As California Declines, Texas Embraces Growth

In the future, historians may likely mark the 2010 midterm elections as the end of the California era and the beginning of the Texas one. In one stunning stroke, amid a national conservative tide, California voters essentially ratified a political and regulatory regime that has left much of the state unemployed and many others looking for the exits.

California has drifted far away from the place that John Gunther described in 1946 as “the most spectacular and most diversified American state … so ripe, golden.”  Instead of a role model, California  has become a cautionary tale of mismanagement of what by all rights should be the country’s most prosperous big state. Its poverty rate is at least two points above the national average; its unemployment rate nearly three points above the national average.  On Friday Gov. Arnold Schwarzenegger was forced yet again to call an emergency session in order to deal with the state’s enormous budget problems.

This state of crisis is likely to become the norm for the Golden State. In contrast to other hard-hit states like Pennsylvania, Ohio and Nevada, which all opted for pro-business, fiscally responsible candidates, California voters decisively handed virtually total power to a motley coalition of Democratic-machine politicians, public employee unions, green activists and rent-seeking special interests.

In the new year, the once and again Gov. Jerry Brown, who has some conservative fiscal instincts, will be hard-pressed to convince Democratic legislators who get much of their funding from public-sector unions to trim spending. Perhaps more troubling, Brown’s own extremism on climate change policy–backed by rent-seeking Silicon Valley investors with big bets on renewable fuels–virtually assures a further tightening of a regulatory regime that will slow an economic recovery in every industry from manufacturing and agriculture to home-building.

Texas’ trajectory, however, looks quite the opposite. California was recently ranked by Chief Executive magazine as having the worst business climate in the nation, while Texas’ was considered the best. Both Democrats and Republicans in the Lone State State generally embrace the gospel of economic growth and limited public sector expenditure.

To be sure, Texas has its problems: a growing budget deficit, the need to expand infrastructure to service its rapid population growth and the presence of a large contingent of undereducated and uninsured poor people. But even conceding these problems, the growing chasm between the two megastates is evident in the economic and demographic numbers. Over the past decade nearly 1.5 million more people left California than stayed; only New York State lost more. In contrast, Texas gained over 800,000 new migrants. In California, foreign immigration–the one bright spot in its demography–has slowed, while that to Texas has increased markedly over the decade.

Read more from Joel Kotkin at Forbes.com

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