For years, conservatives have been saying that a healthy economy depends on low taxes, few regulations and low wages.
At the one end of the scale are Kansas and Texas, with among the nation’s lowest taxes, fewest regulations and lowest wages.
At the other end is California, with among the nation’s highest taxes, especially on the wealthy; toughest regulations, particularly when it comes to the environment; most ambitious health care system, which insures more than 12 million poor Californians, in partnership with Medicaid; and high wages.
So, according to conservative doctrine, Kansas and Texas ought to be booming, and California ought to be in the pits.
Actually, it’s just the opposite.
For several years now, the rate of economic growth in Kansas has been the worst in the nation. Last year its economy actually shrank.
Texas hasn’t been doing all that much better. Its rate of job growth has been below the national average. The value of Texas exports has been dropping.
But what about so-called over-taxed, over-regulated, high-wage California?
California leads the nation in the rate of economic growth — more than twice the national average. If it were a separate nation, it would now be the sixth-largest economy in the world. Its population has surged to 39 million (up five percent since 2010).
California is home to the nation’s fastest-growing and most innovative industries — entertainment and high-tech. It incubates more startups than anywhere else in the world.
Why are Kansas and Texas doing so badly, and California so well?
For one thing, taxes enable states to invest their people. The University of California is the best system of public higher education in America. Add in the state’s network of community colleges, state colleges and research institutions, and you have an unparalleled source of research and development, and a powerful engine of upward mobility.
California also provides services to a diverse population, including a large percentage of immigrants. Such diversity is a huge plus. Both Hollywood and Silicon Valley have thrived on the ideas and energies of new immigrants.
California’s regulations protect the public health and the state’s natural beauty, which also draws people to the state — including talented people who could settle anywhere.
Wages are high in California because the economy is growing so fast that employers have to pay more to attract workers. That’s not a bad thing. After all, the goal isn’t just growth. It’s a high standard of living.
In fairness, Texas’ problems are also linked to the oil bust. But that’s really no excuse because Texas has failed to diversify its economy. Here again, it hasn’t made adequate investments.
California is far from perfect. A housing shortage has driven rents and home prices into the stratosphere. Roads are clogged. Its public schools used to be the best in the nation but are now among the worst — largely because of a proposition approved by voters in 1978 that’s strangled local school financing. Much more needs to be done.
But overall, the contrast is clear. Economic success depends on tax revenues that go into public investments, and on regulations that protect the environment and public health. And true economic success results in high wages.
So far, California gives lie to the conservative dictum that low taxes, few regulations and low wages are the keys economic success. Conservatives should take note.