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Interrogating the "Texas Miracle"
by BubbleBliss Wed Aug 17, 2011 9:56 am
Interrogating the "Texas Miracle"
Aug 16th 2011, 16:57 by E.G. | AUSTIN
OVER the weekend, I predicted that Rick Perry will be a formidable candidate. Although many progressives are discounting him—see Kevin Drum's post on "Why Rick Perry Won't Win"—we can tell that many do take him seriously. The giveaway is that his announcement has inspired a rush of critical commentary about his record, particularly the vaunted "Texas Miracle" of job creation that will be central to Mr Perry's campaign in the primary and in the general election, should it come to that.
One of the major entries comes from Paul Krugman, in a column about the "Texas Unmiracle", which my colleague M.S. discussed yesterday. Mr Krugman writes:
...What you need to know is that the Texas miracle is a myth, and more broadly that Texan experience offers no useful lessons on how to restore national full employment.It’s true that Texas entered recession a bit later than the rest of America, mainly because the state’s still energy-heavy economy was buoyed by high oil prices through the first half of 2008. Also, Texas was spared the worst of the housing crisis, partly because it turns out to have surprisingly strict regulation of mortgage lending.Despite all that, however, from mid-2008 onward unemployment soared in Texas, just as it did almost everywhere else.
Texas's unemployment rate currently stands at 8.2%, which is a point below the national average, but nonetheless too high. That does complicate Mr Perry's claims to be some kind of economic magician, and more generally, as Mr Krugman suggests, some of the underlying factors and political decisions that have helped Texas through the recession can't be simply extrapolated to other states or scaled to the nation as a whole.
However, I would suggest that in the rush to debunk Mr Perry, Democrats are being a little hasty. The Perry campaign is giving the startling statistic that since June 2009, 40% of the net new jobs created in America have been in Texas—a state with less than 10% of the nation's people. The Dallas Fed, earlier this month, reckoned that Texas created 261,700 jobs between June 2009 and June 2011, compared to 524,000 in the nation as a whole. Given the tremendous need for jobs in this country—and grinding unemployment is a horrible thing, not a minor inconvenience—it's a little disheartening to think that people are rushing to dismiss what has happened in Texas just because it's Texas and because Mr Perry, with his accent and his swagger, is the state's governor. So let's put politics aside. Pretend that Mr Perry doesn't exist, and that there's been a dummy stuffed with straw sitting in his office this whole time. What would have happened in Texas?
As Mr Krugman and others have noted, oil prices have helped buoy the economy. However, Texas is less dependent on oil and gas than it once was and the industry does not explain all or even most of the job creation. Another analysis from the Dallas Fed explains that between 1997-2010, a 10% increase in the price of oil would boost Texas GDP by 0.5%—and employment by a bit less, 0.36%, because oil is capital-intensive. Between 1970-1987, by contrast, a 10% uptick would boost the state GDP by 1.9%, and employment by 1%. According to Karr Ingram, an economist with the Texas Petroleum Institute, the Texas oil and gas industry added more than 28,600 jobs since June 2010, or about 13% of the state's net jobs in that span. It would also be fair to say that the oil and gas industry has impacts on Texas that are not captured in the traditional indicators. For example, Texas's longtime energy leadership has helped spur its interest in wind power, an industry where it now leads the nation. It may be counterintuitive, but there's a sense among state politicians that if Texas has the institutional expertise to do energy, that should extend to renewables, too. In any case, we can see that oil and gas are important to Texas job creation, but hardly the whole story.
Mr Krugman's comment about surprisingly strict mortgage lending refers to regulations that were put in place after the savings-and-loan crisis of the 1980s and 1990s, which hit Texas pretty hard. The more general point is that in addition to Texas's natural resources, the state has a policy apparatus that predates Mr Perry and supports business—low taxes, generally few regulations (the mortgage lending being an exception), cheap labour, cheap land, etc. The state has also benefited from significant net population growth during the past decade, which has prompted job creation, including many of the service-sector "jobettes" that critics deride. Mr Krugman argues that population growth is down to "a high birth rate, immigration from Mexico, and inward migration of Americans from other states, who are attracted to Texas by its warm weather and low cost of living, low housing costs in particular." The comment about being attracted to Texas because of the warm weather suggests that Mr Krugman is on slightly shaky footing. It's a furnace right now. Some snowbirds come for the mild winters, but a lot of the in-migration is due to jobs—because companies have relocated here, because the military has expanded its footprint in Texas, or because people were looking at the unemployment rates and figured they would try their luck. It hasn't worked out for everyone, unfortunately. That's one reason why Texas's unemployment rate has jumped, too.
