Texas Budget Deficit Shatters Myths About California's Deficit

Discussion in 'Economics' started by hermit, Jul 20, 2010.

  1. For years now we've been hearing that California's budget problems exist because we "overspend." Others claim it's because our taxes are so high that companies and jobs move to low-tax states. Texas is often held out by those making these claims as an example of what California should emulate - a low-tax, low-services, low-spending state that supposedly has government figured out.

    Except they don't. California faces a budget deficit of about $18 billion. And how much is Texas's budget deficit?

    That's right. $18 billion:

    But as the state's budget shortfall widens-to as much as $18 billion, or about 20% of the next two-year budget, according to the state legislature's latest analysis released earlier this month-critics are complaining that Mr. Perry's policies have left the state with little room to reduce spending.

    "There is no way that they will be able to come up with $18 billion in cuts," said Eva DeLuna Castro, a senior budget analyst at the Center for Public Policy Priorities, a nonprofit that advocates for low-income Texans. "They would have to shut down our prison system."

    Suddenly Texas doesn't look like such a great model for California. They don't have an income tax, yet their revenues have collapsed just as California's have. Texas spends a lot less per resident, with a much smaller level of public services, yet they are still facing a budget deficit about the size of our own.

    This news should put to an end once and for all the lie that California's budget deficit stems from overspending, or that we should cut our income taxes to "stabilize" revenues, or that we should follow Texas's model of low services.

    Instead what Texas shows us is that the real problem - as in Greece - is that taxes are too low, especially on the higher end of the income bracket. Higher taxes help balance the budget, sustain the services we need to attract and retain companies.

    Think that last part is nonsense? Just ask two California companies that are moving to Colorado:

    As for quality of life, "there's less traffic, less stress, the people are more grounded here. My kids aren't going to school where all the kids drive Porsches and Mercedes," he said. "I should have moved sooner."...

    One final thought from Hansen: "It's not that we hated Orange County ... We love it. But here we're not spending our time sitting on a freeway. There are trails right by our office."

    The OC Register article wants to make it sound like Colorado's lower taxes were the key driver. But it sure doesn't sound that way from the quotes. Traffic is a truly massive economic problem here in California, causing lost time and lost money. Had these business owners not had to deal with traffic, because we'd spent our money building alternatives, they may well have decided to stay, since they clearly enjoyed life in the OC.

    Most decisions made by companies about where to locate their businesses don't revolve around taxes. Cost of living, ability to recruit and retain skilled employees, quality of local schools, infrastructure, and other similar issues tend to dominate the list. Since California has systematically starved those services of revenue, it's becoming harder to create the jobs that will produce recovery.

    What we're seeing is the "Texas is better" model proven to be the lie that it is. California should look to the model of Pat Brown, who understood that investment in our state's services, schools and infrastructure produced prosperity, for the way out of our budget and economic crisis.

  2. Sounds like spending is too high.

    Top 5 Texas State Agency Spending Categories, 2009

    1. Public Assistance Payments: $31 Billion

    2. Intergovernmental Payments: $29 Billion

    3. Interfund Transfers/Other: $15 Billion

    4. Salaries and Wages: $10 Billion

    5. Payment on Principal-Debt Service: $8 Billion
  3. clacy


    I don't think that disproves that Cali's deficits are related to overspending.

    If anything, it just says that Texas is guilty of overspending too.
  4. Traffic is a truly massive economic problem here in California, causing lost time and lost money.


    Back in the day when the unions wanted 40 hour work week, the benefit was to spend more time with the family, etc.

    The reality was people moved out of the city and used the free time to commute. Including week ends to head back into the city for services till the burbs built a business base.

    In the end, GM and transportation engineers built the US.

    When we quit building new roads, think those out of work engineers will fade away, nawhhh. Plans are in the works to rebuild our highways for bikes and pedestrians.

    Build more roads and they fill up quickly. Bloomberg has the right idea. Close roads, pedestrian friendly New York. Traffic problems will spike in the short term but in due time traffic will adjust to a manageable level.
  5. Hey stupid, it just proves both states overspend.

  6. Exactly. There's nothing there to "prove" you must increase taxes (on the wealthy or anyone else). Cutting spending is necessary, though--especially in two states with lots of not-so-legal residents pushing welfare/entitlement/handout programs to their limits.

    The only thing the article “proves” is how easily some are duped by a poorly written hack piece from a progressive/lib CA site.
  7. Humpy


    Now youre talking !!

    All the losers on death row - gone in 2 weeks, no more time/money wasting on appeals !! Hung up in public squares with a notice around their necks of what they did.

    Some of them might be innocent wails the bleeding hearts - tough !!

    Minor offenders - an appropriate amount of lashes !!

    problem nearly solved already !!

    You can do it guys if you got the will !!
  8. I just skimmed the article, but doesn't Texas have a 2 year budget? Wouldn't that mean that their annual deficit is only 10% of revenues, not 20% - making them only half as bad as CA?
  9. promagma


    You are correct, sir
  10. As for CA cutting costs, maybe they could start with Pelosi's $18K/month office in San Fran.
    #10     Jul 20, 2010