What to expect in 2013
Area experts shine a light on the good, the bad and the fairly predictable
Christian radio broadcaster Harold Camping predicted that Jesus Christ would come back in May 2011 and that world would come to an end after much suffering and death in October 2011. Well, that was a bunch of nonsense as we surged right past that end date into 2012. But then doomsayers got their kicks with the end of the Mayan calendar falling on Dec. 21. While the Mayan calendar had accurately predicted certain planetary alignments, earthquakes and famines, believers in its accuracy started to panic that the world would actually end when the Mayan calendar was over. Dec. 21 has since come and gone and we are still alive. So with the anticlimactic apocalyptic predictions, one may wonder — what now? We asked our local experts in the field of economics, politics, technology and science/climatology what they felt we had in store this coming year and, for those who had participated in the VCReporter forecast last year, if their predictions were accurate. And so we present the 2013 forecast.
by Bill Watkins
California’s schizophrenic economy is difficult to forecast. There are four centers of mass, and each of them is on a different path.
The Bay Area, and to a lesser extent San Diego, is booming. California’s tech sector is incredibly vigorous, and it’s driving growth rates that exceed the United States growth rate. California’s tech sector will likely prosper throughout the two-year forecast horizon. Those communities that house it will enjoy an excellent economy.
The Greater Los Angeles area is an economy still in transition from an industrial economy to a post-industrial economy. The region has already seen the demise of its tire, steel and auto manufacturing, along with most of its ship building and aircraft manufacturing. The transition has been difficult, but Los Angeles has avoided the devastation we see throughout the rust belt. Its diversification, climate, ports and location on the prosperous Pacific Rim have been huge advantages.
Los Angeles’ transition will continue. We think this mostly means that its economy will plod along, slowly growing most quarters, but the occasional quarterly decline would not be surprising.
Inland California (the Great Central Valley, the deserts and rural Northern California) is suffering what amounts to a depression. Unemployment rates are extraordinary. Poverty is persistent. Economic growth is rare and localized. Expect little economic growth here.
Then there is California’s Geriatric Coast. It’s continuous from Los Angeles to the Silicon Valley. It skips the Bay and begins again at the north end of the Golden Gate Bridge, extending through Mendocino County.
This area is wealthy, but not prosperous. It is where wealthy, and usually older, people come to enjoy life. It is a consumption economy with little investment or growth. The jobs, outside of its still-impressive agricultural sector, are mostly related to tourism, retail, restaurants, government and businesses that support a wealthy and aging leisure class.
There is one growth industry here, medical care. It will continue to be an increasingly important component of the Geriatric Coast’s economy.
Think of it as a big, wealthy, Leisure Village by the Sea. It will get older and richer, and increasingly unequal as the middle class continues to shrink. Don’t expect much in the way of economic growth or job creation here.
So, how do you forecast California with these four different economies? First, you recognize that unless something really big and unforecastable happens, large portions of California’s economy won’t grow much at all. The other, smaller portion has the potential for phenomenal growth. California’s aggregated outcomes are a result of this tension.
Sometimes, tech will dominate, and California’s aggregate economy will look pretty good. More often, the larger slower-growing portion of the state will dominate, and California will look weak. Forecasts are expected averages, and on average, we expect California’s economy to grow more slowly than the United States economy.
In the long run, without significant policy changes, California’s tech sector and venture capital infrastructure will go the way of the state’s industrial base. It will simply disappear. Californians will eventually notice that the center of innovation has moved east or overseas.
It will take longer for tech to leave than it took for, say, the automobile industry to leave, because of increasing returns to scale and the virtuous cycle of tech and venture capital. Still eventually other centers of innovation will reach critical mass. It could be Austin. It could be Singapore. It won’t matter much to Californians where. It will be gone, and maybe then Sacramento will recognize that California has serious economic challenges.
by Bill Watkins
We expect continued anemic economic growth. The two big reasons for this are government spending that crowds out private investment, and regulation that is increasingly onerous and uncertain. Contributing factors include Europe in recession; slowing growth in China, India and Brazil; and uncertainty in the Middle East.