As for Mr Perry, since he does exist, what has he done? In his announcement speech he recited a four-part "recipe" for economic stewardship: low taxes, low regulation, tort reform, and "don't spend all the money." He actually hasn't cut that many taxes, partly because there wasn't much of a tax base to cut; Texas is one of the few states without an income tax, for example. His signature reform came in 2006, when he engineered a "swap" that lowered property tax rates—a constant complaint from homeowners—with the intention of offsetting those declines via an increase on the cigarette tax and a new margins tax on most businesses. Those new revenue streams haven't made up for the decline in property-tax receipts, so Republicans call this a net tax decrease and Democrats call it a structural deficit. More generally, what Mr Perry has done is resisted new taxes; here are a few counterexamples from Politifact. Similarly, he inherited a fairly minimal regulatory framework, but he does fight most new regulations, as in his lawsuit against the Environmental Protection Agency over its effort to regulate greenhouse gas emissions under the Clean Air Act.
Mr Perry can take credit for a major tort reform passed in 2003, and a follow up "loser pays" reform earlier this year. Another thing in his toolbox—he doesn't talk about this—is that in 2003 the legislature established the Texas Enterprise Fund, a "deal-closing fund" that gives the governor subsidies and incentives to use in his efforts to woo, or if you'd prefer, poach businesses from elsewhere. This seems to deviate from free-market orthodoxy and it has exposed him to charges of crony capitalism, but it has also helped his administration create jobs.
Now, clearly, the virtues of this approach are debatable. It may be that cutting taxes and regulations and services is a good way to attract business but a bad thing to do, on balance, because it leaves you less money for health care and education and infrastructure—areas where Texas lags the nation as a whole, and indeed, if nothing else, areas where the state must do better if it is going to have a worthwhile economy in the future. And I certainly don't mean to endorse Mr Perry's approach; personally, I have a lot of problems with it, although I do think the unemployment rate is a key measure of social welfare. But if we're talking strictly about job creation, Mr Perry has a good pitch. He deserves partial credit for Texas's job growth, just as he deserves partial blame for the state's stagnation on other metrics.
Aug 16th 2011, 16:57 by E.G. | AUSTIN
OVER the weekend, I predicted that Rick Perry will be a formidable candidate. Although many progressives are discounting him—see Kevin Drum's post on "Why Rick Perry Won't Win"—we can tell that many do take him seriously. The giveaway is that his announcement has inspired a rush of critical commentary about his record, particularly the vaunted "Texas Miracle" of job creation that will be central to Mr Perry's campaign in the primary and in the general election, should it come to that.
One of the major entries comes from Paul Krugman, in a column about the "Texas Unmiracle", which my colleague M.S. discussed yesterday. Mr Krugman writes:
...What you need to know is that the Texas miracle is a myth, and more broadly that Texan experience offers no useful lessons on how to restore national full employment.It’s true that Texas entered recession a bit later than the rest of America, mainly because the state’s still energy-heavy economy was buoyed by high oil prices through the first half of 2008. Also, Texas was spared the worst of the housing crisis, partly because it turns out to have surprisingly strict regulation of mortgage lending.Despite all that, however, from mid-2008 onward unemployment soared in Texas, just as it did almost everywhere else.
Texas's unemployment rate currently stands at 8.2%, which is a point below the national average, but nonetheless too high. That does complicate Mr Perry's claims to be some kind of economic magician, and more generally, as Mr Krugman suggests, some of the underlying factors and political decisions that have helped Texas through the recession can't be simply extrapolated to other states or scaled to the nation as a whole.
