TEXIT Economics: Texas Path to Prosperity and Global Prominence

As of 2023, Texas stands as the second-largest economy in the United States, boasting a real GDP of $2.03 trillion. This economic output not only highlights the state’s substantial domestic power but also places Texas on the global stage. If it were an independent nation, Texas would be the 8th largest economy worldwide, surpassing the economies of countries like Australia, Italy, and Russia. This impressive economic stature positions Texas as a self-reliant state with unique potential for independence. However, in analyzing Texas’s prospects as a self-governing republic, it is crucial to examine the specific attributes of its economy that could empower it in a post-TEXIT environment.

While the federal economy grew at a modest pace, Texas saw a remarkable 7.4% real GDP growth rate in 2023. This robust expansion reflects the state’s diversified economic foundation, fueled by powerhouse industries in energy, manufacturing, technology, and more. Texas’s economy is also underpinned by a favorable business environment, characterized by low tax rates, substantial infrastructure investments, and a population that continues to grow due to strong domestic and international migration. The Dallas Fed, for instance, projects Texas will add approximately 284,000 jobs in 2024, indicating a steady 2% employment growth that keeps the state far ahead of most national metrics.

The Texas economy’s resilience is further underscored by its steady job creation and continued infrastructure development, particularly in housing and construction, which remain above pre-pandemic levels. These factors combine to create a uniquely dynamic economic landscape in Texas—one that could allow it to flourish independently.

Key Economic Sectors

Texas’s economy thrives on a diverse set of industries that collectively drive its GDP and employment. Each of these sectors contributes distinct strengths, providing resilience against economic fluctuations and underscoring the potential for a robust, self-sustained economy post-TEXIT. Here, we examine the most influential industries, exploring their current impact and potential trajectories as Texas moves toward independence.

Energy

Texas’s energy sector is the crown jewel of its economy. As the nation’s leader in both oil and natural gas production, Texas is responsible for over 40% of U.S. oil output and nearly 25% of natural gas production. In addition, Texas has emerged as the top wind energy producer in the country, contributing significantly to renewable energy and positioning itself as a diverse energy powerhouse.

Impact of Independence on the Energy Sector: An independent Texas would benefit immensely from control over its vast natural resources without the restrictive policies often imposed by the Federal government. Freedom from federal taxes and regulatory oversight could enable Texas to expand its energy production, streamline operations, and negotiate trade agreements directly with foreign nations. This autonomy could lead to a surge in energy exports, with Texas acting as a supplier not only to neighboring U.S. states but also to major energy-importing countries worldwide.

Moreover, the ability to set its own energy policies means Texas could tailor regulations and incentives to encourage further investment in both traditional and renewable energy, potentially establishing Texas as a global energy leader in both oil and wind power.

Advanced Manufacturing

Advanced manufacturing is a thriving component of the Texas economy, driven by a blend of technological innovation and skilled labor. The industry is particularly strong in fields like electronics, automotive, and machinery, with major companies choosing Texas for its favorable tax policies, proximity to supply chains, and a strong workforce.

Impact of Independence on Advanced Manufacturing: Independence could allow Texas to implement targeted industrial policies aimed at bolstering its manufacturing base. For example, tax incentives and deregulation initiatives could enhance Texas’s appeal to global manufacturers looking for a stable, business-friendly environment. Additionally, independence could enable Texas to implement trade agreements that directly benefit its manufacturers, potentially reducing reliance on goods from foreign markets by developing more in-state supply chains. This sector could experience accelerated growth as Texas builds itself as an advanced manufacturing hub on the global stage.

Aerospace, Aviation, and Defense

Texas is home to a robust aerospace and defense industry, supported by major companies such as Lockheed Martin, Boeing, and Bell Helicopter. The state’s strategic location, coupled with strong support for research and development, has made it a key player in defense contracting and aerospace engineering.

Impact of Independence on Aerospace and Defense: A newly independent Texas would need to establish its own defense infrastructure, creating immediate demand for domestic aerospace and defense production. This shift could provide significant growth opportunities for Texas-based companies, fostering innovation and expanding their scope to cover the needs of an independent nation. Additionally, Texas could negotiate defense partnerships with other countries, leveraging its aerospace expertise while building a domestic defense industry capable of supporting its national security needs. The potential for government contracts within Texas alone could fuel massive growth in this sector.

Biotechnology and Life Sciences

Biotechnology and life sciences represent a high-growth sector in Texas, anchored by a strong network of research institutions and healthcare providers. Cities like Houston and Dallas have become major hubs for medical innovation, clinical trials, and biotechnology research, attracting investments from both private firms and federal sources.

Impact of Independence on Biotechnology and Life Sciences: Independence would give Texas the ability to prioritize its own public health strategies, encouraging further development in biotechnology to meet both domestic needs and export opportunities. Without federal oversight, Texas could establish a regulatory environment tailored to accelerate advancements in biotech, potentially making it a global destination for biotechnology research and medical innovation. The absence of federal funding could pose initial challenges, but Texas’s highly skilled workforce and existing infrastructure could quickly bridge this gap, positioning the state as a leader in this field.

Corporate Services and Financial Sector

Texas’s favorable business climate has attracted a significant number of corporate headquarters, making corporate services one of the most vibrant sectors in its economy. Major companies, including those in finance, real estate, and consulting, have migrated to Texas due to its low tax rates and supportive regulatory framework.

