California v. Texas in fight for the future

By Sherry Bebitch Jeffe and Douglas Jeffe
March 8, 2013

It is not a national election year, but the “red state versus blue state” wars continue. Texas Governor Rick Perry’s recent foray into California, to lure away businesses and jobs, signals more than a rivalry between these two mega-states. The Texas-California competition represents the political, economic and cultural differences driving American politics today – and for the foreseeable future.

Texas and California are robust political and economic competitors. We don’t know which will be the template for the future. As California emerges from its economic and fiscal doldrums and some of Texas’ vulnerabilities become evident, it is now far from certain that Texas will emerge the victor.

California is a global hub for trade, tourism, culture and the manufacture of ideas and intellectual property. From high tech and biotech to entertainment, travel and logistics, the state’s brand transcends national boundaries. The Golden State tops the nation in agriculture. It also sets the pace on green energy development, which could lead to a dramatic increase in the state’s energy production.

The Texas economy has always been based on energy and agriculture. But the Lone Star State has been building a manufacturing and service base, attracting businesses with lower wage rates, weak unions, a friendly regulatory climate and large fiscal incentives. It remains to be seen whether it can maintain its economic momentum and overcome the inevitable obstacles to growth, such as a popping of the latest energy bubble.

California and Texas are political mirror images. Once-Democratic Texas has  voted solidly Republican for three decades. Once-Republican California is solidly blue. Texan George W. Bush was trounced in California, home of Ronald Reagan and Richard M. Nixon, in the 2000 and 2004 presidential elections. Barack Obama ran up big numbers in California in both 2008 and 2012 – the opposite of his Texas results. This lopsided pattern of support continues: Obama’s approval rating is more than 60 percent in California, just 40 percent in Texas.

California’s Republican Party is on life support. It has no statewide elected officials and sparse representation in both houses of the legislature. GOP numbers are being overtaken by independent voters.

Democrats, meanwhile, are an endangered species in Texas. Yet they have better prospects for future relevancy than Republicans in the Golden State. The  burgeoning Texas Latino population could change the state’s political balance – if it follows the pattern in California. There, Latinos’ increasing numbers and alignment with Democrats have effectively checkmated the state’s GOP.

The enmity between Texas and California goes beyond politics and is more real than other “rivalries.” “New York v. Los Angeles” doesn’t generate any bile because the two cities now have so much in common with each other and so little in common with the rest of the country. Only Northern Californians care about the state’s North-South cultural divide. California and Texas, however, really don’t like each other.

The two states are most sharply divided by their very different cultural and political values.

Evangelical Christians, for example, compose roughly a third of the Texas electorate, about twice that of California. Though Golden State voters approved Proposition 8 in 2008 to ban same-sex marriage, recent state polls show a growing majority favor of it. Texas remains gun country. California, meanwhile, not only has among the nation’s most stringent gun laws, its electorate strongly supports President Barack Obama’s proposals to fight gun violence.

These differences matter in politics and economics. They contribute to decisions by entrepreneurs, corporate executives and workers looking for a “comfortable” place to land.

This most recent kerfuffle began soon after Governor Jerry Brown’s proposal to temporarily raise California’s income and sales tax rates passed in November. Texas One, “a public-private partnership that markets Texas nationally and internationally as a prime business destination,” bought a series of radio ads featuring Perry inviting California businesses to move to Texas. Brown shrugged off these efforts as “barely a fart.” Perry followed up with a visit to the Golden State, wooing disaffected businesses and stoking media coverage, local and national.

Perry has courted California businesses before. He came calling at the height of the Golden State’s budget crisis. This time, however, Perry has hitting California on its way up.

Though unemployment in the Golden State is still higher than the national average, it has been falling steadily. Last year, California created more non-farm, non-government jobs than Texas. The poverty rate in California is now lower than it is in Texas.

Similarly, California’s housing market is rebounding – a double-edged sword for business development – and technology is again booming. Sacramento’s fiscal crisis stabilized with the passage of Brown’s tax measure, and revenue is coming in ahead of projections.

A plurality of Californians thinks the state is moving in the right direction, for the first time in years, according to the recent Field Poll. Brown’s approval rating stands at 57 percent. Perry’s approval rating among Texans, is 41 percent, according to Public Opinion Polling.

