Sorry, but your comment is nonsense. I don't disagree with your conclusion (at least not entirely), but there are some facts that are in serious need of clarifying here.
> Agriculture is using 80% of the water, but accounts for a mere 2% of the GDP (4% of employment)
Even disregarding the fact that California's agricultural workforce is a smidge below half of California's total population [0] (which indicates that your "4% of employment" figure is incredibly misleading; I'm guessing you're comparing to national rather than state figures?), the article you cited actually agrees with my observation that a green lawn is far less important than, you know, food on tables, and concludes that the "80%" figure isn't going to be true for much longer as urban sprawl continues throughout California.
(EDIT: it's also not clear that agriculture really does account for 80% of California's water use; while the data is probably outdated, California's agricultural water use was actually around 60% as of 2010 per the USGS [3].)
> There's no reason we should be squeezing our rural and suburban centers that fuel the overwhelming majority of our economy
It's pretty hard to fuel that economy without food. This isn't Star Trek; we don't have food replicators, and you're severely understating the sheer quantities of food that California's agricultural industry produces. Per the California Department of Food and Agriculture [1], California produces around half of all American fruits, vegetables, and nuts. Along with this, California (as of 2013; the CDFA hasn't published newer data yet AFAIK) is the sole producer (99% or more) in the nation of 14 crops (including almonds, olives, raisin grapes, and walnuts) and is the leading national producer of several dozen more [2, page 2]. Sure, Hollywood and Silicon Valley make a lot more money, but you're grossly underestimating how vital Californian agriculture is to the national and state economy, and money isn't everything here.
So yeah, we can be more aggressive about cutting off agricultural water if you're willing to go without a lot of types of food (either due to being entirely nonexistent from domestic production or - more realistically - much more expensive).
> Further, if the point is food production and not food profit for the nation then the focus should be on producing the most water efficient foods (per calorie) not the most profitable foods produced under an assumption of free or near free water.
I agree with this, and hopefully farmers will continue to make crop selections based on water consumption.
However, profitability is a pretty big economic motivator. Rice, despite being among the heaviest users of water, still netted California nearly $790 million with 25% of American rice having been grown in California [2, page 11], though these figures are apparently on the decline, probably because of the drought.
Also, it's not quite accurate to say that the water is free. Even if the water itself is entirely free (which isn't always the case), a lot of farmers and ranchers (and other inhabitants of rural areas) are facing the prospect of having to redrill wells, which - if you're not aware - isn't cheap. The well at my old house was drilled with this possibility in mind: deep enough that, even with a drop in water, it can still pump.
> The cost of the product should reflect the cost of the resources required to produce. This is not the current case.
I take it you're not poor? Having grown up in a low-income household, I have a very hard time agreeing with this sort of attitude knowing that putting food on the table was hard enough as it was.
This isn't to say that I disagree with you entirely here. I think there's room for something along the lines of a tax on crops that require large amounts of water or a tax break on crops that are less water-dependent, which would achieve what I'm guessing to be your intention without having such a broad negative impact on those in lower income brackets.
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[0]: http://www.labormarketinfo.edd.ca.gov/?PAGEID=158
[1]: http://www.cdfa.ca.gov/Statistics/
[2]: http://www.nass.usda.gov/Statistics_by_State/California/Publ...
[3]: http://ca.water.usgs.gov/water_use/2010-california-water-use...