Monday, June 3, 2013

A Tale of Three States - CA, TX, and OH


The era of high-stakes economic development as competition between states is about taking aim and following up with gun fights.   In a state full of gunslingers, look for Texas to excel at poaching others peoples' prosperity (the term P3s has several different meanings in Texas).

Consider the economic box score for California, Texas, and Ohio:
  • Real GDP growth (2010-2011) - 2.0% / 3.3% / 1.1% (California, Texas, and Ohio)
  • Number of Fortune 500 companies (2013 ranking) - 54 / 52 / 27
  • Jobless Rate (April 2013) - 9.0% / 6.4% / 7.0%
  • State Income Tax Rate - 1% to 13.3% / None / 0.59% to 5.92%
  • Corporate Income Tax Rate - 8.84% / None, Texas' margin tax is 0.5% - 1% on gross receipts / None, Ohio's commercial activities tax is 0.26%
Numbers not always visible in the box score are also critical.  States must have the money to build business-friendly infrastructure and to educate and train their people.

Gun fights are the ultimate "zero-sum game" - - one state will win and another state will lose.  Detroit has gone from 1.8 million to a mere 600,000 citizens.  But North Dakota's booming economy is paying high school graduates $20 per hour to work for "the King, the Clown, or the Colonel."  Hiring is the issue in North Dakota.  Google, Amazon, and e-Bay are investing hundreds of millions to build out facilities not in California, but in business-friendly Texas.

Duels among states will be structured along simple lines - - low taxes, low debt, and the economic resources to fix roads and bridges and to nurture their schools.  Television commercials and slogans are not a strategy for a gun fight.  States need a true economic vision that goes beyond a hodgepodge of improvisations as people start turning out the lights and heading east or south.  Many of our states will look like emerging markets.  Others will continue to spiral sharply toward declinism.

Never bet against a Texas gunslinger during an oil and gas boom.

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