California, Texas Lead the Rise of the Nation-States

CALIFORNIA’S BOOM-In this highly polarized political environment, states and localities, are ever more taking on the character of separate countries. Washington’s gridlock is increasingly matched by decisive, often “go it alone” polices from local authorities. Rather than create a brave, increasingly federalized second New Deal, the Obama years, particularly since the Republicans took control of the House in 2010, have seen discord rise to a level more akin to that left by James Buchanan, the last president before the Civil War, than Franklin Roosevelt. 

This makes understanding the sometimes-divergent economic and demographic trends of various states ever more important. With no compelling national vision, not only are politics more “local” but are increasingly distinct by region. 

The Main Event: Texas vs. California 

Today’s two leading economic models come, not surprisingly, from our two megastates, California and Texas. For its part, the Lone Star State follows a traditional American growth model, spread among a wide array of industries, notably energy, and prodded by population growth. 

Since the Great Recession, the Texas model – built around lower taxes, less-stringent regulation and pro-business politics – has been the clearly ascendant of the two, with growth seen along a broad array of industries, including construction, manufacturing and technology, as well as energy. This economic diversity helped the state emerge from the recession far earlier than the rest of the country, recovering its 2007 jobs level by 2011. (California barely crawled into positive territory on jobs this past year.) Texas contributed 23 percent of U.S. economic growth in 2012 and 22 percent in 2011. Without Texas’ growth in this decade, the country could well still be in recession. 

For conservatives, Texas has emerged as a sort of Avignon to vie against Obama’s Rome on the Potomac. There is even discussion of a potential presidential bid by former Gov. Rick Perry, whose 2012 foray died during the primary season. 

California’s “boom” has come later in the cycle than Texas’, and is far more narrowly based, depending largely on the social media bubble, stock gains among its many wealthy residents and a surge in prices of high-end, coastal real estate. From October 2007 to October 2014, California gained a net 162,000 jobs; Texas in the same period added more than 1.2 million. Surprisingly, notes economist Dan Hamilton, the California tech industry has added barely 10,000 net jobs since 2007. 

These divergent growth patterns are reflected in the latest Census numbers. From 2010-14, for example, Texas grew by 1.8 million people, or 7.2 percent. California, in comparison, despite having one-third more people, expanded by 1.5 million residents, or 4.2 percent. 

The difference in domestic migration is particularly revealing. Since 2010, Texas has gained over a half million migrants, while California lost 200,000 residents. The Lone Star State has taken over California’s historic role as the primary destination for middle- and working-class people looking to start a new life; the Golden State’s growth now stems from immigration and inertia – from among all the families formed after decades of rapid population growth. 

These differences reflect policy choices. California, one can say, charitably, is looking for “quality” growth that touches the environment very lightly and creates high-end jobs, along with many lower-end service positions. Yet many aspects of state policy – the drive for renewables, stricter land-use regulations and expanding the welfare state – makes the Golden State the national model for progressives, even as middle-class and working-class people head for the exits. 

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Next Up: South Rises Again 

Steeply falling oil prices may push Texas, at least temporarily, off its perch as the country’s ascendant nation-state. To be sure, Texas is far more diversified than in the 1980s. The rapid growth of “downstream” industry due to low energy prices, notes former Federal Reserve economist Bill Gilmer, will offset some of the losses in oil exploration and development. Texas, accustomed to being in the lead, may struggle, at least briefly, to keep up with the national economy. 

In contrast, falling energy prices could prove a boon to the resurgent U.S. Southeast and its burgeoning industrial base. Cheaper fuel helps a region whose cities tend to be relatively new and car-dependent. Generally low housing costs – usually half or less, relative to income, than in California – draw middle-income families. The area also has an expanding tech sector; half of the nation’s top fastest-growing tech economies, notes Mark Schill, analyst at Praxis Strategy Group, are based in the old Confederacy. 

Not that such facts are likely to alter the prejudices of our coastal media. The Atlantic, for example, has proclaimed that the Southeast is “where the American Dream goes to die.” 

Facts tell a different story. Florida, which saw actual net outmigration briefly during the recession, since 2010 has gained roughly 400,000 migrants, second only to Texas. Georgia, both Carolinas, and Tennessee also rank among the country’s 10 most-rapidly growing states. North Carolina, with less than half the population of New York state, has added more people since 2010 than the now-diminished Empire State.

(Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study,The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA. This piece was posted most recently at newgeography.com.   

Wendell Cox is principal of Demographia, an international public policy and demographics firm.  He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member.)

-cw

 

CityWatch

Vol 13 Issue 21

Pub: Mar 10, 2015