Perry’s economic assault makes good political sense. It gives him an opportunity to bolster his anti-liberal bona fides by taking on the scary blue giant as the Texan gears up for a re-election run or another presidential try. It would seem that the real audiences for Perry’s sortie are the national media – and Texans who don’t like the Lakers, the 49ers, Hollywood, kale or much of anything about California.

Looking toward 2016, Perry’s “dissing” of California’s economy and business policies also resonates with the Golden State’s GOP primary voters, whose mantra is that the sky has fallen because Democrats and unions are now holding all the political cards. In the debate over which state has the economic edge, both sides have their talking points. Texas has lower taxes, less unemployment and an energy boom – as well as a lower minimum wage. California leads in venture capital and in the innovation and creative critical mass that spark Hollywood and the Silicon Valley.

California’s Pacific Rim ports also provide a strategic advantage for trade. The Ports of Los Angeles and Long Beach are both ranked in the top 25 world ports. The climate is also a trump card, as well as the intangibles of glamour and lifestyle. Texas, however, can boast lower housing costs and a business-friendly regulatory system. What both states share are huge infrastructure and environmental challenges.

Much of Texas’ economic muscle actually comes from Washington. It ranks 11th in the nation in the percentage of its budget paid for by federal dollars – 40 percent, while California ranks 37th, with 32 percent.

The Golden State has been over-reliant on income, corporate and sales taxes since 1978, when Proposition 13 slashed property tax revenue. In fact, property tax rates are considerably higher in Texas.

Through boom and bust, income tax rates have been high in the Golden State. So this latest round of tax hikes may not translate into a  tipping point. Companies doing business in California largely complain most about the slow, burdensome regulatory process, not income taxes. They also complain about litigious overkill, a clogged transportation system, the confounding layers of government and the outsize political power of public employee unions.

One of California’s biggest economic drivers has traditionally been its strong educational system. But public higher education has been under the budgetary gun in recent years. The University of California and State University systems are fighting to hang on to their top national rankings and gilt-edged faculty. Private institutions like Stanford, the California Institute of Technology and the University of Southern California help add luster.

With the University of Texas, Rice, Texas A&M and other higher education institutions, Texas i exactly an academic wasteland. But only a quarter of all Texans have bachelor’s degrees, while roughly a third of Californian do Both states are struggling with K-12 funding and the challenge of educating a large immigrant population.

Both states are diverse and becoming more so. Both have substantial non-Anglo populations. It’s not surprising that former President George W. Bush and Perry have taken a softer approach to immigration than most other conservatives. Latinos are close to 40 percent of the population in both states, and the percentage is growing. That is the major reason some Democrats have visions of turning Texas purple or even blue.

California also boasts a large and growing Asian population (13 percent), as compared with less than 4 percent in Texas. African-Americans are about 12 percent of the Texas population and 6 percent in California.

Texas and California are like two powerful teams competing to win the Super Bowl – with political and economic dominance at stake. Think of the governors as quarterbacks – the wily veteran versus the brash maverick. Brown has mellowed to the point where he relies on short passes and runs down the middle. Perry uses long passes to his right flank.

This is a game that promises to go on for quite some time.

 

PHOTO (Top): Jerry Brown outside the California Supreme Court in San Francisco, California March 5, 2009.  REUTERS/Robert Galbraith

PHOTO (Insert A): The logo of Google Inc. outside their headquarters in Mountain View, California, August 18, 2004. REUTERS

PHOTO (Insert B): The Exxon Mobil refinery in Baytown, Texas September 15, 2008. REUTERS/Jessica Rinaldi

PHOTO (Insert C): A customer browses for guns at the Cabela’s store in Fort Worth, Texas March 7, 2008. REUTERS/Jessica Rinaldi

PHOTO (Insert D): Students walk on the University of California Los Angeles (UCLA) campus in Los Angeles, September 18, 2009. REUTERS/Lucy Nicholson

292 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

texas wants cali companies because they want cali money…no out of state companies should be allowed local, state, or federal cali money….our state …our money …

why is texas always begging cali for extablished businesses …why is there no business growth or development in texas ..???

