In America’s federal system, some states, such as California, offer residents a “package deal” that bundles numerous and ambitious public benefits with the high taxes needed to pay for them. Other states, such as Texas, offer packages combining modest benefits and low taxes.

These alternatives define the basic division between liberals and conservatives over what it means to get the size and scope of government right.

It’s not surprising, then, that there’s an intense debate over which model is better. What is surprising is the growing evidence that the low-benefit/low-tax package not only succeeds on its own terms but also according to the criteria used to defend its opposite. In other words, the superior public goods that supposedly justify the high taxes just aren’t being delivered.

California and Texas are not perfect representatives of the alternatives, but they come close. The Census Bureau’s latest data show that state and local government expenditures for all purposes in 2005-06 were

46.8 percent higher in California than in Texas: $10,070 per person compared with $6,858. Only three states and the District of Columbia saw higher per capita government outlays than California, while Texas’ expenditures were lower than those in all but seven states.

From 2000 through 2007, an average of 3,247 more people moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas had a net weekly population increase of 1,544.

These folks understand a reality the defenders of the high-benefit/high-tax model must confront: All things being equal, everyone would rather pay low taxes than high ones. The high-tax model can work only if things are demonstrably not equal — if the public goods purchased by the high taxes far surpass those available to people who live in states with low taxes.

Today’s public benefits fail that test. As urban scholar Joel Kotkin of Chapman University puts it: “Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California. Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California’s government and the middle class is constantly being renegotiated to the disadvantage of the middle class.”

These judgments are not based on drive-by sociology. According to a report issued earlier this year by McKinsey & Co., Texas students “are, on average, one to two years of learning ahead of California students of the same age,” even though per-pupil expenditures are 12 percent higher in California.

In what respects, then, does California “excel”? California’s state and local government employees were the best compensated in America, according to the Census Bureau data for 2006. The latest posting on the Web site of the California Foundation for Fiscal Responsibility shows 9,223 former civil servants and educators receiving pensions worth more than $100,000 a year from California’s public retirement funds.

The political reality of the high-benefit/high-tax model is that its public goods are, increasingly, neither public nor good. Instead, the beneficiaries are the providers of the public services, and certain favored or connected constituencies, rather than the general population.

The recession eventually will end, and California’s finances will get better. Given its powerful systemic bias against efficient and effective public services, however, the question is whether the state will ever get well. California’s public sector has pinned its hopes for avoiding fundamental reform on increased federal aid. In other words, residents in the other 49 states would enjoy the privilege of paying California’s taxes. Their one consolation will be not having to endure its lousy public services.

If, on the other hand, America’s taxpayers  don’t shore up California, the state may be forced to try governing itself competently. You wouldn’t know it from putting up with California’s transportation and educational systems, but there actually is a principled, plausible argument to be made for the high-benefit/high-tax model. But for anyone to be convinced, California will have to breaking its Faustian political bargain with its self-serving governmental-industrial complex.

(Voegeli is a contributing editor of the Claremont Review of Books. This report is adapted from the autumn 2009 issue of City Journal and was first published in the Los Angeles Times.)