Exceptional Texas Cities Join the Rust Belt in Legacy Cost Hell

As Chicago grapples with its Detroit moment of infamy, a larger and more structural problem emerges nationwide. Yes, both the City of Chicago and the State of Illinois struggle with pension funding. They have company that includes a few surprises:

The Stanford study found that the states of Illinois, Arizona, Ohio and Nevada, and the cities of Chicago, Dallas, Houston and El Paso have the largest pension holes compared with their own revenues. ...

... Several cities and states, including California, Illinois, New Jersey, Chicago and Austin, would need to put at least 20 per cent of their revenues into their pension plans to prevent a rise in their deficits, while Nevada would have to contribute almost 40 per cent.

What's up with the debt mess in Texas? Dallas, Houston, and El Paso are in the same league as Chicago concerning the "largest pension holes". Greenfields are the new brownfields. The Sun Belt looks great until legacy costs catch up with the boom towns. The Texas Triangle may soon resemble one gigantic Rust Belt inner-ring suburb.

The Sun Belt boom is larger scale sprawl, moving where the land is cheaper. The land is cheaper because the politics are nascent. An old favorite of mine, "China's Golden Cities":

Being near the coast is a help in China, because of access to external ideas and because coastal areas were permitted to experiment with reform first. An intriguing pattern is that governance is best in coastal cities that had very little industry when reform began in 1978. Shenzhen now has the highest per capita GDP in China. The same holds in Jiangmen, Dongguan, Suzhou--all were industrial backwaters in 1978, and responded to China's opening by creating good environments for private investment and learning from outsiders. Cities that already had industry tended to protect what they had and reform less aggressively.

To repeat, "Cities that already had industry tended to protect what they had and reform less aggressively." In some ways, Houston is like Shenzhen. Economic life was elsewhere. Texas was a backwater. Meanwhile, the Rust Belt already had industry and tended to protect what it had. Remember Lee Iacocca and the Chrysler bailout. Detroit kicked the legacy cost can down the road. Houston responded by creating good environments for private investment and learning from outsiders.

Now the tables have turned. Rust Belt cities must respond by creating good environments for private investment and learning from outsiders. Houston, and other Texas cities, protects what it has and reforms less aggressively. Greenfields are the new brownfields.