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Tuesday, August 16, 2011

Rick Perry's Texas "Economic Boon" A Big Lie? Low Wage Jobs With No Benefits!

The Texas Unmiracle

As expected, Rick Perry, the governor of Texas, has announced that he is running for president. And we already know what his campaign will be about: faith in miracles.

Some of these miracles will involve things that you’re liable to read in the Bible. But if he wins the Republican nomination, his campaign will probably center on a more secular theme: the alleged economic miracle in Texas, which, it’s often asserted, sailed through the Great Recession almost unscathed thanks to conservative economic policies. And Mr. Perry will claim that he can restore prosperity to America by applying the same policies at a national level.

So 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.

In June 2011, the Texas unemployment rate was 8.2 percent. That was less than unemployment in collapsed-bubble states like California and Florida, but it was slightly higher than the unemployment rate in New York, and significantly higher than the rate in Massachusetts. By the way, one in four Texans lacks health insurance, the highest proportion in the nation, thanks largely to the state’s small-government approach. Meanwhile, Massachusetts has near-universal coverage thanks to health reform very similar to the “job-killing” Affordable Care Act.

So where does the notion of a Texas miracle come from? Mainly from widespread misunderstanding of the economic effects of population growth.

For this much is true about Texas: It has, for many decades, had much faster population growth than the rest of America — about twice as fast since 1990. Several factors underlie this rapid population growth: 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.

And just to be clear, there’s nothing wrong with a low cost of living. In particular, there’s a good case to be made that zoning policies in many states unnecessarily restrict the supply of housing, and that this is one area where Texas does in fact do something right.

But what does population growth have to do with job growth? Well, the high rate of population growth translates into above-average job growth through a couple of channels. Many of the people moving to Texas — retirees in search of warm winters, middle-class Mexicans in search of a safer life — bring purchasing power that leads to greater local employment. At the same time, the rapid growth in the Texas work force keeps wages low — almost 10 percent of Texan workers earn the minimum wage or less, well above the national average — and these low wages give corporations an incentive to move production to the Lone Star State.

So Texas tends, in good years and bad, to have higher job growth than the rest of America. But it needs lots of new jobs just to keep up with its rising population — and as those unemployment comparisons show, recent employment growth has fallen well short of what’s needed.

If this picture doesn’t look very much like the glowing portrait Texas boosters like to paint, there’s a reason: the glowing portrait is false.

Still, does Texas job growth point the way to faster job growth in the nation as a whole? No.

What Texas shows is that a state offering cheap labor and, less important, weak regulation can attract jobs from other states. I believe that the appropriate response to this insight is “Well, duh.” The point is that arguing from this experience that depressing wages and dismantling regulation in America as a whole would create more jobs — which is, whatever Mr. Perry may say, what Perrynomics amounts to in practice — involves a fallacy of composition: every state can’t lure jobs away from every other state.

In fact, at a national level lower wages would almost certainly lead to fewer jobs — because they would leave working Americans even less able to cope with the overhang of debt left behind by the housing bubble, an overhang that is at the heart of our economic problem.

So when Mr. Perry presents himself as the candidate who knows how to create jobs, don’t believe him. His prescriptions for job creation would work about as well in practice as his prayer-based attempt to end Texas’s crippling drought.

Is Rick Perry's jobs 'miracle' a lie?

Texas Gov. Rick Perry, whose campaign bus is plastered with the slogan "Get America Working Again," is making his record on jobs the centerpiece of his run for the Republican presidential nomination. As proof that he's the GOP candidate best positioned to beat President Obama, he points to the so-called "Texas miracle" — Perry's state has added, not lost, jobs in the faltering economy. But critics say Perry's claims are "overblown," and that others, including President Obama, also deserve credit for Texas' good fortune. Is Perry overstating the "Texas miracle" and his role in it?

The jobs "miracle" didn't happen: "The Texas miracle is a myth," says Paul Krugman in The New York Times. The oil-producing state entered the recession late, largely because it benefited from high oil prices in 2008. After that "unemployment soared in Texas, just as it did almost everywhere else." In June 2011, Texas' unemployment rate, at 8.2 percent, was higher than New York's and Massachusetts', and "one in four Texans lack health insurance, the highest proportion in the nation...."
"The Texas unmiracle"

Perry did create fertile ground for job growth: California has lots of oil, too, says Jeffrey Folks at The American Thinker, yet its economy is "in the Dumpster" while Texas prospers. Why the difference? Texas has no income tax, so working adults and retirees want to live there. And as governor, "Rick Perry helped to create a tax and regulatory environment" that helped businesses flourish. Too bad Obama didn't adopt Perry's policies at a national level.
"Obama and the Perry miracle"

The "Texas miracle" is more complicated than Perry admits: Rick Perry can take credit for a 2003 law capping malpractice awards, says Ezra Klein at The Washington Post, which attracted 20,000 physicians to Texas. But, for the most part, Texas didn't create jobs — it siphoned them from other states by offering sub-par wages and loose business regulations, which is hardly a solution nationwide. And many of Texas' new jobs came from government spending aided by $6.4 billion in Obama stimulus spending, but you won't hear that in Perry's stump speech.
"Breaking down Rick Perry's 'Texas miracle'"

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Sources: CNN, Fox News, MSNBC, NY Times, The Week, Youtube, Google Maps

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