Impact of Independence on Corporate Services and Finance: An independent Texas could continue to attract multinational corporations by offering favorable corporate tax policies and a competitive regulatory environment. Additionally, Texas could establish its own financial regulatory body, providing even greater flexibility to companies operating within its borders. The potential establishment of an independent currency could initially challenge the financial sector, but also offers Texas the opportunity to create innovative monetary policies tailored specifically for its economic goals. Furthermore, with the establishment of new trade agreements, Texas could attract international corporations looking for a stable economic environment, solidifying its reputation as a global corporate hub.

Information Technology (IT)

The IT sector in Texas has seen rapid expansion, with Austin and Dallas becoming significant tech hubs. Texas is home to some of the world’s leading tech companies, like Dell and Oracle, and has attracted thousands of startups and tech professionals due to its supportive business environment and competitive cost of living.

Impact of Independence on the IT Sector: Texas’s independence would likely accelerate growth in the IT sector, as the state could customize its regulations to foster innovation and attract top talent. With control over data privacy laws, Texas could craft legislation that is both pro-business and mindful of consumer rights, potentially drawing in global tech firms looking for a favorable regulatory environment. Additionally, independence may drive Texas to invest further in technology infrastructure, enhancing its appeal as a prime destination for both startups and established IT giants.

Petroleum Refining and Chemical Products

Petroleum refining and chemical manufacturing are essential industries in Texas, supported by the state’s extensive oil reserves and coastline. The state’s ports, including the Port of Houston, are critical for the export of refined petroleum products and chemicals.

Impact of Independence on Petroleum and Chemical Manufacturing: Texas’s access to substantial petroleum reserves would ensure that this sector remains highly profitable in an independent Texas. Without federal environmental restrictions, Texas could expand its refining capacity and streamline export processes, maximizing the economic benefits of its natural resources. Independence could also enable Texas to negotiate direct trade agreements for petroleum products with international partners, reducing logistical barriers and strengthening its role in global markets.

Texas’s key economic sectors reveal a solid foundation capable of thriving independently. The strategic advantages provided by these industries—particularly energy, manufacturing, and tech—mean that Texas has the potential to become a global economic leader in multiple fields. Each sector not only sustains its current economic output but also presents unique growth opportunities that would allow Texas to build a self-sustained economy free from federal limitations.

Economic Projections for an Independent Texas

As Texas charts a path toward independence, its economic trajectory will depend on multiple factors, including trade relationships with the U.S. and other nations, the restructuring of governmental functions, and the adaptability of its industries. To evaluate Texas’s GDP post-independence, we consider three scenarios, each projecting different growth outcomes based on varying levels of success in addressing these critical factors.

When comparing Texas to self-governing independent nations, it’s essential to focus on countries with similar economic foundations, such as strong energy production, manufacturing capabilities, and a significant service sector. This comparison will help gauge how Texas’s GDP growth projections align with the real-world performance of other nations, particularly those that share economic profiles similar to Texas.

Optimistic Scenario: Comparing with Canada, Australia, and Norway

In our optimistic scenario, Texas’s GDP growth rate is projected to be 5-6% annually for the first five years of independence, leading to an estimated GDP of approximately $2.5 trillion. This growth rate and economic scale align with certain well-resourced, developed nations that have diversified economies, strong energy sectors, and solid trade relationships.

Canada

• Current GDP: Approximately $2.1 trillion
• Annual Growth Rate: 1.5-3% in recent years, with energy and manufacturing as major drivers
• Comparison to Texas: Canada’s growth rate remains steady but constrained due to regulatory and tax structures. An independent Texas with streamlined policies could outpace Canada’s growth, particularly in energy exports, technology, and manufacturing.
• Insight for Texas: Like Canada, Texas’s ability to grow at a high rate relies on effective trade agreements, especially with the U.S. Texas’s lower tax environment and deregulated business climate could give it a competitive edge, pushing its growth rate higher than Canada’s.

Australia

• Current GDP: Around $1.7 trillion
• Annual Growth Rate: 2-3% in recent years, driven by resources, agriculture, and services
• Comparison to Texas: With similar GDP size but a slower growth rate, Australia’s focus on resource exports and a developed service sector mirrors potential areas for Texas’s growth. However, Texas’s diversified industries and substantial energy sector may allow it to grow faster than Australia.
• Insight for Texas: Australia’s growth is often limited by its geographic remoteness and reliance on Asia-Pacific trade partners. Texas’s central location in North America and established infrastructure could give it a trade advantage, enhancing its projected growth to outpace Australia’s rate.

Norway

• Current GDP: Roughly $500 billion
• Annual Growth Rate: 1-2% in recent years, highly dependent on energy exports
• Comparison to Texas: While smaller in GDP, Norway’s economic success is tied to its sovereign wealth fund and efficient management of energy resources. Texas’s energy potential could rival Norway’s, and autonomy over energy exports would enable Texas to capture a significant share of the global market.
• Insight for Texas: Norway exemplifies how a resource-rich economy can achieve high living standards. Texas could adopt a similar model by managing its energy revenue effectively, potentially investing in a sovereign fund to support infrastructure and public services.

In this optimistic comparison, Texas’s projected 5-6% growth rate is realistic given its favorable business environment, resource wealth, and central geographic location. Achieving a GDP of $2.5 trillion within five years could place Texas firmly in the ranks of large, developed economies like Canada and Australia.

Moderate Scenario: Comparing with Saudi Arabia, South Korea, and Poland

Under the moderate scenario, Texas’s GDP growth rate is projected to be around 3-4%, reaching approximately $2.3 trillion within five years. This scenario aligns with economies that have strong industrial bases, energy resources, and a significant emphasis on trade.

