Has an abundance of Vitamin D desensitized us to our relative economic decline?
As we enter the holiday season with the “Trump bump” in the stock market and a steady stream of accolades for President Obama’s economic stewardship in light of our declining unemployment rate, it is important to consider whether Santa Barbara County is on sound financial footing. History has taught us (repeatedly, unfortunately) that overly optimistic economic predictions can lead to poor policy choices that, in turn, have disastrous impacts on our public finances and quality of life. Misplaced economic optimism has, for example, caused our public employee pension costs to soar over the past two decades. This enormous expense – well over $100m a year – has, in turn, eroded funding for our parks, roads, and government buildings, contributing to an unfunded deferred maintenance backlog of well over $300m.
Notwithstanding the patent weaknesses in the County budget, many economists would have us believe that the County is on the verge of returning to economic easy street. Indeed, it has become quite fashionable of late to celebrate our economic good fortune here in sunny Santa Barbara County. When the latest jobs report was released before Thanksgiving, our unemployment rate was 4.6%, which caused one prominent economist to declare that we had achieved virtually full employment through solid and stable job growth. Just three weeks earlier, another prominent economist proclaimed that economic conditions in our area were much better than most people realized, and that this would be clear to anyone considering the correct statistics.
Here at Reason in Government, we accepted this challenge and decided to research a few key statistics that provide a clear window into the economic health and vitality of Santa Barbara County. It turns out our skies are only partly sunny.
With regard to our unemployment rate, the year-to-date average for 2016 (rather than the October rate, standing alone) is roughly 4.9%. Although this may seem low, this number must be put in historical perspective. From 1993 – 2007, Santa Barbara County achieved a lower annual unemployment rate in eight different years, notwithstanding the bursting of the dotcom bubble and the 9/11 attacks.
Moreover, the years preceding the Great Recession – 2005 -2007 – provide ample evidence of how our County has fallen into the trap of diminished economic expectations:
|Santa Barbara County||Average Unemployment Rate||Average Poverty Rate|
How is it that we have come to celebrate a “new normal” of substantially higher unemployment and poverty levels than we achieved just a decade ago in the three years preceding the Great Recession?
Tempting as it may be, one cannot justify this uninspiring new normal by noting that we are doing better than California as a whole. Although it is true that Santa Barbara County is doing better on these two economic measures than the statewide average, that is tantamount to claiming that the Chargers are a good football team simply because they have a better point differential than the average California NFL franchise. A more apt comparison would be among Santa Barbara and three coastal counties in California that share similar characteristics – San Luis Obispo, Marin, and Sonoma. Sadly, Santa Barbara is substantially under-performing its peers. The current unemployment rates of the four counties are:
|County||October Unemployment Rate|
|San Luis Obispo||4.1%|
Indeed, the comparison with Sonoma – a county that our County government uses as a budget benchmark because it is very similar to Santa Barbara on several measures, including total population and workforce – is particularly unflattering. Notwithstanding the presence of UCSB, SBCC, and the Goleta Entrepreneurial Magnet, Santa Barbara County has a lower percentage of higher-paying jobs (e.g., Information, Financial Activities, and Professional and Business Services) than Sonoma County. More troubling is the fact that Sonoma’s unemployment rate is not only .7% lower than Santa Barbara’s, but its current poverty rate is an astounding 4.6% lower than Santa Barbara’s.
These simple statistics demonstrate that we can and should be doing better as a County. We have excellent schools, successful entrepreneurs and established businesses, green developers, and some of the best weather in the world. There is simply no reason we should accept the new normal – historically high unemployment and poverty levels combined with historically low investments in public goods.
So other than moving north along the coast, what can Santa Barbarans do to raise our economic expectations and improve our economic health? We must start by taking off our rose-colored glasses and forming a realistic picture of the economic conditions in our County – a picture we have started painting in this piece. Then, for those areas where the County is ailing economically, we need to accurately diagnose the underlying causes. Lastly, we need to develop policies that remedy these maladies in ways that are consistent with our strengths and community values, but do not sacrifice economic vitality in the name of those values. At Reason in Government, we intend to work on each of these issues in the weeks and months to come.