Texas ... Gold standard, or fool’s gold?

Fort Worth Star-TelegramNovember 6, 2013 

The eyes of the U.S. are upon Texas. But what exactly do they see?

The state’s fast-growing economy and Gov. Rick Perry’s extensive travels to boast about it and lure more business to the state are drawing greater attention, as well as scrutiny, to the so-called Texas Miracle.

In fact, dissecting the Lone Star State has become something of a cottage industry.

Time magazine ran a long cover story last month by Libertarian economist Tyler Cowen, “Why Texas is Our Future.” Discussing the state’s economic success, low taxes and widening gap between rich and poor, it says the Lone Star State portends trends that could spread across the country.

“Texas is already one of the most unequal states. America’s safety net is fraying under the weight of ballooning Social Security and Medicare costs [while] Texas’ safety net was built frayed,” wrote Cowen, a professor at George Mason University in Virginia.

Austin College in Sherman recently ran a symposium called “Texas Got It Right?” — paying cautious homage to the 2012 book Texas Got it Right! co-written by Dallas billionaire Sam Wyly.

This year, Texas Monthly editor Erica Grieder published Big, Hot, Cheap, and Right: What America Can Learn from the Strange Genius of Texas, and New York Times columnist Gail Collins took a more skeptical tack with As Texas Goes: How the Lone Star State Hijacked the American Agenda.

During a recent visit to Israel, Perry said that since 2000, some 5.2 million people voted with their feet by moving to Texas. And, he tells audiences, a combination of low taxes and modest regulation has created the environment that allowed 1.6 million jobs to be created while he has been governor.

But others question the long-term effects of those policies.

In the Time article, Cowen quoted Scott McCown, a University of Texas law professor, as saying: “We are not strong economically because we have low taxes and lax regulation. We are strong economically because of geography and geology. We’ve built an economy favoring the wealthy. … If that’s the ultimate end result of the Texas model in a democratic society, it will be rejected.”

Still, many Americans are being pulled south of the Red River for jobs, a cheaper cost of living and a less regulated climate.

“Texas has those in spades,” Cowen wrote.

Cal Jillson, a political scientist at Southern Methodist University, says, “The idea of the Texas Miracle is half a century old, at least going back to the [Gov.] John Connally period, and certainly has seen a renewed life in the last four, five years as Texas recovered more quickly form the Great Recession.”

But demographic trends suggest a widening gap in income and educational achievement in Texas’ future. Jillson and others say the changes will make the state look like anything but something to emulate unless priorities change at the leadership level. And a larger percentage of Texans are in poverty, 17.9 percent in 2010 compared with 15.3 percent for all Americans.

If current trends that worsen social disparities continue, Jillson warns, “We’re going to become Guatemala.”

The state’s business-friendly regulatory environment took some shots after the fertilizer plant explosion in West, which killed 15 people.

Sacramento Bee cartoonist Jack Ohman lampooned Perry with a cartoon that depicts the governor at a lectern saying, “Business is booming in Texas!” The next panel depicts a massive explosion.

Perry demanded an apology; Lt. Gov. David Dewhurst went further, insisting that Ohman be fired. The newspaper stood by its cartoonist.

Both state and federal agencies had responsibility for overseeing fertilizer processors and distributors, such as the one in West.

Investigations have yet to pin blame on any agencies that might have dropped the ball. Media reports say the plant failed to inform authorities how much explosive material it had on hand.

Trouble ahead?

“At the macro level, the state has done exceptionally,” said Stuart Greenfield, a former state comptroller’s economist first hired by Bob Bullock, who later became lieutenant governor.

Now an economics instructor at the University of Maryland and Austin Community College, Greenfield said, “The population growth between [the 2000 and 2010] censuses has exceeded any other states. So, in terms of income growth and employment, we’ve done exceptionally well.”

But that’s far from the whole story, Greenfield says. “The concern to me is how widely has this improvement been distributed.”

He noted that more than 17 percent of Texans live in poverty. When adjusted for cost of living, California fares slightly worse. Still, Greenfield says, the poverty level in Texas is above the national level.

Academics such as Greenfield and Jillson are concerned that the low-tax policy will have damaging consequences, particularly because of the relatively meager amount spent ensuring graduation rates for Hispanics, the state’s fastest-growing population segment.

Texas ranks 49th in per capita student funding in public schools, and minorities are disproportionately affected, they say.

Hispanics will pass Anglos in 2020 and will compose half of the state’s population by 2050, according to the state demographer’s office. So if minority graduation rates don’t improve, the Texas Miracle could take a major hit.

Greenfield put it more bluntly.

“If Texas doesn’t provide resources to improve education attainment of Hispanics, the state is dead,” he warned. “I don’t think our leadership has recognized the fundamental demographic trends.”

Citing statistics compiled by Rice University professor Steve Murdoch, the former state demographer, he said household income will decline without those improved graduation rates, dropping from $66,333 in 2010 to $58,574 in 2050.

“According to Murdoch, things will get worse if we don’t make an effort to close the gap between Anglos on one hand, and blacks and Hispanics on the other, in terms of improved education.”

Jillson agreed: “Unless we increase investment in our schools to enhance minority educational attainment, the future of Texas will involve a comfortable but shrinking Anglo population and a growing but poor minority population.”

That, he said, is “not a recipe for success.”

But his SMU colleague, economist Bud Weinstein, said spending more doesn’t always bring corresponding results.

“Texas is often criticized for our ‘modest taste’ for governmentally provided services,” Weinstein said. “We rank close to last when it comes to per capita spending for public schools, health, parks and recreation, libraries, etc. But many states that spend twice as much per capita as Texas often have the same outcomes in terms of high school dropouts, poverty rates, etc.

“So is Texas America’s future? Probably not,” Weinstein said.

‘The Texas model’

But the state could become a model for at least part of the country, for better or worse.

“Blue states like California, Massachusetts and New York will never emulate the Texas model,” he said. “Indeed, they detest us.

“But Texas has clearly become the gold standard for red states, and several of them are already changing their public policies in hopes of becoming more like Texas.”

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