America’s Future: California Or Texas?

If California is America’s future, then that future is overrun with poverty.

by Chuck DeVore, July 6, 2015, The Federalist

Demographers estimate that in less than 30 years America will be “majority-minority,” with the white, non-Hispanic population dipping to under 50 percent. The future has already arrived in California, Hawaii, New Mexico, and Texas. Of those four states, California and Texas have demographic profiles most closely matching our nation’s demographic future. Which version of America’s future provides opportunity for all Americans, the California model or the Texas model?

A state’s poverty level is a good place to start for measuring the effectiveness of state policies that encourage job creation, self-sufficiency, and upward mobility. Since, for a variety of reasons, average poverty rates are higher among minority groups and immigrants, it’s important to both measure overall poverty rates and to compare rates between like demographic groups.

The federal government has two measures of poverty, the Official Poverty Measure (OPM) and the Supplemental Poverty Measure(SPM).

Important Details about Measuring Poverty

The familiar official measure is more than 50 years old, and is showing its age. It has two huge shortcomings: it considers the cost of living to be the same in the 48 contiguous states (a patently ridiculous proposition when considering that the average rent in San Francisco in the first quarter of 2015 was $3,458 vs. $867 in Houston), and it doesn’t account for in-kind benefits, such as Section Eight housing subsidies and Electronic Benefit Transfer cards (food stamps).

Thus, the federal government’s main poverty gauge undercounts material poverty levels in high-cost states such as California, New York, and Hawaii, while over-counting true poverty in much of the low-cost Midwest and South.

Responding to concerns from Congress, advocates for the poor, and academics, some 20 years ago the U.S. Census Bureau began developing an alternative measure of poverty to address weaknesses in the official measure. The Census Bureau’s new, more comprehensive Supplemental Poverty Measure (SPM) is the result. Unlike the official measure, the supplemental measure accounts for housing cost differences from state to state, while including the value of non-cash benefits such as housing vouchers and some work-related expenses and taxes.

Poverty in California and Texas

Both California and Texas have official poverty rates above the national average. But, under SPM, Texas’ poverty rate matches the national average while California’s is the nation’s highest with proportionately 47 percent more people living in poverty than in Texas and the United States.

Much of California’s nation-leading poverty rate is due to the high cost of housing in the Golden State, a significant portion of which is driven by hyper-controls on development, greenhouse gas fees, restrictive zoning, and taxes. It takes five years to get permission to build in California what commonly takes five months in Texas. If California is America’s future, then that future is overrun with poverty.

The share of minorities in California and Texas is about 50 percent higher than in the nation as a whole, triple that of Wisconsin or Minnesota, more than quadruple that of Iowa, and about six-and-a-half times that of New Hampshire. Thus, it is an illuminating measure the wellbeing of America’s four largest racial or ethnic groups in the two most-populous states that one-fifth of Americans call home. The table below shows the average SPM for four years, 2010 to 2013, for these four groups.

Note that in Texas, all four groups’ poverty rates are below the national average, while in California all four groups suffer a poverty rate above the national average.

Economic Freedom Reduces Poverty

What’s remarkable (or not, depending on your worldview) about the huge disparity in poverty rates between California and Texas is that the states are diametrically opposed in their taxing, spending, and regulatory policies. California, featuring America’s highest marginal income-tax rate, ranks as the fourth-most taxed state in the nation, according to the Tax Foundation, while no-income-tax Texas came in at forty-seventh. In a broader survey of economic freedom that includes labor law and regulation, Canada’s Fraser Institute rated Texas and South Dakota as tied for first with California lagging far behind at forty-third, just ahead of New Jersey at forty-fourth.

In the time it will take for a child to be born, gain self-sufficiency, and start a family, America will become a majority-minority nation. Some politicians who size up this eventuality fear it and demagogue against demographics, while some pander to it, exchanging promises of government largess to buy allegiance. Neither path is worthy of our ideals. Neither path will lead to a prosperous America.

When developing policies and platforms to attract the support of America’s emerging majority, conservatives would do well to point to California as a cautionary tale while drawing inspiration from Texas—confidently and boldly asserting that freedom and hard work remain the main ingredients of the American Dream.

Chuck DeVore is vice president of policy at the Texas Public Policy Foundation and served in the California State Assembly from 2004 to 2010.