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ARTICLE5 (printed) - (FPcPPMiFPP llPlll WIIZ Z Z

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Unformatted text preview: (FPcPPMiFPP llPlll WIIZ Z Z Il-FPiIPM-lFFPW‘Sl-FEDU'EHNS UDl'ulJ UHIfiJlFIP" Ill orfthe industry. insighter, a timely resqurce from: __ _ mighteris produced in caperafionwfiemfidm . -. ., Economistcom SPECIAL REPORTS Lone Star rising Jul 9th 2009 From The Economist print edition Thanks to low taxes and light regulation, Texas is booming. But demography will bring profound changes, says Christopher Lockwood (interviewed here) Corbis VISITORS to Governor Rick Perry's vast office in the Texas capitol building in Austin (with a dome a mite taller, naturally, than the one in Washington, DC) are sometimes offered a viewing of a triumphalist video. Entitled “The Texaplex”, the seven-minute film is a hymn to the successes Texas has achieved in recent years, and they look pretty impressive. Texas now hosts more Fortune 500 companies than any other American state. They include AT&T, Dell and Texas Instruments; oil giants such as Exxon Mobil, ConocoPhillips and Valero; American, Continental and Southwest Airlines; Fluor, a huge construction firm (recently lured from California); 1C. Penney; Halliburton; and 52 others. Texas claims to have been responsible for 70% of all the net new jobs created last year in America’s 50 states, though since only a few states created any jobs at all that is not quite as astonishing as it sounds. True, the film tactfully ignores the recession. Texas followed America into the downturn in September last year, almost a year after the rest. In May it shed a worrying 24,700 jobs, and the Dallas Federal Reserve now forecasts that between 315,000 and 350,000 jobs will go in 2009. But proportionately the May figure was still lower than for the nation as a whole, and Texas's unemployment rate, at 7.1%, was 2.3 points below the American average. Housing repossessions are still very rare; the state budget is still in surplus even as California and New York teeter on the edge of bankruptcy. Uniike those feliow states with large populations, Texas levies no personal income tax, and with almost unlimited space on which to build, its houses are big and affordable. ' Illllllllllllll3fl I:me IIPIII All this has brought people flooding in and made Texas America’s fastest—growing state. Net domestic inflows have been running at around 150,000 people in recent years, whereas California and New York have seen net outflows. Next year’s national census is expected to show that flourishing Houston has replaced struggling Chicago as America's third city. Of the ten largest cities in America, three are in Texas. Those three, Houston, Dallas and San Antonio, together with the state capital, Austin, and Fort Worth, make up what the boosters call the Texaplex: a densely packed triangle, with each side measuring about 300 miles, that is home to roughly 80% of the state’s population of 24m (second only to California’s 37m). This “Texas triangle", containing America’s third—largest airport (Dallas—Fort Worth) and its secondmbusiest port (Houston, despite being 50 miles iniand), has emerged as one of the most dynamic regions in all of America. Joel Kotkin, an urbanologist based in California, recently compiled a list for Forbes magazine of the best cities for job creation over the past decade. Among those with more than 450,000 jobs, the top five spots went to the five main Texapiex cities—and the winner of the smaiE—cities category was Odessa, Texas. A study by the Brookings Institution in June came up with very similar results. Mr Kotkin particularly admires Houston, which he calls a perfect example of an “opportunity city"—a place with lots of jobs, lots of cheap housing and a welcoming attitude to newcomers. He is certainly right about the last point: not too many other cities could have absorbed 100,000 refugees, bigheartedly and fairly painlessly, as Houston did after Hurricane Katrina struck New Orleans. With vibrant Asian communities alongside its balanced Hispanic, white and black mix, with no discernible racial tensions, and with more foreign consulates than any American city except New York and Los Angeles, Houston is arguably America's most enthusiastically cosmopolitan city, a place where the future has already arrived. ,ih‘ouswn.‘ _ I. ishie gang?! ' {isiifif fifit'ffifi, ' Pannier: Basin Barnettdmia Hnymm'llmholc f “iuxas Mange“ Wander round to the Senate side of the state capitol, though, and you will hear a different Texan taie. There, you might encounter Eliot Shapleigh, the Democratic state senator for a district centred on El Paso, on the extreme west of the Mexican border. Mr Shapleigh publishes his own repert: “Texas on the Brink”. His statistics are a lot less rosy. Texas has the highest proportion of people lacking health insurance of ali 50 states; the third-highest poverty rate; the second-highest imprisonment rate; the highest teenage-birth rate; the lowest voter turnout; and the lowest proportion of high—school graduates. Mr Shapieigh is not surprised that these figures are so terrible: Texas spends less on each of its citizens than does any other state. Being a tow-tax, low—spend state has not made Texans rich, though they are not dirt—poor either; their median income ranks 37th among the 50 states. HIIIIIHIIIIIISEI Ktiifilllz Z Z ll-FPCFPMIFFPlfil‘HflEH-BHNS USN.) WIFIP " Ill (WW IIPlIl K‘l'ifllllZ Z Z Il-FPUEPMJFHleSl‘FlDfl-BHN3 Lillian.) WEHP" lll These two faces of Texas are hardly a