November 21, 2003

Commentary:

Arnold’s Opponents are Right, UNLESS ....

By Mick Pattinson

The opponents of Arnold are right about at least one thing: If nothing changes, the state budget cannot be balanced without a massive and debilitating tax increase. They, of course, think tax increases are invigorating. Thus the recall.

But even if Arnold’s financial wizards find a way to paper over the $20 billion plus state budget deficit, that can only be a temporary fix unless - and until - the state comes up with new money, or cuts the heart out of schools, roads, and public safety. Which no one is prepared to do.

We are simply going to have to grow our way out of this mess. And we must do it quickly. Luckily we can. But we need to change.

If Arnold needs a reminder of how, perhaps he could ask Pete Wilson what happened when state engineers told him —if nothing changed— it would take three years to rebuild the earthquake-ravaged freeway bridges in Los Angeles. Instead, Wilson declared a state of emergency and the broken freeways were fixed in nine months.

Arnold has the same challenge - and opportunity. California is losing jobs because of a catastrophic —and systematic— series of laws and regulations that simply make it increasingly difficult to do business here. This is not just one emergency; it is half a dozen crises all at once. All with the same solution: Strip away regulations, then hire managers who know how to make the regulations work to create jobs, encourage initiative, and stop the fiscal bleeding that is killing the Golden Dream of California.

Then step back and watch California bloom. Nowhere are regulations more damning to our prosperity and damaging to jobs than among California homebuilders. Furniture makers, car dealers, small business owners, and people from every industry in California are probably rising now to insist their businesses are hurt the worst. It is a sign of how bad things are that they could be right.

Rather than argue about how many crises we can fit on the head of a pin, let us at least say this: California is short one million homes. Even the opponents of Arnold will agree with that. (Curiously enough, it is even on state government web pages.)

There can be only be two explanations for this shortage: One, California homebuilders are so unambitious that all of us have decided that building these million homes for our eager customers would be just too much trouble.

Instead, how about a reason that makes sense: State laws allow state and local governments to stop us from building all the homes our customers want.

There can be no California rebirth without a rebirth of housing. There is no recovery without new housing policies that remove the impenetrable layers of regulations that are strangling this state.

And over-regulation doesn’t just stop new homes: It also stops roads, schools, office buildings, and other projects. If it doesn’t stop them, it adds years of delay and doubles and triples their cost.

Even state agencies have trouble complying with state regulations. Look at how long it takes to approve plans for the most important new road in San Diego, state  Route 56. This critical east-west connector between two of San Diego’s most congested freeways has been on the drawing board for decades, yet is ten years behind schedule because of incredibly tedious state regulations. Every city and county in California can tell this story.

Now if state regulations are too burdensome even for other state agencies that support the public projects, think about the damage done to private companies.

It often takes ten to twenty years to break ground on new homes in California. And by the time the first shovel of dirt is turned, government regulations add up to $100,000 to the cost of a new home.

So we don’t need to have any more ponderous discussions about why housing in California is so scarce and expensive. Nor do we need to spend a lot of time documenting the incredible explosion of jobs and opportunity that would occur if the new governor treats our housing crisis the way our old governor treated the Long Beach freeway.

Do the math: one million homes at $400,000 each would create $500 billion dollars worth of new activity. Then put a multiplier on that to measure what would happen as the money spreads around. It adds up to a trillion dollars in a hurry.

Then start taking the same attitude to workers compensation, new regulations, new taxes and fees, for other California industries from fishing to furniture, and people will get the message that California is ready for business and innovation and enterprise and new jobs, once again.

Then, all of a sudden that $20 billion tax shortfall starts looking like chump change. And that would be the best change of all.

Pattinson is the president of a Barratt American, a Carlsbad, California-based homebuilder and past president of the California Building Industry Association.

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