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Why California is broke, and Texas is not

By REpro following x   2012 Oct 10, 3:30pm 18,125 views   63 comments   watch   nsfw   quote     share    


http://economy.money.cnn.com/2012/10/10/california-texas-richard-fisher/?iid=HP_River

This coyote may be safe in California but should watch its back in Texas, according to Dallas Fed President Richard Fisher. Dallas Federal Reserve President Richard Fisher is proud of the Texas economy and isn't afraid to let it show.

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1   Ceffer   ignore (1)   2012 Oct 10, 4:20pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

The California governor tried to give the coyote a welfare check, but the coyote ate it and bit him again.

2   lostand confused   ignore (0)   2012 Oct 10, 9:41pm   ↑ like (1)   ↓ dislike (1)   quote   flag        

Texas is broke too. Why do republicans think facts are for fools??

3   TechGromit   ignore (0)   2012 Oct 11, 4:45am   ↑ like (3)   ↓ dislike (0)   quote   flag        

Among the states having debt problems, California is #1, Texas is #3. I'll say this much for Texas, they didn't suffer the kind of property value implosion California did. State law requires 20% down for mortgages and you must have more than 20% in equity before you can get a home equity loan (and not for more than 80% of the value). Also there were no such things as interest only mortgages. Texas didn't escape the housing market collapse without some damage, they still had no doc and sub-prime loans, but because Texans had more equity in there homes and fewer risky mortgages. They suffered a rock slide, but at least it didn't turn into an avalanche that wiped out everyone.

4   REpro   ignore (0)   2012 Oct 11, 4:53am   ↑ like (0)   ↓ dislike (1)   quote   flag        

TechGromit says

State law requires 20% down for mortgages and you must have more than 20% in equity before you can get a home equity loan (and not for more than 80% of the value).

You make this up, don’t you?

5   edvard2   ignore (1)   2012 Oct 11, 4:57am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Major problem with TX most people don't realize is they have HIGH property taxes. As in a few years ago, we actually considered moving there and found that the rates were anywhere from 2-3% on average. As in if you bought a modest $200k house, which in cities like Austin gets you not a whole lot, you're on the hook for $6,000 in taxes. What's more, that rate goes up over time as the house goes up in value. Given that even in Austin I was unable to find a job in my field that paid more than $50k, this would be a major problem.

6   bob2356   ignore (4)   2012 Oct 11, 5:06am   ↑ like (0)   ↓ dislike (0)   quote   flag        

edvard2 says

Major problem with TX most people don't realize is they have HIGH property taxes.

Tx has no state income tax. That's a pretty big deal compared to CA. Believe it or not Austin is not the only city in Texas. It's just about the highest cost of housing in Texas however. There are many places less expensive.

So getting a really nice house for 200k and paying 2-3% (4-6k) bothers you while the same house in the bay area for 700k and only paying 1.25% (8k) is some how a better deal? Please explain.

7   REpro   ignore (0)   2012 Oct 11, 5:09am   ↑ like (1)   ↓ dislike (0)   quote   flag        

Major problem with TX most people don't realize is they have HIGH property taxes.
About property taxes: (that’s what I pay)
CA home value $500,000 pay 1.2% in taxes = $6,000/y.
TX equivalent house value $200,000 @ 2.4% rate = $4,800/y plus no State income tax
NJ…. doesn’t want even think about it.

8   edvard2   ignore (1)   2012 Oct 11, 5:12am   ↑ like (1)   ↓ dislike (0)   quote   flag        

bob2356 says

So getting a really nice house for 200k and paying 2-3% (4-6k) bothers you while the same house in the bay area for 700k and only paying 1.25% (8k) is some how a better deal? Please explain.

Its a person-by-person situation. I had a real-life experience with a serious attempt to move to TX a few years ago. I work in tech and had lost my job during the start of the recession. In TX there's few cities that cater to this sort of work, Austin being the primary one. I had for years heard about oh-how-wonderful it was. I figured I'd get a tech job there, buy my nice 150k house and wallah- be set.