paradox. Texas has one of the most unequal income distributions of any state, a legacy of the days when rich ranch-owners and oil billionaires were served by poorly paid ranch hands and roughnecks; and when Mexican immigrants crossed an essentially open border at will to toil away at sun-scorched farm jobs for pay that “Anglo” (non-Hispanic white) workers would not contemplate. You might call this Texas’s persistent “Southern” side, a contrast to its high-tech, urban and liberal “Western” side. These two aspects of Texas’s character and history still sit uneasily together, just as geographically the vast iandmass of Texas belongs both to the South and the West. Historically, a low—tax, low-spend model has served Texas fairly weil, though the limitations of dependence on a few commodities (oil, cattle, cotton) were cruelly shown up in the mid-19805. When the oil price crashed, the property market and then the entire banking system went down with it. Between 1982 and 1993 Texas saw 523 banks go under, and in the single year of 1986 its gross state product slumped by 3.1%. Since then it has been diversifying frantically, with considerable success. Sta rstruck But there are now two big reasons to think that the Texas model will need further revision. One is external to the state: the global economy has become a much more knowledge—intensive place, with even the oil business turning into a high-tech industry, so Texas needs more and better universities and schools. Embarrassingly for the state, only one of its universities (the small, private Rice University in Houston) makes it into the list of the top 20 universities in America, let alone the world. In contrast to those Forbes ratings, the Kauffman Foundation, which promotes entrepreneurship, puts'Texas only 18th in its ranking of states’ ability to take advantage of America's “transformation into a global, entrepreneurial and knowledge— and innovation-based New Economy". Texas fails down in a number of categories, most of them to do with education. Kauffman ranks Texas 41st for the education level of its workforce as well as for the average education level of recent arrivals from elsewhere in America, suggesting that too many of its newcomers are chasing low-end jobs. A committee on education appointed by Mr Perry concluded in January that “Texas is not globally competitive” and gave warning that it “faces a downward spiral in both quality of life and economic competitiveness". The other, even more important, reason to expect change is internal. In 2004 Texas became one of only four states in America where whites are no longer in the majority. On recent trends, Hispanics will be the largest ethnic group in the state by 2015. Since they tend to vote Democratic, this has big implications for Texas’s political make-up and for national politics. And an increasingly assertive Hispanic caucus, in an increasingly Democratic state, also seems sure to demand better schools and health care for the people it represents, who currently lag far behind the Anglos on any social indicator you care to name. Close to half of Latinos in Houston, for instance, fail to graduate from high school. How Texas responds to these forces will determine its future. Get it right, and the state wiil remain business— friendly and globally competitive, with high employment and a rising standard of living. Get it wrong, and Texas could follow California (which “flipped” from Republican to Democratic control in part thanks to rapid immigration) down the road of high taxes and excessive regulation. This route has bankrupted California and is prompting a net 100,000 people to leave each year. Many of them head for Texas. One simple statistic tells that tale: it costs nearly three times as much to rent a self-drive van for a one—way journey from Los Angeles to Houston as the other way around. Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved. lllllllllllllllEEl llFlll WIIZZEIFFFEHDMJFPPIBUDWWIFIP"WBB Illlllll GPII‘HOH LEADERS Economistcom California v Texas America's future Jul 9th 2009 From The Economist print edition An intriguing, much more equal rivalry out West. But both California and Texas can learn from each other flluslration by KAL 5N AM ERICA’S recent history has been a relentless tilt to the West—of people, ideas, commerce and even political power. California and Texas, the nation’s two biggest states, are the twin poles of the West, but very different ones. For most of the 20th century the home of Siiicon Valley and Hollywood has been the brainier, sexier, trendier of the two: its suburbs and freeways, its fads and foibles, its marvellous miscegenation have spread around the world. Texas, once a part of the Confederacy, has trailed behind: its cliché has been a conservative Christian in cowboy boots, much like a certain recent president. But twins can change places. Is that happening now? It is easy to find evidence that California is in a funk (see article). At the start of this month the once golden state started paying creditors, including those owed tax refunds, business suppliers and students expecting grants, in IOUs. California's governor, Arnold Schwarzenegger, also said that the gap between projected outgoings and income for the current fiscal year has Ieapt to a horrible $26 billion. With no sign of a new budget to close this chasm, one credit agency has already downgraded Caiifornia's debt. As budgets are cut, universities will let in fewer students, prisoners will be released early and schemes to protect the vulnerable will be rolled back. They