A Tale of Two States

Note: All sources are listed at the bottom of this post.

California is a favorite subject of nativists everywhere. The State government faces a perpetual budget crisis, the tax base is decreasing and its economy is doing much worse than many other states. All of this, we hear with regularity, is because of all the illegal immigrants California has within its borders. Without these illegal immigrants, we are told, all of California's budget woes would be gone.

In reality, Californians voted themselves into the crisis they are currently in, and stricter enforcement of current US immigration laws will not help and may very well harm their situation. As evidence, one needs only to look at another high-population, high-illegal immigrant state, Texas.

Texas is currently the second most populous state in the US next to California (25 million versus 37 million, respectively.) California has more illegal immigrants, but for the population size they are almost exactly the same (6.7% of the population versus 6.8%.) Given these facts, one would expect Texas to be as much in the red and facing as serious of troubles as California. Well, not so much.

Since 2005, California's population has gone up merely 3.1%, and its economy has gone up 16.1%. Texas has seen much more robust growth, at 9.9% population growth and 26.7% economic output growth. Both economies have been strong, but Texas' has seen markedly larger growth, along with its population.

In Texas, unemployment has gone up 56.6% since 2005, from 5.3% to 8.4%. In California, it has shot up a whopping 129%, from 5.4% to 12.4%. What is the cause of this huge difference between two states who are, as some argue, suffering from an economically crippling number of illegal immigrants?

It is easy to see some structural differences. California is one of the most notoriously business-unfriendly states in the union. In 2010, it tied for 32nd place in CNBC's rankings of the best states to do business in the United States. Texas, on the other hand, came in as the most business-friendly state in the Union, and it has consistently stayed in the top three since 2005.

In government expenditures, California also beats out Texas, at $4,455 per person in California versus $3,579 in Texas.  (I should also mention that there are now 9 California state employees for every 1000 California citizens, almost double what it was in 1950. That's a lot of payroll, not to mention health care and pension debt!)

Both states face budget shortfalls. In Texas, they seem confident that their rainy-day fund and budget cuts can carry them through the current $4.3 billion deficit until the economy improves. In California, they face crushing requirements to fund schools and public pensions, combining to make their deficit over four times as large at $20 billion.

By the logic of the nativists, California and Texas are in a similar boat. They both face the highest number of illegal immigrants and a high percentage of them per capita, yet Texas is weathering the economic downturn in much better fashion than California.

The reason is simple; Texas presents a much better opportunity for people to do business. Its regulations are far less onerous and its government spends far less of its peoples' money. Texas is far from perfect; it has increased its own spending at a much faster rate than California since 2005, apparently determined to undo the good it has done, but as it stands it still remains a far better choice to live than California. This, not how many illegal immigrants are within its borders, is what is causing California's government to be facing a budget nightmare.


Illegal immigrants by state: http://pewresearch.org/pubs/1876/unauthorized-immigrant-population-united-states-national-state-trends-2010

Population by State: http://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population

Gross State Product: http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP

California State Spending, 2005: http://www.lao.ca.gov/2005/major_features/2005-06_major_features.htm

Texas & California State Spending: http://usgovernmentspending.com

CNBC Business-Friendly State Rankings: http://www.cnbc.com/id/19733620/

Comments (4)

Very interesting comparison. Thanks.

Thanks for laying out the numbers like that.

And then on the other hand.... The LA Times fights back.


Well, no one here is saying that Texas is perfect, and rest assured, their budget problems are not caused by illegal immigration either!

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