Saudi Arabia

• Current GDP: Roughly $1 trillion
• Annual Growth Rate: 2-4%, driven primarily by oil exports and economic diversification efforts
• Comparison to Texas: Saudi Arabia’s economic performance is heavily reliant on energy exports, similar to Texas. However, Texas’s more diversified economy—including technology, manufacturing, and corporate services—may position it for more balanced growth.
• Insight for Texas: Saudi Arabia’s push for economic diversification (Vision 2030) demonstrates the importance of reducing dependency on one sector. Texas’s diversified economy and innovative sectors could yield a comparable growth rate but with more stability across sectors.

South Korea

• Current GDP: Approximately $1.8 trillion
• Annual Growth Rate: Around 2-3%, with strong technology, manufacturing, and export sectors
• Comparison to Texas: South Korea’s industrialized economy, emphasis on technology, and strong export capacity make it a suitable comparison. Texas’s similar emphasis on technology and manufacturing would likely produce comparable growth.
• Insight for Texas: South Korea’s export-driven economy shows the value of high-quality infrastructure and innovation policies. Texas, with its established tech hubs and growing infrastructure, could leverage similar growth rates through strategic investments in high-value industries.

Poland

• Current GDP: Roughly $750 billion
• Annual Growth Rate: 3-4%, with manufacturing, services, and trade as major drivers
• Comparison to Texas: Poland’s recent economic growth demonstrates how an emerging market can grow with foreign investment and exports. Texas, already a developed economy, could match Poland’s growth by continuing to attract investment and expanding its trade footprint.
• Insight for Texas: Poland’s focus on manufacturing and integration with the European market highlights the benefits of a strong trade network. Texas would need robust trade agreements with neighboring states and international partners to sustain comparable growth.

In this moderate scenario, Texas’s projected 3-4% growth aligns with nations like South Korea and Poland. With diversified industries and strategic trade partnerships, Texas could maintain a stable economic expansion while reaching a GDP of around $2.3 trillion, solidifying its status as a leading global economy.

Pessimistic Scenario: Comparing with Brazil, Mexico, and Argentina

In the pessimistic scenario, Texas’s GDP growth rate is projected at a modest 1-2% annually, with GDP potentially reaching $2.1 trillion. This scenario resembles economies facing trade challenges, heavy regulatory costs, or limited investment appeal.

Brazil

• Current GDP: Approximately $2 trillion
• Annual Growth Rate: Around 1-2%, hindered by regulatory complexities and economic volatility
• Comparison to Texas: Like Texas, Brazil has vast natural resources and a large population. However, bureaucratic hurdles and trade limitations restrict Brazil’s growth. Texas’s more favorable business climate might still give it an edge even in a pessimistic scenario.
• Insight for Texas: Brazil’s struggles emphasize the importance of streamlined regulation and clear trade policies. Texas could mitigate risks of slow growth by avoiding regulatory pitfalls and fostering a transparent economic environment.

Mexico

• Current GDP: Around $1.4 trillion
• Annual Growth Rate: Approximately 1-3%, constrained by economic challenges and reliance on the U.S. market
• Comparison to Texas: Mexico’s reliance on trade with the U.S. mirrors the importance of trade for an independent Texas. However, Texas’s advanced infrastructure and diverse industry base could help it outperform Mexico’s growth rate, even in a conservative model.
• Insight for Texas: Mexico’s dependence on the U.S. market highlights the potential challenges of a Texas economy if trade terms with the U.S. are not favorable. Diversifying trade partners could be key for Texas to maintain growth stability.

Argentina

• Current GDP: Roughly $500 billion
• Annual Growth Rate: Fluctuates, often negative due to economic crises and policy challenges
• Comparison to Texas: Argentina’s economic struggles reveal how mismanagement and currency instability can hinder growth. Texas, with a focus on economic autonomy and careful fiscal management, could avoid the volatility seen in Argentina.
• Insight for Texas: Argentina’s issues underscore the need for Texas to establish a stable currency and maintain fiscal discipline. Texas’s commitment to a balanced budget could help it navigate potential challenges.

In this pessimistic scenario, Texas’s projected growth rate aligns with economies that struggle with stability and regulation. Even at 1-2% growth, Texas could maintain a GDP similar to Brazil’s while benefiting from a more business-friendly environment.

Summary of Comparative Insights

• Optimistic Scenario (5-6%): Texas’s growth rate and GDP size could align with well-established economies like Canada and Australia, showcasing its potential to join the ranks of developed, high-growth nations. Texas’s resource wealth and business climate would position it favorably within this group.
• Moderate Scenario (3-4%): Texas’s growth would resemble dynamic economies like South Korea and Poland. By expanding its export footprint and maintaining competitive industries, Texas could secure steady growth comparable to these emerging leaders.
• Pessimistic Scenario (1-2%): Even with potential trade challenges and fiscal burdens, Texas’s business-friendly environment and diversified economy could help it outperform nations with similar GDP growth rates, such as Brazil and Mexico.

These comparisons illustrate that, as an independent nation, Texas could leverage its economic strengths to achieve growth levels similar to resource-rich and industrialized nations. While external factors like trade agreements and fiscal policy will play critical roles, Texas’s competitive advantages in energy, technology, and manufacturing could allow it to outperform many similarly sized economies globally.

Impact of Federal Funding vs. Federal Tax Contributions

One of the most significant fiscal questions facing an independent Texas is the financial impact of losing federal funding versus the potential benefit of no longer contributing federal taxes. Texas currently receives various forms of federal funding, including social services, transportation infrastructure, and education. However, as one of the largest net contributors to the federal budget, Texas also sends substantial tax revenue to Washington. By analyzing these factors, we can evaluate whether Texas could maintain economic stability and fund its own services independently.

