The California Dream

As Mr. Levin’s article points out, what once passed as the Golden Era of California dates back a half-century to a time when median family incomes were sufficient to enable most persons to live comfortably. With easily acquired down payments sufficient for the purchase of a typical tract residence, home ownership became the common life form.

For those who preferred to rent, a suitable apartment could usually be found for no more than one-fifth of a typical worker’s monthly salary. Even transportation became affordable when necessary; in 1963 my new bride learned to drive on the 1954 two-door Chevy we bought from a private party for $300.

It appears the middle-class dream is no more. Over the past four decades, our state’s working class incomes failed to match the cost of living increases. In 1980, according to the nonpartisan Public Policy Institute of California, the median California family earned – in today’s dollars – about $68,000. Now, nearly 40 years later, this income has only risen to $73,000 – but because of inflation, however, the cost of living exploded.

A striking example: A house, which 50 years ago cost about three times a younger Californian’s household salary now costs seven times what a youthful householder earns. Is it any wonder why a sense of depression now descends upon many persons who seem to be falling further behind with every passing year?

Although the problems of faltering prosperity are by no means unique to California, with our cost of living factored in, the middle-class is experiencing an ever greater difficulty making ends meet. And as you might guess, the problems faced by the least affluent among us can be described as untenable. The simple fact is we’ve become the poorest state in the union … falling behind even Mississippi and West Virginia. Perhaps this explains, according to a recent USC/Los Angeles Times poll, why only 17 percent of Californians believe the state’s current generation is doing as well as the previous one.

I suppose with these disclosures revealed, I’m entitled to end my investigation here and concur with Mr. Levin’s findings that the California Dream is essentially dead. Most certainly a statistical evaluation might justify such a presumption. Nonetheless, I can’t quite bring myself to this conclusion. Although the arguments seem valid, there’s a factor being ignored. The implications are all collective in nature; the missing ingredient is individuality. Admittedly, there are probably few millennials capable of purchasing the $500,000-plus median priced house.

Despite this fact, a far less expensive starter home can become a substitute dream home – if the purchasers are willing to regard it as such. By less expensive, I’ll not pass this off vaguely; I’ll be specific. Over the past 18 months you might have purchased: a two-bedroom condominium on Monroe Street in Indio for $92,000; a 2-bedroom manufactured house on San Carlos Drive in Hemet for $46,449; a two-bedroom condominium on Orchid Lane, Moreno Valley, for $81,000; and a three-bedroom house on Emerald Avenue in Indio for $112,000. The properties are all in respectable areas and may be expected to appreciate nicely over the next several years.

As for the exploding cost of living, once again it’s viewed collectively, not individually. Consider the nationwide average price of a wedding; according to The Knot Real Wedding Study, it’s now $35,329 … and this does not include the cost for a honeymoon. I’ll concede that if the long-term success of a marriage were directly proportional to the cost of the nuptials, the high price might be warranted, but we all know this isn’t the case. Regardless of who pays for the wedding, if the sum goes, instead, to the newlyweds, it will be a fine start to their personal California Dream.

What else feeds into an excessive cost of living?  According to an analysis released by personal finance company NerdWallet, the average U.S. household owes $16,061 in credit card debt. According to the most recent figures from the Federal Reserve, total U.S. consumer debt now stands at $3.62 trillion. With credit card interest rates regularly in the double digit range, is there any doubt the average American – and Californian – sees much of their disposable income as just that: disposable. But of course it needn’t be. If each person simply pays off any credit card balance in full each month, no interest accrues to the credit card companies. This would be a fine step toward the California Dream. But once again we must do this individually; collectively we’ll probably continue to pump out our dollars to the institutional loan sharks.

If there’s a single aspect of modern life separating the favored from the unfavored, it’s education. It’s almost axiomatic, those who fail to go beyond high school will find themselves relegated to lower paying employment and far less likely to share in the bounty a prosperous economy offers.

If anyone should be credited with enhancing higher public education here in California, it must be the late Clark Kerr (1911-2003). As a professor of economics and industrial relations and a masterful labor negotiator, Kerr joined the UC Berkeley faculty in 1945 as a flood of post-war servicemen and women enrolled. What this generation of students did with the opportunities afforded them by the GI Bill of Rights resulted in a deep impact on Kerr’s insistence on universal access to higher education. He served as UC Berkeley chancellor from 1952 to 1958, when he was thereafter elevated to president of the University of California system, a position he held until 1967.

His tenure became an era of tremendous growth and planning. As UC president he spearheaded the negotiation of California’s Master Plan for Higher Education. Adopted by the state Legislature in 1960, it assured access to public higher education for all California students and defined the roles of the UC campuses, California State University and California’s system of community colleges. The plan has been used as a model in education planning around the world.

It’s my belief the ability to acquire a first-rate university education and the credentials to accompany it is the key to advancement and recognizable success in this second decade of the 21st Century. Of vital importance, however, is that this be accomplished well within the student’s financial means, with the assurance no massive debt is incurred. As for meeting these requirements, I’m thoroughly convinced there’s no place this is more attainable than here in California.

The approach is straightforward. The first two freshman and sophomore years will be at a modestly-priced local community college, preferably while living at the parents’ home. The junior and senior years are then spent at a nearby California State University campus, also commuting from home. During the summer months a paying job of some sort will be helpful, if one can be found. With frugal living and perhaps some family assistance, it may be possible to complete the full four years without having to borrow at all. And with university degree in hand, it’s time to take the first step toward prosperity.

A final word: Be aware, much of what is touted in life is mostly nonsense. The education and prestige a top name university offers is essentially hyperbole.  An expensive vehicle provides no better transportation than an inexpensive one.  A Rolex wristwatch does not keep more accurate time than does a Timex. The $25 Chanel selection of lipstick from Macy’s is fundamentally the same as the $1.39 tube of Wet ‘n Wild from Target. Never doubt you’re viewed as a mark by most of the vendors you encounter.  If you hope to truly prosper in this world and enjoy the benefits the California Dream offers, you must do so on your own terms as an individual, not as an integral part of the collective society. It’s a magnificent world we’re privileged to occupy; try to avoid positioning yourself in the less agreeable portion of it.

Al Jacobs, a professional investor for nearly a half-century, issues weekly financial articles in which he shares his financial knowledge and experience. You may view them on http://www.roadwaytoprosperity.com.

al@beachcomber.news