Since Jerry "Moonbeam" Brown took over as governor in January 2011, the state of California has engineered an extraordinary recovery from the brink of economic collapse. Consider some of Brown's stellar achievements: for the 2013-2014 fiscal year, state coffers are projected to show a budget surplus of $4.2 billion [from a $6-billion deficit in 2010-2011]; a stabilizing of the once-precarious housing market; and job-creation programs that have kept unemployment at about 8.5 percent (still high, but down from 12.5 percent in 2010). Some of these accomplishments resulted from the imposition of (temporary) tax hikes and spending cuts by the governor’s administration.
With an annual GDP of some $1.9 trillion, California ranks as the eighth largest economy in the world (roughly similar to the economic output of India or Italy), reflecting the Golden State’s crucial importance to the U.S. and even global economy. Indeed, Brown (who has run for president three times, all unsuccessfully) should be a shoo-in for re-election come November, if he chooses to return to Sacramento.
However, California, the state renowned for Beverly Hills mansions, glittery Hollywood stars, Malibu beaches, palm trees, and the stunning Golden Gate Bridge, hides a deep, dark secret – it has the nation's highest poverty rate. According to the Census Bureau, nearly one-fourth (23.8 percent, up from a 20-year low of 12 percent in 2006,) of California's 38-million people live below the poverty line – with Latinos, now the state's single largest ethnic group, bearing the brunt of such deprivation. According to the Public Policy Institute of California (PPIC), at least 6-million households in the state live with incomes below the federal poverty level (about $23,000 for a family of four). Poverty rates are extremely high not only for Latinos, but also African-Americans and those lacking in college diplomas. Reportedly, 5 million Latinos (one-third of their total number) are living in poverty in the state.
The Los Angeles Times explained that the 23.8 percent poverty figure arose from the Census Bureau's “supplemental poverty measure,” which differs from the official poverty rate yardstick by, among other factors, including tax credits and government benefits, while counting expenses for such items as child care, out-of-pocket medical costs as well as housing costs (which tend to be quite high in California).
Regardless of the measuring method, poverty rates in California now exceed even those of such endemically deprived states as Mississippi and Louisiana. On the basis of this “alternative” measure, some 16 percent of Americans, or about 50 million people, are now living in poverty. “Most poor families in California are working,” PPIC stated. “The majority of poor people in California live in working families. In 37.3 percent of poor families, at least one family member is working full time, and in another 25.6 percent someone is working part time.”
Ann Huff Stevens, director of the Center for Poverty Research at University of California-Davis said soaring housing costs, especially in California's cities, explains the vast majority of the higher poverty rate based on both the ‘alternative’ measure versus more traditional measures of determining the extent of poverty. “Housing costs in Nevada or Florida… are nowhere near this extreme,” she said in an interview. “It is important to note that California is a very expensive state, but it is also important to keep in mind that this is the main factor that makes our poverty rate jump from slightly higher than the national average in the official measure to number 1 in the supplemental measures.”
Given California's huge size (at 165,000 square miles, it takes up as much real estate as Iraq), poverty rates vary significantly within the state – from a low of 7.2 percent in San Mateo County (home of tech hub Silicon Valley) to a high of 30 percent in Merced County in the Central Valley which suffered mightily during the housing collapse. On the basis of absolute numbers, Los Angeles County is home to the largest population of people trapped in poverty – some 1.8 million, 30 percent of the state's total.
The Economist reported that at a recent meeting of the California Economic Summit, lecturers spoke of “two Californias” – basically, the affluent coastal areas and the depressed inland regions. Even with the drastic (but necessary) spending and welfare cuts enacted by Brown, California still accounts for an astounding one-third of all welfare recipients in the entire U.S. – though it has only about one-eighth of the country's population. The Economist estimated that income inequality is higher in California than almost any other state – with a gutted middle-class, an expanding underclass, and a thriving elite of 1 percenters.