However, I would suggest that in the rush to debunk Mr Perry, Democrats are being a little hasty. The Perry campaign is giving the startling statistic that since June 2009, 40% of the net new jobs created in America have been in Texas—a state with less than 10% of the nation's people. The Dallas Fed, earlier this month, reckoned that Texas created 261,700 jobs between June 2009 and June 2011, compared to 524,000 in the nation as a whole. Given the tremendous need for jobs in this country—and grinding unemployment is a horrible thing, not a minor inconvenience—it's a little disheartening to think that people are rushing to dismiss what has happened in Texas just because it's Texas and because Mr Perry, with his accent and his swagger, is the state's governor. So let's put politics aside. Pretend that Mr Perry doesn't exist, and that there's been a dummy stuffed with straw sitting in his office this whole time. What would have happened in Texas?
As Mr Krugman and others have noted, oil prices have helped buoy the economy. However, Texas is less dependent on oil and gas than it once was and the industry does not explain all or even most of the job creation. Another analysis from the Dallas Fed explains that between 1997-2010, a 10% increase in the price of oil would boost Texas GDP by 0.5%—and employment by a bit less, 0.36%, because oil is capital-intensive. Between 1970-1987, by contrast, a 10% uptick would boost the state GDP by 1.9%, and employment by 1%. According to Karr Ingram, an economist with the Texas Petroleum Institute, the Texas oil and gas industry added more than 28,600 jobs since June 2010, or about 13% of the state's net jobs in that span. It would also be fair to say that the oil and gas industry has impacts on Texas that are not captured in the traditional indicators. For example, Texas's longtime energy leadership has helped spur its interest in wind power, an industry where it now leads the nation. It may be counterintuitive, but there's a sense among state politicians that if Texas has the institutional expertise to do energy, that should extend to renewables, too. In any case, we can see that oil and gas are important to Texas job creation, but hardly the whole story.
Mr Krugman's comment about surprisingly strict mortgage lending refers to regulations that were put in place after the savings-and-loan crisis of the 1980s and 1990s, which hit Texas pretty hard. The more general point is that in addition to Texas's natural resources, the state has a policy apparatus that predates Mr Perry and supports business—low taxes, generally few regulations (the mortgage lending being an exception), cheap labour, cheap land, etc. The state has also benefited from significant net population growth during the past decade, which has prompted job creation, including many of the service-sector "jobettes" that critics deride. Mr Krugman argues that population growth is down to "a high birth rate, immigration from Mexico, and inward migration of Americans from other states, who are attracted to Texas by its warm weather and low cost of living, low housing costs in particular." The comment about being attracted to Texas because of the warm weather suggests that Mr Krugman is on slightly shaky footing. It's a furnace right now. Some snowbirds come for the mild winters, but a lot of the in-migration is due to jobs—because companies have relocated here, because the military has expanded its footprint in Texas, or because people were looking at the unemployment rates and figured they would try their luck. It hasn't worked out for everyone, unfortunately. That's one reason why Texas's unemployment rate has jumped, too.
As for Mr Perry, since he does exist, what has he done? In his announcement speech he recited a four-part "recipe" for economic stewardship: low taxes, low regulation, tort reform, and "don't spend all the money." He actually hasn't cut that many taxes, partly because there wasn't much of a tax base to cut; Texas is one of the few states without an income tax, for example. His signature reform came in 2006, when he engineered a "swap" that lowered property tax rates—a constant complaint from homeowners—with the intention of offsetting those declines via an increase on the cigarette tax and a new margins tax on most businesses. Those new revenue streams haven't made up for the decline in property-tax receipts, so Republicans call this a net tax decrease and Democrats call it a structural deficit. More generally, what Mr Perry has done is resisted new taxes; here are a few counterexamples from Politifact. Similarly, he inherited a fairly minimal regulatory framework, but he does fight most new regulations, as in his lawsuit against the Environmental Protection Agency over its effort to regulate greenhouse gas emissions under the Clean Air Act.
