Because of its ideological ramifications, the rivalry between Texas and California is more than just competition for bragging rights between the nations two heaviest hitters; rather, it is ground zero in an ideological proxy war between the progressive and conservative factions of larger-scale national politics. And in recent years, as the Lone Star State was experiencing its so-called "Texas Miracle" while California was limping along from budget crisis to budget crisis, it was far from uncommon for conservative ideologues to point to the contrast between the two as evidence of the success of conservative economic policy.
Unfortunately for them, the tide has turned on this view. First, the so-called Texas Miracle turned out to be a sham masked by a combination of rapid population growth, high oil prices and low wages. Ironically enough, it was billions of dollars in stimulus funds that was propping up Texas' budget solvency. When that ran out and the economic crisis finally showed its full effects, the state faced a crippling budget deficit of $27 billion, and was forced to make massive cuts to Medicaid and education to stay afloat.
California, meanwhile, has been on exactly the opposite trajectory. The voters, sick of the tax revolt that had been artificially maintained by the Republican minority, voted in a series of structural reforms that loosened the minority's stranglehold in Sacramento and followed that up by passing two tax measures to promote green energy and protect our schools from further cuts. Combined with the economic recovery that has been taking place nationwide, these changes were enough to put California's budget back in the black for the first time in many years, even as Texas suffers from high poverty, low wages and a drastically failing education system.
Join me below the fold to learn more about why the economic miracle in Texas was really a mirage.
Texas' economic success, then, was more mirage than miracle. But even had it been sustained, it could never have been a model suitable for nationwide implementation. As Krugman explains:
What Texas shows is that a state offering cheap labor and, less important, weak regulation can attract jobs from other states. I believe that the appropriate response to this insight is “Well, duh.” The point is that arguing from this experience that depressing wages and dismantling regulation in America as a whole would create more jobs — which is, whatever Mr. Perry may say, what Perrynomics amounts to in practice — involves a fallacy of composition: every state can’t lure jobs away from every other state.This job-poaching practice serves as the context behind Texas Gov. Rick Perry's latest media gimmick: a tiny media buy and a poaching tour throughout California, wherein he sought to visit California businesses in an attempt to convince them to relocate or expand to Texas. A primary focus of Perry's efforts is a company located on the Southern edge of California's Central Coast, Haas Automation, which claims it is unhappy doing business in California and is considering offers from other states.
In fact, at a national level lower wages would almost certainly lead to fewer jobs — because they would leave working Americans even less able to cope with the overhang of debt left behind by the housing bubble, an overhang that is at the heart of our economic problem.
Conservatives love to promote the narrative that businesses are leaving California in droves because of high taxes and regulation, but the truth is an entirely different story:
Conservatives have made hay of reports of California companies leaving the state. And it's true! Some have—254 in 2011, to be exact. Conservative media had a field day with that little stat. On the other hand, 132,000 new businesses were created that same year—second highest per capita in the nation, tied with Texas, and behind only Arizona. And that was California's down year.As Markos also wrote:
California leads the nation in job creation because it is the world center for both entertainment and technology. Even foreign corporations, like Samsung, house their R&D in Silicon Valley for obvious reasons—this is where the talent and venture money lives. And yes, the things that make California awesome (like infrastructure, education, entertainment) cost money. But we appreciate those things, which is why we voted ourselves tax increases.Turns out that businesses actually like to be here and love to start here. Maybe that's why Gov. Perry's trip was a massive failure:
On a conference call with reporters from Laguna Beach, the Republican said he spent his four days meeting with entrepreneurs and business leaders and held a reception for more than 200 California companies that have expressed interest in moving to Texas. His office later clarified, though, that the reception was actually with only 20 businesses.If Gov. Perry wants to recruit high-tech businesses from California to Texas, perhaps he should stop spending time in California making a failed sales pitch and spend more time at home fixing his state's poverty crisis and broken education system by actually investing in his state's people, instead of forcing his people to fall to the lowest common denominator of his state's laissez-faire business climate. Maybe he should lead by example and learn about California before visiting the next time. Who knows? He might actually learn that we have an energy industry.
Such relocations can take time, but Perry also offered no details on prospects, much less concrete announcements.