Pure examples of government spending that crowds out private investment are difficult to come by. Some economists don’t believe it happens, but we are witnessing crowding out right now. First, we must review a bit of international economics. I’ll try to make it as painless as possible. The fundament equation of international economics is not theory. It’s accounting, and there is no avoiding it:
Investment - Savings = Imports - Exports
This equation says that when we import more than we export, the other country has to invest in our country. It is to buy offsetting assets from us. Sometimes this leads to some strange things. China, with per-capita income of about a tenth of ours, is lending us money. That’s so improbable that Paul Krugman ridiculed the very possibility in a 1990s article.
That’s what we’re seeing, though. What are they buying? Mostly, they are buying government securities, the availability of which is only made possible by our large and growing debt.
If we didn’t have such an abundance of government debt, the Chinese would have to buy something else. They could buy real estate, which would increase home prices, making most of us a bit wealthier. More likely, they would invest in American businesses, buying stocks or bonds, allowing these companies to make more investments in assets that would increase current and future income. More importantly, it would create jobs in an America that needs jobs.
Our debt is costing us jobs.
Regulation is also costing us jobs. Sarbanes-Oxley and Dodd- Frank are two big ones. Business is a known quantity. It’s been around for a while. Dodd -Frank, by contrast, is still being implemented, and regulations are still being promulgated. This will be costly, but it enshrines the concept of too big to fail. This will become very costly.
There’s more though. The more we learn about Obamacare, the more costly is looks to be. The IRS just released more than 150 new regulations supporting the implementation. Obamacare has costs beyond its direct cost. These are the perverse incentives, such as the increase in business expense for companies more than 50 employees.
We’re also about to see a new batch of EPA regulations, which hints at the biggest problem.
Individual regulations are what they are. Some are good. Some are bad. All involve costs. Right now, the uncertainty and the pace of new regulations are overwhelming business. Each new regulation involves legal review, training, and likely changes in operations. When business people see large numbers of new regulations, they deal with it, at the cost of taking care of business. When they know many more are coming, they refrain from new initiatives and investments.
For years, I’ve heard from business people about the increasing cost of regulatory compliance. Recently, and for the first time, I’ve heard from local governments.
Bill Watkins, Ph.D., is executive director of the California Lutheran University Center for Economic Research and Forecasting and an associate professor of economics. The previous forecasts have run previously in other periodicals.
Here’s what we have to do: We need to consider the economic impact of new regulations. New regulations need to be precisely written, rather than lists of goals with precise regulations delegated to bureaucrats. We need to slow down the pace of new regulation. Let’s give our employers a breather, and let them hire a few people.
Dr. Herbert E. Gooch
by Herb Gooch
The problems of Democrats and Republicans will be mirror images to one another: the former will struggle with their strength, the latter with their weakness.
In 2010 Jerry Brown and the Democrats won the governorship and every other statewide office. In contrast to a national Republican bounce-back from Obama’s 2008 victory, California Republicans lost registration, votes and seats in the legislature.
In 2012 Republicans weakened even further, ebbing into near irrelevancy as a political force. Democrats snatched a handful of seats in the Congressional delegation that Republicans had held for years (as here in Ventura for the past 70 years), and advanced decisively in the state legislature. Republicans dropped below the one-third of seats needed to contest an override, tax increase or any other act in Sacramento.
Their sagging share of registration met the rising share of independents and other parties (tied at roughly 28 percent of the total vs. 44 percent for Democrats). Results for the Republicans were dots extending the declining slope of its electoral fortunes since the 1990s. The trend has been partly obscured by Arnold (Schwarzenegger)’s election, but as he proved to be all hat and no cattle, the long-term trend came undeniably into focus with his adios.
