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Don’t Max with Taxes

The July 9th edition of The Economist features a leader and special report about the economic and fiscal calamity that is California and the relative Bonanza that is Texas. The California unemployment rate is well into double digits, but Texas remains at only 7.1 percent.

The two states have followed two different public policy paths: California based on a higher tax, higher public service, higher land use regulation, and high tech model and Texas on a low-tax, low public service, no land use regulation, and natural resource (energy and agriculture) model. Both states, however, have experienced high rates of immigration, mainly from Latin America. The article predicts that the current California situation, which has cyclical, structural, and demographic roots will spread to Texas and the rest of the nation.

How bad are things in California? Well, so bad that even free-market guru Arthur Laffer has decamped from cosmopolitan Malibu to backwoods Tennessee. He attributed his move not to the usual Tiebout sorting but to some universal truisms revealed from spurious correlations of tax rates and economic welfare evidently computed on the back of a napkin.

All in all, the article reminds me of a recent Pat Buchanan jeremiad, the difference being that The Economist predictably applauds the transformation of America into a facsimile of their wonderworld of a newly amalgamated Houston and LA.

Pat says "Don't Mex with Texas"

Pat says 'Don't Mex with Texas'

Well they should. The country may become a vast wasteland of people, sprawling asphalt, and hot summer nights. But, from The Economist’s vantage point change and calamity represent opportunity. Yep, thar’s gold in them thar hills.

Posted in Economics. Tagged with , , , .

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