My colleague Derek Thompson takes on Paul Krugman's contention that the Texas miracle was a mirage in his comment "Is Texas Special?" Challenging Krugman's notion that the state's deficit undercuts the advantages it derives from its population and economic growth, Thompson notes that, when it comes to Texas -- and you can say this for just about any kind of economy -- it is structural factors rather than short-term policy fluctuations that ultimately matter. "Whether or not Texas has cultivated a uniquely successful business environment at the state level," he notes, "it's pretty clear that many of Texas' largest cities are uniquely positioned to withstand the recession. As a general rule, the cities that survived the recession avoided the housing boom and clung to strong government-backed sectors, like health care, higher education, and military." Six Texas metros number among the country's 20 best-performing regions, according to research and rankings by the Brookings' Metropolitan Policy Program, he adds.
Thompson has it right. Texas is a state that is defined by big strong metros. It began investing in its superb state university system a long time ago, which distinguishes it from many other Sunbelt states. It has used its natural resource endowments not as a crutch but as a mechanism for investing in technology and economic transformation. Many of its big metros have high human capital levels and high levels of the creative class. When I did the original analysis for the Rise of the Creative Class, I was struck to find three Texas metros among the country's top 10: second place, Austin; seventh place, Houston; and 10th place, Dallas. On top of that, Texas has two giant mega-regions, Hou-Orleans and Dal-Austin, that some analysts suggest actually constitute one gargantuan mega-region -- The Texas Triangle, home to more than 20 million people and producing $700 billion in economic output, making it the fifth largest in the U.S. and 10th largest in the world.
Krugman may be right that Texas' "conservative theory of budgeting" is hurting its short-term prospects. As former Houston Mayor Bill White notes, the state very much needs to continue -- even expand -- its investments in research and higher education. But the state has the economic and geographic fundamentals that can counterbalance short-term policy changes and lay a solid foundation for long-run prosperity.