Federal Tax Contributions: A Substantial Outflow

As one of the most populous and economically robust states, Texas contributes a significant amount of revenue to the Federal government annually through individual, corporate, and excise taxes. In recent years, estimates indicate that Texas’s annual federal tax contributions amount to around $250 billion, primarily from individual income taxes, payroll taxes, and corporate taxes.

1. Individual Income and Payroll Taxes: Texans contribute substantial revenue through income and payroll taxes, primarily supporting federal programs like Social Security and Medicare. An independent Texas could retain this revenue, allowing it to establish or restructure its own social welfare programs.
2. Corporate Taxes: With a large number of Fortune 500 companies headquartered in Texas, the state contributes significant corporate tax revenue. Under independence, Texas would have the flexibility to tailor its corporate tax policies to further encourage investment while retaining more of this revenue for state priorities.
3. Excise and Sales Taxes: Taxes on goods such as gasoline, alcohol, and tobacco contribute to federal coffers. Without this federal obligation, Texas could redirect excise tax revenue toward state-specific needs, such as infrastructure and healthcare.

Federal Funding: Revenue Streams Texas Could Lose

Texas currently receives federal funding for numerous programs and services, which amount to roughly $150 billion annually. These funds primarily support healthcare (through Medicaid), education, and infrastructure projects. Losing this funding would require Texas to reallocate its newly retained tax revenue to cover essential services independently.

1. Healthcare: Medicaid is a major recipient of federal funds in Texas, with over 70% of Medicaid funding coming from federal sources. Independence would necessitate a restructuring of Medicaid, requiring Texas to either replace this federal contribution or explore alternative healthcare funding models.
2. Education: Federal funding also plays a role in Texas’s education system, especially for low-income districts and higher education. However, compared to some states, Texas’s education funding is less reliant on federal support, giving it flexibility to cover these expenses independently.
3. Infrastructure: Texas benefits from federal funds allocated to transportation projects, such as highway construction and maintenance. Post-independence, Texas could redirect excise and fuel tax revenue to ensure ongoing support for critical infrastructure.

Net Impact: Independence Gains vs. Losses

By retaining $250 billion in federal tax contributions while losing $150 billion in federal funding, Texas would see a net gain of approximately $100 billion annually. This surplus could be used to cover the costs of services previously funded by federal programs and to invest in essential public goods, potentially leaving room for other priorities.

Fiscal Analysis

• Net Revenue Gain: Approximately $100 billion annually, assuming federal tax contributions are fully retained and reallocated toward state priorities.
• Funding Redistribution: Texas could direct these funds to healthcare, education, and infrastructure, ensuring continuity and potentially improving on existing federally funded programs.
• Social Programs and Services: With control over payroll taxes, Texas could fund its own version of Social Security or similar programs tailored specifically to its demographic needs.

Potential Economic and Fiscal Benefits of Full Revenue Control

1. Flexibility in Tax Policy: Without the obligation to contribute federal taxes, Texas could reform its tax structure to attract businesses, incentivize startups, and support residents. Texas’s low-tax reputation could become a defining feature of its fiscal policy, further enhancing its appeal as a business hub.
2. Public Spending Autonomy: Texas could direct tax revenue toward state-specific needs rather than federal priorities. By prioritizing funds based on Texas’s unique economic, social, and infrastructure needs, an independent Texas could create a more responsive and efficient public sector.
3. Investment in Growth Sectors: Texas could allocate surplus revenue toward high-growth sectors like technology, energy, and manufacturing, supporting long-term economic expansion. For instance, reinvesting in infrastructure projects and education could attract skilled labor and support sustained economic growth.

Case Study Comparisons: Self-Funded Independent Economies

To contextualize Texas’s financial position as an independent entity, we can draw comparisons to other nations that operate with significant self-reliance. Countries like Switzerland and Singapore, known for limited reliance on external aid and strong domestic revenue streams, provide useful benchmarks.

• Switzerland: With a GDP of approximately $800 billion and a strong tax revenue base, Switzerland funds a high standard of living and robust social services through domestic resources. Like Texas, Switzerland uses low taxes to attract businesses, relying on an efficient public sector and limited debt to maintain economic stability. Texas, with a more substantial revenue base, could potentially achieve even greater fiscal autonomy.
• Singapore: Known for its efficient use of tax revenue and investments in growth sectors, Singapore has grown into a global financial hub. By prioritizing trade, education, and technology, Singapore has demonstrated that a streamlined fiscal approach can yield strong economic outcomes. Texas could take a similar approach, reallocating its tax surplus toward strategic sectors to maximize growth potential.

Both Switzerland and Singapore exemplify how a focus on self-funded growth, efficient tax policy, and infrastructure investment can create a resilient, self-sustaining economy. Texas’s comparable resources, coupled with its projected tax surplus, make this model feasible for a post-TEXIT economy.

Potential Risks and Challenges

While Texas’s financial independence offers considerable benefits, there are challenges associated with covering the services previously funded by federal sources. Texas would need to address the following:

1. Initial Administrative Costs: Establishing independent systems for Social Security, healthcare, and defense would involve significant initial investments. Texas’s net revenue gain provides a strong foundation, but careful planning and budgeting will be essential to cover these transition costs.
2. Medicaid Funding Gap: With over $30 billion in federal Medicaid funds at risk, Texas may need to reconfigure healthcare for low-income residents. Options include adjusting Medicaid programs or exploring partnerships with private healthcare providers to manage costs.
3. Potential Tax Burden Adjustments: Depending on the effectiveness of revenue reallocation, Texas may need to adjust tax policies to balance any budget shortfalls. However, with a projected net gain, Texas has a strong fiscal buffer that can absorb these initial adjustments without imposing significant tax hikes.

