In the interstate economic-development wars, few rivalries can match the long-running one between California and Texas. At a time when so many Americans have such sharply divided attitudes on the proper role of government, these states illustrate the extremes. They're both also thought to be, in their own way, models of success, yet they have very different outcomes.
Texas is best understood as a place where the private sector prevails over the public sector. Among the 50 states, it ranks near the top in economic freedom, a measure of fiscal and regulatory policy, and near the bottom in overall tax burden. It's a state known for building, with Dallas and Houston routinely among the top metros in new home permits and Austin first in the nation for permits per capita since 2004. But state and local government spending per capita is the 11th-lowest of any state, according to data from the Tax Policy Center.
California's the opposite: a state where the government is large and powerful and the private sector is taxed and regulated to support that. It is near the bottom in economic freedom and near the top in overall tax burden. It ranks as one of the most regulated states for land use, highlighted by famously constricted metros like San Jose and San Francisco. It has strict labor laws high minimum wages, barriers to independent contracting, union favoritism that are meant to foster a middle class. State and local government spending per capita is the nation's sixth-highest.
So which model has better enabled prosperity? Well, advocates on both sides can point to strong numbers. California and Texas are in the top 10 in GDP growth, the top three in the number of Fortune 500 companies, and first and second in population. They're viewed by their respective ideological tribes as policy innovators Texas as a place where the working class can buy homes and start businesses, California as a place that cuts carbon, expands entitlements and spurs tech innovation.
But California's model increasingly comes with an asterisk. While its economy looks impressive on paper, fewer and fewer people get to enjoy it. Heavy land-use regulations make housing markets inelastic and expensive, with median home prices more than double the national number. The labor laws, rather than fostering a robust middle class, just make everything more expensive. The faith in and funding of government has not created superior public services, but rather a bunch of state and local bureaucracies that escalated debt by awarding themselves unsustainable pensions. Despite the high taxes which hit every resident California has the 10th-highest per-capita government debt; of the nine local governments that filed for bankruptcy between 2010 and 2019, three were in California.
People have responded with their feet. More leave California than move in, and a 2019 survey found that 53 percent of its residents were considering leaving the state, citing high costs. Much of the exodus goes to Texas. California is now the No. 1 exporter of people to the Lone Star State. It's not that California is losing population: Since 2010, it has gained 2.3 million residents. Meanwhile, however, Texas has added 3.9 million, more than doubling California's population growth rate.
And it's not just people. Businesses are leaving California too, at an estimated annual clip of over 1,000. For 12 straight years Texas has been the biggest recipient of businesses leaving California. Texas has long sought to capitalize on and accelerate that trend, even running ads in California touting Texas' business friendliness.
More than data, though, it's the feeling of what can be accomplished in a state that emphasizes freedom versus one strangled in red tape and high taxes. Houston ended veterans' homelessness in part by cheaply building large supportive housing projects; California cities have spent billions fighting homelessness, but still have tent cities because it costs so much to build affordable housing there. Dallas has, over three decades, built the nation's longest light-rail system, and a private company is planning high-speed rail between there and Houston. California metros have struggled to add capacity to their transit systems, and last year the state's high-speed rail project lost federal funding due to ongoing delay. Perhaps most damning is an annual survey by Chief Executive magazine asking CEOs nationwide to rank state business climates. Texas has been first for 15 straight years, and California in last place for five.
This should be a wake-up call both to Californians, to fix the flaws within their government, and to those who want to make the California model national policy. While it aims to help people, it ultimately inflicts costs that drive them out. The fact that many of these people go to Texas speaks volumes about which model really works.
Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
Read more:
A Leg Up in the Search for Prosperity: Economic Freedom - Governing
- Freedom Caucus: The Fight Club of Congress - The Christian Science Monitor - September 29th, 2023 [September 29th, 2023]
- History shows a better strategy than shutdown for reducing the deficit - MinnPost - September 29th, 2023 [September 29th, 2023]
- Haake: For the freedom caucus, chaos is the point - Chicago Tribune - September 29th, 2023 [September 29th, 2023]
- Appeals court sets hearing date on Missouri abortion rights initiative ... - Missouri Independent - September 29th, 2023 [September 29th, 2023]
- Things to Know About the Billionaire Card - a Diamond-Encrusted ... - CEOWORLD magazine - September 29th, 2023 [September 29th, 2023]
- Report on Countries that are Candidates for Millennium Challenge ... - Millennium Challenge Corporation - August 28th, 2023 [August 28th, 2023]
- The Freedom Caucus' shutdown threat recalls tactics of past House ... - NPR - August 28th, 2023 [August 28th, 2023]
- Opinion | Joe Biden op-ed: 60 years after March on Washington, we ... - The Washington Post - August 28th, 2023 [August 28th, 2023]
- Universal Basic Income: Fiscal fantasy or AI necessity? - talkbusiness.net - August 28th, 2023 [August 28th, 2023]
- Hurtling toward a fiscal cliff - POLITICO - POLITICO - August 28th, 2023 [August 28th, 2023]
- Governor Glenn Youngkin - Virginia Governor Ralph Northam - Proclamation - August 28th, 2023 [August 28th, 2023]
- New Zealand - The Heritage Foundation - January 4th, 2023 [January 4th, 2023]
- Singapore Economy: Population, GDP, Inflation, Business, Trade, FDI ... - January 4th, 2023 [January 4th, 2023]
- Mexico Economy: Facts, Population, GDP, Corruption, Business, Trade ... - December 12th, 2022 [December 12th, 2022]
- Economic liberalism - Wikipedia - November 7th, 2022 [November 7th, 2022]
- Don't ask, don't tell - Wikipedia - October 15th, 2022 [October 15th, 2022]
- In first debate, Healey and Diehl clash over the economy, abortion and Trump - WBUR News - October 15th, 2022 [October 15th, 2022]
- Election 2022: What to know about California propositions - Visalia Times-Delta and Tulare Advance-Register - October 15th, 2022 [October 15th, 2022]
- Vice President Kamala Harris calls on Texans to protect reproductive and voting rights during Austin visit - 25 News KXXV and KRHD - October 15th, 2022 [October 15th, 2022]
- How Republicans in the Rio Grande Valley are using faith to draw in Latino voters - CBS News - October 15th, 2022 [October 15th, 2022]
- Letter to the editor: Pierce will work for values that matter to Senate District 25 - Press Herald - September 20th, 2022 [September 20th, 2022]
- Letter to the editor: Left needs heads examined - Washington Times - September 20th, 2022 [September 20th, 2022]
- Book Banning, Curriculum Restrictions, and the Politicization of U.S. Schools - Center For American Progress - September 20th, 2022 [September 20th, 2022]
- Judge considers halting enforcement of Indiana's near-total abortion ban - The Times of Northwest Indiana - September 20th, 2022 [September 20th, 2022]
- Texas Youth Summit draws conservative to plot the culture war - The Texas Tribune - September 20th, 2022 [September 20th, 2022]
- The Weight of Trump - The Atlantic - September 20th, 2022 [September 20th, 2022]
- Tanzania and Zambia want to upgrade the 'Uhuru Railway' but can they? - The Conversation Indonesia - September 20th, 2022 [September 20th, 2022]
- Power games: Plans to shift to a centralised market in power sector must take into account concerns of all stakeholders - The Indian Express - September 20th, 2022 [September 20th, 2022]
- Inside the Academic-Freedom Crisis That Roiled Florida's Flagship - The Chronicle of Higher Education - September 7th, 2022 [September 7th, 2022]
- Liz Trusss energy price cap handout will put her talent for U-turns to the test - The Guardian - September 7th, 2022 [September 7th, 2022]
- FM stresses joint Arab action to overcome regional crises - Jordan Times - September 7th, 2022 [September 7th, 2022]
- The contract of Nigerian citizenship and diaspora voting - Guardian Nigeria - September 7th, 2022 [September 7th, 2022]
- Study ranks Midland as top economic freedom area in Michigan - The Center Square - September 6th, 2022 [September 6th, 2022]
- Another Shocking Decline in Life Expectancy | The Fiscal Times - The Fiscal Times - September 6th, 2022 [September 6th, 2022]
- Liz Truss Has Been Elected As The New Prime Minister Of The United Kingdom. Replace Boris Johnson - Nation World News - September 6th, 2022 [September 6th, 2022]
- Why the Left Is Learning to Love the Military - The Atlantic - September 6th, 2022 [September 6th, 2022]
- Millions of dollars spent secretly at B.C. Legislature - theBreaker - theBreaker - September 6th, 2022 [September 6th, 2022]
- Economy forecast to grow by 7-7.5% in current fiscal Times of India - English Bharat Times - September 6th, 2022 [September 6th, 2022]
- The Union Government Is Arbitrarily Squeezing States Fiscal Freedom To Borrow - The Wire - August 15th, 2022 [August 15th, 2022]
