The California economy is not recovering from recession at the same pace as the rest of the nation. At the core of its persistent economic problems lies a structural change in the California economy—the cutbacks in military procurement in the Los Angeles area. It is now on a new and lower growth path. Washington will not be able to step in and restore the previous level of spending: the amounts are just too big. And market forces will not, by themselves, overcome the state's structural problems. If it is not to continue to lag behind the rest of the United States, California must make policy changes to encourage business expansion and retention. Because heroic changes in Californian politics, however overdue and desirable, are not realistic, we have to look to some simple measures that California should take to begin to climb onto a higher growth trajectory.
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