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<DIV class=timestamp>August 14, 2011</DIV>
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<H1><NYT_HEADLINE version="1.0" type=" ">The Texas
Unmiracle</NYT_HEADLINE></H1><NYT_BYLINE>
<H6 class=byline>By <A class=meta-per
title="http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html?inline=nyt-per CTRL + Click to follow link"
href="http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html?inline=nyt-per"
rel=author>PAUL KRUGMAN</A></H6></NYT_BYLINE><NYT_TEXT>
<DIV id=articleBody><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>
<P>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. </P>
<P>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. </P>
<P>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. </P>
<P>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 <A
title="Washington Post article."
href="http://www.washingtonpost.com/wp-dyn/content/article/2010/04/03/AR2010040304983.html">spared
the worst</A> of the housing crisis, partly because it turns out to have
surprisingly strict regulation of mortgage lending. </P>
<P>Despite all that, however, from mid-2008 onward unemployment soared in Texas,
just as it did almost everywhere else. </P>
<P>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.
</P>
<P>So where does the notion of a Texas miracle come from? Mainly from widespread
misunderstanding of the economic effects of population growth. </P>
<P>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. </P>
<P>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. </P>
<P>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.
</P>
<P>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. </P>
<P>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. </P>
<P>Still, does Texas job growth point the way to faster job growth in the nation
as a whole? No. </P>
<P>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. </P>
<P>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. </P>
<P>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.
</P><NYT_CORRECTION_BOTTOM>
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<DIV
class="wrapper opposingFloatControl">___________________________</DIV></DIV></DIV></FONT></DIV>
<DIV><FONT size=2 face=Verdana>Wayne A. Fox<BR><A
href="mailto:wayne.a.fox@gmail.com">wayne.a.fox@gmail.com</A><BR></FONT></DIV></BODY></HTML>