In a very balanced portrayal of Texas Gov. Rick Perry’s tenure, Business Week’s Joshua Green sheds some light on the so-called Texas miracle. Perhaps the most compelling aspect is Perry’s technique for solving the budget shortfall:
When the legislature convened in January , it confronted a massive budget shortfall of $27 billion from the collapse of sales tax revenue in the recession. Offsetting this grim figure was a $6 billion rainy day fund that the business community, the Democrats, and many Republicans wanted to use to protect school budgets. But Perry refused to touch the money and made preserving the fund a litmus test of conservatism.
Instead, through a combination of deep cuts and audacious gimmickry, the shortfall was erased. This entailed cutting $5 billion from the public schools and breaking a commitment, dating back to World War II, to budget for the thousands of new students who enroll every year. The state’s population is rising at twice the national rate. Its schools will absorb 85,000 new students this year alone, and for the first time without any new money to pay for them.
The legislature made another $5 billion disappear by pretending the state’s population isn’t rising. The budget assumes no growth in Medicaid claims, although these track population growth. Lawmakers allotted enough money for 18 months but declared that it will last 24 months. Of course, Medicaid is an entitlement, so eventually the state will have to pay up. It is universally understood this will claim the entire rainy day fund. But that bill, and others, won’t come due until the next legislature convenes in January 2013. By then, Perry intends to be in the White House.
It’s this kind of smoke-and-mirrors accounting that infuriates Tea Partyers. Moreover, it’s important to note the difference in style between Perry and Republican Govs. Mitch Daniels of Indiana and John Kasich of Ohio. The latter two embarked on bold reform plans to enhance service, improve efficiency, channel education funds to the classroom and away from bureaucracy, and remodel health care at the state level. Perry’s aim, on the other hand, was to give the appearance of fiscal reform. He or his successor will have to clean up the mess in future years.
Green also looks at the job growth:
Texas has fared better than most other states for a number of reasons. Its energy-intensive economy has been sustained by high oil prices. Crossborder commerce with Mexico and its rising middle class helped Texas businesses. Also, the state doesn’t have a large concentration of financial-services companies and avoided the worst excesses of the housing bubble thanks to state regulations limiting the size of home equity loans. . . .
Perry’s low-tax, pro-business policies have certainly helped, too. The state became an even more desirable destination for companies and job seekers. During the 18 months of the recession, Texas grew by 800,000 people, the equivalent of adding everyone in San Francisco.
Government has also played a large role in sustaining the state’s economy. The federal stimulus saved or created 210,000 jobs in Texas, according to Baylor’s analysis of a national study by economists Mark Zandi and Alan Blinder. A quirk of state government also helped. Unlike most other states, Texas is on a two-year budget cycle. The effects of the recession didn’t begin to register there until the end of 2008, about a year later than the rest of the country. So there hadn’t yet been much of a drop-off in revenue when the legislature wrote the 2009 budget, and by then the state had begun receiving federal stimulus funds. Consequently, while other states had already slashed spending, Texas was carried through the next two years with a budget that was much more robust.
This is the big reason why Texas kept adding jobs during the recession, even as the rest of the country lost them: 65 percent of the net new jobs there since the beginning of 2007 were government positions.
It’s fair to say that Perry took advantage of the governorship he inherited from George W. Bush. He didn’t reverse its right-to-work laws or pass a bunch of regulation or raise taxes. But then no Republican governor could get away with that. Aside from tort reform (which hasn’t improved the availability of affordable health care), however, he did not build or innovate or reform. If the task for the next president is to fix problems, remodel entitlement programs, redesign a tax system and construct an effective foreign policy, there is precious little in his background to show he is able to complete those tasks. He is an expert at aggrandizing power, tending to donors and using the levers of power and taxpayer dollars to reward friends and punish opponents. Unfortunately, those “talents” are the last thing we need in D.C. More to the point, that behavior is what Tea Partyers are trying to eliminate.