Many Californians who are close to me have heard me query this; " If the last 50 years were the 'California half-century', will the next 50 years be known as the 'Texas-half century?' " I've had this conversation with Texas-phile Jeff Brown, mortgage partner Sean Purcell, and Texas buddy and money manager Nick Ripostella.
My thoughts:
1- While I warned that Texas' property taxes were a reason not to invest there, it appears that California's "buy now, pay later" approach (Proposition 13) is broken.
2- California's march to socialism is an experiment gone awry. If left unchecked, it will penalize the net producers in favor of the net consumers. That penalty will drive producers to a state like...well, Texas. Sean Purcell's argument was that the creative genius in California (ie- the Hollywood types) are decidedly liberal and would never leave. My counter to that argument was that those creative types are still capitalists at heart, despite what they portray to the public.
3- Texas is more business-friendly and hell bent on a constructive immigration policy that continues the American tradition of new immigrants pushing the whole economy upwards instead of the California model of vote-buying through appeasement. Texas' focus is on assimilation while California's is on victimization.
4- While I believe Texas is advantaged today, California leads the nation and arguably the world in intellectual capital and innovation. We thrive in spite of the actions of our obstructionist Legislature. This (admittedly "homer") idea maintains my belief that California will eventually prevail.
I'm not alone. The Economist must have been reading my mind:
Plenty of American states have budget crises; but California’s
illustrate two more structural worries about the state. Back in its
golden age in the 1950s and 1960s, it offered middle-class people, not
just techy high-fliers, a shot at the American dream—complete with
superb schools and universities, and an enviable physical
infrastructure. These days California’s unemployment rate is running at
11.5%, two points ahead of the national average. In such Californian
cities as Fresno, Merced and El Centro, jobless rates are higher than
in Detroit. Its roads and schools are crumbling. Every year, over
100,000 more Americans leave the state than enter it.
This was the overarching theme in my hypothesis. When you create an environment that gives middle-class people an incentive to build wealth, you have a winning formula. Think of Hollywood in the 40's and 50's. Think of Long Beach, for the defense workers, in the 50s and 60s. Think of Silicon Valley, for high-tech, in the 80s and 90s. Think of San Diego , for life sciences, in the 90s and this decade. Californian entrepreneurs innovate and invent and of jobs (should) follow suit.
The second worry has to do with dysfunctional government. No state has
quite so many overlapping systems of accountability or such a
gerrymandered legislature. Ballot initiatives, the crack cocaine of
democracy, have left only around a quarter of its budget within the
power of its representative politicians. (One reason budget cuts are
inevitable is that voters rejected tax increases in a package of ballot
measures in May.) Not that Californian government comes cheap: it has
the second-highest top level of state income tax in America (after
Hawaii, of all places). Indeed, high taxes, coupled with intrusive
regulation of business and greenery taken to silly extremes, have
gradually strangled what was once America’s most dynamic state economy. Chief Executive
magazine, to take just one example, has ranked California the very
worst state to do business in for each of the past four years.
This is the real chokepoint in California; our Legislature. They just don't understand the California with Ronald Reagan at the helm. They have irresponsibly spent money, in pursuit of the great social experiment, to the detriment of the innovators and inventors. The result? Businesses, and people, are leaving California for better opportunities in...
Good Lord....TEXAS???? Even LA Jollan, Arthur Laffer is eyeing the Lone Star State:
American conservatives have seized on this reversal of fortune: Arthur
Laffer, a Reaganite economist, hails the Texan model over the Gipper’s
now hopelessly leftish home. Despite all this, it still seems too early
to cede America’s future to the Lone Star state. To begin with, that
lean Texan model has its own problems. It has not invested enough in
education, and many experts rightly worry about a “lost generation” of
mostly Hispanic Texans with insufficient skills for the demands of the
knowledge economy. Now immigration is likely to reconvert Texas from
Republican red to Democratic blue; Latinos may justly demand a bigger,
more “Californian” state to educate them and provide them with decent
health care. But Texas could then end up with the same over-empowered
public-sector unions who have helped wreck government in California.
Alas, the Economist's conclusion is identical to mine. I believe that the inevitable California bankruptcy will pave the way for a reversal...a rebirth if you will. Sharp leaders like Tom Mc Clintock will lead this "rebirth" and restore the gold to California's beautiful coastlines and mountaintops.
I gotta stay positive because I'm an optimist at heart. After all, that's why I moved here.
