The Texas model vs. the Seattle model

Texas did far better in the recession than its big rival, California. Which one should we emulate?
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Texas state capitol: Don't mess with Seattle, Longhorns.

Texas did far better in the recession than its big rival, California. Which one should we emulate?

I've recently become fascinated by Texas, an economic dynamo with a rich political culture. One Texas native has been telling me about "the Texas model" for a modern economy. His simple definition: "Not California." It made me wonder: Do we have a Seattle model?

Compared to California, an economic and political basket case, Texas looks pretty good these days. A helpful survey can be found in Texas mostly avoided the housing bust, while California had an ugly one, besides being the center of the sub-prime mortgage finance industry. Not hamstrung by state initiatives, Texas was able to whack at a budget shortfall by imposing 10 percent across-the-board cuts by getting the governor around a table with the speaker of the house.

The big difference is in the amount of regulation, maddeningly complex in the Golden State, and taxes. The Texas tax structure is high on sales tax and has no income tax (just like Washington), which means less volatility. Income taxes surge in boom times (leading to over-spending) and plummet in poor times; sales taxes tend to plug along more steadily. Low taxes in Texas also help to make it the top-rated state for doing business, according to a 2010 survey by Chief Executive magazine. California ranked worst in this survey; Washington was 30th and Oregon was 38th.

Low taxes may lure business, but there are trade offs, particularly in the poor state of Texas schools, where spending per student is now 42nd lowest in the nation. Still, hot cities like Austin are attracting lots of mobile, highly educated, entrepreneurial types. The city, like Seattle, is spawning important global companies and research; Dell and Whole Foods are two of the Austin "brands" (along with music).

Which way Seattle? The state, curiously, has high corporate taxes and low taxes on the rich — the sort of structure that hurts small businesses and start-ups, while rewarding high salaries. It's a high-regulation state, with an overlay of Nanny-state fussiness in some of the cities. Texas politics are high-octane, vigorously two-party, and colorful, but the state does concentrate power in the hands of some pols (with very few citizen initiatives), so it seems better able to make hard decisions and to stick with economic strategies. Washington is far more dependent on trade and ports, a valuable part of its economic diversity but also a liability in downturns, when the Asian import and export business sags.

Finally, the Seattle model is a northern-tier model, combining both a stolid high-mindedness (such as the Gates Foundation) and an unshowy style. We tend to muffle up our behavior with a strong governmental overlay (just how many chickens can you have in your Seattle backyard?), and a passive-aggressive style in politics. This muted style travels well (think of Nordstrom), since it conveys a sense of service and durable value.

In falling in between the Golden State and the Lone Star State, the Seattle/Washington model lacks strong definition and rarely produces national political figures. Agreeable and balanced it is. But it may come to seem, in the muscling for brand recognition and the attracting of the best brains, a tad too mild, too middling, too muddled.


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