Exploding the Texas Myth of Prosperity

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Texas-economyThe key to understanding politics is to understand that most political claims are largely political spin.  It is not that they are manufactured lies (at least most of the time), but rather that they are claims taken out of context and presented without nuance or qualification.

The sophisticated political observer learns to take such claims with a grain of salt and not to merely repeat these claims as facts.

One of these pervasive myths at the state level is the claim that Texas is the answer to California’s troubles.  The idea is that they are growing faster than California and have been more resistant to the economic recession due to less taxes, less regulation and less government.

Republicans in the legislature, along with Lt. Governor Gavin Newsom, a Democrat from the legislature and a representative from the California Teachers Association are going to Texas to learn how to fix the problems of California.

The myth is perpetrated in part by Texas’ Republican Governor Rick Perry, who “delights in telling tales of his California ‘hunting trips’ — hunting for businesses ready to flee the Golden State.”

Sounds good, but is there in fact any truth behind it?  Republicans argue that there is, as between 2008 and 2010 Texas gained 165,386 jobs while California lost more than one million jobs.

However, beneath that detail is considerable nuance.  For instance, in February the LA Times reported that the state that “prides itself as a model of conservative spending and responsible budgeting” has a $27 billion budget gap.  That gap amounts to roughly one-third of the state’s budget, so it is actually a good deal larger than California’s.

Moreover, because Texas is already lean on government, they lack easy solutions.

Part of the myth may have been due to the fact that “Texas has a two-year budget cycle, which allowed it to camouflage its red ink last year, thanks in large part to billions of dollars in federal stimulus money.”

Reported the LA Times in February, “The Texas budget crisis is prompting some experts to reconsider what had been dubbed the Texas Miracle.”

Those jobs you ask, well it turns out they may not be as good in reality as they look on paper.  It is true that the state has a much lower unemployment rate than California, but that comes at a cost, as most of those jobs are low-paying.

How low?  “One out of three wage earners in Texas earns too little to keep a family of four above the federal poverty level, according to a 2009 study by the Corp. for Enterprise Development, a Washington-based nonprofit. That is double the percentage of similarly low-wage Californians.”

Reports the LA Times, “Such figures call into question whether Texas’ economy has really transitioned into a new 21st century model, or whether it has been buoyed by high oil prices and lots of loosely zoned land where construction of cheap houses endured through the recession.”

What about the myth that Texas is stealing California’s jobs?  A UCLA Study finds that “Texas isn’t stealing California jobs, workers or wealth” and moreover, “Although businesses often say California has high tax rates, tough environmental regulations and difficult permitting systems, some of those accusations are untrue.”

“California, for instance, takes about 4.7% of what a business produces in taxes — which happens to be the national average. Texas takes more, 4.9%, according to a study last fall by the Council on State Taxation, a business-friendly trade group,” a March LA Times article reports.

The truth is more nuanced, of course.  And it amounts to businesses leaving California who are not suited for California.  But businesses are doing better in California that are better suited for California.

The LA Times cites Mr. Nickelsburg, who said “It appears that some businesses are more naturally suited to California and are growing, while others are more naturally suited to Texas. Legislators should focus on making it easier for California-centric businesses to grow in the state.”

California has more expensive land and less open space and so it is better suited for companies that do not use a lot of land but are operations that provide “high value-added, labor-intensive production of goods and services.”

“There’s a long list of sectors in which employment has grown faster in Texas than in California in the last eight years,” Mr. Nickelsburg told the Times.

On the other hand, California has outperformed Texas in semiconductors, computers and peripherals, communications equipment and miscellaneous durable goods manufacturing such as medical equipment.

The Times adds, “Among nondurable goods, employment in Texas grew faster in plastics and rubber, food and petroleum, partly because Texas has a lot of oil. California outperformed Texas in printing, tobacco and beverages — the state has a lot of vineyards.”

Texas Governor Perry claimed that in 2010 up until November 4, 153 businesses have moved from California to Texas.