As the party has shrunk, it has appeared to harden into an obstinate, ideological opposition. It acquired a toxic branding, popularly concocted of pro-wealthy and anti-minority, anti-immigrant, anti-tax, anti-youth, anti-women, anti-environment biases. Swimming against the demographic tides, it has been reduced to swaths of mostly inland, rural, white male, privileged, older Californians outraged at the trifecta of debt, dysfunction and disillusion that seem to define the world’s eighth-largest economy.
For Republicans, 2013 will be a year of infighting. On the one hand, there will be those who seek to broaden party appeal and rebrand it as a serious political alternative. On the other, there will be those tempted to double down in ideological defensiveness by refusing any change, hopeful that even the need for a makeover will be obviated by Democratic excess and blunder.
Ventura County had long been a partial exception, an oasis of middle-class prosperity and a Republican stronghold. A recent surge in Democratic registration plus the effects of re-districting shifted the political landscape in 2012, putting the county, for the most part, in Democratic hands for the first time in decades.
Ventura’s Congressional representation and its state Senate seat are occupied by Democrats Julia Brownley and Fran Pavley, respectively. The Assembly alone remains Republican and is occupied by Jeff Gorell, who is noted for being a moderate and for appealing across party lines.
Julia Brownley and Fran Pavley
State Assemblyman Jeff Gorrell
Proposition 30 passed easily, though its significance is easily misunderstood. It staunched the bleeding of funding, enabling a footing, but not a floor, under educational programs and prison realignment revenues. The patient’s condition is stable, but still on life support. The “structural” imbalances in state finances are not eliminated, comprehensive solutions for education and pension obligations remain elusive, and huge and pressing investment needs in infrastructure have yet to be faced.
Prop 30 enhanced Brown’s political credit as a political leader. Coupled with Democratic control of the legislature, there is no external force to check or balance his agenda, except the notorious factiousness of his own party and its allies, and the temptation to attempt too much, too quickly in the coming year.
Brown will be looking forward to the 2014 elections and to constructing a legacy as the only four-time governor and the son who outdid his father in building California as the premier state in the union.
His challenges are tremendous. Prop 30 gives California the dubious distinction of having the highest state income and sales tax in the nation, which enhances a dire anti-business reputation. How can he turn the sputtering economy around to attract the jobs and capital to finance his dreams (rebuilding the water system and road and rail infrastructure)? How can he service, much less reform, the burdens of over-regulation, educational decline and environmental experimentation, while simultaneously coping with the Affordable Health Care Act (Obamacare) scheduled for implementation by 2014?
For Ventura County, special difficulties may be brewing. Major defense reductions could trigger talk of base closures and government layoffs in the ranks of the county’s largest employer.
Political leadership is changing. Brownley and Pavley will have to cope with districts recently redrawn but with substantial numbers of Republicans in tact. Brownley in particular will be hard-pressed since much more of the district is new to her; she has to stand again just two years from now and in midterm elections, in which a president’s party typically declines in percentage of the vote; and her prior, close opponent (Tony Strickland) may repeat his run against her.
Democrats have new leadership, but so far it is untested in the county. Republicans are without the leadership of Elton Gallegly, who had been in office for 26 years. The Stricklands (Audra and Tony), forceful leaders in Ventura politics in the Assembly and Senate since the 1990s, are out of office. It is not clear who will lead and the times are critical if Republicans are to regain their edge in Ventura and rebuild the party in California.
Democrats need to show that now that they own the state, they aren’t going to break it. 2013 is likely to see fissures in the legislative majority and their allies, and tensions with Gov. Brown over conflicting agendas and priorities. There will be efforts to revise Proposition 13 (taking on the 2/3 majority provision to increase taxes with the exception of “parcel” local property taxes, limits lowered to 55 percent and split rolls”).
Brown will likely relegate further pension and tax revisions to his second term. He has his own agenda, but his plate will be loaded with a kaleidoscope of demands for greater spending and regulation by progressives within his own party and their supporters. The latter feel past-deprived and future-emboldened by the newfound strength of the Democratic majority. For Brown and California, these will be interesting and eventful times.
