Rebuild California : Diverse Opinions on Where to Focus

No one questions California’s poor economic health. But that’s where agreement apparently ends. When discussing how to heal the state’s bludgeoned economy, prescriptions vary depending on the physician.

The state is undergoing the deepest and most prolonged economic downturn since the Great Depression, with no end in sight.

Coupled with that are wrenching structural changes that are undermining the traditional pillars of the economy--aerospace, real estate, construction and financial services. And persistent budget problems presage massive layoffs in the public sector as well.

Finding solutions to such a variety of problems is not easy.

Business people want less regulation and reform of workers’ compensation. Some economists counsel a coherent industrial policy; others say there is little to be done until the national economy revives.

Labor wants more controls on international trade; many federal officials want to drop trade barriers. One banker wants to see more public spending to revitalize riot-ravaged inner-city areas. Another wants to see federal restrictions eased to allow more flexible lending to small businesses.

Some overall themes emerge. Many people voice a desire for more responsive legislators. Others also argue for greater investment in infrastructure--including roads, schools and job training programs. And still others agree with proposals for tax credits to spur investing or home buying.

Here is a sampling of opinions:

William Campbell, former state senator and president of the 1,000-member California Manufacturers Assn., Sacramento:

“There are three essential things California will have to do if we are to create additional jobs, retain the jobs we have and expand the economy. We need to come up with a workers’ compensation reform bill; we need to take a good hard look at the tax structure and see what we need to do to make California a more competitive place to manufacture products, and third, we need to take a good hard look at all the regulatory requirements . . . and streamline them so that we still have a clean environment but a competitive environment.

“(Beyond that,) there are some things that are beyond our control: the need for investment capital, which is a federal issue. . . . We need a considerable lessening of requirements there to get more money into the marketplace.

“Also, the reduction of spending on the defense areas is having an impact on California, and we have a need to come to grips with that. . . . We can talk about retraining, and we need to provide additional retraining. We need to talk about what other areas these high-tech facilities can get involved with in the marketplace, and that’s something they themselves have to do.

“A lot of it hinges on our ability to provide capital to bring this about, and we have to have the legislative reform.”

Stephen Levy, director and senior economist with the Center for Continuing Study of the California Economy in Palo Alto:

“None of the stuff the state Legislature is talking about--workers’ compensation, streamlining regulations--though they may be important, can turn the California economy around quickly. Those are long-term agenda items.

“The pace of the U.S. recovery is the single most important determinant of how California will do in ’93 and ’94. If the U.S. can have a vigorous recovery in ’93 and ‘94, then the California economy could grow.

“We think the decisions now being made by (President-elect Bill) Clinton . . . are critical choices which will determine California business opportunities next year. They have two areas in which they’ve outlined programs: infrastructure investment and tax decreases focused on investment.

“And on the public investment side, many people are advocating . . . temporary loans or grants to states and local governments which have had to postpone their own (infrastructure) projects . . . with the idea that state and local governments have real projects ready to go, rather than making up projects.”

Harold Chuang, chairman of American International Bank, Los Angeles:

“For us to rebuild the economy in Southern California, there is a need to try to help small businesses to grow, because this is really the backbone of the economy--as we all know. . . . The credit crunch for small business is real. . . . They simply cannot get the funding they need to grow. That’s something that can be taken care of immediately.

“All of the banks in this community have a lot of money; they just don’t know what to do with it. If you want to lend money to a small business, you face (strict regulation) from the (federal government). They think that your loan is not justified, because small businesses--especially new ones--don’t have the financial history to support that loan. And most also are in a very weak financial position, so it’s very difficult for them to qualify for a loan, compared with other big organizations.

“Another thing that can be done: Minorities are the majority (in Southern California). . . . (But) they all are more or less working in their own small pockets . . . in very isolated communities. It would help us tremendously to break down these barriers to provide communication among all the communities.

“L.A. is the gateway to the whole Pacific Rim, and we (Asian Americans) have all kinds of contacts to get into Asian markets, or get goods and services from Asia. And Hispanic and blacks can also make use of us to reach the other side easily. If we can work together closely, it will help the economy.”

John F. (Jack) Henning, executive secretary-treasurer of the California Labor Federation, AFL-CIO, San Francisco:

“One immediate goal should be the money plunged into the infrastructure that the President-elect is planning. . . . There’s a desperate need and we see it everywhere . . . and it provides employment. It’s a stimulant, and you need one.

“Second, (I favor) the defeat of the North American Free Trade Agreement, which would be absolutely disastrous for our people. . . . It can be possible in a European environment, to have a free trade agreement between industrialized nations. But it’s impossible for us to have one . . . between an industrialized nation and a Third World nation.

