How can a flat and dusty bumpkintopia like Texas outgrow a paradise on earth like California?

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

A clip from a fascinating City Journal article on the differences in taxes and services among the states and how that affects growth:

If California doesn’t want to be Texas, it must find a way to be a better California. The easy thing about being Texas is that the government has a great deal of control over the part of its package deal that attracts consumer-voters—it must merely keep taxes low. California, on the other hand, must deliver on the high benefits promised in its sales pitch. It won’t be enough for its state and local governments to spend a lot of money; they have to spend it efficiently and effectively.

The optimistic assessment is that things are going to get worse in California before they get better. The pessimistic assessment is that they’re going to get worse before they get much worse. As is often the case, hanging around with the pessimists is less fun but more instructive. The current recession has driven California’s state government into what amounts to a five-month budget cycle, according to Dan Walters of the Sacramento Bee. He estimates that the budget deal tortuously wrought in July should start falling apart in October, because it was predicated on pie-in-the-sky revenue estimates and because so many of its spending cuts are being challenged, often successfully, in the courts.

The recession will eventually end and California’s finances will improve, say the optimists. Given the state’s pervasive political bias against efficient and effective public services, however, the question is whether its finances will ever get truly well. States that have grown accustomed to thinking of the engine that drives their economies as an inexhaustible resource—whether it’s Michigan and the auto industry, New York and Wall Street, or California and the vision of the sunlit good life that used to attract new residents—find it tough to compete again for what they thought would be theirs forever, and to plan budgets for lean years that turn into lean decades. Instead, they invest their hopes in a deus ex machina that will rescue them from the hard choices they dread.

For California’s governmental-industrial complex, a new liberal administration and Congress in Washington offer plausible hope for a happy Hollywood ending. Federal aid will replace the dollars that California’s taxpayers, fed up with the state’s lousy benefits and high taxes, refuse to provide. Americans will continue to vote with their feet, either by leaving California or disdaining relocation there, but their votes won’t matter, at least in the short term. Under the coming bailout, the new 49ers—Americans in the other 49 states, that is—will be extended the privilege of paying California’s taxes. At least they won’t have to put up with its public services.