As Governor Rick Perry positions for his big run, it’s worth examining the accomplishments he can and can’t take credit for. The importance of this exercise stretches beyond his campaign. You can expect that other states might try to duplicate Texas’ relative success in weathering the economic crisis. It’s important that they replicate what works rather than merely believing the propaganda.
First, how well has Texas done? Meh.
Perry has touted Texas’s fabulous success in job creation, but it’s not entirely clear what he’s talking about. The state has created a lot of new jobs and the unemployment rate is better than average – it ranks 24th – with unemployment at a stubborn 8%. It is true that Texas’ population is growing rapidly, but the majority of that growth is coming from Mexico.
The state has, in fact, avoided the worst of the downturn. The most important factor in Texas’ success during the recession is that it never experienced the real estate bubble of the ‘aughts, with its subsequent destruction of capital and jobs.
The home I bought in Houston in 2001 is worth about the same now as it was then. Real estate in Texas has always been practically free, when compared with that in other states. Endless sprawl, no meaningful quality regulation, staggering property taxes, and a lack of public capital have kept values, not just prices, low and flat. Avoiding the worst of that boom and bust gave the state a relative lift while much of the rest of the country cratered.
You know who else was untouched by the global real estate meltdown?
Missing the bust may have been linked to Texas’ “great” policy decisions, or it may have been a result of Texas being disconnected from what’s happening in the global economy.
Texas is growing, but it is also getting poorer. Its high poverty rate, fifth highest in the country, is even more dramatic when you consider its inequality. To quote a report from the University of Texas, “Texas is only one of three states to rank in the top five in each category of poverty – that is, to be in the top five in both poverty rate and income inequality (the other two are Mississippi and Louisiana).” With a gini coefficient of .49, the gap between rich and poor in Texas is slightly greater than in Mexico (.48). It should come as no surprise that it also among the worst states in terms of money spent on education (37th), graduation rates (43rd), teenage pregnancy (46th), literacy (47th), and percentage of uninsured (50th). And its government ranks 50th in the U.S. in terms of money spent per capita.
The state gets a lot of kudos for low taxes, but again the picture is more complex than it might appear. Since Jesus hates an income tax, Texas is stuck with a bizarre corporate tax structure that creates tremendous confusion and inequity. The conservative Tax Foundation described the state’s gross receipts tax as “the most economically harmful tax structure available to lawmakers.” Corporate taxes in Texas are great for some kinds of companies and horrible for others.
And I can tell you from my own very surprising personal experience that the move from supposedly low-tax Texas to crazy-taxtational Yankee-land somehow slashed my own tax bill dramatically. Others describe a similar experience. The lack of an income tax puts a heavy tax burden on middle-earning homeowners.
But Texas has a natural economic advantage that it should capitalize on. A story might help illustrate.
A town here in the Chicago area recently passed an ordinance to regulate the size, color, and locations of RedBox machines – those DVD vending machines you find at the grocery store.
Why did they do this?
The machines were causing no documented problems. No one in the community had complained about them. They don’t spew waste or make noise. They’re not even ugly. Someone on the town planning commission just decided that there should be some rules.
So now the company, which operates nationally, has one more irritating and meaningless set of limits it has to track and comply with. Multiply that absurd example by tens of thousands of municipal and county authorities and you begin to see the scale of the problem. Nothing gained whatsoever by anyone for the significant costs incurred. And no realistic recourse for the job-creating company.
A Governor is in no position to stop a bored city council in some self-important little suburb from creating obstacles to prosperity for the whole state.
It can’t be done.
It is a bottom-up problem that infects the whole public sphere and is extremely difficult to curb.
The kind of freedom to create and build that Texans enjoy doesn’t come from the Legislature. In fact, the Legislature and the Governor are doing everything they can to undermine the potential of this advantage via an unfair system of taxation and a refusal to support schools and other public capital.
Texas’ best economic advantage comes from the culture. You can’t give that to someone.
An aspiring Texas entrepreneur will face relatively little pressure to support a union racket, bribe a city councilman, or spend thousands of dollars a month deciphering layers of bizarre and pointless local regulations imposed at every level of an endless state and local bureaucracy.
Why? Because Texans don’t tolerate those obstacles.
Perry’s greatest accomplishment has been to accumulate a lot of personal power and wealth by cynically indulging the culture’s most self-destructive instincts. Texas has held its ground economically in spite of him. He took over a small government that contributed almost nothing to the people’s welfare and worked to cripple it further. His reckless tax cuts generated the nation’s largest budget hole (in percentage terms), which he is trying to fill primarily by slashing Medicaid and education.
With this culture of open business development, imagine what Texas could accomplish if it had the finest schools, top research institutions, and a first-class communications and transportation infrastructure. Ranking 50th in spending, Texas has plenty of room to get this done if Texans only wanted it.
There are parts of the Texas Advantage that the rest of the country should emulate.
And then there are other parts.