Fiscal Self-Sufficiency of an Independent Texas

With a projected net revenue gain of around $100 billion annually, Texas would be well-positioned to fund its essential services independently. By redirecting federal tax contributions to healthcare, education, and infrastructure, Texas could cover most, if not all, federally funded programs and have funds left to invest in economic growth. Comparisons with self-reliant nations like Switzerland and Singapore suggest that a streamlined, Texas-tailored fiscal approach could yield strong economic stability, supporting Texas’s position as a global economic leader.

Let’s now examine Trade Relations and Foreign Direct Investment (FDI) as essential components of Texas’s economic strategy in an independent framework. Establishing strong trade relationships and attracting international investments would be crucial for Texas to sustain and grow its economy post-independence.

Trade Relations and Foreign Direct Investment (FDI)

As a self-governing nation, Texas would need to build its own trade policies and agreements to ensure continued access to international markets, especially with the United States. Texas’s economy relies heavily on exports—petroleum, electronics, and machinery, among others—and the state’s strategic location and strong infrastructure make it a desirable trade partner. Additionally, Texas’s favorable business environment could make it a magnet for Foreign Direct Investment (FDI), further bolstering its growth potential.

Building Trade Relationships: Key Partners and Strategic Agreements

Texas’s economy is highly integrated into the global economy, with the U.S., Mexico, China, and Canada as its largest trading partners. Crafting new trade agreements would be crucial to maintain stability and growth in Texas’s export-driven economy. Here’s how Texas might approach key trade relationships and agreements post-independence.

Trade with the United States

Given Texas’s current economic integration with the U.S., maintaining a close trade relationship would be paramount. Texas exports around $350 billion worth of goods annually, with the U.S. being its largest customer. The challenge for an independent Texas would be negotiating terms that allow free or reduced-tariff trade with the U.S. while retaining autonomy over its resources and industries.

• Potential Trade Structure: Texas could seek a free-trade agreement (FTA) with the U.S., similar to the agreements the U.S. has with Mexico and Canada (USMCA). An FTA would allow Texas to maintain tariff-free access for goods like petroleum, electronics, and machinery, which are major exports to the U.S.
• Energy Exports: Texas supplies over 40% of U.S. oil and nearly 25% of its natural gas. The U.S. would likely be motivated to secure a favorable energy trade agreement, given Texas’s strategic importance to U.S. energy supply. This could give Texas strong leverage in trade negotiations.

Trade with Mexico and Canada

Texas’s existing economic ties with Mexico and Canada position it to negotiate advantageous terms. Texas’s proximity to Mexico and its shared border facilitate cross-border trade, while Canada has strong interests in Texas’s energy exports. Texas could pursue agreements modeled after the USMCA, ensuring continued collaboration with both countries.

• Mexico: Given Texas’s historic ties to Mexico, a tailored trade agreement with favorable terms for agricultural products, manufactured goods, and cross-border services would be mutually beneficial. An FTA could also ensure streamlined logistics and workforce mobility, which are important to Texas-based industries operating in northern Mexico.
• Canada: Canada imports a considerable amount of petroleum and manufactured goods, and Texas could capitalize on this demand. Establishing direct trade agreements with Canada would solidify Texas’s position in North American trade and help maintain stability for industries reliant on Canadian exports.

Trade with China and Europe

China and Europe represent major export markets for Texas, especially in sectors like technology, energy, and chemicals. China, in particular, is one of Texas’s largest trading partners outside of North America.

• China: As one of the world’s largest importers of petroleum and electronics, China is a critical partner for Texas’s exports. An independent Texas could negotiate a bilateral trade agreement focused on technology, energy, and raw materials, ensuring continued access to the Chinese market.
• European Union (EU): The EU is a major importer of chemical products, machinery, and pharmaceuticals—key industries in Texas. By establishing direct trade agreements with the EU, Texas could maintain a stable export market for these goods and potentially expand its presence in the European market.

Leveraging Strategic Trade Assets: Ports, Infrastructure, and Geography

Texas’s strong trade infrastructure is an invaluable asset for an independent nation. The Port of Houston, the largest U.S. port in terms of total foreign tonnage, and the state’s proximity to Mexico create unique logistics advantages.

• Port Infrastructure: The Port of Houston, Port of Corpus Christi, and other major ports along the Texas Gulf Coast provide access to global markets, particularly in energy exports. Expanding port facilities and optimizing logistics could further strengthen Texas’s position as a trade hub, supporting export growth.
• Geographic Advantage: Located between North and Latin America, Texas occupies a strategic location that could facilitate trade agreements with South American countries. Texas’s existing infrastructure could support expanded trade with Latin American nations, establishing Texas as a gateway for goods flowing north and south.

Foreign Direct Investment (FDI): Attracting Global Capital to Texas

Foreign Direct Investment (FDI) would be essential for Texas to fuel its growth and stabilize its economy in the initial years of independence. Texas’s business-friendly environment, low taxes, and diversified industries make it an attractive destination for global investors. By promoting key sectors and offering investment incentives, Texas could secure FDI from international companies, fueling growth in technology, manufacturing, and energy.