In reality not only where there very few jobs at all, but hardly any of them paid even 50% of what I was making at my last job in the BA. On top of that, after visiting Austin I found that unless you wanted a cookie-cutter house crammed into a suburb far out from the city with horrible commute traffic, you were realistically looking at spending 300-400k on a house. Putting all of that into consideration, Austin turned out to be MORE expensive than the Bay Area.

We ultimately paid more for a house in the Bay Area, but our higher incomes means we pay probably a smaller percentage of our incomes than if we had moved to Austin, gotten paid less, and had to pay more of our income for a house there.

Sounds contradictory, but that's what I found.

9   freak80   ignore (4)   2012 Oct 11, 5:15am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Yikes, I'm glad I don't work in the "tech" sector.

10   edvard2   ignore (1)   2012 Oct 11, 5:17am   ↑ like (0)   ↓ dislike (0)   quote   flag        

freak80 says

Yikes, I'm glad I don't work in the "tech" sector.

Why? Its Been good for us so far.

11   REpro   ignore (0)   2012 Oct 11, 5:22am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Sure, each area of profession is different. When my daughter moved from Bay Area she got slashed $1,500/y on salary. When her husband moved from Manhattan NY he got $20,000 more in TX.

12   curious2   ignore (0)   2012 Oct 11, 5:30am   ↑ like (0)   ↓ dislike (0)   quote   flag        

TechGromit says

Texas...didn't suffer the kind of property value implosion California did. State law requires 20% down for mortgages and you must have more than 20% in equity before you can get a home equity loan (and not for more than 80% of the value).

You're 2/3 right but 1/3 wrong:

"[A] major difference between Texas and other states during the boom was that Texas required any homeowner seeking to refinance a mortgage or take out a home equity loan to have at least 20 percent equity after taking out the new loan... There were no limits on how much a bank could lend to someone buying a home, and in some parts of Texas, subdivisions sold with easy-credit loans have been devastated by foreclosures since prices fell."

Texas should have required at least 10% down for a purchase mortgage, preferably 20%, but didn't. Another reason Texas housing prices tend to be more stable is because Texas allows construction supply to meet demand, so the price/income ratio remains reasonable, unlike California. Median price/income ratios should range between 2 and 5; the state of California hit 10 (obviously unsustainable) while Houston remained below 3. From California, Bubble's Ben's efforts to reflate the housing bubble look criminal, like trying to reflate Madoff Ponzi scheme account statements so the "investors" will feel rich again and spend more.

13   freak80   ignore (4)   2012 Oct 11, 7:28am   ↑ like (0)   ↓ dislike (0)   quote   flag        

edvard2 says

Why? Its Been good for us so far.

It sounds like you get stuck working in places with very high housing costs, like SF, Austin, Boston, etc.

14   lostand confused   ignore (0)   2012 Oct 11, 7:35am   ↑ like (0)   ↓ dislike (0)   quote   flag        

I work in tech and have worked the last few years in the mid-west and even abroad. Pretty nice salary, when compared to the housing cost. Apart from the mid-west, I even worked in the suburbs of Atlanta and a colleague bought a townhome for 85k- 3br 2 bath with garage. Decent area, in terms of crime etc.

15   edvard2   ignore (1)   2012 Oct 11, 7:37am   ↑ like (0)   ↓ dislike (0)   quote   flag        

freak80 says

It sounds like you get stuck working in places with very high housing costs, like SF, Austin, Boston, etc.

I think you could say that for any job. Every industry has areas that are more favorable. Like for instance if I worked in the auto industry I'd probably have to live in the Midwest ( MI, OH, IN, etc). But the thing is that its not like I'm complaining. I live in a house I like, in a city I like, in an area with an almost year-round pleasant climate with a healthy economy and lots of jobs. We can easily afford what we have and that's perhaps more important. There are plenty of people who can barely afford to pay their bills even in the cheapest states in the country.