Herbert E. Gooch III, Ph.D., is an associate professor of political science at California Lutheran University.
Professor of chemistry at CSUCI Simone Alioisio
by Simone Aloisio
I am delighted to be able to come back and share my predictions for 2013. I have to be honest with you in saying that I am also sorry to anyone who thought I would have anything new to share. My predictions for 2013 are pretty much the same as those for 2012. The global temperature for 2013 will probably be hotter than 2012.
Last year, I predicted that 2012 had a better-than-average chance of being hotter than 2011. This past year was hotter than the year before it. So far, 2012 is looking to be the eighth-hottest year on record globally, while 2011 was the 11th. We have had 36 consecutive years of above-average global temperatures. Nationally, 2012 will probably be the hottest year on record, surpassing 1998.
Here are some of the other predictions I made related to climate change at the end of 2011: droughts and storms, a particularly devastating flood that might get people talking about climate change, more expensive cheeseburgers, water and insurance.
And here is what actually happened in 2012: we had the worst drought in decades over a large area of our country, Sandy got some people talking about climate change for a couple of days in New York, Connecticut and New Jersey, and cheeseburgers are still $1.99 at the local place down the road.
I will score that two out of three.
Can Hurricane Sandy and the subsequent flooding really be attributed to climate change? Sea level rise certainly is, and that will continue to magnify the impact of coastal flooding in the next century. So the short answer is yes. Climate change caused billions of dollars of extra damage in this one incident. As for the strength and frequency of storms, there is less understanding of what the impact of climate change is on those. It makes sense that warmer surface water can lead to stronger and more frequent storms, but that’s not enough. Scientific explanation needs to do more than just sound good. People who are smarter than I am will figure that out one day.
If there is a relationship, I recently heard a nice analogy. Most sportswriters agree that steroid use led to more home runs hit during the 1990s and 2000s, the so-called “Steroid Era” of baseball. It is impossible, however, to attribute individual home runs to steroid use. Deciding which home runs were because of steroids and which were not is like deciding which storms are due to climate change and which are not. They are all affected by climate change, but none of them can individually be attributed to climate change.
I spend a lot of time in my classroom talking about the scientific method. My students are probably sick of it. “Did I miss anything in class today?” they ask each other. “No, he just talked about the scientific method again.” “Whatever, can I borrow your MCAT study guide?” But scientific literacy is important.
Science is fallible. But then, how are mistakes found? They are not found by using Google or Wikipedia. They are not found by a bunch of dirty hippies beating drums and yelling at people. Problems are certainly not solved by ignoring the data and just telling people what they want to hear. They are solved by more science!
Scientific conclusions can be used to correctly make predictions. Isaac Newton used science to predict how an apple will fall out of a tree. One day, science might even be used to figure out a really difficult problem, like what the Cubs need to do to win a World Series. Somewhere on the linear scale of human understanding, between predicting that an apple will fall down instead of up and fixing the Cubs, lies the understanding of what we are doing to our climate and how that will affect our Earth and lives.
This year, James Powell, Ph.D., did an extensive search of the scientific literature and pointed out that out of 13,950 peer-reviewed papers published about climate change since 1991, only 24 denied a link between human activity and global warming. The other 13,926 acknowledged that human activity is contributing to climate change. Somewhere more toward the uncertain side of that linear scale lies what we think the impacts on society from climate change will be. Somewhere more toward the certain side of that is how we think temperature will continue to go over the next century. Impacts, generally costly; temperature, generally hotter.
