Friday, June 25, 2010

Prosperity in Texas makes a Case for Federalism

Article I, Section 8 of the Constitution makes it clear -- the federal government is limited to 17 specific powers and nothing more. To make sure the people understood such, the founders gave us the Tenth Amendment, which states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." The founders wanted a weak federal government and strong states for several reasons, among them:

  • The delegates to the Constitution Convention were sent there to represent the interests of the states. There was no national government and it had no representation at that event. It was entirely about the interests of state governments.
  • The states knew it was better to have problems solved in specific states, instead of making any issue a national problem. The concept is simple, "divide and conquer."
  • Competition among the states were designed to maximize liberties. Regulations would be modest, as would taxes, in all the states in order to prevent the exodus of unhappy citizens.
  • When problems are solved on a state level, other states get the next idea on how to tackle the issues they face.

Today, states could learn from Texas, which has led other states in job creation. The Texas office ofAmericans for Prosperity, notes the Workforce Commission found the state added "43,600 nonagricultural jobs in May. This marks the largest over-the-month increase in employment in the nation and is the largest monthly gain in more than three years."

"Individuals and businesses are flocking to Texas during these tough economic times," said AFPF State Director Peggy Venable. "The reason for this is clear - our business environment is competitive, taxes are low, and we have no income tax. All of the right elements are in place to ensure prosperity and opportunity in our state."

States are competing for businesses. Some states, like Michigan and Ohio, are not even contenders because their tax, labor, and regulatory environment are hostile to job creation. Those that are still "players," like Texas, recognize that taxes and regulations are simply a fixed cost of doing business. These things are very similar in the eyes of decision makers as the cost of office space, labor cost, and other factors. Just like companies have a choice on these factors, they also have a choice as to where they do business. They will look for the most cost effective pricing in order to be more competitive.

Since Texas has among the lowest costs for labor in the country, among the most friendly regulatory environments, and among the lowest in business taxes, Texas is very hot for business. The federal government, on the other hand, is providing a huge weight on all businesses to such an extent that other countries -- regardless of the virtues of Texas -- are looking more attractive daily. The current economy and the example of Texas makes a great case to restore the founders' idea of federalism.


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