October 13, 2009

California: the pyrite state

By California: the pyrite state

Author: Timothy Sandefur

…or is it Pirate State? A report issued last month by Sanjay Varshney and Dennis Tootelian, professors at the Cal State Sacramento College of Business Administration, finds that the state’s miles of red tape cost Californians $493 billion–that’s billion with a b, which is a third of the state’s gross product. These business regulations, so labyrinthine that even legal experts admit they cannot really navigate them successfully, aren’t just an enormous drain on the state’s resources, they’re also a particular burden on small businesses and entrepreneurs–people who cannot afford the time and expense necessary to comply. When faced with California’s enormous regulatory hurdles, large corporations have the advantage of being able to draw on legal help and political influence…while small businesses, many owned by individuals, are forced to swim for themselves. So much for regulation being the way to curb the influence of big nasty corporations.

As the authors of this study observe, “The total cost of regulation was $134,122.48 per small business in California in 2007, labor income not created or lost was $4,359.55 per small business, indirect business taxes not generated or lost were $57,260.15 per small business, and finally roughly one job lost per small business.”

When a state punishes its hardest working citizens, simultaneously rewarding the least productive people, it is only a matter of time before the political, social, and psychological foundations of prosperity are destroyed. We in California are very lucky that we have long been able to afford to impose so many bureaucratic burdens on businesses and still get along pretty well. But that’s not a long term strategy for success and prosperity. And, worst of all, it is morally perverse and untenable for political leaders to continue making it easier for Californians to get a welfare check than a paycheck.

More info here, and John and Ken on KFI Los Angeles interviewed the authors of the report.

What to read next