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LA & CA Economic Forecast: Upbeat but Cloudy

LA & CA Economic Forecast: Upbeat but Cloudy

By Joel Fox.

California is shockingly business unfriendly but it hasn’t stopped economic growth or a positive assessment of the Los Angeles and California economy Beacon Economics co-founder Chris Thornberg said at the third annual Forecast LA.

Loyola Marymount University’s Fernando Guerra presented an upbeat assessment of local residents on the LA economy, results from a poll of nearly 2500 area residents before Thornberg offered his economic analysis. Loyola Marymount University’s Thomas and Dorothy Leavey Center for the Study of Los Angeles and Beacon Economics presented Forecast LA.

Despite the positive outlook, not all is rosy, Thornberg said. While the state’s growth may have overcome the state’s negative business environment so far, Thornberg said, “Sacramento is trying to make California business unfriendly enough to stop growth!”

He noted more than once than manufacturing lose was an impediment to California business growth.

However, he said the Los Angeles region had great strengths including in the area of high tech. Thornberg said that the Los Angeles tech work force was larger than that of San Francisco and San Jose combined.

Thornberg called the minimum wage laws passed recently in Los Angeles and in California a “failed policy.” He said it would reduce jobs in the long term and would not reduce poverty, its intended goal. Minimum wage increases would raise the costs of goods and services for those who live on the poverty level, he said.

Thornberg admonished the state legislature for passing a blanket $15 minimum wage for the entire state. He said while $15 might actually not be enough for a low wage worker in San Francisco, its more than twice as much as needed to help residents in Inland California.

Thornberg called passing the state minimum wage legislation a cheap political win that actually would not fix anything. His recommendation for improving the lives of those in poverty: an Earned Income Tax Credit, funding for Pre-K education and housing supports.

Thornberg said that between economic policies like minimum wage increases and the cost of housing, lower economic classes would be forced out of California.

Thornberg blamed the lack of housing on two major items: CEQA and Proposition 13.

CEQA rules delay and stop housing. As for Prop 13, Thornberg said, because of property tax caps under Prop 13, the incentive to okay housing building permits is not there for local governments.

Thornberg said while California’s tax rates are not a threat to the California economy, California tax structure is. He proposed a change to the tax structure of lowering income taxes but raising property taxes.

However, Thornberg’s own economic analysis would stop such a scheme in its tracks.

Thornberg pointed out that the greatest demographic change coming to California is not the impact of Millennials but the growth of percentages in the senior category. The Boomer generation is living longer. Telling the Boomers, many of whom no longer bring in a work income, that an income tax cut is a good trade off for a property tax increase is dead before it starts.

Originally posted at Fox & Hounds Daily.

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