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Serious Underlying Problems in California May Bring Bigger Fall Than in New England

March 03, 1991

The chart that accompanied the guardedly optimistic article "Golden State's Luster Not Worn Off Yet" (Jan. 8) presented contrasts between New England and California economics but failed to address some serious underlying problems.

Just because California is not overbuilt, as New England is, does not mean real estate prices won't eventually fall as sharply. Thousands of homes here require two incomes to stay out of foreclosure. Many of these are owned by high-tech, defense and finance industry employees.

Also, housing price structures and income demographics are likely more sensitive here than in New England. Can we support our housing industry with fast-food employees and the small sweatshops of unskilled workers that have sprung up on the backsides of Los Angeles and Orange counties? Mere growth of employment is only part of the equation. A big part is the skills and earning levels of workers.

It is consistent with California's sense of self-importance that we believe that the entertainment industry is a major employer and recession-proof. There is potential for major reductions in entertainment spending as the economy turns sour.

Our usually strong agricultural industry is a shambles since the recent freezes. And how many skilled workers are employed in that industry?

International trade? How much of that is based on U.S. imports? Can we continue to borrow and spend? What do consumer spending habits tell us?

Exports? If we end up in a world recession, they'll suffer enormously.

High tech? All technology-based industries are ready for a major shakeout. Where will the money for R&D come from?

An economy twice the size of New England that is trying to assimilate unskilled workers while slashing education funding, raising taxes and increasingly falling victim to costly special interest no-growth housing policies may be twice as likely to take a very hard fall.

ARTHUR J. DELLINGER JR.

Los Angeles

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