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Home Publications Blogs Beat the Press George Will Never Heard of the Housing Bubble (or Labor Economics)

George Will Never Heard of the Housing Bubble (or Labor Economics)

Sunday, 22 May 2011 07:29

Fortunately, his job as a columnist for the Post doesn't require that he have any knowledge of such things. His article today touts California's fiscal hardships. It includes no mention whatsoever of the housing bubble.

California was at the epicenter of the housing bubble with prices in some areas more than tripling in the decade from 1996 to 2006. This led to a massive construction boom as well as a consumption boom based on bubble-generated home equity. 

Now that prices have returned to pre-bubble levels in many of the former bubble markets, construction has fallen through the floor and consumption has plunged as underwater homeowners struggle to keep current on their mortgages. This collapse is the main cause of the state's economic downturn as well as its fiscal crisis.

While Mr. Will looks forward to the prospect of the state's public employees being forced to take large pay cuts, in most sectors public sector wages are not substantially higher than for their private sector counterparts with similar education and experience. Basic economics dictates that if wages are lowered by much below their private sector level then the state will be unable to attract qualified people to work as teachers, nurses and other positions in the public sector.

Comments (2)Add Comment
written by PeonInChief, May 22, 2011 12:30
This kind of drivel is a mantra among the right in California. See http://www.sacbee.com/2011/05/...ecome.html
where one columnist proposes doing everything we can to turn California into Michigan.
written by pete, May 22, 2011 4:17
Pensions were inexcusably raised by California in the midst of the bubble...when things looked rosier...there is plenty of blame to go around. Returning to pre-1999 levels seems fair.

State universities have been below national market for years...essentially professors take a huge cut in real income just to live in California versus, say, Wichita.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.