16   TechGromit   ignore (0)   2012 Oct 11, 10:08am   ↑ like (0)   ↓ dislike (0)   quote   flag        

edvard2 says

On top of that, after visiting Austin I found that unless you wanted a cookie-cutter house crammed into a suburb far out from the city with horrible commute traffic, you were realistically looking at spending 300-400k on a house.

I don't know about Austin, but the traffic situation in Dallas Fort-Worth wasn't bad at all. There's no where near the level of traffic Philadelphia or New York has. The roads are very well laid out, I had almost no problems the two weeks I was there for work. There were a few construction areas where traffic was slow, but usually it was only a few miles. Compared a commute to Philadelphia it was cake.

17   Vicente   ignore (0)   2012 Oct 11, 11:00am   ↑ like (6)   ↓ dislike (1)   quote   flag        

Texas is filled with RED STATE SOCIALISTS sucking up California Federal tax dollars. Jacks up their bottom line artificially.

18   zzyzzx   ignore (1)   2012 Oct 11, 12:20pm   ↑ like (1)   ↓ dislike (1)   quote   flag        

edvard2 says

Major problem with TX most people don't realize is they have HIGH property taxes. As in a few years ago, we actually considered moving there and found that the rates were anywhere from 2-3% on average. As in if you bought a modest $200k house, which in cities like Austin gets you not a whole lot, you're on the hook for $6,000 in taxes. What's more, that rate goes up over time as the house goes up in value. Given that even in Austin I was unable to find a job in my field that paid more than $50k, this would be a major problem.

That's a way better deal than I am getting now with my more than 10K/year state income taxes in Maryland.

19   TechGromit   ignore (0)   2012 Oct 11, 1:36pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

curious2 says

You're 2/3 right but 1/3 wrong

Please don't confuse me with facts. :)

20   Dan8267   ignore (3)   2012 Oct 11, 1:57pm   ↑ like (3)   ↓ dislike (0)   quote   flag        

Vicente says

Texas is filled with RED STATE SOCIALISTS sucking up California Federal tax dollars. Jacks up their bottom line artificially.

I thought this too, but Texas is one of the few red states that actually pays more in federal taxes than it receives in federal funding.

Granted CA is burdened by supporting other red states, but not Texas.

21   BoomAndBustCycle   ignore (0)   2012 Oct 11, 2:07pm   ↑ like (1)   ↓ dislike (1)   quote   flag        

California is also the 8th largest economy in the world. (Larger than most countries and red states combined). Not sure where Texas ranks.

22   REpro   ignore (0)   2012 Oct 11, 2:24pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

BoomAndBustCycle says

California is also the 8th largest economy in the world. (Larger than most countries and red states combined).

How these facts benefit you?

23   monkframe   ignore (0)   2012 Oct 11, 2:32pm   ↑ like (0)   ↓ dislike (1)   quote   flag        

"Dallas Federal Reserve President Richard Fisher is proud of the Texas economy and isn't afraid to let it show."

But to live there?

24   REpro   ignore (0)   2012 Oct 11, 3:24pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

BoomAndBustCycle says

Not sure where Texas ranks.

Per Wikipedia:
As of 2010, Texas had a gross state product (GSP) of $1.207 trillion, the second highest in the U.S.[130] Its GSP is comparable to the GDP of India or Canada, which are the world's 12th- and 11th-largest economies, respectively.

25   Vicente   ignore (0)   2012 Oct 11, 3:30pm   ↑ like (1)   ↓ dislike (1)   quote   flag        

Texas population has gone up even faster than it's vaunted job creation rate. Thus unemployment has been rising.

And let's be frank, any oil-producing state makes more money when oil prices are jacked the way they are.

What happens when the wells run dry?

I don't care much for Cato nor Fisher. I'm sure he's well paid for his speaking engagements and he got a good chuckle for telling everyone what they want to hear, which is Texans do everything bigger and better than anyone else.

