Comparing Texas And California, And Why Texas Wins Out

“Texafornia – A Glimpse into America’s Future” headlines The Economist’s special report last week comparing America’s two mega states, California and Texas.  The British magazine looked at several areas where the two states compete, and for the most part California came out second best.

One fifth of all Americans call California or Texas home.  California, with 40 million people is the fifth largest economy in the world, but Texas, with 29 million people is the world’s tenth.  Their joint GDP is almost $5 trillion. But their trend lines are headed in almost exactly the opposite direction.

“Between 2007 and 2016, a net one million American residents, or 2.5 percent of the state’s population, left California for another state, and Texas was the most popular destination,” notes The Economist.  “Most of those leaving California for Texas earn less than $50,000 a year and have only a high school education.”  But these are the people who once made the California Dream, returning GIs who in the post-War world who found good blue collar jobs in California, and upward mobility for their children.

Not any more.   High housing prices are causing one in three Californians to think about moving out of state.  And companies are leaving too. ”Last year McKesson, a medical supply company, and Core-Mack, a supplier to convenience stores, shifted their headquarters from California to Texas, as did Jamba Juice, a smoothie company,” The Economist noted.  “Many California firms are adding jobs outside the Golden State.  Charles Schwab, a financial brokerage firm based in San Francisco, received more than $6 million in incentives from Texas, and by the end of this year will have more employees there than in California.”

In a section titled “Faded Gold”, The Economist blames the usual suspects for people abandoning California: over regulation and high business taxes.  They conclude that the state simply does not provide enough decent jobs or affordable housing for working families.  “California needs to adopt a pro-business attitude and strategy more like Texas.”

The magazine also grades the states on their success in educating their children, in a segment entitled: “Do Your Homework.”  Here both states fail. “If California and Texas were to be graded for their achievements in the classroom, they would barely pass.  They rank 36thand 41st respectively … for educational outcome.”  Texas has long been criticized for its skimpy spending on education; and in the legislative session just ended the legislature and governor finally provided more money for schools.

But California’s vastly more money spent on education does not result in a better outcome.  California spends 22 percent more per student on education than Texas, and average teacher salaries are 50 percent higher. In budget terms; California spend twice as much on education as Texas, yet their educational outcomes are roughly the same; in both states fourth graders are below the national average in reading. 

The Economist has a ready explanation for California’s poor performance in education.  “Teachers unions are a powerful political force in California, significantly more than in Texas.  Unions represent the interests of their members, not the students they teach…. In California, firing underperforming teachers is more difficult than mastering advanced calculus.”  

The magazine also notes that, “In 2012, California voters approved a 30 percent increase in income tax rates, in part to fund public schools, but all that extra money went to pensioners and their health care.”   This is the reason why there is no political cost for the failure to provide better education, or jobs and housing for that matter. The people who benefit the most from California spending are those beyond their working years, or those too poor to work. In California the student population is heavily non-white, but with the collapse of the state’s Republican Party, there is no alternative to a Democratic Party largely controlled by teacher and public employee unions, whose priorities are more public spending and higher taxes, which in the view of The Economist, are exactly the worst policies for California.    

In Texas, however, there is a growing political backlash to the state’s poor educational performance.  Business and civic leaders have made known their concern about inadequate education spending and the lack of skilled workers for an expanding economy.  Over the past decade, the Texas legislature spent its time on social conservative causes like stopping transgender bathrooms. But in 2018, long dormant state Democrats made something of a comeback defeating 12 Republican legislators.  “Some Republicans believe that, without more investment and improvement in public education, voters could bring in the Democrats. If poor test results do not cause them to change their approach, the mathematics of politics might.”

There is no such political pressure in California. Democrats in this one party state pay no price for lack of affordable housing, lack of job creation, and lousy education.   To some degree this is the result of the self immolation of the state’s once powerful Republican Party since its dalliance with immigration bashing that began a quarter century ago.  Now all Republicans have left is a cohort of elderly white voters who are either leaving the state or dying off, so when they criticize Democratic policies they are hardly even heard.

In its segment on welfare, titled “Social Insecurity,” The Economist zeroes in on the most important legacy of California’s one party Democratic rule: the fact we are the most impoverished state in the nation.  At 19 percent, California’s poverty rate is the highest among the 50 states. “The huge gaps between the wealth of the top five percent and the bottom 20 percent make California the second most unequal state after New York.”

California’s poverty and inequality can be traced mainly to the lack of blue collar manufacturing industries.  “Texas is the country’s number one producer and consumer of energy, and environmentalism is not part of its brand.”  Texas is therefore attractive to manufacturers and heavy users of electricity while California is not. California’s political class and its voters have long been dedicated to fighting climate change, and as the magazine points out: “California’s leadership on the environment has won it kudos, but it has also exacerbated the housing shortage and high cost of living.”

Overall The Economist has little positive to say about California’s future.  That was not always the case. Fifteen years ago, in May 2004, the magazine ran a special survey titled: “Is California Back,” with a picture of newly-elected Gov. Arnold Schwarzenegger on its cover.  The magazine opined that perhaps this actor-politician, just elected in a recall campaign, would make the structural changes necessary to put California back on the path to prosperity. It did not happen; and today the poverty rate and inequality are worse than 15 years ago.

Today, both California and Texas face special challenges for the future. The Economist lists three:  first, making the state a desirable place to do business “ensuring the creation of well paid jobs and prosperity for their citizens.”  Here Texas seems to be winning out. Second, both states need to educate their children better. “As the number of poor, English language learners grows in both states, this task takes on even greater significance.”  Neither California nor Texas seem to be doing very well here.

Finally, “they must be mindful of the gap between the haves and have-nots and to deal with the inequality of income and opportunity that exist in both states.”  Here again, Texas seems better positioned because it is the more affordable state to live in.

The Economist’s survey closes by quoting Joel Kotkin of Chapman University, who notes that, “the Golden State used to be a rising tide lifting all sorts of boats.  Now it is a rising tide lifting a few yachts.” For far too many of those left to paddle for themselves, the problems of living in California are best resolved by packing up and moving someplace else.

This article was originally published by Fox and Hounds Daily