Being in California, I hear a lot from Republican lawmakers in this state about the “Texas miracle.” They claim that businesses are decamping to Texas because of their “pro-growth” policies, and driving a boom time there. This will clearly be a signature of the Rick Perry campaign for President if he chooses to run.
Only thing about that: it doesn’t appear to be true. Texas’ economic state, in fact, has plenty to do with tough government regulation of the mortgage sector during the bubble years. Brad Plumer writes:
Texas, economists note, has long been a low-tax, loose-regulation state, but it hasn’t always thrived—between 2008 and 2010, after the U.S. economy collapsed, the state’s unemployment rose faster than in high-tax Massachusetts. In May, Texas’s unemployment rate, at 8 percent, ranked twenty-fourth in the country, slightly worse than liberal New York’s. What’s more, not all of those vaunted jobs are great jobs: Texas has the highest percentage of minimum-wage workers in the country, and its per-capita income still sits below California’s.
What is clear is that Texas’s population has been exploding, leading to disproportionate job growth. In the past decade, the state added more people than anywhere else, partly due to fast-growing Hispanic families, but due also to migration from other states. So why are people flocking to Texas? It could be the state’s lower taxes, though that probably isn’t a big driver: As Brad DeLong of University of California, Berkeley, has noted, Texans pay, on average, 26 percent of their income in taxes, not much lower than the 28.5 percent average in California.
More likely, people are moving to Texas because housing is so affordable. In a 2006 survey by the Census Bureau, Texas ranked forty-second in the cost of housing. Conservatives can take some credit—by and large, it’s easier to build houses in Texas’s biggest cities, with fewer land-use and zoning hassles, according to Harvard economist Edward Glaeser.
But conservatives shouldn’t be too triumphal. Texas didn’t suffer from a ruinous housing bubble like nearby Arizona and Nevada, thanks to regulations that limited debt on homes and restricted “cash-out” refinancing (a common practice in states like Florida and California, in which people got free cash for refinancing their homes). As a result, Texas didn’t fare as badly when the housing market cratered this time: Only 6 percent of Texas borrowers were in or near foreclosure, versus a national average of nearly 10 percent. Two cheers for intrusive regulations.
A few things on this. First of all, it shows how housing remains a lead weight on top of the overall economy. In states that don’t have a housing crisis, the economy can move along (relatively) smoothly. In states where housing is in crisis, there’s very little hope of any economic recovery. There are exceptions to this – Michigan has seen a manufacturing boom that has reduced their unemployment rate in the past year-plus. But for the most part, this is the case. Texas has a functioning housing market, and that’s propping up their economy.
There’s also something to be said about the blunt instrument of the unemployment rate, or the even blunter instrument of job gains. Texas jobs are simply not as good as the rest of the nation. Minimum-wage jobs are more the norm here than in the rest of the country. More Texans are on public assistance. More Texans have no health insurance. If this is a vision of the future of America, it’s an ugly one.
In addition, you cannot talk about any state’s economy without talking about their oil and gas resources. Texas is flourishing while oil prices are at or near triple digits. This is true of a lot of the low-unemployment states, particularly in the Great Plains.
But finally, there’s this salient fact – Texas is deep in debt. They have a $27 billion deficit for the next two-year budget cycle. They’ve basically been floating this debt for the last two years, which has been a net positive for the economy. That’s coming to an end, as expectations are high for major safety net cuts in the 2012-13 budget. This will reduce demand and sap the competitive advantage on public schooling that Texas has over its adversaries in the south.
In short, there’s no such thing as a Texas miracle. It’s a miracle if Rick Perry gets away with claiming one.