The Texas Ascendency

Southern Californians who care about the region's relative economic prowess tend to focus on competition from places like New York, Silicon Valley and the Intermountain West. Yet the time has come to acknowledge who has been the biggest winner of the 1990s: Texas.

Like California, the Lone Star State entered the decade limping in its case from the effects of the long-term decline in oil prices. But way before California shook off the effects of the aerospace bust, Texans were already rebuilding their economy, their infrastructure and, most importantly, their often-annoying self-confidence.

And with Gov. George W. Bush the favorite to win the GOP nomination and possibly the presidency, Texas' power may also reach all the way to Washington. In comparison, at least among conservatives, California now seems, in the words of The Weekly Standard's Fred Barnes, "the wave of the past."

Yet with or without another Bush planted at the White House, Texas, once a relative sick man of the U.S. economy, has established itself as a clear and present competitor for preeminence in the 21st century. The Lone Star State has already passed New York state in population; Dallas and Houston are the only major cities that are both magnets for foreign immigration and migrants from other regions in the country, a category where the Dallas area now leads all comers. Dallas now leads the nation in both job creation and new construction; Houston is not far behind.

One big part of the story is the state's emergence as a high-tech powerhouse. During the '90s, Texas has overcome Massachusetts to emerge as the No. 2 locale for high-tech jobs overall. During the first six years of the decade, Texas high-tech jobs grew a whopping 25 percent, while such jobs declined 11 percent in Massachusetts and 12 percent in New York, and barely grew 1 percent here in California.

Most attention paid to Texas high tech has been concentrated on Austin, and its superstar Dell Computers, whose 33-year-old founder Michael Dell is now the richest man in Texas. But the Lone Star boom has actually been more widespread, with Dallas the home of Texas Instruments and Southwestern Bell, and Houston the headquarters town for Compaq.

Southern California does not have one technology or telecommunications company that measures up to any of these four. The high-tech explosion helps explain why Texas added more names to the Forbes 400 list of wealthiest individuals than any state, twice as many as California.

Massive new investments in research universities Baylor, Rice and, most importantly, the University of Texas suggest that home-grown Texas technology has a bright future indeed. Texas also appears ahead of California in the race to retrofit its troubled K-12 system, in addition to funding a $1.5 billion Telecommunications Infrastructure Fund targeted at wiring hospitals, schools and libraries.

But it's not merely high tech that has led the Texas recovery. The Lone Star recovery has been remarkably broad-based, supported by a low cost of living and tax rates a fraction of California's. The state and local tax burden in Dallas or Houston is a good 20 percent lower than in Los Angeles or Orange County. The cost of living in either city is 5 percent below the national average; in Los Angeles it's more than 17 percent higher and in San Francisco it's twice that.

These costs are often cited by larger firms when they decide to locate or consolidate operations in Texas, as JC Penney did several years ago, or why firms with huge stakes in L.A., like GTE, keep most of their staff in the Dallas area. Today Dallas, with half L.A. County's population, has roughly twice as many Fortune 500 companies.

Like L.A., Texas is a mecca for entrepreneurs, only more so. Rates of new startups in Dallas, Houston and Austin are almost twice those of Los Angeles and well above those in Orange County and even San Jose, the supposed ultra-mecca of entrepreneurialism.

Yet Texas resurgence may be less a matter of costs than a reflection of spirit. When California was down in the 1990s, many business and political leaders, particularly in Los Angeles, generally accepted the description of the place as an economic disaster area. Who could forget Kathleen Brown's 1994 campaign slogan that referred to the Golden State as the "nation's worst economy?"

In Texas, a candidate with such a message would be more likely to be lynched than elected. Even though the Eastern media has ignored the rapid economic growth in places like Dallas and Houston, people there don't worry much over what some Ivy Leaguer in a Manhattan high-rise thinks of them. Texans, far more than Californians, tend to believe in themselves and their state.

This self-confidence is even evident in the inner cities of Dallas and Houston, where construction cranes have returned and new lofts, sports stadiums and renovations are all the rage. Today in these once-backwoods burgs, you can find night life, fashionably attired people and great ethnic food. Houston, in particular, has emerged as a major Asian business center the city's Asian population has grown from 4 percent to over 7 percent this decade.

But it's not just immigrants who are moving to places like Dallas and Houston. A growing crop of yuppies, many from the Northeast, are helping drive real estate in downtown Dallas, which has slid from as little as $10 a square foot in the mid-1980s to as much as $100. Deep Ellum, Dallas' still funky bohemian section, is spinning off exciting startups, most notably Broadcast.com.

The people leading this recovery are generally young entrepreneurs like 44-year-old Cliff Booth, who moved down south 20 years ago from Montreal and is retrofitting several buildings adjacent to the original Neiman Marcus store downtown. "I like it here because it's a town where you contribute and benefit," Booth says. "You can do it further and faster than anywhere. You can't say you can't do it here."

Of course, some might snicker that such boosterism is typical of a rude, crude and backward place. But jaded Angelenos should be careful about expressing such sentiments they parallel exactly what was said about our little desert town not so long ago.

Joel Kotkin is a senior fellow with the Pepperdine Institute for Public Policy and a research fellow at the Reason Public Policy Institute.

For reprint and licensing requests for this article, CLICK HERE.