In his first debate with Rep. Beto O’Rourke, a Democrat from El Paso, Sen. Ted Cruz promoted Texas’ low taxes and light regulations as essential to job creation, citing as evidence, “The cost of a one-way U-Haul from California to Texas is more than 300 percent the cost the other way around.”
Why mention U-Haul at all in a Senate debate? The rationale is clear, even if the explanation requires a bit of set up.
Full disclosure: I’m a California transplant to Texas, moving to the Lone Star State in late 2011 after representing almost 500,000 people for six years in the California legislature and even running for the U.S. Senate myself there in 2010.
In 2009, at the height of the Great Recession, it cost $399 to rent a 26-foot U-Haul truck from Austin to San Francisco — but if you were moving from the Bay Area to the capital of Texas, that same truck would set you back $3,236. This cost differential is easy enough to explain: If U-Haul has more people wanting to move in one direction than the other, then eventually U-Haul will have to pay drivers to deadhead a truck back to the outbound location.
For decades now, California has experienced net outbound domestic migration. The general pattern is easy to explain: California largely gains population from the small handful of states with higher taxes and more burdensome regulations than it imposes — states such as New York, New Jersey, and Connecticut — while losing population to much of the rest of the nation, with Texas being the greatest recipient of the California diaspora.
While it’s true California’s population keeps growing due to international immigration and natural population growth, gone are its heydays of growth far above the national average. In fact, California’s growth rate slowed so much that in the 2010 Congressional reapportionment, California gained no new seats in the U.S. House of Representatives for the first time since being admitted to the union in 1850 (the results of the 1920 Census were an exception as politics blocked reapportionment in 1922). Further, many demographic experts expect California to once again see no gains in the House after the 2020 Census, with some even predicting California will lose a seat. By comparison, Texas gained four new congressional seats after the last census and is on track to gain another two to three seats after the 2020 Census.
However, state tax and regulatory policies are properly the domain of the governor and state legislature. So, why did Cruz speak to Texas’ state policies in a debate for federal office?
Here’s where things get very interesting.
For years, largely liberal federal lawmakers and unelected federal regulators laboring for the administrative state have erected layer upon layer of statute and code that gradually erased interstate competitive differences. From the national minimum wage, to the 100 percent deductibility of state and local taxes from federal individual income taxes, to environmental and energy regulations, a heavy federal hand of the sort favored by lawmakers such as O’Rourke operated to blur state distinctions.
Thus, when Cruz touted the U-Haul index to highlight the consequences of high taxes and regulations at the state level, he was leveling a criticism at his opponent who largely supports California-type policies. Policies which, if they were implemented, would begin by repealing the Trump tax cuts and tax reforms while reinstating job-killing energy regulations and then would logically proceed to make gasoline and electricity more expensive while making it more difficult to hire new employees and start new businesses.
Cruz’s debate citation of the U-Haul index is entirely understandable, given that federal lawmakers from California, New York, and Illinois have sought to use the federal government’s laws and regulations as a way to reduce or eliminate their competitive disadvantages versus states such as Texas.
But now with President Trump and congressional Republicans rolling back regulations and signing the tax law that reduced federal tax deductions for high state and local taxes, the ability of states such as California to use federal power to reduce their competitive disadvantage with Texas is shrinking.
This heightens the competitive differences between Texas and California, which is exactly what the Founding Fathers intended in the laboratories of democracy known as states.