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The Reality And The Myth Of The Texas Miracle

The initial liberal reaction to Rick Perry's "Texas miracle" has been to dispute that any such miracle has occurred. The instinct here was understandable -- for reasons I'll explain below, Perry's story doesn't make a lot of sense -- but it doesn't seem to be correct. Matthias Shapiro persuasively argues, in a lengthy blog post that's hard to summarize, that Texas has indeed enjoyed very impressive growth under Perry. Dean Baker, after initially reaching the opposite conclusion due to spreadsheet error, reaches the same conclusion.

So Texas has done great under Perry. What does this mean? Perry's explanation is that he fostered a pro-business environment by keeping taxes and regulation low and luring employers from other states. But that story does not really make sense even on its own terms. First, Perry's right-wing policy cocktail closely resembles conservative governance in other Republican-run states. And yet we don't see a general trend of extraordinary job growth in states with low taxes, pro-business regulation, and so on.

Second, even if it were true that Texas thrived because Perry poached business from California, this hardly provides us with a blueprint for national policy. Begger-thy-neighbor policies aren't a formula for national success. There are only so many jobs we could poach from Canada or Mexico. It's always going to be easier to get a business to move across state lines than international lines. 

The best explanations for Texas's success, other than its proximity to Mexico and resulting high levels of immigration, is genuinely good housing policies. Texas had tight lending requirements that prevented the inflation of a housing bubble, and it maintains loose zoning rules that allow for lots of cheap housing. In a housing-based economic crisis, this goes a long way. It doesn't, however, especially recommend Perry's national economic agenda.