True?  He made that claim on Fox & Friends on November 4 and then on Nov. 8, he said it to host Greta Van Susteren on Fox News’s “On the Record.”

According to the Austin American-Statesman, “Perry spokeswoman Katherine Cesinger told us that “the 153 figure came from a Dun & Bradstreet analysis of California business migration from January 2010 to August 2010.””

It is a misleading figure, however.  It does not mean “that 153 individual companies pulled up stakes in California to settle in Texas.”

For example, “If one company with five offices in California keeps its headquarters in state and moves its branches out of state, including one to Texas, that would figure into the D&B count that Perry cites.”

The real number appears to be 61 business cites, most of these in the kinds of businesses that figure to do better in Texas than California, based on the above totals.  So Governor Perry’s statement of 153 sites was clearly exaggerated but half-true.

However, based on the study by UCLA, that does not mean California is going to benefit a great deal by changing policies.  Rather, this study actually gives California a blueprint as to what businesses to attract and how to focus their efforts and what not to do as well.

Had the delegation to Texas simply taken the time to read an actual study, they would have learned that their effort was fruitless.  These are different states with different resources, and what may work in Texas might not work in California.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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15 thoughts on “Exploding the Texas Myth of Prosperity”

  1. biddlin

    Having lived and worked in Texas I can’t think of anything that they have which we need, other than good BBQ. Racist jokes, grinding poverty, misogyny and execution of the retarded are Texas staples we probably want to eschew. As always, I hope everyone who envies Texans will move there and experience it for themselves, and that those who like will stay. Drive friendly, drink ’em if ya got ’em.

  2. E Roberts Musser

    dmg: “Republicans in the legislature, along with Lt. Governor Gavin Newsom, a Democrat from the legislature and a representative from the California Teachers Association are going to Texas to learn how to fix the problems of California.”

    So what are you afraid of if they go have a look? CA has huge budgetary problems, and could use a bit of humbling, instead of assuming it knows the best way to do everything…

  3. wdf1

    Further context on the Texas state budget. Summary: In 2006 Texas rolled back property taxes and increased business taxes. Property taxes are more stable than business taxes. When business soured, revenues fell and put Texas into a deficit. They will rely on some rainy day funds, but I doubt that Texas will be as well funded in the future. It’s somewhat reminiscent of Prop. 13.

    What’s the Matter With Texas? A Self-Inflicted Mess

    [url]http://www.nytimes.com/roomfordebate/2011/01/19/whats-the-matter-with-texas/a-self-inflicted-mess[/url]

  4. davehart

    Okay, E Roberts Mussser, I read the SignOnSanDiego article. And your point? Texas sounds like a hell hole outside of Austin, Dallas and San Antonio. Repressed, intolerant, backward and socially retarded. Economic growth by almost every measure in California is greater. Texas strength is more low wage workers? That’s good for whom? They have no money to spend at the end of their low wage work day. Another example of self-defeating trickle down economics. People pay more than twice the property tax and the state has a bigger budget hole than California. Who should learn from whom?

  5. Frankly

    [i]”Having lived and worked in [b](California)[/b] I can’t think of anything that they have which we need, other than good sushi (we call it “bait”), social elites, environmental wackos, racists, reverse racists, communists, Marxists, socialists, grinding poverty, misandry, moral tupitude, and retarded economic growth, the highest overall taxes in the country and they still cannot blanace a budget [b](California)[/b] staples we probably want to eschew[/i].

    Something very important that all you Texas bashers seem to be forgetting. They have some of the lowest state tax rates in the country. Of course the had government funding problems with the economic downturn… Washington DC was the only state/district with economic growth since through the recession. However, Texas can double and triple some taxes and still be a much lower taxed state than California.

    California is fully-leveraged. Texas is not. Big difference.

  6. Frankly

    Elaine: Well balanced article except for the lack of mention of the difference in the cost of living. Texas housing and energy costs are much less than CA.