Key Sectors for FDI Attraction

1. Energy and Renewables: Texas is globally recognized for its energy sector, not only in oil and natural gas but also in renewable energy, especially wind power. Independence would allow Texas to offer targeted incentives to foreign energy companies interested in its resources, potentially boosting FDI in both traditional and renewable energy projects.
2. Technology and Innovation: With established tech hubs in Austin, Dallas, and Houston, Texas could attract tech giants and startups looking for a favorable regulatory environment. Independence could enable Texas to tailor policies for data privacy and intellectual property, drawing tech investors and enhancing its reputation as a technology leader.
3. Manufacturing and Advanced Industries: Texas’s existing manufacturing base and skilled labor force make it an ideal location for advanced manufacturing investment. An independent Texas could streamline regulations and offer tax breaks, attracting FDI in high-value manufacturing sectors like aerospace, automotive, and electronics.

Strategies to Increase FDI

1. Investment Incentives: Texas could implement tax incentives, grants, and land-use advantages to attract foreign investors. By reducing corporate taxes and offering subsidies for high-growth sectors, Texas could establish itself as a go-to location for international companies looking to establish operations in North America.
2. Free Trade Zones: Establishing Free Trade Zones (FTZs) near Texas’s ports and borders could simplify trade processes and reduce costs for foreign companies. FTZs allow companies to defer or eliminate duties on imported materials, which would be particularly advantageous for manufacturing and logistics companies.
3. Public-Private Partnerships (PPPs): Texas could employ PPPs to fund large infrastructure projects, such as highways, railways, and airports. By collaborating with foreign investors on these projects, Texas could reduce public costs while expanding critical infrastructure. This model has been successfully implemented in countries like Singapore and the United Arab Emirates, demonstrating its viability for Texas.

Case Studies: Comparative FDI Success Stories

Singapore: Known for its strong FDI policies, Singapore has attracted multinational corporations through its favorable tax policies, trade zones, and ease of doing business. By keeping taxes low and offering stability, Singapore has become a global business hub, despite its small size and limited resources. Texas, with similar tax policies and strategic location, could replicate this model, especially in technology and finance.

United Arab Emirates (UAE): The UAE’s Free Trade Zones have attracted substantial FDI by allowing 100% foreign ownership and tax-free business environments. The UAE’s model demonstrates how FTZs and attractive tax policies can turn a resource-rich region into a diversified economic powerhouse. Texas, with its oil and gas resources and large urban centers, could similarly diversify its economy by creating FTZs and welcoming global capital.

Potential Challenges in Trade and FDI

While Texas has a strong foundation for trade and FDI, independence may present challenges that need to be carefully managed:

1. Trade Barriers with the U.S.: Any delays in establishing favorable trade agreements with the U.S. could affect Texas’s economy, especially in industries highly integrated with American supply chains. Tariffs or logistical restrictions would place pressure on Texas-based companies reliant on U.S. markets, requiring careful negotiation to ensure minimal trade disruptions.
2. Currency Stability: Investors may initially approach Texas cautiously if it establishes a new currency, as currency volatility can deter FDI. Texas might consider pegging a Texas dollar to a stable foreign currency (e.g., USD) initially to attract FDI and ensure stability during the transition period.
3. Regulatory Adjustments: New trade and business regulations will need to be implemented efficiently to avoid disruptions. Setting clear, business-friendly regulatory policies early on could reassure investors and help Texas attract FDI from companies looking for a predictable environment.

Positioning Texas as a Global Trade and Investment Leader

As an independent nation, Texas’s trade infrastructure, strategic location, and business-friendly environment give it an advantageous position to negotiate favorable trade agreements and attract FDI. By establishing strong trade relationships with the U.S., Mexico, and other key partners, Texas could ensure market access for its major exports, particularly energy. Additionally, Texas’s ability to attract FDI in sectors like energy, technology, and manufacturing could provide sustained economic growth and bolster its transition to an independent economy.

With strategic use of Free Trade Zones, investment incentives, and public-private partnerships, Texas could maximize its appeal to international companies and investors. Successful models from countries like Singapore and the UAE underscore the potential for Texas to become a trade and investment powerhouse, supported by favorable policies and strategic global relationships.

Challenges of Independence: Currency, Social Services, and Government Functions

While Texas has strong economic fundamentals, the transition to an independent state would bring significant administrative and operational challenges. To ensure a smooth transition, Texas would need to carefully plan and implement systems for currency management, social services, and essential government functions. These elements are not only vital for economic stability but are also critical to the daily lives of Texas residents.

Establishing a New Currency: Stability and Strategic Options

One of the most consequential decisions for an independent Texas would be the establishment of its own currency. The choice of currency could impact trade, investment, and inflation, making it essential to develop a stable and strategic monetary policy.

Currency Options and Considerations

• Texas Dollar: Creating a new Texas Dollar could provide the state with full control over its monetary policy, allowing it to manage interest rates, inflation, and exchange rates in line with Texas’s unique economic needs.
  • Advantages: Independence in monetary policy would allow Texas to respond flexibly to economic conditions, set interest rates to attract investment, and potentially stabilize the economy during downturns.
  • Challenges: A new currency may initially face volatility as markets adjust, creating potential risks in trade and investment. Additionally, establishing a currency requires building institutions for regulation and management, such as a central bank.
• Currency Peg: Texas could choose to peg a Texas Dollar to a stable foreign currency, such as the U.S. Dollar or the Euro, to mitigate volatility and build investor confidence.
  • Advantages: A currency peg would offer stability in the early years of independence, helping attract FDI by providing a predictable exchange rate. It could reduce the risk of inflation and currency speculation.
  • Challenges: A pegged currency may limit Texas’s flexibility in monetary policy, especially if economic conditions diverge from the country to which it is pegged. A peg would also require sufficient foreign reserves to maintain the exchange rate.
• Use of U.S. Dollar (USD): Initially adopting the USD, as countries like Panama and Ecuador have done, could simplify trade and provide immediate stability.
  • Advantages: Using the USD would facilitate trade with the U.S. and offer Texas a stable, recognized currency without requiring immediate monetary infrastructure.
  • Challenges: By using the USD, Texas would relinquish control over its monetary policy, making it reliant on U.S. monetary decisions. This dependence may limit Texas’s ability to manage inflation and respond to local economic needs.

