Gov. Gavin Newsom has recognized California’s high living costs, but government is a major driver of those costs.
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Gov. Gavin Newsom’s inaugural address was a bit too long and somewhat disjointed, but he did make some cogent points, including this one:
“Even in a booming economy, there is a disquieting sense that things are not as predictable as they once were, that we must now run faster just to stay in place. Stagnant wages. Costs that keep rising – rent, utilities, visiting the doctor – the basics are increasingly out of reach. We face a gulf between the rich and everyone else – and it’s not just inequality of wealth, it’s inequality of opportunity.”
While decrying economic inequality is not a new theme for California politicians, they’ve only occasionally cited high living costs as a factor.
In fact, those costs are the major reason we have the nation’s highest level of poverty, as measured by the Census Bureau, and they are not confined to housing.
Californians’ personal incomes, while not the nation’s highest, average above the nation as a whole. But Californians’ incomes don’t stretch as far as those in most other states.
Take gasoline, a necessity of modern life. The American Automobile Association’s latest survey pegs the national average at $2.24 per gallon with Missouri having the cheapest gas at $1.82 and California the most expensive at $3.32.
That $1.06 gap between California and the average translates into about $15 billion per year in additional costs for motorists, or about $400 for driving 10,000 miles a year.
Utilities, another basic, are also expensive, as Newsom mentioned. California’s electric utility rates are among the nation’s highest and have climbed steeply in recent years, thanks largely to shifting to wind and solar sources.
The Tax Foundation annually calculates what $100 is worth, in terms of buying goods and services, state by state. Last year, a c-note was worth the most in Mississippi, at $115.74, and the least in Hawaii ($84.46), followed by New York ($86.51) and California ($87.41).
Bankrate, a financial data website, recently published a “cost of living calculator” which allows the user to see how moving from one metropolitan area to another changes living costs.
One example illustrates the disparity – someone moving from the San Francisco Bay Area to Austin, Texas, another technology hub that’s a popular destination for Californians seeking more affordable lives.
According to Bankrate, someone with a $75,000 annual income in the Bay Area could maintain the same standard of living for $40,816 in Austin, where overall costs are 45.6 percent less, including 74 percent less to buy the median home, or 67 percent less for apartment rent.
Bankrate covers dozens of other specific costs, including food items, clothes, gasoline (31 percent less), cosmetics, medical services and even haircuts, the only expense even slightly (8 percent) higher in Austin.
Those with high incomes, such as Newsom himself, can easily absorb the higher costs of California living, but the state is seeing an exodus of those who can’t and is increasingly becoming a society of haves and have-nots with a declining middle class.
Moreover, many of those costs – housing, gasoline and utilities for example – are directly attributable to political actions and inactions, which Newsom should also acknowledge as he decries their impacts.
He seems inclined to offset health care, housing and other high costs with state subsidies. But that approach would ultimately require big tax increases in a state whose residents already have one of the nation’s highest tax burdens, and could encourage even more flight.