July 30, 2015 Print

When it comes to economic growth and prosperity, institutional incentives and interventionist policy make all the difference. In the United States, a fairly direct comparison can be made between large states like Texas and California, which each have similar demographic profiles but vastly different policy structures at the level of state government. A recent pair of commentaries by Chuck DeVore, vice president of policy at Atlas Network partner the Texas Public Policy Foundation, show that the economic model in Texas is the clear winner when measuring important statistics like poverty levels.

DeVore points out that, according to the U.S. Census Bureau’s Supplemental Poverty Measure, the poverty rate in Texas “matches the national average while California’s is the nation’s highest with proportionately 47 percent more people living in poverty than in Texas and the United States.” Much of this disparity can be attributed to the astronomical cost of housing in California, “a significant portion of which is driven by hyper-controls on development, greenhouse gas fees, restrictive zoning, and taxes. It takes five years to get permission to build in California what commonly takes five months in Texas.”

Another important marker of economic success is the level of opportunity that a state’s policies provide for those of all demographic backgrounds. In this case, Texas once again comes out on top.

“How do America’s four largest racial and ethnic groups do in these four majority-minority states?” DeVore asks. “Texas is the only state where white, non-Hispanics; Hispanics; black, non-Hispanics; and Asians all have supplemental poverty rates below the national average. New Mexico’s residents also do well. In California, on the other hand, all four groups suffer a poverty rate above their group’s national average.”

Ultimately, the lesson to draw from the comparison between Texas and California is that economic freedom reduces poverty and provides greater opportunity for low-income and low-skilled residents to reach a more prosperous life.

“When developing policies and platforms to attract the support of America’s emerging majority, conservatives would do well to point to California as a cautionary tale while drawing inspiration from Texas—confidently and boldly asserting that freedom and hard work remain the main ingredients of the American Dream,” DeVore concludes.

Read “America’s future: California or Texas?”

Read “Texas economic model works.” 

Read “Texas vs. California.”

Read “Competitive States: Texas v. California: Economic Growth Prospects for the 21st Century.”