Politics & Policy

The Texas Miracle Is No Myth

It’s worth looking under the surface.

Just hours after Rick Perry officially entered the presidential race last Saturday, liberals started to attack Texas’s economic record. Paul Krugman got the ball rolling in Sunday’s New York Times: “So what you need to know,” Krugman claimed, “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.” With the latest Gallup poll showing that just 26 percent of Americans approve of President Obama’s performance on the economy, liberals have little choice but to try to distort what is happening in Texas. To do so, they will have to rely on sleight of hand. Krugman continued: 

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. . . .

#ad#The Texas unemployment rate is indeed about one percentage point lower than the national average, and it is true that other states such as New York and Massachusetts have very similar rates.

But things in America are a lot worse than the unemployment numbers indicate, for the simple reason that many people have given up looking for work altogether, thus completely removing themselves from the labor force. This complicates the numbers, as people do not fall out of the “unemployed” column only when they get a job, but also when they stop looking for one. If we are to see a recovery, we will need to lower the unemployment rate by returning Americans to work. Unfortunately, job seekers’ simply giving up has been a hallmark of the Obama administration. During the Obama “recovery,” about 2.8 million Americans have given up and completely stopped looking for work.

This is why, even though Texas has created lots of jobs, its official unemployment rate is similar to those in “blue states” like New York and Massachusetts. It is a superficial similarity. While Texas’s labor force has grown by 350,000 since the recession ended in June 2009, Massachusetts’s has remained virtually unchanged, and New York’s has fallen by 140,000. 

Keeping a similar unemployment rate to Texas’s isn’t quite the wonderful accomplishment it seems to be when so many people have given up looking for work. Eventually, the rest of the states will suffer a long-term unemployment problem that Texas won’t because, when the economy does recover, those who have given up looking for work will start looking again. When they do, they will quietly add themselves to the numbers and the disparity will become apparent.

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So where does the notion of a Texas miracle come from? Mainly from widespread misunderstanding of the economic effects of population growth. 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. . . .

But if population growth creates jobs, then why don’t we see this nationally? The nation’s working-age population has grown by about five million since the beginning of the Obama administration.

#ad#Yet instead of growing with the working-age population, the number of jobs has decreased by 2.91 million. Krugman claims that Texas has more jobs simply because its population has grown, but the reverse is really the case: The ability to get a job in Texas continues to lure Americans from other states, as well as Mexicans.

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. . . .

If Krugman can see significant swings in either the number of people employed or the number in the labor force as gas prices change, he has better eyes than I do.

Krugman notes that Texas benefited from rising gas prices in 2008, but he fails to mention how Texas still did well relative to other states even when gas prices plummeted in late 2008 and stayed low through most of 2010.

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Krugman’s views have been echoed in other publications, notably by Brad Plumer and Harold Meyerson in the Washington Post. They also mention Texas’s “oil boom” economy and then go after the high number of Texans who earn the minimum wage.

Plumer: “The state boasts the highest percentage of minimum-wage workers in the country . . . .”

Meyerson: “It has the fourth-highest poverty rate of any state. . . .”

#ad#Unfortunately, neither of these writers really understands what these numbers mean. The biggest problem with both claims is that Texas has the second largest percentage of under-18-year-olds in the country. Children between ages 0 and 17 don’t make much income, if any, but they nonetheless are factored into per capita income calculations. In order usefully to compare what people are making across the states, a better approach is to compare GDP per adult. In 2008 Texas ranked 14th, which is not too shabby. Even more important, from the day Perry became governor in 2000, until 2010, Texas ranked 10th in terms of real GDP growth per adult. By contrast, California ranked 24th.

Krugman and his cronies may not realize it, but Texas’s very young population also dramatically raises the rate of people in the population earning the minimum wage. Given that single women with kids make up such a large portion of those in poverty, it isn’t surprising that the high birth rate also drives up the poverty rate.

With nationwide unemployment stuck over 9 percent — a number made artificially less horrific because millions of Americans have given up looking for work — President Obama and his supporters will have a tough time convincing Americans that they know what they are doing. As a result, their only option is to convince Americans that Republicans don’t have a solution. If the attacks on Rick Perry’s record are the best that Democrats can do, the election might already be over.

— John R. Lott, Jr. is a FOXNews.com contributor. He is an economist and author of the just released revised edition of More Guns, Less Crime.

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