Texas Trumps Governor Moonbeam

By John Fund

Monday, February 11, 2013

 

Texas governor Rick Perry knows how to start a rumble. Last week, he spent a mere $24,000 on radio ads in California, urging firms there to move to Texas, with its “zero state income tax, low overall tax burden, sensible regulations, and fair legal system.” The ad goaded Governor Jerry Brown into telling reporters that Perry’s effort wasn’t news. “It’s not a burp,” he sneered. “It’s barely a fart.”

 

But his insult generated dozens of stories about the differences between Texas and California, playing into Perry’s hands. He begins a four-day barnstorming tour of California today, touting Texas’s virtues to business owners.

 

The Sacramento Bee, the leading paper in California’s state capital, went beyond Governor Moonbeam’s sneer by running a long editorial that roundly trashed Texas and Perry: “Actually, we think it’s more than a fart. It’s a cry for help. Perry can’t create jobs, he can only steal them from other states. His campaign for the Republican presidential nomination was a joke. His beloved Dallas Cowboys haven’t been in the Super Bowl since 1996.” The liberal Bee then offered to organize a “book drive” to help Texans graduate more high-school students, suggested that the Lone Star State could spend more on “mental health services,” and quoted the late Texas liberal Molly Ivins’s put-down of her native state as “a low-tax, low-service state.” “We can afford to do better,” the Bee quotes Ivins as saying. “We just don’t.”

 

But several observers acknowledged that Perry has gotten the better of the battle.

 

“Perry’s getting exactly what he wanted,” Gavin Newsom, the former Democratic mayor of San Francisco and now the state’s lieutenant governor, told radio station KQED. “He’s getting all kinds of press up and down the state, and why? Well, because he’s leaning in. He’s in the game. He’s getting in our heads.” Newsom ought to know. In 2011, he accompanied a group of state legislators on a fact-finding trip to Texas to interview former California business owners about their reasons for moving. Newsom told me at the time: “I am impressed with the focus on job creation I’ve seen here. We need to have a more balanced business climate in California.”

 

Indeed, in the last five years Texas has gained 400,000 new jobs while California has lost 640,000. The Lone Star State’s rate of job growth was 33 percent higher than California’s last year, even as the Golden State finally pulled out of the recession.

 

Joseph Vranich, a California business-relocation expert, agrees that California has a systemic job-creation problem and says it needs to worry about more than just Texas. He says that 15 states are sending delegations to California and seeking to convince firms to relocate or, if they stay in California, to expand their operations out of state. Wealthy individuals such as golfer Phil Mickelson are  openly talking about following Tiger Woods and moving to low-tax states such as Florida. EBay, Facebook, and Visa, among others, have recently made major expansions in Texas. “That kind of talk will only intensify now that top earners in California face a 13.3 percent income-tax hit on earnings over $1 million,” says Jon Fleischman, editor of the political blog FlashReport.com. “That’s not only the highest rate in the U.S. It’s the highest rate any state has had since World War II.”

 

California liberals, including Governor Brown, respond to such criticism by saying that their state’s quality of life remains unmatched and that Texas specializes in creating jobs at or near the federal minimum wage of $7.25 an hour. Texans respond that they are creating many middle-class jobs in the energy and manufacturing sectors, and that even minimum-wage workers have it better off in Texas than their counterparts do in California. “California has the third-highest cost of living, while Texas has the second-lowest,” says Chuck DeVore, a former California GOP state legislator who relocated to the Lone Star State to work as an analyst for the Texas Public Policy Foundation. “That means California’s $8 minimum wage buys $6.06 worth of goods and services, while Texas’s lower $7.25 wage buys the equivalent of $8.04.” One might even say that California’s high-tax, high-cost model is a form of class warfare against its poorest residents.

 

Dan Walters, a columnist for the Sacramento Bee, doesn’t dispute that California has an anti-business climate but claimed in a video made for the paper’s website that the Perry PR blitz has a lot to do with restoring the governor’s faltering polls back in Texas. “He would like to run for reelection in 2014,” Walters said. “And he can think of nothing better to get Texans on his side than to tweak those crazy people out there in California, whom all good Texans love to hate.”

 

Perry may be politically weakened after last year’s failed presidential bid. He has also accumulated many years’ worth of political barnacles since he first held office (as a Democratic state representative) in 1984. But should he choose to run for a fourth term as governor next year, he will have a good story to tell. Texas’s legislature has just trimmed its $188 billion two-year budget by 8 percent, and the state may have more revenue than it can legally spend because it is barred from raising outlays more than the rate of economic growth. “This state is foremost geared to fostering a business climate that creates jobs,” Governor Perry told me last year. “We can do more good in other areas if first we ensure people can support and raise their families.” By contrast, California appears to have different priorities. Many of its residents pride themselves on being on the cutting edge of artistic, political, and social experimentation. My home state can take pride in that, but it has lost sight of the economic basics that provide the foundation for bringing new ideas and products to fruition. When Lieutenant Governor Newsom and California state legislators visited Texas in 2011, they heard testimony from business leaders there that Texas’s tort reforms had improved job creation. At the time, the papers back in the Golden State were touting their legislature’s latest priority: a bill mandating that all public-school children learn the history of disabled and gay Americans.

 

One businessman who had left California couldn’t contain his frustration during his meeting with Newsom and the legislators. “You can have the most liberated lifestyle on the planet, but if you can’t afford to put gas in your car or a roof over your head, it’s somewhat limited,” I heard him warn them. 

 

A lot of Californians would agree with him. Liberal good intentions don’t help much if the laws and regulations they foster gradually erode the ability of the middle class to stay in the state. That’s why I won’t be surprised at all if Governor Perry eventually brings back some handsome trophies from his recruitment trip to California this week.