups from R&D;

— End poverty by raising the minimum wage, embracing automation, including the autonomous vehicle revolution, and mandating high school and college apprenticeship partnerships with advanced manufacturing and other industries;

— Personalize and modernize education by establishing a 9-to-5 school day that results in the elimination of homework for students, and of schoolwork for teachers; an incremental lengthening of the school year; and unleashing the special talents of all students through digital instruction and teacher tutoring;

— Make property taxes fair and sustainable by empowering a representative “citizens jury” to undergo a year-long evidence-based deliberation that culminates in an amendment to California’s constitution;

— Establish and enforce the principle of universal worker rights for all social classes by demanding the federal government create a path to citizenship for a labor force lacking political rights and power; reforming public pension obligations; and making pension contributions the responsibility of future public employees.

This plan can unify workers, employers, and taxpayers. Workers will benefit from higher wages and cheaper housing. Employers benefit from being able to grow their high-wage and high skill business in California. And Baby Boomer homeowners will benefit from the creation of housing their children and grandchildren can afford. 

This coalition should be enough to overcome well-funded interest groups. School teachers, principals, and parents will benefit from a modernized school day and year, higher pay, and better outcomes. The labor unions whose members lack housing they can afford greatly outnumber the small number of unions opposing CEQA reform. And pro-density environmentalists are younger and growing in power over anti-development NIMBYs.

Acknowledgements

I would like to thank Madison Czerwinski, Mark Nelson, Rasheed Auguste, Nick Burt, Terrance Kloeckl, Arun Ramamurthy, Aishwarya Saxena, Paris Wines, and Jack Austin for their research assistance; Jesse Ausubel, Dalton Conley, John Gamboa, Brian Hanlon, Jennifer Hernandez, Peter Kareiva, Joel Kotkin, Michael Lind, Julie O’Brian, Roger Pielke, Jr., and Kim Shellenberger for their valuable input; and the Pritzker Innovation Fund, Frank Batten, Jim and Susan Swartz, Alex C. Walker Foundation, Carl Wurz, Steve Kirsch, Rodel Foundation, Ross Koningstein, Crary Family Foundation, Bellwether Foundation, Michael Pelizarri, and the Mountain Fund for their generous support.

Introduction

Over the last two years, as I’ve travelled around the world speaking out in defense of nuclear plants at risk of being replaced by fossil fuels, I am invariably asked two questions. First, why did I change my mind about nuclear energy? And, second, why are other people still so opposed to it?

When it comes to most questions about energy and the environment, my answers tend to come more quickly and confidently over time. But over the last two years, as I was asked these questions, particularly the second one, I found myself increasingly slow to respond until, toward the end of last year, I started answering, “That’s a very interesting question,” which was code for, “I’m not sure if I know.”

I wrote California in Danger, in part, because I wanted to answer that question. Why were people who claimed to be deeply concerned about climate change shutting down its two largest sources of low-emissions electricity, San Onofre and Diablo Canyon nuclear power plants, rather than seeking to expand them?

A big part of the answer, I knew, is that people are ignorant of the facts. They believe things about energy generally, and nuclear and renewables specifically, that are simply not true. Those of us, myself included, who changed our minds tend to remember learning the truth about, say, Chernobyl, and emphasize the “a-ha!” moment of our conversion.

But this fact-based explanation is plainly inadequate for understanding the persistence of anti-nuclearism. When pressed, some of nuclear’s fiercest opponents acknowledge the science showing that nuclear is low-emissions and even that it is relatively safe but continue to oppose it anyway. Opposition to nuclear energy is clearly motivated by deeply-held values, world views, and fears that are not so easy to alter. 

What are they? For many it is clearly the fear of a high energy, high population, high-tech, and highly modern planet that is (supposedly) devoid of nature and spiraling out of control. A better alternative, they feel, would be a low-energy planet powered by renewables where humans accept nature’s limits and accordingly live simpler lives.

While the anti-nuclear belief system is often described as idealistic, in his history of the origins of the anti-nuclear movement, Critical Masses: Opposition to Nuclear Power in California, 1958-1978, the historian Thomas Wellock points to a darker motivation: the exclusion of newcomers.

In the 1960s, nuclear energy was understood to provide abundant and inexpensive power. While most Californians at the time saw cheap electricity as a positive thing, others — including the then-Executive Director of the Sierra Club, David Brower — did not. They believed cheap energy would attract people and industry to the Golden State and destroy its scenic character. 

“The discredited theories of nineteenth century economist Thomas Malthus were taken off the shelf and put back to work,” Wellock writes. The message of neo-Malthusians, “was that humanity had to restrict its demands on nature to avoid catastrophe.”

The paradox was that nuclear energy, in several fundamental ways, significantly reduces humankind’s demands on nature. With nuclear energy there is no need to mine and burn coal, drill for oil and gas, or dam wild rivers for electricity — a fact widely recognized by scientists, politicians, and informed members of the public (including Brower’s boss and colleagues at the Sierra Club) in the 1960s. 

But since nuclear provided cheap and abundant power it would attract more people, Brower reasoned, who would destroy California’s landscapes with factories and — here’s where we arrive back at the situation California faces today — more housing.

Most people who oppose nuclear energy, of course, have never heard of Malthus and would be appalled by his brazenly misanthropic ideas. Most people who fear nuclear have simply been misled. 

But others, particularly the founders and leaders of the anti-nuclear movement — a remarkable number of whom hailed from California — shared an impulse to exclude with Malthus and the neo-Malthusians. 

Whether limits are being imposed on aid for Irish farmers in Malthus’s time, on black and Asian-American families seeking to buy a home in Berkeley in the early 20th Century, or middle-class Millennials today, what’s being expressed is the will to exclude others from property and prosperity.

The impulse to exclude and restrict access is, in many instances, understandable and wholly justifiable. Few Californians would support the building of high rises in Yosemite, or the conversion of Napa’s wineries and cattle ranches into subdivisions. Many of us who move here — and pay dearly to remain — do so in part to enjoy its spectacular natural environments. 

But more than 40 years of exclusionary housing, energy, taxation, and regulatory policies have made California increasingly the province of the affluent, those who bought homes here years ago, and their subsidized service class. Those being excluded are the young, the poor, and the propertyless. “The country doesn’t need to embrace the willy-nilly destruction of structures of genuine historic value,” writes Matthew Yglesias, “but progressives must see that scarcity is the enemy of equality.”

As this report documents, there is abundant land for large quantities of new housing in cities and suburbs, which are far less dense than those on the East Coast. And there’s even some room for new homes on farms and cattle ranches, which comprise five times more of California’s land mass than its urban areas, and are not nearly as sustainable (or scenic, for that matter) as many of us were taught to believe.

Of course, the fact that there is abundant land for new housing is no more likely to persuade NIMBYs to accept homebuilding near them than the truth about Fukushima is likely to persuade them to accept the continued operation of Diablo Canyon. The will to exclude others — to keep this special state (or at least our precious little bit of it) to ourselves — will remain a powerful force within the Golden State for years to come.

But the pro-scarcity coalition is also aging, weakening and threatened by a countervailing movement of younger and hungrier newcomers advocating inclusion and abundance. A coalition founded on those values could challenge and eventually overthrow the old regime. But for that to happen, it will need a new vision of California grounded in current physical, economic, and technological realities, and animated by values at once humanistic and ecological. It is my hope that California in Danger will contribute to the shaping of that vision and to the uniting of that coalition.