“Capital is international. Labor by its nature is national. (Under NAFTA), capital will go down to Mexico . . . (and jobs) will move down there in a flood. The wage (differences) are the heart of it. . . . And that economy can’t produce adequate wages. Mexico needs help, but our own stricken economy doesn’t have the ability to rebuild the Mexican economy. To pretend that we can do it is absurd.”

Barbara H. Franklin, outgoing U.S. Secretary of Commerce in Washington, D.C.:

“(International trade) is going to be good for California in time too, because you do have a lot of manufacturing in California, and a lot of high tech, and that is in large measure what the world is buying from us.

“If the NAFTA goes into effect, trade would go up as a result, and I would think California would benefit.

“We may need some special efforts to get over the downsizing of defense . . . (such as) helping people to get retrained or helping communities that need some added help in terms of trying to bring new business in there.

“We have (economic development grant) monies, and there have been some grants (requested for) California . . . to help communities hit by defense downsizing . . . to help enhance business opportunities and therefore jobs. The proposals that have been made (would) give a little more worker assistance to those in transition from defense-related industries.

“California also has a lot of small business, and we do need to attack this problem of small-business growth (from) the credit-crunch aspect. . . . I would put forward a program of some kind . . . that includes some changes in legislation and differences in regulatory activity and other incentives: things like giving people tax credits for adding employees. . . . That is where our jobs come from: either creating (small businesses) or growing of small- and medium-sized businesses.”

Carlton Jenkins, managing director of Founders National Bank, Los Angeles:

“I think the prescriptions for a community like Los Angeles mirror those for the nation in general: Fix the legislative infrastructure, which is ego-driven at the expense of the constituency it is elected to represent. Also, address the basic infrastructure concerns of (the community): police, safety, education.

“When you consider a place like South Central . . . (improve) access to capital and credit. How do you uplift a community financially if not through its own inbred financial institutions, with focused marketing and business development efforts, and access to investment capital dollars. . . . (We should) redeploy resources back into the community.”

Bruce Karatz, president and chief executive of Kaufman & Broad Home Corp., Los Angeles, the state’s largest home builder:

“Housing production is at historic low levels, and in past recessions, housing has always been the spark to lead an economy out of a recession. . . . I’d suggest we ought to look at housing again.

“(We need) to give people enough of a reason to buy today, in spite of all of the reasons why someone might hesitate. I think that the incentive ought to be in the form of a tax credit--something in the neighborhood of a $5,000 tax credit for first-time home buyers. That would be enough of a reason to convince a young family, presently hesitating on whether or not it’s a good time to buy, to make the decision to buy.

“The second thing is to focus on . . . small business, which is an integral part of the growth of California and its economic health. Give incentives to small businesses to buy machinery and employ new people, again in the form of a one-time tax credit that would be large enough to push a small business into investing or hiring.

“I think if we could do those two things, we would see a big change, a lessening of unemployment and an increase in consumer confidence, and the momentum would move in a positive direction.”

Goetz Wolff, economist who heads the consulting firm Resources for Employment and Economic Development, Los Angeles:

“One of the most important things would be to give a serious indication that action supersedes talk with regard to economic development and industry retention for the region. I think another part . . . would be to shift the formal responsibility for economic development in the region from private or quasi-public agencies back to an accountable public body and coming up with a focused industrial policy for the state: recognizing the tremendous importance of manufacturing and then providing the support, whether additional capital or education and training, toward that end.

“It is certainly better to spend money on tax incentives than being stuck in the position of having to bail out savings and loans. . . . (We should) direct public resources to the fundamental elements of growth: education and training directed toward job growth, and . . . supporting those industries that are the most likely to provide high value added jobs for the future.

“(Without such a policy), the problem is that other economic systems, whether they happen to be Asian or European, which do make use of industrial policy, will use our undirected system to their advantage. Whether we like it or not, we are party to this process, so we may as well try to get our hands on the steering wheel as well.”

Donna F. Tuttle, former U.S. undersecretary of commerce for travel and tourism in the Reagan Administration and now president of Korn Tuttle Capital Group, an investment firm in Century City:

“The image of Southern California is the most negative I’ve ever seen it. We all know we suffer from high crime, freeway killings. . . . More than this, I have heard that there is a lack of faith and a real perception that we are far worse off than the rest of the country, that we are still on a downward slide. If you think that way, and other people think that way, that could be part of the problem. . . . It’s going to hurt us if we can’t turn it around.

“We have a critical lack of leadership, not just from politicians, but from city civic leaders. With all the skepticism about our politicians, (there needs to be) optimism that we have leader who will lead us.”