Mr Perry can take credit for a major tort reform passed in 2003, and a follow up "loser pays" reform earlier this year. Another thing in his toolbox—he doesn't talk about this—is that in 2003 the legislature established the Texas Enterprise Fund, a "deal-closing fund" that gives the governor subsidies and incentives to use in his efforts to woo, or if you'd prefer, poach businesses from elsewhere. This seems to deviate from free-market orthodoxy and it has exposed him to charges of crony capitalism, but it has also helped his administration create jobs.
Now, clearly, the virtues of this approach are debatable. It may be that cutting taxes and regulations and services is a good way to attract business but a bad thing to do, on balance, because it leaves you less money for health care and education and infrastructure—areas where Texas lags the nation as a whole, and indeed, if nothing else, areas where the state must do better if it is going to have a worthwhile economy in the future. And I certainly don't mean to endorse Mr Perry's approach; personally, I have a lot of problems with it, although I do think the unemployment rate is a key measure of social welfare. But if we're talking strictly about job creation, Mr Perry has a good pitch. He deserves partial credit for Texas's job growth, just as he deserves partial blame for the state's stagnation on other metrics.
BubbleBliss
Re: Interrogating the "Texas Miracle"
by BubbleBliss Wed Aug 17, 2011 9:56 am
Here is the above mentioned Article:
My opponent is a carbon copy of the failed policies of the past
Aug 15th 2011, 16:20 by M.S.
ONE thing that happens in presidential administrations that are getting beaten up politically is that they lose the ability to speak in simple, normal, recognisable terms. They get so wrapped up in the euphemisms they've settled on to avoid using words that have polled poorly in focus groups that every sentence becomes a contorted string of code which only a dedicated political observer can understand. And because normal people aren't dedicated political observers, this has the opposite of the intended effect; rather than appealing to voters, it confuses and frustrates them. It seems to me that's started to happen lately to this White House. Take these lines, via Ben Smith, from Barack Obama's campaign spokesman Ben LaBolt, laying out the case against Rick Perry:
Governor Perry’s economic policies are a carbon copy of the economic policies of Washington Republicans. He pledged to support the cut cap and balance plan that would preserve subsidies for oil and gas companies and tax cuts for the wealthiest while ending Medicare as we know it, eroding Social Security, eliminating hundreds of thousands of jobs and erasing investments in education and research and development.That’s the same approach he took in Texas, where middle class families know his economic record is no miracle—it’s a tall tale. Governor Perry allowed special interests to write their own rules, hired corporate lobbyists to oversee corporations, and cut funding for programs that would create opportunity for middle class families. In a Republican field that has already pledged allegiance to the Tea Party and failed to present any plan that will benefit the middle class or create the jobs America needs to win the future, Governor Perry offers more of the same.
Maybe I don't understand how regular Americans respond to political rhetoric, but...huh? This reads like an attempt to tie Mr Perry to a list of words that surveys indicate voters don't like. I realise voters are generally held to be allergic to numbers or charts, but isn't this chart from Paul Krugman the simplest way to go after the "Texas miracle"?
Unemployment in Texas is 8.2%. Unemployment in New York is 8%. Unemployment in Massachussetts is 7.6%. I realise this is an oversimplified picture of the economies of the three states, but so is the whole "Texas miracle" schtick; and just as a matter of political rhetoric, isn't this a much clearer way to score a point?
My opponent is a carbon copy of the failed policies of the past
Aug 15th 2011, 16:20 by M.S.
ONE thing that happens in presidential administrations that are getting beaten up politically is that they lose the ability to speak in simple, normal, recognisable terms. They get so wrapped up in the euphemisms they've settled on to avoid using words that have polled poorly in focus groups that every sentence becomes a contorted string of code which only a dedicated political observer can understand. And because normal people aren't dedicated political observers, this has the opposite of the intended effect; rather than appealing to voters, it confuses and frustrates them. It seems to me that's started to happen lately to this White House. Take these lines, via Ben Smith, from Barack Obama's campaign spokesman Ben LaBolt, laying out the case against Rick Perry:
Governor Perry’s economic policies are a carbon copy of the economic policies of Washington Republicans. He pledged to support the cut cap and balance plan that would preserve subsidies for oil and gas companies and tax cuts for the wealthiest while ending Medicare as we know it, eroding Social Security, eliminating hundreds of thousands of jobs and erasing investments in education and research and development.That’s the same approach he took in Texas, where middle class families know his economic record is no miracle—it’s a tall tale. Governor Perry allowed special interests to write their own rules, hired corporate lobbyists to oversee corporations, and cut funding for programs that would create opportunity for middle class families. In a Republican field that has already pledged allegiance to the Tea Party and failed to present any plan that will benefit the middle class or create the jobs America needs to win the future, Governor Perry offers more of the same.