So I am obliged to predict that 2013 will be hotter than 2012, one of the hottest years on record. Looking ahead, today will seem quite cool compared to the mid- and late 21st century, though. Sea level will continue to rise, ice will continue to melt. The impacts of climate change will be felt incrementally and disproportionally. They will be costly but manageable in the richer parts of the world, and will be devastating and life-threatening for the poorest people in the world. Prevention will be less expensive than the cost of cleaning up after the fact, but in many cases, we will choose to pass the buck to our kids and grandkids. I am sure there will be people saying that we did everything we reasonably could to prevent this problem. Those people will be lying.
I continue to be optimistic about what people can do to reduce their impact on climate change in 2013. I will use less electricity, and the next car you buy will get better gas mileage. The California State University system’s new chancellor, Timothy White, is chair of the steering committee of the American College and University Presidents’ Climate Commitment. Maybe higher education can set the example? Ventura County can continue to take steps toward being a leader on climate change solutions if people decide that is what we need to do. The students I have seen and worked with over the past year will definitely play a part in that. And I hope that we continue to use science, as fallible as it is, to make decisions that help people and make our planet a better place to live in.
Simone Aloisio, Ph. D., is a professor of chemistry at California State University Channel Islands. He is also chair of the chemistry department.
Vice President of technology and communication at CSUCI A. Michael Berman
by A. Michael Berman
It’s easy to forget that in just the last five years, our use of technology has changed radically. The first iPhone hit the market in 2007, and the iPad less than three years ago. We now take for granted that we can carry a lightweight, flat, always-connected computer in our pocket or purse, ready to turn on instantly, with access to the world’s information at our fingertips.
Children today take this technology for granted in the same way that my generation assumed that telephones and televisions belonged in every home. We have not yet begun to understand the radical implications of a world in which a young child sees a magazine as a broken iPad. The appeal of portable flat-screen technology has led us to introduce these new tools into our lives without understanding their full power or appreciating the risks that they represent.
The ways in which we socialize, work, learn and relax have all changed in just five years. Take a look around at your next social gathering and count the times that someone pulls out a smartphone. Or, perhaps more frightening, observe how many freeway drivers’ faces are illuminated by the glow of a phone or tablet. (I recommend you do this from the passenger seat!)
We can expect a lot of incremental improvements in flat-screen mobile devices in the coming year. Samsung has emerged as a credible competitor to Apple, and Google’s Android operating system has many fans. While Microsoft’s newest operating system has received both raves and pans, it’s clear that the company has put its engineering and marketing might behind its new Surface tablets. But don’t count out Apple — this could be the year that it merges the technology in iPhones, iPads and televisions, further modifying the ecosystem for consuming video.
Perhaps the most interesting new trend is the newfound appeal of analog content. I’ve enjoyed watching my teenage children embrace vinyl records. It’s not just about something that sounds different — it’s about making a physical connection with an object that feels valuable and permanent as opposed to the inexpensive and ephemeral digital download.
Paradoxically, the digital revolution has led us to find greater value in the physical and the analog. The obvious parallel is the Arts and Crafts movement of the late 19th and early 20th centuries. This countermovement values not just the physical object, but also making things yourself — the so-called Maker Movement. Makers don’t necessarily reject the digital; rather, they embrace it as a tool that gives more democratic access to the tools of production.
The embodiment of the analog/digital confluence is the 3D printer. 3D printers use a digital model to “print out” an object — a cell phone case, a toy, a sculpture. 3D printers have been around for more than a decade, but reached widespread awareness in 2012. Visit “Google Trends” and enter “3D Printer” to see how quickly interest is growing.
Until recently, 3D printers were expensive tools used by industrial design labs and small manufacturing facilities, but several options are now available for the home at the cost of a good camera. For the adventurous, do-it-yourself kits and plans can be found to build a 3D printer for less than $1,000. Firms such as Cubify and Makerbot offer home printers in the $1,000 to $3,000 range.
A. Michael Berman is the Vice President for Technology and Communication at California State University, Channel Islands.
3D printers may never achieve the widespread use of devices like the iPhone, but as digital content becomes ever cheaper and more universal, we will increasingly value activities that are tangible, flawed and personal.