Rick Perry should send Ben Bernanke a thank-you note

at 02:00 PM ET, 09/26/2011

Turns out Rick Perry’s “Texas Miracle” owes much of its success to... Ben Bernanke. A new research paper from the Dallas Fed finds that Texas has rebounded from recession faster than the rest of the country thanks, in no small part, to actions by the U.S. Federal Reserve. (Yep, the same central bank that Perry occasionally deems “almost treasonous.”)

(Carlos Osorio/Associated Press)
The Dallas Fed economists, David Luttrell and Harvey Rosenblum, observe that the Fed’s monetary stimulus appears to have packed a bigger wallop in Texas than in other regions of the country. But why should that be? One theory is that Texas’ banking system was in better shape because of regulations put in place after the savings and loan crisis in the 1980s. Regulations on mortgage finance and lack of zoning restrictions also meant Texas didn’t really suffer through a housing bubble. The authors note that Fed policy stimulates growth through several channels — including the “bank loan channel” and the “asset prices and wealth channel.” A healthy banking sector meant that these channels “remained relatively unblocked” in Texas.

The authors also note that the Fed’s moves to weaken the dollar disproportionately benefited Texas. “A weaker dollar spurs exports, and Texas is the country’s largest exporter, comprising almost one-sixth of the nation’s total by origin of movement,” they wrote.

Now, the Federal Reserve can’t hog all the credit for the fact that Texas has been growing relatively faster than many other parts of the country (although unemployment is still high). The Dallas Fed economists point to a variety of factors that have helped the Texas boom, from low income taxes to high birth rates to “recent violence in Mexico,” which has “produced an influx of middle- to high-income immigrants, bringing their human and financial capital across the border.” Still, they note, the Fed’s “extraordinary monetary and fiscal policy intervention” appears to have given Texas — and, by extension, Perry’s presidential prospects — a big lift.

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