paved paradise and put up the parking taxes Plenty of American states have budget crises; but California’s illustrate two more structural worries about the state. Back in its golden age in the 19505 and 19605, it offered middle-class people, not just techy high-fliers, a shot at the American dream—complete with superb schools and universities, and an enviable physical Illllllllllllllfifl i l (Fm—“PW llFllI WIIZZZIfFFEFPWBLDMJWIHWWHE llllllll infrastructure. These days California's unemployment rate is running at 11.5%, two points ahead of the national average. In such Californian cities as Fresno, Merced and El Centro, jobless rates are higher than in Detroit. Its roads and sChools are crumbling. Every year, over 100,000 more Americans leave the state than enter it. The second worry has to do with dysfunctional government. No state has quite so many overlapping systems of accountability or such a gerrymandered legislature. Ballot initiatives, the crack cocaine of democracy, have left only around a quarter of its budget within the power of its representative politicians. (One reason budget cuts are inevitable is that voters rejected tax increases in a package of ballot meaSures in May.) Not that Californian government comes cheap: it has the second—highest top level of state income tax in America (after Hawaii, of all places). Indeed, high taxes, coupled with intrusive regulation of business and greenery taken to silly extremes, have gradually strangled what was once America’s most dynamic state economy. Chief Executive magazine, to take just one example, has ranked California the very worst state to do business in for each of the past four years. By contrast, Texas was the best state in that poll. It has coped well with the recession, with an unemployment rate two points below the national average and one of the lowest rates of housing repossession. In part this is because Texan banks, hard hit in the last property bust, did not overexpand this time. But as our special report this week explains, Texas also clearly offers a different model, based on small government. It has no state capital—gains or income tax, and a business-friendly and immigrant-tolerant attitude. It is home to more Fortune 500 companies than any other state—64 compared with California’s 51 and New York's 56. And as happens to fashionable places, some erstwhile weaknesses now seem strengths (flat, ugly countryside makes it easier for Dallas—Fort Worth to expand than mountain—and-sea-locked LA), while old conservative stereotypes are being questioned: two leading contenders to be Houston’s next mayor are a black man and a white lesbian. Texas also gets on better with Mexico than California does. American conservatives have seized on this reversal of fortune: Arthur Laffer, a Reaganite economist, hails the Texan model over the Gipper’s now hopelessly leftish home. Despite all this, it stiil seems too early to cede America's future to the Lone Star state. To begin with, that lean Texan model has its own problems. It has not invested enough in education, and many experts rightly worry about a “lost generation” of mostly Hispanic Texans with insufficient skills for the demands of the knowledge economy. Now immigration is likely to reconvert Texas from Republican red to Democratic blue; Latinos may justly demand a bigger, more “Californian” state to educate them and provide them with decent health care. But Texas could then end up with the same over-empowered public—sector unions who have helped wreck government in California. Second, it has never paid to bet against a state with as many inventive people as California. Even if Hollywood is in the dumps (see article), it still boasts an unequalled array of sunrise industries and the most agile venture—capital industry on the planet; there is no prospect of the likes of Google decamping from Mountain View for Austin, though many start-ups have. The state also has an awesome ability to reinvent itself—as it did when its defence industry collapsed at the end of the cold war. Perhaps the rejection of tax increases will “starve the beast” and promote structural reform. A referendum on a new primaries system could end its polarised politics. Mr Schwarzenegger’s lazy governorship could come to be seen not as the great missed opportunity, but as the spur for reform. ' Fifty laboratories, one magic formula The truth is that both states could learn from each other. Texas still lacks California's great universities and lags in terms of culture. California could adopt not just Texas’s leaner state, but also its more bipartisan approach to politics and its more welcoming attitude towards Mexico. There is no perfect model of government: it is America's genius to have 50 public~po|icy laboratories competing to find out what works- best—just as it is the relentless competition of clever new firms from Portland to Pittsburgh that will pull the country out of its current gloom. But, to give Texas some credit and serve as a warning to Mr Schwarzenegger’s heir, at this moment America's two most futuristic states look a lot more like equals than ever before. Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved. |lllll|lll||lll3£l mww..firnmmwfiifl .. ...
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This note was uploaded on 03/19/2012 for the course GEOG 305 taught by Professor Prout during the Spring '08 term at Texas A&M.

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ARTICLE5 (printed) - (FPcPPMiFPP llPlll WIIZ Z Z

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