Comparing State Economies Is a Fool’s Game

Kevin DrumI like Kevin Drum very much, but I think he was a bit deceptive in an article last week, Three Cheers For the California Miracle! It is a comparison of the Texas and California economies. In 2014, California actually added more jobs than Texas. So much for the “Texas miracle.” Drum is correct that the whole business of the Texas miracle was nonsense from the beginning, “It was mostly just PR bluster.” Just the same, there is something good about Texas and other backwater states with regard to business: the cost of living is cheap and so companies don’t have to pay their workers as much.

This brings up what I think is a really important question, “Who wants to live in Texas?” I’ve been to Texas many times. I’m sure for some people it is just wonderful. But for most people, it is a hot place that is far better characterized by George W Bush than Jim Hightower. On the other hand, California is overall fantastic. Yes, I am a left coast boy and I’m mostly thinking of northern California and our adjuncts, Oregon and Washington. But I can’t imagine leaving the state because I could pay my employees a bit less. And apparently that is how most people feel because California has never seen the mass exodus of companies claimed by conservatives.

But you still have to give Texas its due. During 2014 (roughly), “California gained 498,000 new jobs, almost 30% more than the Lone Star State’s total of 392,900 for the same period.” 498,000 new jobs in Wyoming would mean a lot more than in California. The contrast is not so large with Texas, but it is still notable. California added 27% more jobs than Texas. But California’s population is 44% higher. Similarly, it total employment is 44% higher. Its GDP is 40% higher. Even its non-farm employment is 35% higher. None of this means that California is doing worse. I would say it is more or less a wash.

The real takeaway from Drum’s column is that all this stuff about a Texas “miracle” is rubbish. He provided the following helpful graph that shows the unemployment rate of all of the states around Texas. And what it shows is that Texas is right in the middle of the other states. In fact, if you look carefully, you can see that Colorado has actually seen a greater decrease in unemployment, even though it started at the same level. Obviously, there are reasons for everything, but Texas’ low taxes and “blowed up real good” regulations are not the reasons.

Unemployment in and Around Texas

We’ve seen this a lot. If there is a state that is doing well, conservatives claim that it proves that conservative economic policy is the cause. Usually, it is just random fluctuations. But roughly what we are seeing is a zero sum game. When State Farm moves from California to Texas (which it recently did), there aren’t more jobs created. State Farm did this to lower its costs and increase its profits. Those profits will go overwhelmingly to people who are already wealthy. And that just leads to more of what we’ve had over the last four decades: middle class stagnation and increased economic inequality. But that’s great! Just ask George Will.

But let’s not make the same mistake that the conservatives make. The Texas economy is doing okay. Without digging into the numbers, it seems to be doing as well or slightly better than California. Of course, the median household income in California is 25% higher. The main thing is that the US economy is improving, so things are getting better everywhere. This business of comparing different states is a fool’s game.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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