The ‘Texas Miracle’ is a Myth

Posted by AzBlueMeanie:

Predictably, the media villagers and Beltway bloviators rotely reported secessionist Texas Governor Goodhair Rick Perry's "jobs" talking point like the good little stenographers they are without any fact checking or raising any caveats about his claim:

“Since June of 2009, Texas is responsible for more than 40 percent of all of the new jobs created in America. Now think about that. We’re home to less than 10 percent of the population in America, but 40 percent of all the new jobs were created in that state.”

This abject failure of the corporate media is slowly being corrected today. Glenn Kessler of the Washington Post does a fact check of Governor Goodhair's jobs assertion and finds that the so-called "Texas Miracle" is not all it is claimed to be. Fact Checker: Fact Checking Rick Perry’s Announcement Speech:

This is a great-sounding statistic, and likely will form the core of Perry’s campaign …But, as always, there needs to be some context. The Federal Reserve Bank of Dallas has especially promoted this figure, and even it acknowledges that the number comes out differently depending on whether one compares Texas to all states or just to states that are adding jobs. Since Texas is adding jobs, and many other states are losing jobs, Texas’s gains become out-sized in a general national survey.

Texas, as a state rich in oil and national gas, has also benefited from increases in energy prices that have slowed the economy elsewhere in the country. Higher energy prices have meant more jobs in Texas. Though Perry proudly claims the job growth is the result of a low-tax, anti-regulatory environment, others have pointed to a big investment in education in the 1980s that, yes, was the result of a tax increase.

[That would be Democratic Governor Mark Wells White (1983-1987), who "[laid] the groundwork for a more diversified economy – one less reliant upon the . . . swings of a single industry." Governor White sought to improve education, transportation, water resources, law enforcement, and taxes to lure new industry to Texas. Education was an essential factor for White. When he took office, Texas was ranked as one of the lowest performing states for the Scholastic Aptitude Test (SAT) also in teachers' salaries. After taking office, White immediately appointed a committee on Public Education, called a special session of the legislature in 1984, and worked with lawmakers to pass the Educational Opportunity Act (EOA). The EOA was committed to building the finest public education system in the country. Through White's work, Texas saw the desired results. SAT scores increased by twelve points, Texas first graders improved in statewide tests and teacher salaries increased by $5,000. By focusing on education, Governor White was able to make Texas a "state of the future" with regard to its most important resource, its children. Through his diligent work as Governor of Texas, many of the problems of the present and the future were alleviated.]

The so-called "Texas Miracle" comes with some Texas-size caveats according to Laylan Copelin at The Statesman (Austin, TX), Should Perry get credit for Texas Economy?:

People moving to Texas accounted for almost half of the 4.2 million new Texans since 2000, a 20 percent increase that means more people are demanding more goods and services, a kind of self-generating economic engine. And that influx is not just people working in low-skilled jobs. Texas is attracting more college graduates each year than the state's universities graduate.

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Most people know of Texas' reputation for creating jobs — the cornerstone of Perry's pitch that limited government, less regulation and low taxes are the tonic for what ails the nation. Yet almost half of the state's job growth the past two years was led by education, health care and government, the sectors of the economy that will now take a hit as federal stimulus money runs out and the Legislature's 8 percent cut in state spending translates into thousands of layoffs among state workers and teachers in the coming weeks.

Also, Texas is tied with Mississippi as the nation's leaders in minimum wage jobs.

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The state's economy added about 282,300 jobs from June 2009 through April, according to an analyis by the Federal Reserve Bank of Dallas. The state also lost 45,500 jobs during that period.

Job gains and losses, however, did not fall equally across the Texas economy the past two years. Construction, manufacturing and information sectors lost jobs overall. Education and health services led in job creation (32 percent of all jobs added), followed by professional and business services (23 percent), petroleum (18 percent) and government (12 percent). Other industry sectors, ranging from utilities to hospitality, had smaller job gains.

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Economists disagree on how much credit Perry deserves for the state's recovery, but they agree his economic policies are a continuation of a long-standing Texas tradition.

"As for our reputation as a low-tax, low-service state, that's always been true, ever since the Republic," said James Galbraith, a professor at the Lyndon B. Johnson School of Public Affairs. "Gov. Perry did not inherit a high-tax, high-service state and transform it."

Galbraith said other economic factors, not Perry, are driving the Texas economy: "He has no influence that I'm aware of over geology, the oil price, immigration or capital inflow."

The so-called "Texas Miracle" is really an illusion according to the New York Times Paul Krugman. The Texas Unmiracle:

[The Perry] 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 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 [RomneyCare] 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.

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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.

Looks like this Texas turd blossom is all hat and no cattle.