Kevin Drum reads Phillip Longman:
and relitigates the question of whether Rick Perry's so-called Texas Miracle is fact or fiction. He concludes that it's mostly fiction, and he makes a good case. Not a bulletproof case, but a good one. What's more, to the extent that Texas really does have a strong economy, he says, it's largely due to fracking, immigration from across the border, and a high birth rate. It's not due to low taxes—at least, not for most Texans:
Oh yes, I know what you’ve heard. And it’s true, as the state’s boosters like to brag, that Texas does not have an income tax. But Texas has sales and property taxes that make its overall burden of taxation on low-wage families much heavier than the national average, while the state also taxes the middle class at rates as high or higher than in California....The top 1 percent in Texas have an effective tax rate of just 3.2 percent. That’s roughly two-fifths the rate that’s borne by the middle class, and just a quarter the rate paid by all those low-wage “takers” at the bottom 20 percent of the family income distribution. This Robin-Hood-in-reverse system gives Texas the fifth-most-regressive tax structure in the nation.
Middle- and lower-income Texans in effect make up for the taxes the rich don’t pay in Texas by making do with fewer government services, such as by accepting a K-12 public school system that ranks behind forty-one other states, including Alabama, in spending per student.
The chart below tells the tale (data here). Most Texans pay more in taxes than most Californians. But rich Texans pay a lot less. That's great for rich Texans, but not so much for everyone else. For the middle class, Texas isn't a low-tax/low-service state, and it's not a high-tax/high-service state either. It's the worst of all worlds: a high-tax/low-service state. Hee-yah!
The counter, of course, is that the extra 5.5% of their income that the rich in Texas get to keep is what allows them to unleash their massive job-creation skills and has driven the boom in Texas's employment.
And the counter to that is that since 1980 Texas's population has grown 15% points more than California's, and California's income has grown 12% points more than Texas's.
But I have been over this ground before:
Brad DeLong: Should Kansas's (and Missouri's) Future Be "a Lot More Like Texas"?: The View from The Roasterie La Farine XIV: October 18, 2013 (DeLong: Long Form): That is one of Kansas Governor Sam Brownback's constant applause lines--that he wants Kansas to be a lot less like California and a lot more like Texas.
And so I was reading Bryan Burrough on Erica Grieder: ‘Big, Hot, Cheap and Right’: What America Can Learn from the Strange Genius of Texas, and ran across Burrough's claim:
AS a Texas-raised journalist, I can tell you two things with confidence about my native state. One, its economy has been humming nicely for years…
And I think: which years are those? The Texas unemployment rate jumped 4.5% points to above 8% in the depths of the Lesser Depression, and is still 6.5%. That's not "humming"--at least not unless you view the experience of the unemployed and of those who fear they might lose their jobs as of no account.
Perhaps Burroughs merely means that the economy has not been "humming" but merely doing better than the rest of the country? It has:
After a long period in which its unemployment rate was above that of the rest of the country, since the Lesser Depression started Texas's unemployment rate has been lower--thanks to an absence of bureaucratic red tape hobbling construction and to relatively tight regulation of mortgages that together kept a big house price bubble from developing, and thanks to the carbon energy boom.
But real per-capita personal income in Greater Houston had in 1980 closed the gap to be within 15% of what it was in Greater San Francisco, while today the gap is not 15% but rather 30%.
And looking forward, I can see the gap widening to 40% as we as a country pull out of the Lesser Depression and restart our technological engines of growth much more easily than I can see it shrinking to 20%.
What the "Texas Miracle" consists of is an enormous boom in population and employment:
That has carried Texas up from 8% of America in 1970 to probably 11% of America--and perhaps 70% of California's population--in 2020. But there was a long time when Texas was not America's most attractive large population growth pole as America moved south and west: Texas's population exceeded California's in 1930, but by the mid-1960s California's population was twice Texas's.
All this would probably lead Burrough to classify me as one of those who doesn't understand Texas. For immediately after writing that its economy has been humming for years, he says:
Two, this appears to greatly offend a certain breed of Northern writer… [who] attempt[s] to rebut stories of a "Texas miracle"…
and who needs to be in turn rebutted. And so Burrough applaud's Erica Grieder's "counter[ing] much of this silliness" that "Texas is corrupt, callous, racist, theocratic, stupid, belligerent, and most of all, dangerous.”
The problem is that three paragraphs later Burrough is writing of how:
Texas’s laissez-faire mix of weak government, low taxes and scant regulations is deeply rooted in its 1876 Constitution, which was an attempt to vehemently dismantle an oppressive post-Civil War government of radical reconstructionists…
What was most "oppressive" about the radical reconstructionists? It was, of course, that they thought African-Americans should vote, and enabled them to do so.
And so by paragraph 5 of Burrough's review, I was thinking that Burrough had just managed to negate whatever countering Grieder had managed to do. To talk in the twenty-first century of oppressive radical deconstructionists who thought the 14th Amendment ought to mean something--that is to play not just the race card but the entire race deck. And I thought that Grieder had set herself a Sisyphean task: where else would a governor both think to say and believe it was a vote-winner to threaten to lynch the Federal Reserve Chair should he set foot inside the state? Texas seemed to me to need different advocates--and a very different governor.
But let's put the callousness and the racism and the theocracy and the belligerency--where else has a state governor threatened to lynch the Federal Reserve Chair of his own party is he comes into the state?--and stick to the economics. Would it be good, economically, for states to become more like Texas? Is it good for Texas to be as much like Texas as it is?
In some ways, yes. Lots of natural resources--especially natural gas, which puts only half as much a global warming load per unit of energy produced as coal and oil--are good. A Hispanic-friendly culture that welcomes and assimilates immigrants is good. Tight mortgage regulation is good. The absence of red tape that hobbles development is good--although do note that, in California at least, it is right-wing Republicans who left us the present of Proposition 13 which makes it impossible for towns to collect enough in property taxes to cover the services required by new development, and it is that that does most to hobble population growth and produce excessive sprawl. In an age of cheap air conditioning, Americans would rather live with hot summers than cold winters.
But, of course, when people talk about emulating the Texas Miracle, they don't mean moving your state so that it is next to the Rio Grande, has mild winters, and has plenty of natural gas. They mean: low taxes--spending only 80% of the national average on state and local government--little regulation of business, weak unions, low minimum wages, a bare-bones Medicaid program, record percentages of people without health insurance, and so forth. Do those work? Would the rest of America be well-advised to emulate Texas along those dimensions?
Paul Krugman says: "No." In The Texas Unmiracle, he wrote that he believes that:
What Texas shows is that a state offering cheap labor and, less important, weak regulation can attract jobs from other states…. 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…
What prosperity Texas is gaining from its differences with the average U.S. policy mix are, he thinks, zero-sum from the perspective of the nation as a whole--a pro-bidness race to the bottom that leaves us worse off as a country than we might be, with high inequality and private affluence at the peak of the income distribution and collective and public squalor.
I am not sure I completely agree. At the very least we need to make the Californias, the New Mexicos, the Colorados, and the Illinoises more open to upgrading the density of their settled areas--to make the rent no longer be so damned high. Then we would actually be able to see whether people still wanted to move to Texas more than climate and energy fundamentals would dictate.
And until that happens--until San Francisco begins replacing some of its Painted Ladies with structures more like those of Brooklyn, and until Berkeley begins replacing some of its bungalows with Painted Ladies--Brownback's applause lines will continue to have at least a surface plausibility.