In the early years of independence, Texas may choose to peg a new currency to the USD for stability while gradually moving toward a floating Texas Dollar once its central banking infrastructure and currency reserves are established.

Restructuring Social Services: Healthcare, Social Security, and Education

Currently, Texas benefits from federal funding for social services, including Medicaid, Social Security, and public education grants. Independence would necessitate a restructuring of these programs to ensure continued support for residents, many of whom rely on these services for healthcare, retirement income, and education.

Healthcare (Medicaid)

Medicaid, which serves low-income Texans, currently receives about 70% of its funding from federal sources. Replacing this federal funding would be essential, and Texas could explore several approaches:

• Texas Health Program: Texas could establish its own healthcare program similar to Medicaid, funded through state revenue and managed according to local needs. By tailoring eligibility and coverage to Texas’s demographics, the program could operate more efficiently than federal Medicaid.
• Public-Private Partnerships: To manage healthcare costs, Texas could partner with private healthcare providers, offering a competitive model that encourages private investment in healthcare infrastructure and reduces the public cost burden.
• Health Savings Accounts (HSAs): Texas could incentivize HSAs or other individual savings mechanisms to supplement state-provided care, encouraging residents to contribute to their own healthcare while reducing reliance on public funding.

Social Security

Social Security currently provides benefits to retirees and individuals with disabilities, funded by payroll taxes. Post-independence, Texas could redirect federal payroll tax contributions to fund a state-based retirement system.

• Texas Retirement Fund: Texas could establish a sovereign retirement fund to support retirees, funded by payroll taxes retained within the state. This fund would operate similarly to Social Security but could be managed locally to ensure solvency and tailored benefits.
• Alternative Models: Texas may also explore pension-style systems, where contributions are invested, allowing for more sustainable growth of the fund and potential higher returns for retirees.

Education Funding

Federal contributions also support Texas’s public education system, particularly in low-income districts and higher education grants. Texas would need to replace these funds to ensure educational continuity and quality.

• State Education Fund: Texas could establish a dedicated education fund to support public schools, community colleges, and universities. By redirecting retained federal taxes, Texas could ensure consistent funding for education.
• Scholarship Programs: To support higher education, Texas could create scholarship funds or grants for Texas residents, encouraging workforce development and reducing student loan dependence.
• Incentives for Private Contributions: Texas could incentivize private-sector contributions to education, encouraging partnerships that support STEM and vocational programs, enhancing workforce readiness and innovation.

Essential Government Functions: Defense, Border Security, and Infrastructure

Independence would require Texas to assume full responsibility for functions previously managed or funded at the federal level. Setting up efficient systems for defense, border security, and infrastructure would be critical to maintaining stability and ensuring the safety of Texas residents.

Defense and National Security

Establishing a national defense structure is one of the most complex challenges Texas would face as an independent state. Currently, Texas benefits from the U.S. military presence, with multiple military bases across the state. Independence would require Texas to develop its own defense capabilities and strategic alliances.

• Texas Defense Force: Texas could establish a Texas Defense Force, incorporating the Texas State Guard and possibly creating new military branches to cover essential defense functions. By recruiting former U.S. military personnel, Texas could leverage existing expertise and infrastructure.
• Defense Partnerships: Texas could negotiate defense pacts with allies, including the U.S., Mexico, and possibly NATO countries, ensuring security support while minimizing the need for a large, costly standing military.
• Private Military Contracts: Texas could employ private defense contractors to manage certain functions, especially in areas like cybersecurity and specialized military technology, providing flexibility and reducing public spending.

Border Security

With a long border shared with Mexico, Texas would need robust border security measures to control immigration and trade effectively.

• Texas Border Patrol: Texas could expand its current border security programs into a dedicated Texas Border Patrol, responsible for managing cross-border activity, preventing smuggling, and ensuring legal entry.
• Advanced Technology: Investing in surveillance and biometric technology could enhance border management, ensuring security without the need for extensive manpower.
• Trade and Immigration Agreements with Mexico: Texas’s close economic ties with Mexico make a cooperative approach beneficial. By establishing agreements for trade and workforce mobility, Texas could create a stable cross-border relationship that reduces unauthorized migration.

Infrastructure

Texas’s extensive infrastructure, including highways, ports, and airports, is critical for supporting trade, tourism, and economic growth. Independence would allow Texas to fully control infrastructure funding, enabling strategic investments tailored to its unique needs.

• Highway and Transportation Funding: Redirecting federal excise taxes to fund highway construction and maintenance would support Texas’s extensive road network, critical for its economy.
• Port Expansion Projects: Texas could invest in expanding ports along the Gulf Coast, ensuring trade capacity for growing export sectors, particularly energy and agriculture.
• Public-Private Partnerships (PPPs): PPPs could be employed to fund large infrastructure projects, such as high-speed rail or new airport facilities, sharing costs and leveraging private expertise.

