Californication Impacts Neighboring States

A couple of posts ago, I quoted George Will dubbing Arnold Schwarzenegger “the best governor the states next to California have ever had.” At City Journal, Nicole Gelinas looks at the state governments of the areas into which his former constituents have decamped:

If states were airlines, New York and California would be Delta and United. Even when competently managed, they must shoulder the institutional inheritance of decades of other people’s decisions, good and bad. They must bear the heavy cost of legions of retired government workers. And they carry billions of dollars of debt that backs expensive, complex infrastructure.

Over the last few decades, when New Yorkers and Californians tired of paying high taxes to fund big government, they tended to migrate to what we might call the JetBlue states: Arizona, Florida, and Nevada. In those three low-tax refuges, the construction industry swelled to build houses for the new residents. And the construction workers themselves needed houses, providing jobs for still more construction workers. All the new people needed new places to shop, as well as new doctors, dentists, and restaurants. The local financial industry also grew and grew, filling office parks with the folks who did the back-office work for all the mortgages that New York bankers were eagerly approving. The result: double-digit population growth.

But during the boom times, elected officials in Arizona, Florida, and Nevada took a page out of the old states’ playbook, driving up spending at an unsustainable pace. Now that the growth of the low-tax states has hit a wall, shattering revenues, they face a tough choice: they can raise taxes to fund permanently higher costs, or they can aggressively cut spending. So far, it’s proving surprisingly easy for them to choose Option One, taking a small step toward transforming themselves into the high-tax states that so many of their own residents have fled.

As Will wrote, “The state’s perennial boast — that it is the incubator of America’s future — now has an increasingly dark urgency”, which can increasingly be witnessed in the spending of its neighboring state governments.