Maybe I don't understand how regular Americans respond to political rhetoric, but...huh? This reads like an attempt to tie Mr Perry to a list of words that surveys indicate voters don't like. I realise voters are generally held to be allergic to numbers or charts, but isn't this chart from Paul Krugman the simplest way to go after the "Texas miracle"?
Unemployment in Texas is 8.2%. Unemployment in New York is 8%. Unemployment in Massachussetts is 7.6%. I realise this is an oversimplified picture of the economies of the three states, but so is the whole "Texas miracle" schtick; and just as a matter of political rhetoric, isn't this a much clearer way to score a point?
BubbleBliss
Re: Interrogating the "Texas Miracle"
by kronos Wed Aug 17, 2011 12:58 pm
A fair and balanced article.
Could I ask you to somehow indicate what website or publication your articles come from? Thanks.
Could I ask you to somehow indicate what website or publication your articles come from? Thanks.
kronos
Re: Interrogating the "Texas Miracle"
by TexasBlue Wed Aug 17, 2011 3:35 pm
kronos wrote:A fair and balanced article.
Could I ask you to somehow indicate what website or publication your articles come from? Thanks.
1st one:
http://www.economist.com/blogs/democracyinamerica/2011/08/job-creation
2nd one:
http://www.economist.com/blogs/democracyinamerica/2011/08/obama-v-perry
TexasBlue
Re: Interrogating the "Texas Miracle"
by TexasBlue Wed Aug 17, 2011 3:38 pm
All bullshit aside here.
I lived in Dallas-Ft. Worth from 1984 to 2006. The FW suburb I lived in (Keller) was 7,000 people when I first took up residence there in July 0f 1984. In August of 2006 when I left to move back to Minnesota, it was 39,000.
Now... something happened there, wouldn't anyone think? And we're just talking a far north FW suburb.
I can also tell you that the boom began in 1992 and really went into overdrive in 1998 till I left.
I lived in Dallas-Ft. Worth from 1984 to 2006. The FW suburb I lived in (Keller) was 7,000 people when I first took up residence there in July 0f 1984. In August of 2006 when I left to move back to Minnesota, it was 39,000.
Now... something happened there, wouldn't anyone think? And we're just talking a far north FW suburb.
I can also tell you that the boom began in 1992 and really went into overdrive in 1998 till I left.
TexasBlue
Re: Interrogating the "Texas Miracle"
by kronos Wed Aug 17, 2011 5:24 pm
TexasBlue wrote:kronos wrote:A fair and balanced article.
Could I ask you to somehow indicate what website or publication your articles come from? Thanks.
1st one:
http://www.economist.com/blogs/democracyinamerica/2011/08/job-creation
2nd one:
http://www.economist.com/blogs/democracyinamerica/2011/08/obama-v-perry
I meant in general, not just for this thread.
kronos
Re: Interrogating the "Texas Miracle"
by TexasBlue Wed Aug 17, 2011 6:19 pm
kronos wrote:TexasBlue wrote:kronos wrote:A fair and balanced article.
Could I ask you to somehow indicate what website or publication your articles come from? Thanks.
1st one:
http://www.economist.com/blogs/democracyinamerica/2011/08/job-creation
2nd one:
http://www.economist.com/blogs/democracyinamerica/2011/08/obama-v-perry
I meant in general, not just for this thread.
I knew that.
I consciously insert the name of the site(s) I post things from. Others should do the same.
TexasBlue
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