Thursday, October 09, 2008

Economist Dr. Laffer: TX beats CA

I'm running pretty busy this week, so just a quick pass-along from the Texas Public Policy Foundation on California vs. Texas, reinforced by recent news California may need a federal bailout too.
Internationally renowned economist Dr. Arthur Laffer declared Texas the knockout winner of its economic rivalry with California and predicted a bright future for the Lone Star State due to its commitment to low taxes and limited government.

“The result of a head-to-head competition between Texas and California is an economic blowout,” Laffer said. “The economic environment in Texas has significant advantages over California. The implications of this competitive advantage are clear; Texas’ economic prospects are bright and the Texas economy will significantly outperform California’s.”

Laffer made his announcement at a luncheon in Austin sponsored by the Texas Public Policy Foundation, the Texas Association of Business, and the Texas Conservative Coalition Research Institute.

“Working with the legislature, we laid the foundation for today’s economic success by creating a reasonable regulatory climate, competitive job creation fund and one of the lowest tax burdens in the country,” said Texas Gov. Rick Perry, who accepted the accolades and spoke at the luncheon. “Today we are reaping the benefits of these policies and are able to cut taxes while other states are cutting budgets.”

The Foundation also released a paper authored by Dr. Laffer, “Competitive States: Texas v. California – Economic Growth Prospects for the 21st Century.” The report contrasted Texas and California on six broad categories that have been proven to affect a state’s economic competitiveness: taxes on labor, taxes on capital, taxes on consumption, overall tax environment, regulatory environment, and government spending policies.

Laffer’s analysis declared Texas a decisive winner in five of the categories, with “taxes on consumption” scored as a tie.

“Texas’ current prosperity and California’s struggles are not a coincidence,” said Foundation president Brooke Rollins. “Businesses want to locate and people want to live where government doesn’t get in their way with excessive taxes and regulation. As long as these states continue on their current paths, businesses and people will continue to flee California for places like Texas.

The report is available for download from the Foundation’s website. Video of the luncheon, including the remarks by Dr. Laffer and Gov. Perry, will soon be available in the site’s multimedia section.

The Texas Public Policy Foundation is a non-profit, free-market research institute based in Austin, Texas.

Dr. Arthur Laffer is the founder and chairman of Laffer Associates, an economic research and consulting firm that provides global investment-research services to institutional asset managers, pension funds, financial institutions, and corporations. He is the creator of the “Laffer Curve,” an innovation that earned him the distinction as the “Father of Supply-Side Economics.” He was a member of President Reagan’s Economic Policy Advisory Board for both of his terms.

Hat tip to David.

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At 8:02 PM, October 09, 2008, Blogger  Robert Boyd said...

Didn't the fact that the price of oil went from $11/bbl to almost $150/bbl have something to do with Texas's economic good fortune in the past decade? (And the price of oil certainly didn't do most other states any good.) Failing to acknowledge this when discussing Texas's economic success makes Laffer's remarks seem merely fatuous, rather than seeming to contain any sort of essential truth.

At 8:42 PM, October 09, 2008, Anonymous Anonymous said...

Robert, it doesn't look like the study is based off of production so much as it is tax policies and the future. The pdf explains.

Also, if this is so obvious, why doesn't the federal government open their eyes and follow suite?

At 10:27 AM, October 10, 2008, Anonymous Anonymous said...

You better be careful with this kind of article. Californians regard themselves very highly and are socialized to believe they are superior. If this talk continues they will react and try to trash our state.

The economic growth in Texas is very impressive. I have driven through Austin, Dallas and Houston recently and can say that Texas has boomed again.

The Wind Energy Boom has been a big success. I think Texas is a land of the future.

We need to avoid talking about California.

At 6:28 AM, October 12, 2008, Anonymous Anonymous said...

Did you know that in the energy capital of the Western Hemisphere (Houston) energy is not the largest employer.

That honor goes to healthcare. There is a 2nd downtown just South of Louisiana and Caroline called the MedCenter. Check it out.

At 5:23 PM, October 12, 2008, Blogger Michael said...


Nearly 50% of Houston's job's are in the energy sector, according to this article from the Washington Post. This is better than 70% that was tied to energy in the 1980's, but still - the point that Robert is making is that when 50% of your economy is benefiting from $100+ oil, that is a far more significant factor in our economy's health (or lack thereof) than any tax policy or zoning laws.

If you think energy is not the largest employer in Houston, show me a source. Somehow, I don't think the breakdown is energy ~49.9%, health-care 50.1.


At 12:26 PM, October 14, 2008, Anonymous Anonymous said...

"the point that Robert is making is that when 50% of your economy is benefiting from $100+ oil,"

Well, it was that much but not anymore. Besides, it never hit $150 and was close only for a month. Over the decade, it's about 39. Not only that, the feds get most of the tax money from it, not the states. Other states who don't benefit from oil get a much better return from theier tax dollar than Texas does anyway....especially for highways. We're last on the list for that, and Mass. is on top. If that was the whole story, then get Nancy Pelosi to loosen up and get California to drill, and they'll be on top? Don't think so.

At 4:07 PM, November 14, 2008, Anonymous Anonymous said...

Problem is, Arthur Laffer has rather been right about anything.
Prime example:


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