- House Freedom Caucus calls on McCarthy, McConnell to reject 'lame duck' spending this fall - Fox News - August 15th, 2022 [August 15th, 2022]
- JAGs 7th and most ambitious season yet is titled 'The Freedom Practice' - Vermont Biz - August 15th, 2022 [August 15th, 2022]
- Why is the Michigan Medicine nurses' union abridging freedom of speech? - WSWS - August 15th, 2022 [August 15th, 2022]
- Board of Elections certifies recall effort to oust East Cleveland's mayor - News 5 Cleveland WEWS - August 15th, 2022 [August 15th, 2022]
- Bangabandhu's thoughts on economic freedom are still relevant - The Financial Express - August 15th, 2022 [August 15th, 2022]
- Overview: A Year of Taliban Rule in Afghanistan - Voice of America - VOA News - August 15th, 2022 [August 15th, 2022]
- Rochester enters the era of the $250,000 police officer - Rochester City Newspaper - August 15th, 2022 [August 15th, 2022]
- India aims to be developed nation in 25 years: Modi - Gulf Times - August 15th, 2022 [August 15th, 2022]
- EDITORIAL: Welcome to new thinker on the block - Coeur d'Alene Press - August 15th, 2022 [August 15th, 2022]
- Letters to the editor for Sunday, August 14, 2022 - News-Press - August 15th, 2022 [August 15th, 2022]
- The Serious Lack of Good Governance and Economic Freedom: Root Causes of Sri Lanka's Ongoing Turmoil - Heritage.org - July 27th, 2022 [July 27th, 2022]
- The FOIA backlog continued to grow last year - Federal News Network - July 27th, 2022 [July 27th, 2022]
- More money rolling into state's casinos, less tax being collected The Daily Gazette - The Daily Gazette - July 27th, 2022 [July 27th, 2022]
- EDITORIAL: Fentanyl, death by the dose - Washington Times - July 27th, 2022 [July 27th, 2022]
- Liz Truss's tax cuts are not inflationary - The Telegraph - July 27th, 2022 [July 27th, 2022]
- The UN wants to educate children it will succeed only if it feeds them first - The Guardian - July 27th, 2022 [July 27th, 2022]
- Sunburn The morning read of what's hot in Florida politics 7.27.22 - Florida Politics - July 27th, 2022 [July 27th, 2022]
- A first look at the medium-term fiscal program - BusinessWorld Online - July 19th, 2022 [July 19th, 2022]
- Financial Giants Reject West Virginia's Claims That They're Boycotting Fossil Fuels - The Epoch Times - July 19th, 2022 [July 19th, 2022]
- Five Waldo County towns ready to vote on broadband - Republican Journal - July 19th, 2022 [July 19th, 2022]
- Indian Navy expected to spend 70 pc of capital budget in domestic procurement this fiscal: Rajnath Singh - ThePrint - July 19th, 2022 [July 19th, 2022]
- NGO letter opposing T.42 amendments in appropriations - Government Accountability Project - July 19th, 2022 [July 19th, 2022]
- Digital services provided by foreign firms to be taxed from tomorrow - The Kathmandu Post - July 19th, 2022 [July 19th, 2022]
- Ayushman health ID card: A need for fine tuning! - Times of India - July 19th, 2022 [July 19th, 2022]
- Windfall tax on crude goes against incentive of more pricing freedom - The Financial Express - July 9th, 2022 [July 9th, 2022]
- Diversity, equity and inclusion update: June 2022 issue | CU Boulder Today - CU Boulder Today - June 29th, 2022 [June 29th, 2022]
- Menendez, Schiff alarmed that Biden again approves US military aid to Azerbaijan - Armenian Weekly - June 29th, 2022 [June 29th, 2022]
- Egypt is cozying up to Russia. It's time for the US to step in. - Atlantic Council - June 29th, 2022 [June 29th, 2022]
- PM to say to G7 leaders: We must keep up our resolve on Ukraine - GOV.UK - June 29th, 2022 [June 29th, 2022]
- Where have all the Christians gone? | News, Sports, Jobs - Williamsport Sun-Gazette - Williamsport Sun-Gazette - June 29th, 2022 [June 29th, 2022]
- President Biden waives Section 907 restrictions on US aid to Azerbaijan - Armenian Weekly - June 24th, 2022 [June 24th, 2022]
- Senate retirement bill benefits wealthy Americans - The Hill - June 24th, 2022 [June 24th, 2022]
- Ambassador Kierscht Interview with The Key - US Embassy in Mauritania - USEmbassy.gov - June 24th, 2022 [June 24th, 2022]
- Roe v. Wade overturned: How will it affect abortion access in Indiana - The Herald-Times - June 24th, 2022 [June 24th, 2022]
- Constricted devolution of fiscal power - The Kathmandu Post - June 22nd, 2022 [June 22nd, 2022]
- Public office and accountability issues in Nigeria - Daily Trust - June 22nd, 2022 [June 22nd, 2022]
- Shaheen, Portman Participate in Discussion Hosted by Dartmouth on Russia's Unprovoked Invasion of Ukraine | US Senator Jeanne Shaheen of New Hampshire... - June 22nd, 2022 [June 22nd, 2022]
- Congress Ignores Pressing National Business While It Obsesses on Jan. 6 - The Epoch Times - June 11th, 2022 [June 11th, 2022]
- Ukraine Economy: Population, GDP, Inflation, Business, Trade, FDI ... - June 11th, 2022 [June 11th, 2022]
- How would India fare on a modified misery index? Better than US & UK, worse than most others - ThePrint - June 11th, 2022 [June 11th, 2022]
- "Don't Want RBI To Become Extension Of Government": Ex CEA Arvind Subramanian - NDTV Profit - June 11th, 2022 [June 11th, 2022]