    See here for housing costs by state in 2006: [url]http://money.cnn.com/2006/09/26/real_estate/costliest_housing_cities_for_middle_managment/index.htm[/url]

    See here for a nice view of the cost of living differences per state:
    [url]http://www.missourieconomy.org/indicators/cost_of_living/index.stm[/url]

    The wage gap David points to is a bit disingenuous because it skips the cost of living difference. Frankly, CA cost of living is hostile to low income people. It has pushed many of them to congregate in an ever shrinking supply of low cost areas where the elites can flee from. Then the elites take up residence in exclusive and gated communities where they can demand higher taxes to satiate their guilt for having fled. Texas is much more economic-class integrated.

    In terms of weather and natural beauty, CA takes the prize. Also, CA has a history of having a much stronger industry of higher learning… where CA kids can get a quality college education for next to fee. However, this is in decline from unchecked bureaucratic bloat. So, now CA only has the weather and scenery to boast about.

  7. biddlin

    JB-How much time have you spent in Texas ? I’ve lived there and still have family above and below the dusty, red earth there.”Texas is much more economic-class integrated.” I guess that doesn’t include Starr county. Per US census data, the per capita income for the county was $7,069, which is the third-lowest in the United States. Texas per capita income, $27,752. About 47.40% of families and 50.90% of the population in Starr county were below the poverty line, including 59.40% of those under age 18 and 43.30% of those age 65 or over. BTW, 97.54% of the population were Hispanic or Latino of any race. Texas boasts 17 0f the 100 poorest counties in the USA,by per capita income. Lagging behind again, California boasts none. California’s percentage of the population living below the poverty line is a pretty abysmal 13.3%, ranking us at #21, meaning 29 other states have a lower poverty level. Texas, with 15.8% below the poverty level is #8. We graduate about 68% of our kids from high school in four years, Texas, though they may have a marginally higher literacy rate, is a little behind, at 65%. National rate is only 69%. We can agree on the weather, but Texas has some spectacular scenery, and lots of it. The Big Bend region, the Austin hill country and Lake Sam Rayburn spring to mind.

  8. Frankly

    biddlin: This all sounds factual. I have not lived in the great state of Texas, but spent quite a bit of time there for business. My wife and I have considered moving there at times.

    My point was that the population of Texas is more economically integrated… meaning that there are more cities and areas where the gap between wealthy and poor is less profound. Visit Santa Barbara, San Francisco, San Jose… then visit Stockton and areas like Clear Lake, or Oroville.

    Also, when compairing the poverty level based on the national measure, it does not factor cost of living. For some reason, I cannot find more current data, but in 2006 the median sales price of a house in CA was $452,500; in Texas is was $144,900.

    One thing both states have in common is the percentage of poor Latino immigrants. The difference in Texas is that there are more poor natives keeping them company.

  9. Frankly

    [i]”The per capita income for the county was $7,069. Nowhere outside of the third world is the cost of living that low.”[/i]

    From Wikipedia on Starr County Texas:
    [quote]“97.54% of the population were Hispanic or Latino of any race. According to the Census Bureau, Starr County had the highest percentage of Hispanic residents of any county in the United States”[/quote]
    Based on this, I think we would need to look at counties in Mexico for an accurate comparison.

    So is one reason that folks on the left support open border immigration from Mexico… to jack up the poverty rates?

  10. Frankly

    More from Wikipedia:
    [quote]Starr County has long been a strongly Democratic county but suffers from low voter turnout with only approximately 20% of its 53,000 residents voting. No Republican has won the county in over a century[6] and the county favored Michael Dukakis by the highest percentage in the nation.[7] Starr County is among a handful of counties in Texas that gave the majority of their votes to Senator John Kerry of Massachusetts. John Kerry received 7,199 votes which was 74% of the votes while George W. Bush received 2,552 votes which was 26% of the votes. In 2008, Illinois Senator Barack Obama did a lot better than Kerry in Starr County, receiving 8,233 votes, which was 84% of the vote. Arizona Senator Republican John McCain received 1,488 votes, which was 15% of the vote.[/quote] Never mind my previous question. This explains enough why some folks on the left support open border immigration from Mexico.

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