The reality just doesn't make a headline:

Texas and California are BOTH indebted

See the Texas debt clock:

http://www.usdebtclock.org/state-debt-clocks/state-of-texas-debt-clock.html

California debt-to-GDP: 18.9%
Texas debt-to-GDP: 18.3%

A whole 0.6% advantage, man that's like.... diddly squat.

But you know everyone got what they wanted. Texans patted themselves on the back and the CNN reporter got a funny joke he could print. And Californians are pretty much used to everyone spitting on them for generations, and being told they will fall off into the ocean after the shake & bake and of course the Mad Max period. It would make much more exciting film at least than handing Texas back to Mexico.

26   freak80   ignore (4)   2012 Oct 12, 12:00am   ↑ like (1)   ↓ dislike (0)   quote   flag        

Vicente says

And let's be frank, any oil-producing state makes more money when oil prices are jacked the way they are.

Who is jacking oil prices? OPEC?

27   BobMSN   ignore (0)   2012 Oct 12, 12:17am   ↑ like (4)   ↓ dislike (0)   quote   flag        

BoomAndBustCycle says

California is also the 8th largest economy in the world. (Larger than most countries and red states combined). Not sure where Texas ranks.

China is the 2nd largest economy in the world. Would you move there?

28   Quigley   ignore (0)   2012 Oct 12, 12:41am   ↑ like (3)   ↓ dislike (0)   quote   flag        

Bob says, "China is the 2nd largest economy in the world. Would you move there?"

Some people are doing that! I hear there's a demand for white guys to follow Chinese businessmen around so their competitors believe they are pursuing deals with Americans and their business is going well.

29   edvard2   ignore (1)   2012 Oct 12, 1:08am   ↑ like (0)   ↓ dislike (1)   quote   flag        

TechGromit says

I don't know about Austin, but the traffic situation in Dallas Fort-Worth wasn't bad at all. There's no where near the level of traffic Philadelphia or New York has.

Oh, I have no doubt. I actually drove up through the eastern seaboard about 5 years ago: Through DC, Philly, etc. That has to be the WORST traffic I have ever been in. It made traffic in the Bay Area seem outright tame.

Oh- one more thing about TX: the weather. I myself grew up in the South with the heat and humidity. But in TX? Austin is at least in the 90's for months on end and pushes triple digits on a routine basis. Houston? Not only is it miserably hot, but humid as hell. That shouldn't be underestimated because basically you're looking at months and months of unbearable weather.

30   freak80   ignore (4)   2012 Oct 12, 1:26am   ↑ like (1)   ↓ dislike (0)   quote   flag        

edvard2 says

That shouldn't be underestimated because basically you're looking at months and months of unbearable weather.

But at least it's sunny unbearable weather.

31   edvard2   ignore (1)   2012 Oct 12, 1:37am   ↑ like (1)   ↓ dislike (1)   quote   flag        

freak80 says

But at least it's sunny unbearable weather.

That's sort of like saying that at least its sunny, frigid weather. Pretty to look at indoors, but miserable to be outside in. I was reminded of how miserable super hot weather can be recently. I drove up to Sacramento a few months ago. As soon as you leave the coast here the interior of Cali turns into a furnace. It was over 100 degrees that day. So hot that it just about knocked you down when stepping out of the car. It was downright unpleasant to be outside. Luckily for me all I had to do was drive back home. But imagine having to live in that sort of heat for 6 months out of the year?

32   finehoe   ignore (0)   2012 Oct 12, 1:52am   ↑ like (2)   ↓ dislike (0)   quote   flag        

edvard2 says

But imagine having to live in that sort of heat for 6 months out of the year?

Get used to it. That's the future.

33   edvard2   ignore (1)   2012 Oct 12, 2:05am   ↑ like (0)   ↓ dislike (1)   quote   flag        

finehoe says

Get used to it. That's the future.

Maybe.... maybe not.

