While dire predictions of economic stagnation and energy shortages shake the nation each day, here on the country's western fringe a new sense of optimism is sweeping through California's economic community.
Pointing to the state's rich reserve of natural resources, a highly diversified economic base, drastic tax reductions, and the state's booming electronic and aerospace industry, many are predicting that California and the West are on the verge of a dramatic economic expansion.
The state does face some critical problems -- an acute housing shortage, serious air pollution, and a large population of poor people who may gain nothing from the state's expected boom.
But the general outlook remains so sanguine that a number of economists, businessmen and political leaders are assertng that California's iniatives in energy and industry may be the key to solving the nations long-term problems. Here, they say, has come a rebirth of the country's old faith in the spirit of the entrepreneur and the promise of technology.
"California has recaptured what Americans once had -- that spirit of pioneering," said Cyril Magin, 80, chairman of the board of Joseph Magnin and Co., one of the state's leading retail clothiers. "People in business out here are creative; they are willing to take risks."
Behind the optimism are widespread economic forecasts that California will largely avoid the national recession expected this year. Economists at Bank of America, the nation's largest bank, are predicting a 10 percent jump in business scales and the addition of 250,000 jobs in California in 1980.
The new employment represents a 2 percent increase over 1979, while the national situation is expected to remain stagnant. California's unemployment rate, which traditionally has benn more than a percentage point above the nation's, is projected to be almost equal to the national average in 1980, despite an anticipated immigration of 200,000 persons.
Bank of America also is forecasting the construction of 180,000 housing units in Califronia this year, five times that expected in New York and an amount that will increase the state's already high share of the national market.
The result is that California's real economic growth could reach 2 percent this year compared with a projected 1.5 percent increase nationally. According to the bank, business profits should climb nearly 6 percent in the state while declining 5 percent in the rest of the country.
"I think we will do in a range of moderately better to a hell of a lot better," conludes Michael Salkin, an economist at the Bank of America. "We are to some extent recession-proof."
To explain their glowing report, economists point to the state's varied industrial base in the finance, real estate, aeropspace, electronics and service sectors, which are more resistant to economic downturns than the heavy manufacturing industries of the East. The backlog of unfilled orders in the aircraft industry, for example, has jumped by more than 200 percent in two years, providing a cushion through the expected recession.
The $12-billion-a-year California agri-business sector also is expecting another banner year, with a projected 7.7 percent increase in gross farm income in 1980. Finally, California's position as gateway to the expanding markets of the Far East sparked an increase in state exports of more than 30 percent in the beginning of 1979, one of the few bright spots in the nation's bleak balance-of-trade picture.
"In the long term, California has a very strong competitive advantage," sums up Dr. Robert Arnold, directed of the Center for Continuing Study of the California Economy in Palo Alto.
Unlike Salkin, Arnold expects the state to do only "slightly better" than the rest of the United States this year, and warns if the recession deepens California also will be hit severely.
But once the national economy recovers, Arnold predicts California will outdistance the rest of the country significantly. According to a recent study completed by the center, the state's job force will expand by one-third through 1990 (compared with 25 percent nationally), and California's gross product will mushroom by more than 70 percent, again markedly better than the U.S. average.
Arnold and others say that the centerpiece of the state's promising futureis the burgeoning mult-billion-dollar high-technology, aerospace and electronics industry. That sector, by conservative estimates, is expected to provide 35,000 to 40,000 new jobs for Californians in 1980 alone.
Some people here are concerned, however, that the state's love affair with high technology may not bring any benefits to those who need them the most -- California's estimated 4 million to 5 million improverished residents.
"I don't think it will necessarily trickle down to those people," explains Robert Gnaizda, an attorney in San Francisco who represents advocacy groups and a former Brown administration official. "There are virtually no blacks in the scientific fields, for example, and there's a very small amount of affirmative action."
Even worse is the plight of the state's estimated one million rural poor, whose luck of skills, distance from urban manufacturing areas and dependence on huge agribusiness employers may shield them completely from any economic growth in the state.
Officials at the state capital remain confident that the poor will benefit, and point to statistics showing that the number of welfare recipients in California has been declining for the past several years (following a national trend). State Health and Welfare Secretary Mario Obledo adds that a $25 million program recently signed into law by the governor will provide the disadvantaged with training in "critical" industries like electronics where employment is expected to increase the most.
The Brown administration's faith in high technology has spilled over into the state's long-term energy plans which rely heavily on developing alternative energy sources. California has paced the rest of the country, for example, in instituting a 55 percent income tax credit for home solar power installations, and a comprehensive program to convert state cars to gasohol.
More exotic efforts include a recent agreement with an Israeli corporation to help design a large-scale solar power plant in Southern California, and a plan to use engineering skills developed in the People's Republic of China to build a system of small hydroelectric generators on the state's waterways.
"California has led the nation -- maybe the world -- in pushing alternative (emergy) technology," says James Piper, president of Piper-Hydro, a major producer of solar energy products in Southern California.
Even bigger pluses in the state's energy future are the vast reserves of coal and oil that lie in the West. Officials point to the development in Southern California of a 10-billion-barrel reserve of heavy, or sulfur-laden, oil that is estimated to be larger than that on the North Slope of Alaska.
The state is expected to remain dependent on Alaska oil and energy produced by coal-fired plants in bordering western states to meet much of its future energy needs. The development of the heavy oil reserves, however, coupled with increases in offshore oil production, could reduce significantly the state's already small (20 precent) reliance on imported oil.
Officials here grumble that the major problems affecting the state are federal policies like the national gas allocation system that they blame for the state's long gas lines last spring.
"The feds are really bad news, says William Northrup, exeuctive director of the California State Lands Commission, which regulates oil production on state-owned property. "The sagebrush rebellion is real. If you were to give (people in the West) a way out of these United States, most of them would have left yesterday."
Although many in the business community share the anger toward Washington, there is strong sentiment that state environmental policies also are throwing a damper on development here. One of the most critical areas is housing, where environmental restrictions have produced spiraling prices.
"There are terrible policies on housing," says Nathan Shapell, president of Shapell Industries, one of the state's leading home builders. "We're so concerned about every snake and every tree that we forget about people."
There is virtually unanimous agreement in the business community on the economic benefits they have gained from the state's tax-cutting efforts. The passage of Proposition 13, the elimination of a business inventory tax, anti-inflationary indexing of state income taxes and a recent initiative placing a limit on state spending all had a positive effect on the California business climate.
According to one recent state study, Proposition 13 alone gave the business sector a $1.8 billion windfall and reduced the effective tax rate on business by nearly 40 percent. The report also concluded the lowered costs of owning a home under Proposition 13 could provide a near-term boost to the state's poor housing market.
Some observers contend that while Proposition 13 has stimulated the economy, other factors, including federal programs, are the reasons the state's economy is expanding so dramatically.