Economics 101: Yet another California-headquartered company leaves for Texas

We have mentioned previously that business unfriendliness in government will have impacts on business, costing states jobs. From Forbes:

It Makes Sense For Toyota To Leave California For Texas
4/27/2014 @ 9:28PM

For Japanese auto brands, the logic of keeping their U.S. sales and administrative arms in California is breaking down under the outrageous penalties of conducting business in the Golden State and the changing dynamics of the North American automotive industry. So Toyota is leaving, according to Automotive News.

And where is Japan’s biggest automaker relocating its sales and marketing operations in America? Why, North Texas, of course. The move to Plano, Texas, will involve most of the 5,000 managers and employees at Toyota’s current Torrance, Calif., headquarters, the magazine said.

Texas Gov. Rick Perry apparently didn’t even have to make a recruiting trip to southern California to get Toyota to do this, although he has helped lure plenty of companies with that gambit over the last several years.

And yet Texas has scored one of the biggest prizes so far in its very focused, state-on-state battle with the administration of Gov. Jerry Brown to get plum companies now headquartered in California to abandon the bluest state for the reddest one.

The Forbes article continues to note that there are solid business reasons which have nothing to do with the business-unfriendly climate in the Pyrite State, but when you pile on those additional government burdens, the incentives for companies which can move to move increase.

In the annual Chief Executive magazine “Best States / Worst States” ranking that surveys CEOs for their opinions, Texas has been holding on to the No. 1 spot for a while; California seems permanently relegated to No. 50.

As Automotive News put it, “Despite the deep, creative talent pool in greater Los Angeles, doing business in California has become more expensive for companies and their workers.” Bestplaces.net said that the cost of living for employees is 39 percent higher in Torrance than in Plano, and housing costs are 63 percent lower in Plano.

What does that mean? Well, it means that, for Toyota executives who have to move from southern California to the Lone Star State, they will see what is, in real terms, a 39% raise. When they sell their houses in California, they’ll wind up being able to by a house 2/3 larger for what they have been spending, or, looked at another way, be able to simply buy, with cash, just as good a home in Plano as the one on which they were making mortgage payments in California.

Of course, some won’t be able to make the move, due to family commitments or spouses’ careers, and that’s tough on them. Some will wind up losing their jobs due to this.

Would it be uncivil of us to point out that we told you so?

We have said before that if liberals really understood economics, they wouldn’t be liberals. Businesses exist to make money for their owners and shareholders, and states and cities which view businesses as milch cows for taxes rather than creators of jobs for their citizens are going to, eventually, cause businesses which can leave for friendlier areas to leave, and inhibit the creation of new businesses. Eventually this will have a negative effect on the number of jobs available for the public.

And you can see the effects in hard numbers: the March unemployment rate for Texas was 5.5%, well below the national average, while California’s was 8.1% and Illinois’ was 8.4%.1 It doesn’t take a PhD in economics, like Paul Krugman has, to understand this, yet the left keep ignoring it. It’s almost as though they kind of, sort of, understand that capitalism provides jobs, but want socialism anyway.

7 Comments

  1. I’m pretty sure it was Dennis Miller, on the Bill O’Reilly show, who said California (and especially its political leadership) are like a beautiful woman who’s spent her entire life getting by on her looks, and now she’s paying the price. Unlike other women, she never had to develop an attractive personality, or learn job skills, or get an education, and now (like California), she’s getting older and looks alone are just not enough. All the same, California’s politicians, like the vain, shallow woman, just assume they (meaning: their state) is so attractive that they will always continue to get what they want simply because they always have. Why should they make the effort to change, to compete?

  2. You’re not painting the entire picture, Editor. In 2010, Texas gained 4 Representatives. California gained none. And if it weren’t for illegal aliens (California has lots of “sanctuary cities”.) California would have lost Representatives. Texas has to create many more jobs per capita than any other state just to maintain the same unemployment rate, because Texas is growing in population faster than any other state. And still, Texas’ unemployment rate is far below the national average. All the while, Illinois, which is definitely seeing emigration, and California, which is definitely seeing emigration can’t even get their unemployment rates down, despite the number of people leaving.

  3. Why should they make the effort to change, to compete?

    Because today Ms California can’t give away the same favors that yesterday attracted legions of suitors and commanded the highest prices. Buyers once paid up with nary a discouraging word, but today Toyota’s headed out for that new home on the Texas range, and they ain’t lookin’ back.

    Home, home on the range,
    Where the deer and the antelope play,
    Where seldom is heard a discouraging word,
    And the skies are not cloudy all day.

  4. Pingback: Should I Move From California To Plano, Texas? « Truth Before Dishonor

  5. Eric wrote:

    All the same, California’s politicians, like the vain, shallow woman, just assume they (meaning: their state) is so attractive that they will always continue to get what they want simply because they always have. Why should they make the effort to change, to compete?

    The obvious answer is: because what they have been doing isn’t working. Albert Einstein defined insanity as doing the same thing over and over, and expecting different results. By that definition, California’s politicians are insane.

    But there’s another form of insanity, and that’s the egotism which tells some people that they are right, damn it, even when the results of their policies continually prove them wrong. Our banned former commenter insisted that the stimulus program didn’t produce the projected results not because the policy was wrong, but because the attempted stimulus plan just wasn’t big enough. That argument might have had some merit if the stimulus program held unemployment to a maximum of 8.7% instead of the projected 8%, but the fact that unemployment soared a whole percentage point higher than what we were told it would be without the program ought to have indicated to anyone that the administration didn’t know what they were talking about in the first place.

    It doesn’t take a genius to realize that when the state piles additional costs on businesses, some of those businesses won’t be able to make a profit; it shouldn’t take a PhD in economics to realize that if costs are significantly lower in another state, and the business is capable of moving — some aren’t; some are tied to the local economy — then the owners and executives will at least consider making such a move, because it directly improves the bottom line. But what it does take to realize these things is to not be a liberal!

  6. But what it does take to realize these things is to not be a liberal!

    It is amazing that they just don’t get it. You guys know I’m surrounded by businessmen. Over the last few years I’ve told you about a buddy who owns a replacement window and storm door manufacturing company and how he moved to Mexico and moved his distributors to Canada. Now admittedly, he only employs perhaps 100 or so folks, but still it’s a net job loss for the U.S.. I can tell you several stories about other business people who are either moving, not expanding, laying off or who have decided to curtail future growth all together but our banned commentator who wave them off as “anecdotal”. He would believe more people working for the government, i.e. taxpayer is a sign of economic growth. It is not. More taxpayers is a sign of economic growth which few of the major cities or states run by Dems has.

    John Hitchcock stated: “Texas gained 4 Representatives. California gained none. And if it weren’t for illegal aliens (California has lots of “sanctuary cities”.) ” Since when are illegals represented in Congress? And if illegal, non-citizens are represented I want a Congressman to represent my wife’s family in Korea. Hell, they ain’t citizens either but if Hector can be represented so can they!

  7. The obvious answer is: because what they have been doing isn’t working. Albert Einstein defined insanity as doing the same thing over and over, and expecting different results. By that definition, California’s politicians are insane.

    In fairness, California was once a well run state. Remember, Reagan was a two-term governor there before later becoming president. But more recently its been like a mine owner who just assumes his mine will keep producing gold forever, without any additional efforts on his part. The state will – eventually – turn around. It has to, it’s just too valuable not to, but it’s going to take a Rudy Giuliani type will will come in and kick ass, squash the government unions and restore budget sanity while not giving a damn what the press says about him.

Comments are closed.