Rick Perry and the Economics of the Texas Miracle

Forty percent of Obama's jobs record is Perry's jobs record. Even if the Texas governor isn't "responsible" for it, that's still a formidable record.

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If Texas Governor Rick Perry is the Republican nominee for president, the 2012 election will have a striking parallelism. President Obama would ask voters to overlook a bad national economy for which he's not fully responsible. The Republican challenger would ask voters to credit him for an impressive state economy for which he is also not fully responsible.

There are two themes here. One is that the likelihood of a politician to take ownership over an economy is directly proportional to the health of the economy. The other lesson is that even as political leaders can try to guide an economy, they are ultimately victims, or beneficiaries, of its underlying fundamentals.

The Texas miracle is, like so many miraculous things, complicated upon closer inspection. Texas accounted for 40 percent of the nation's new jobs since June 2009. This impressive statistic is the result of geology, geography, history, and politics.

-- Geology blessed Texas with oil, natural gas and other energy and agricultural resources that powered Texas through the early part of the recession and bolstered the state's recovery in the subsequent global commodities boom.
-- Geography gave Texas open, arable land that encourages wide, cheap housing and a Mexico border offering a steady stream of cheap immigrant labor.
-- Recent history, especially the S&L crisis of the 1980s, gave Texas a lesson in conservative banking practices that served it well in the 2000s.
-- And as national politics is responsible for high military spending that is a backbone of the San Antonio economy, many companies in Texas also benefit from the state's conservative regulation, which holds down the cost of business.

Texanomics is well-suited to a recession stemming from a financial crisis. When consumers' balance sheets are hurting, they seek out low cost-of-living. That's Texas. When companies don't have access to credit, they hire cheaper labor. Texas again. When young couples look to start a family, they're drawn to affordable housing, nice weather, and industries that hire: Energy and aerospace in Houston, health care and military in San Antonio, tech and education in Austin, and communications and more energy Dallas.

And all that explains why Texas has dominated the recession, expanding its labor force by more than 600,000 in the two years after the bust while the national employment-to-population ratio shrank:
President Obama clearly suffers from the opposite problem. Just as Texas was well suited to withstand the Great Recession, the U.S. couldn't have been in worse shape than when the president took office in 2009. The economy shed three-quarters of a million jobs in the president's first month in office. Real estate bubbles devastated the Sun Belt, and low export figures prevented a swift recovery. In Texas, cheapness was a virtue. Meanwhile the rest of the country was still living with the hangover of its credit-fueled binge.

That the stimulus was a PR-failure says more about the strength of the downturn than the weakness of the administration. But that's an economist's distinction, not a campaign platform. The president's message to voters asks them to see the successes of his policies by imagining how bad things would be without them. In a rotten economy, Obama has to run on a hypothetical. The governor's economic message is simpler. It's reality. It's "Look at Texas." Perry isn't entirely responsible for the state's economic record. But he's a record worth claiming.