“Unemployment is still huge. We’ve cut housing. We’ve cut Head Start [childhood education programs]. We’ve cut nutrition programs,” said Ron Haskins, co-director of the Brookings Center on Children and Families to the Los Angeles Times. “Now it's food stamps.... That'll show up in these [poverty] numbers next year."
The Women's Economic Agenda Project (WEAP) blamed California’s high poverty on the increasing costs of housing, electricity, and health care in tandem with job cuts. WEAP further noted that some 6.5 million – or one-fifth of Californians -- lack any kind of health insurance. In 2008, the National Low-Income Housing Coalition determined that to live in an average two-bedroom apartment in California, one must earn at least $24.01 per hour – about triple the minimum wage at the time.
A. Colin Cameron, professor of economics at UC-Davis, said a significant portion of California’s high poverty reflects the state’s large number of immigrants. “While many immigrants are well educated and high-paid, there are also many immigrants who are low skilled and have poor English [skills],” he noted. Indeed, according to PPIC, California, with more than 10 million immigrants, has more than any other state – or one-fourth of the nation’s entire population of foreign-born residents. In 2011, 27 percent of the state’s population was foreign-born (primarily Latin America but also Asia), about double the U.S. percentage. Nearly half (47 percent) of California’s immigrants are naturalized U.S. citizens, and another 26 percent have some other legal status. But according to the Department of Homeland Security, about 27 percent of immigrants in California are undocumented.
Meanwhile, the trends towards a bifurcated society in California have been percolating for decades. “Nearly 30 years ago, [I] wrote a book about California and its future, suggesting that despite its egalitarian and upwardly mobile pretensions, the state was evolving into a two-tier society of haves and have-nots,” Dan Walters wrote in the Sacramento Bee newspaper. “Unfortunately, that has become its reality and while the state’s media and political elites may sneer at Texas and other states that lack our mild weather and scenic attributes, they should note that Texas’ poverty rate is just two-thirds of California’s and Iowa’s is just one-third. You can’t eat an ocean view.”
Poverty will likely emerge as a dominant theme in this year's gubernatorial campaign in California. Neel Kashkari, a former U.S. Treasury official who played a major role in the federal government's bank bailouts and who has announced he will run for governor as a Republican, has criticized Brown (his presumptive challenger), for failing to alleviate poverty in the state. “The status quo is unacceptable,'' Kashkari said at a speech at California State University unveiling his candidacy for the state's highest office. “Governor Brown may claim a ‘California comeback,’ but the truth is that he has forgotten the millions of California families who are struggling.”
Assemblyman Tim Donnelly, a Tea Party favorite who will also run for governor, said Brown "has repeatedly failed to address how he intends to get the state back to work and return prosperity to California." Republicans also point to the state’s massive debt crisis – not only a $24.9 billion “wall of debt,” but also $330 billion “skyline” of other liabilities, including $80 billion needed to cover teachers' pensions and $64 billion to pay for state workers' health care in retirement.
California's GOP (a party now in serious decline in the state) also criticized Brown for failing to mention poverty in his recent 'State of the State' address. But last year, during an interview on National Public Radio, Brown addressed the poverty rate by describing it as "the flip side of California's incredible attractiveness and prosperity,” citing the large number of unskilled immigrants. But that hasn’t appeased Brown’s opponents, on the right or left.
Ellen Brown, an attorney, president of the Public Banking Institute, and who is running for state treasurer under the Green Party banner, complained that under Brown's austerity budget, welfare payments, health care for the poor, and benefits for the elderly and disabled have been slashed, state workers have been downsized, and school districts in need of cash have been reduced to borrowing through bonds bearing interest rates as exorbitant as 300 percent. “California cannot solve its budget problems by slashing services that have already been cut to the bone or raising sales taxes that hurt the poor far more than the rich,” she wrote. “We are fighting over a pie that remains too small.”
But Stevens of UC-Davis is cautiously optimistic about the state’s near future. “I do not expect poverty in California to worsen substantially in the coming years,” she said. “Like the rest of the country, the state seems to be recovering, slowly, from the great recession.”
Palash has worked as a business journalist for 21 years in New York.