Posted by libiure | Report as abusive

It’s sure nice that two Californians are talking about Texas. People will vote with their feet on this issue. Phil Michelson had the issue right – at what point are the services I receive too little for the payment. Californian scenery is nice, but you can’t eat it and you can always go back for a a visit. The moving vans tell the story, people are making decisions and moving from the highest tax states to lower cost areas – Texas, Utah, Florida, etc… It’s not just the high taxes, its also the fiscal waste and political situation. What qualifies the Hollywood crowd to constantly opine upon policy decisions.

Posted by AppletreeD | Report as abusive

I find it interesting that obama’s proposals are to “fight gun violence” suggesting that any difference in opinion is for gun violence. Opposition to this liberal madness does not mean people want the status quo just some logical way to solve it that is not related to touchy feely emotions, but facts and logic.

Posted by adrenalize13 | Report as abusive

The difference between California and Texas. Is that California is a very liberal, and it has the highest state tax in the nation (13.4%). Texas has a 0% state tax. California is over-regulated that makes it impossible to operate a business. Which explains why more businesses relocate to Texas that has a lower corporate tax rate. Texas has $0 debt whereas California has an increasing debt of $180 billion in the hole.

California public schools rank poorly than the rest of the nation. While Texas public schools continue to improve and raise academic standards. Texas is a “Right-To-Work” state whereas California is not. Labor Unions dictate state policy in California. Filling the pockets of politicians serving in the California State Legislature asking for favors. Three California cities have filed for bankruptcy. Cities in Texas are more fiscally responsible, and have not filed bankruptcy.

Reuters’ article favors California over Texas, and fails to point out California’s huge $180 billion plus debt, and it’s out of control spending spree and tax increases. California Gov. Jerry Brown has also raised college tuition while cutting academic programs due to budget cutbacks. While forcing community colleges and universities to limit the number of students accepted statewide. California is also known as the “welfare state,” “tax & spend state,” and “illegal immigrant state.” Now, you decide which state and the advantage – economically?

Posted by Iroquois | Report as abusive

Texas is my old home and I have no beef with the state, but the above comment is purely Texan fantasy. TX has higher property tax rates which you must pay whether you’re working or not, which can hit the middle class just as hard as income taxes. CA is also business friendly as long your business is not to pollute the state, which requires regulations, as it should be to avoid explosive mishaps.

Texas public schools are nothing to brag about, and we still have better educated workforce. Right to work is great for your boss, unions are where it’s at if you prefer to make better wages. And the CA cities that file bankruptcies are normally the inland red cities of “Bush Country”.

Reuters article was pretty darn accurate, and TX debt is how higher in comparison to CA debt which is looking to be in surplus by next year. Such quick turnaround is unlikely to happen for Texas. The only reason CA is called a welfare state is because the state guarantees food stamps to every child…oh, and Texas employs more illegal immigrants than California, ironic, ha?

Posted by kclark | Report as abusive

Texas is a good business destination like Bangladesh is. Adequately politically-stable and it’s the low-cost producer.

Posted by slashdot | Report as abusive

Businesses and individuals vote with their feet and dollars. The trend is clear. Productive individuals and firms are moving to Texas. It’s the right choice for those who value economic freedom and individual rights. And, there’s no denying that the Lone Star State leads the nation in creating new jobs. Despite the myths, these aren’t all low-wage, low-skill jobs:

Posted by MovingToTexas | Report as abusive

Texas is doing better economically then California is. Simple answer is, no unions, no major regulations, no state income tax, fracking oil and natural gas (lots of high paying jobs coming from this), low cost of living, best of all a government that doesn’t have much power. Simplified, less government more freedom = better economy.

If you live in Cali and need a job, look for Texas oil careers. I started as a field tech 2 years ago and am now a systems engineer…yes a engineer with no degree, on site training and lack of college grade engineers means the oil companies are filling engineer roles with guys like me. Great pay 80+ a year, long hours, great benefits. Oh and don’t forget a 300k home in Cali cost about 95k in Texas….gas is 2.95 a gallon as well…Texas is way better then Cali for a middle class guy like me.

Posted by Reavs | Report as abusive

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