1. California, America and the World to 2050 Presentation to the California Bankers Association by Joel Kotkin, Distinguished Presidential Fellow, Chapman University Santa Barbara, CA January 11, 2013

2. Long Term Fundamentals U.S. has healthier long- term demographics than most competitors U.S. only advanced country with large, growing population We still have a significant resource, energy, land and water base Growth will come --- but how about California?

3. UN World Population Prospects, 2008 rev Declining Global Population Rate

4. More Crowding to Come: US Population Growth 1960-2050 Source: Bureau of the Census, CensusScope

5. 5

7. Labor Force Growth U.S. Census Bureau, International Database

8. In a post-industrial age, stuff still matters…

9. Room to Grow Total Arable Land

11. Ag Exports Increasing Driven by solid worldwide demand, increased productivity, and strong commodity prices, America’s ag sector has seen overall export levels steadily increase over the past decade. Source: USDA Economic Research Service

13. Leading in Gas Production

14. Source: EMSI Complete Employment, 2011.4

17. New Drivers of Growth for US States Back to Basics Economics Rise of Commodities Energy Revolution Favorable Demographics

18. GDP Growth December 2001-December 2011 Color threshold is Zero

19. Employment Growth December 2001-December 2011 Color threshold is Zero

20. Domestic Migration by State: 2000-2009 10 LARGEST STATES Data from Census Bueau

21. Day after day more people moving away

24. Net Outflows to Blue Net Inflows from Orange IRS Tax Return Data. Net flow of tax return exemptions Los Angeles County Net Migration Flows, 2000-2010

25. Top Inflows of Gross Income Due to Net Migration, 2004-2008 O’Neil Center for Global Markets and Finance SMU Cox School of Business

26. Metropolitan Areas Measures job change Mar-May 2001 to Mar-May 2011. Source: U.S. Bureau of Labor Statistics Current Employment Survey

27. California Smaller Part of U.S. Economy 11.4% 11.2% 10.9% 10.6% 10.7% 10.8% 11.0% 11.1% 11.0% 10.8% 10.7% 19901992199419961998200020022004200620082010 California Nonfarm Jobs as a share of United States Center for Economic Research and Forecasting California - (percent of U.S.)

30. Slow Job Growth

31. Grand Delusions won’t save California *Green Jobs and forced density *High-Speed Rail *Social Media “boom”

33. Figure 33 Housing Affordability: 1970-2012 LIBERAL, CALIFORNIA & OTHER SMART GROWTH MARKETS 1970: From Census Bureau 1980-2009: From Harvard University 2010-2012: Demographia  Median Multiple: Median House Price divided by Median Household Income

34. Housing Affordability Demographia Housing Affordability Survey Affordability: Below 3.0

35. No Children: Housing Affordability METROPOLITAN AREAS: WOMEN AGED 15-45: 2010 VARIATION FROM NATIONAL AVERAGE Median Multiple (Median House Price/ Median Household Income) 2001-2010 Average No own children at home Higher where higher density

36. Change in 5-17 Population: 2000-2010 MAJOR METROPOLITAN AREA EXAMPLES Source: Census Data

37. Squandering Our Advantage: Is This California’s Future?

38. Critical Problems for California Widespread Anti-Growth Attitude, particularly in aging, affluent coast Too Much Regulation and Taxation Lack of Balanced Approach on environment Higher than average income inequality and a shrinking middle class

39. Source: EMSI Complete Employment, 3 rd Quarter 2010 Analysis by Praxis Strategy Group

40. Source: EMSI Class of Worker Employment, 2012.2

41. Is There a Way Back? California needs to take advantage in responsible way of its competitive strengths in basic industries Create a better environment for small and immigrant businesses Educate and use the skills of newcomers Focus government from funding pensions and salaries to necessary infrastructure

42. Immigration Rates Top 15 Regions Annual Average, 2001-2008 Areas are MSA U.S. Census Population Estimates

43. Ethnic Purchasing Power Continues To Soar Source: Selig Center for Economic Growth, Terry College of Business, University of Georgia (2008) Spending Power by Ethnic Groups (in Billions) 1990, 2000, 2008, with 2013 projections

45. Big Changes in Composition of New Entrepreneurs Share of All New Entrepreneurs (1996, 2010)

48. California Is Becoming Less Educated Than Other States Numbers in Table Show Rank Among States in Percent of Population with College Degrees) Age Group:AA or HigherBA or Higher >642 nd 5 th 45-6411 th 10 th 35-4421 st 16 th 25-3430 th 23 rd

51. It all depends on her… Education is the biggest challenge for California…once our greatest strength now becoming a critical weakness

52. The Biggest Challenge: The Issue of Class Growth of poorly educated newcomers and youngsters poses a unique problem High drop-out rates in high schools can guarantee the rise of an underclass. 54% percent of SB public school students qualify for free lunch --- highest percentage in a decade Economic development needs to focus on upward mobility — basic industries like agriculture, manufacturing, warehousing, energy can provide a strong base

53. “The Great Recession and Distribution of Income in California” Public Policy Institute of California

55. California Back to Basics In 1960 20 percent of state Budget went to infrastructure Today Less than 3 percent California schools, roads, ports, water and power once pre- eminent, now fading Solution: A return to basics oriented government focused on industries that can employ a broad segment of Californians The Good Brown: Pat Brown

56. The Political Challenge: Get Beyond the Partisan Agenda “There is no Republican or Democratic way to clean streets." New York Mayor Fiorello LaGuardia

57. JOELKOTKIN.COM A vivid snapshot of America in 2050 focusing on the evolution of the more intimate units of American society—families, towns, neighborhoods, industries. It is upon the success or failure of these communities that the American future rests.

58. Questions and Comment