Toward a Texas Century?
A new report by Texas 2036 provides hard data to support the claim that Texas’ economic growth engine makes for a miracle. Using a quarter of a century of gross domestic product figures from the U.S. Bureau of Economic Analysis, the report finds that the state’s economy expanded in unparalleled magnitude, with exceptional velocity, and in a manner that increased Texas’ footprint within the nation’s economy.
No other large state achieved Texas-grade performance over the past 25 years. Not California, Florida, New York or Illinois. When comparing the speed and relative size of states’ economic growth, Texas stands alone.
Should these trends continue, the 21st century could very well be the Texas Century.
A Miracle Built on Structural Foundations
Texas’ growth story was built on the structural foundations of reliable water infrastructure, a dependable electric grid and a qualified workforce. Each of these foundations provides the resources essential to economic growth, stability and prosperity. Should one fail or falter, the continuation of Texas’ economic success story comes into question.
Fortunately, with regard to education and workforce development, Texas has adopted policies to align career-readiness standards with workplace labor needs. The policy foundation there appears firm. The water and electric reliability foundations, however, warrant closer attention.
The Water Infrastructure Challenge
A growing state, in terms of population and economic activity, requires more water infrastructure. These include water supplies to slake a growing thirst, and drinking water and wastewater systems to serve existing and expanding communities.
The economic costs and consequences of insufficient water infrastructure are severe. According to the 2022 State Water Plan, Texas could endure billions in economic losses if the state fails to expand its water supply portfolio before the next long, severe drought. Further, the problem of aging, deteriorating drinking water and wastewater systems could inflict over $300 billion in losses.
Beyond these damages, insufficient water infrastructure telegraphs a terrible signal for future growth: Texas may not have enough water to go around. Other states looking to beat Texas in the nation’s economic growth race — such as California — won’t hesitate to expose this shortcoming.
The Electricity Challenge
An expanding economy also requires more electricity. ERCOT forecasts that Texas’ electrical demand may double within the next decade. Despite Texas being an energy-rich state with abundant hydrocarbon and renewable resources, the challenge will be to develop the generation and transmission infrastructure required to meet these escalating demands.
Winter Storm Uri in 2021 imparted a cold lesson on the economic cost of electric unreliability. Electrical outages during the winter storm, combined with the cessation of water service for many Texans, resulted in estimated economic damages near $300 billion. For reference, this was equivalent to just over 14% of Texas’ GDP in 2021, which totaled $2.117 trillion.
Putting questions about specific potential large loads aside, continued growth and its correlative demands — especially within an increasingly electrified economy — necessitate greater electric supply. As is the case with water infrastructure, electric grid capacity can work to either inhibit or foster greater growth and development.
The Long Race
While California still has the largest state economy, the scale and pace of Texas’ recent expansion makes it a contender for pole position. More critically, Texas’ economic success story enhances and reinforces the state’s significance to U.S. economic productivity and gains. The continuation of this story, and Texas’ race to catch up with and possibly surpass California, depends on how well state policymakers support and maintain the structural foundations for growth. The realization of a Texas Century depends on it.