Navigating the Complexities of Self-Governance

Establishing currency stability, restructuring social services, and assuming essential government functions are critical steps for Texas to manage successfully if it chooses independence. While challenging, these steps are feasible with careful planning, efficient use of resources, and strategic partnerships. By retaining federal tax contributions and redirecting them toward state-specific needs, Texas would have a strong fiscal foundation to support these initiatives.

Developing efficient systems for defense, border security, and infrastructure would require significant upfront investment, but Texas’s existing economic strengths and strong business environment provide a foundation for success. Establishing partnerships with private sectors and neighboring countries could also facilitate a smoother transition while supporting Texas’s long-term self-sufficiency.

Texas’s Path to Economic Independence and Global Prominence

Texas, with its diverse economy, strategic geographic location, and wealth of natural resources, stands uniquely positioned to thrive as an independent nation. An economy valued at over $2 trillion, robust industries spanning energy, technology, manufacturing, and agriculture, and a culture deeply rooted in self-reliance provide Texas with a foundation that few states could replicate. Independence offers Texas the chance to fully control its economic policies, direct its tax revenue toward state-specific needs, and cultivate a government responsive solely to Texans’ interests.

Economic Strength and Growth Potential

Texas’s economy is defined by its dynamism, with recent growth rates outpacing the national average and leading the U.S. in sectors like energy, technology, and advanced manufacturing. Independence would allow Texas to leverage these strengths on the world stage:

• Energy Dominance: As a global leader in oil, natural gas, and renewable wind energy, Texas would become one of the most critical suppliers of energy worldwide. Freedom from federal energy regulations would allow Texas to expand its production and negotiate direct trade agreements with energy-importing nations, reinforcing its economic stability and global influence.
• Technology and Manufacturing Hub: Texas’s advanced manufacturing and booming tech industry—already major drivers of its GDP—could flourish with targeted incentives and regulatory autonomy. An independent Texas could build on these assets to attract international firms, create high-paying jobs, and develop infrastructure that supports sustained growth.
• Trade Infrastructure and Global Connections: With its strategic position at the crossroads of North America, Texas’s ports, highways, and rail systems offer unmatched logistical advantages for trade. By developing trade partnerships and establishing Free Trade Zones, Texas could serve as a vital hub for commerce between the Americas and beyond.

These economic strengths suggest that Texas could rival, if not surpass, the economic performance of similarly sized independent nations. Under optimistic projections, Texas’s GDP could grow by 5-6% annually, reaching $2.5 trillion or more within five years, putting it on par with global economic leaders like Canada and Australia.

Strategic Trade Relations and FDI Attraction

As a self-governing state, Texas would have the freedom to form its own trade agreements and attract foreign investment, ensuring stable and growing revenue streams:

• Trade Partnerships with Key Markets: Maintaining strong ties with the U.S. and Mexico would be essential for Texas’s economic stability. An independent Texas could pursue favorable trade terms with these major partners while expanding its trade network to include China, the European Union, and Latin American nations. This approach would ensure market access for Texas’s energy, manufacturing, and agricultural exports.
• Investment-Friendly Environment: Texas’s low-tax, pro-business environment could make it one of the most attractive destinations for Foreign Direct Investment. By incentivizing FDI in high-growth sectors, Texas could create jobs, fund infrastructure, and drive technological innovation—all while strengthening its reputation as a global economic leader.

Learning from successful FDI strategies used by nations like Singapore and the UAE, Texas could enhance its appeal to international corporations by implementing tax incentives, creating Free Trade Zones, and fostering a business-friendly regulatory environment.

Addressing the Challenges of Independence

While Texas has the economic resources to support independence, it must address key challenges to ensure stability and prosperity. Establishing a new currency, funding social services, and building defense and border security capabilities will require careful planning and initial investment:

• Currency and Monetary Policy: Whether Texas establishes a new Texas Dollar or adopts the U.S. Dollar temporarily, careful currency management will be critical. A pegged currency could provide early stability while Texas builds financial infrastructure, while eventually establishing a fully independent currency could enhance Texas’s control over its economic future.
• Social Services: Replacing federally funded programs like Medicaid and Social Security will require Texas to redirect federal tax contributions effectively. By establishing state-managed healthcare and retirement funds, Texas can ensure continuity for its residents while tailoring these services to better meet local needs.
• Defense and Border Security: Ensuring the safety and security of Texas’s borders and residents will be paramount. By forming partnerships for defense and creating a specialized Texas Border Patrol, Texas can protect its borders and build a reliable defense system. Collaborations with private defense contractors and neighboring nations could also reduce costs and provide specialized expertise.

A New Era of Prosperity and Self-Governance

Independence offers Texas the opportunity to realize its full potential as a self-reliant, prosperous nation. The state’s unique mix of resources, industrial strength, and business-friendly policies could enable it to become a powerhouse on the world stage. Free from federal constraints, Texas could craft policies that reflect Texan values, invest in the future, and empower its people.

Texas’s journey toward self-governance is more than an economic transformation; it is a movement toward greater accountability, freedom, and local control. Independence would allow Texas to prioritize the well-being of its people, reinforce its cultural identity, and build a government that serves the interests of Texans first and foremost. In doing so, Texas would serve as a beacon of self-determination and resilience for the rest of the world.

For Texans, independence is not merely a political aspiration; it is a pathway to economic empowerment, cultural preservation, and a brighter future for generations to come. The promise of TEXIT is one of renewed opportunity, where Texas can fully exercise its strengths and stand as a sovereign, influential nation on the global stage.