By Dale Kasler
dkasler@sacbee.com
Published: Saturday, Jan. 8, 2011 – 12:00 am | Page 1A
Last Modified: Sunday, Jan. 9, 2011 – 12:42 pm

Put aside Gov. Jerry Brown’s political skills for a moment, along with his insider’s knowledge of state government and his honeymoon with voters and lawmakers.

Those assets might not stand a chance against 12.4 percent unemployment.

Brown’s entire governorship could ride on something that’s almost entirely beyond his control: the direction of California’s economy.

If the state remains on its current path of slow, almost invisible economic growth, Brown’s term could be consumed by multibillion-dollar deficits and endless infighting over how to bridge the gap. He’s already promised a “painful” first-year budget, the details of which will be released Monday.

“If the economy doesn’t pick up, the deficit’s going to come back like an opportunistic infection. If the economy does pick up, he’ll look like a genius,” said Jack McKenna, an expert on politics and government at Claremont McKenna College.

It’s mostly out of Brown’s hands. Experts say there’s little a governor can do in the short term to rev up growth – even a governor handed the reins of the world’s eighth-largest economy. The state is essentially hostage to global economic forces, fluctuations in the stock market and policy decisions made in Washington.

At the state level, “we don’t control interest rates, we don’t control trade policy. If you’re talking about fighting the recession in 2011, we have very few tools,” said Stephen Levy of the Center for Continuing Study of the California Economy.

The federal government can cut taxes and ramp up spending, as the Obama administration has, to try to expand the economy.

State governments aren’t allowed to run deficits. In fact, the moves they make to stop the red ink – like cutting spending or raising taxes – will usually dampen economic growth.

Whatever the details are, Brown’s plan for curing California’s deficit – estimated to be at least $25 billion over 18 months – will take money out of circulation for the time being.

That leaves Brown’s governorship largely at the mercy of people like John Hancock, owner of a struggling Rancho Cordova factory called Form & Fusion Manufacturing.

Form & Fusion, which makes cargo racks for commercial vehicles, laid off half its 60 workers and put the survivors on reduced hours after the auto industry collapsed.

Sales have recovered somewhat in the past six months, but they’ve “got a long way to go,” Hancock said.

He doesn’t expect to rehire anyone this year, and he doubts Brown’s policies can do much to increase sales of his products.

“I wish him well; I hope I’m wrong,” Hancock said.

Brown and the Legislature do have some control over the economy. State tax rates and regulatory policies can affect the climate for business. They can influence whether a California factory relocates to a low-tax state such as Nevada, for instance.

But the impact generally isn’t felt right away, according to Levy and other experts. “A state’s economic weapons are medium- to long-term,” Levy said.

The same is true about the emergence of new industries. Brown and other officials have vowed to support the development of green technology. But green tech is responsible for just 3.4 percent of California’s jobs, according to a recent Employment Development Department study.

New industries “don’t shoot up overnight,” Levy said.

Hancock is among those skeptical about green tech as an immediate cure. Form & Fusion built some wind turbines for a Sacramento company. The deal was profitable, but the customer went out of business.

“I think there are opportunities there, but to say that’s the salvation of the state’s economy, I think that’s holding out a false promise,” he said.

Economic trends aren’t necessarily life or death for a governor. Sherry Bebitch Jeffe, a political scientist at the University of Southern California, said governors can be tripped up by crises outside the economy, such as floods or wildfires. Gray Davis was wounded by the energy crisis of 2001, although he was able to get re-elected a year later.

A governor also can prosper despite a weak economy if voters perceive he’s a strong leader. “It comes down to how well you handle it,” said Michael Shires, a political scientist at Pepperdine University.

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