34   REpro   ignore (0)   2012 Oct 12, 2:10am   ↑ like (1)   ↓ dislike (0)   quote   flag        

I’m visiting Dallas area frequently. Summer indeed is hot. Too hot for me, but the same heat we have in Central Valley or desert area in CA. Just add occasional heavy rain in summer time.

35   edvard2   ignore (1)   2012 Oct 12, 2:14am   ↑ like (0)   ↓ dislike (1)   quote   flag        

REpro says

I’m visiting Dallas area frequently. Summer indeed is hot. Too hot for me, but the same heat we have in Central Valley or desert area in CA. Just add occasional heavy rain in summer time.

That's why I don't live in the Central Valley either...

36   REpro   ignore (0)   2012 Oct 12, 2:23am   ↑ like (1)   ↓ dislike (0)   quote   flag        

Young people can adjust to temp. and humidity fairly easy. Either in Alaska, North Dakota or TX, Louisiana, or AZ.

37   edvard2   ignore (1)   2012 Oct 12, 2:35am   ↑ like (0)   ↓ dislike (1)   quote   flag        

REpro says

Young people can adjust to temp. and humidity fairly easy. Either in Alaska, North Dakota or TX, Louisiana, or AZ.

So? What does this have to do with the debate? That its "worth it" to endure bad weather for cheep houses? I'll be honest: I lived on the east coast and grew up in the South. Even though I was raised in it, summers was a time we all knew meant putting up with god-awful humidity and heat. It wasn't like we were "used to it", it meant we had to deal with it. The cold up north was unbearable. I absolutely hated it. From October-May the weather was just outright crappy. As in if I didn't dry my hair it would sometimes freeze. Yes- that just sounds like more fun than a barrel full of monkeys.

Weather is totally subjective. Obviously people can live in all sorts of it otherwise places like Michigan, Arizona, and other places that get extreme weather would be void of people. But whenever I go home to visit my family its a reminder that yeah, the Bay Area is expensive. But man the weather is fantastic.

38   AverageBear   ignore (2)   2012 Oct 12, 2:36am   ↑ like (1)   ↓ dislike (0)   quote   flag        

This thread reminded me of an article I read back in March: Texas vs California..It's all about BIG STATE GOV'T, and an unsustainable budget, pensions, entitlements, etc.... It ain't rocket-science, folks...

http://www.nationalreview.com/articles/293412/texas-vs-california-chuck-devore

..."While California has more bureaucrats, Texas has 17 percent more teachers, with 295 education employees per 10,000 people, compared to California’s 252."

39   Vicente   ignore (0)   2012 Oct 12, 2:46am   ↑ like (0)   ↓ dislike (1)   quote   flag        

edvard2 says

I drove up to Sacramento a few months ago. As soon as you leave the coast here the interior of Cali turns into a furnace. It was over 100 degrees that day.

"But it's a dry heat man!" - Hudson

It's only a furnace if you are a coast-dwelling wimp. For those of us who live here, it's just afternoon weather in the summer. As soon as the sun goes down the Delta breeze cools everything off. Most days I don't need to run the AC, just ventilate the house at night and button up in the daytime.

Let me return to my point:

Fisher Bluster headline translation:

"Why California is Broke, and why Texas is VERY SLIGHTLY LESS BROKE (just like many other states)."

That scan well? No, but it's the facts! Unlike the misleading garbage he's selling. Is a Fed governor supposed to blow sunshine up your ass, well apparently so! Keep worshipping him, next I'll see they've caught Ron Paul and Dick Fisher in a torrid embrace.

40   edvard2   ignore (1)   2012 Oct 12, 2:56am   ↑ like (0)   ↓ dislike (1)   quote   flag        

Vicente says

It's only a furnace if you are a coast-dwelling wimp.

If not having to deal with hotter-than-hell weather makes me a "wimp", well then I reckon there are worse things...

But anyway, its interesting that you have all these people from other states going on and on about ooooohh how BAD things are in Cali. Why should they care? Or is it because they secretly like it here and trash-talking Cali makes em' feel better?

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