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Perry criticizes government while Texas job growth benefits from it

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LONGVIEW, Tex. — Texas Gov. Rick Perry has leapfrogged to the top tier of Republican presidential candidates largely on the strength of one compelling fact: During more than a decade as governor, his state created more than 1 million jobs, while the nation as a whole lost 1.4 million jobs.

Perry says the “Texas miracle” rests on conservative pillars that he would bring to the White House: minimal regulation and government, low taxes and a determination to limit the reach of Uncle Sam.

What he does not say is that much of that job growth has come because of government, not in spite of it.

With a young and fast-growing population, a large and expanding military presence and an influx of federal stimulus money, the number of government jobs in Texas has grown at more than double the rate of private-sector employment during Perry’s tenure.

The disparity has grown sharper since the national recession hit. Between December 2007 and last June, private-sector employment in Texas declined by 0.6 percent while public-sector jobs increased by 6.4 percent, according to the federal Bureau of Labor Statistics. Overall, government employees account for about one-sixth of the workforce in Texas.

The significant role of government in Texas’s relative prosperity stands in stark contrast to the “go-it-alone” image cultivated by Perry, who credits a lack of government interference for fostering a business-friendly environment in Texas.

“The fact is, government doesn’t create jobs, otherwise the last 21 / 2 years of stimulus would have worked,” Perry said this month in a speech to the National Conference of State Legislatures. “Government can only create the environment that allows the private sector to create jobs. The single most important contributor to our jobs-friendly climate here in Texas is our low tax burden, because we know dollars do far more to create jobs and prosperity in the people’s hands than they do in the government’s.”

Perry has criticized Washington for “thumbing its nose” at the American people. In announcing his candidacy for president last weekend, Perry said he would “work every day to make Washington, D.C., as inconsequential in your life as I can.”

Mark Miner, a Perry spokesman, said the governor’s job-creation record speaks for itself. He also said the state received less per capita — about $1,000 per resident vs. more than $1,400 in New York and $1,200 in California — than most other states from the stimulus plan while still producing more jobs.

Population boom

Analysts call the growth in government employment in Texas a natural consequence of the surging population, which has grown by more than 20 percent in the past decade to 25.1 million. The increase has caused local governments and school systems to hire more teachers, budget analysts, compliance officers and police officers.

“A lot of growth has been happening in the public sector to respond to a growing population,” said Don Baylor Jr., a senior policy analyst with the Center for Public Policy Priorities, a research and advocacy group in Austin. “That has been an ongoing driver of our job growth.”

Baylor warned that the growth in government jobs may shortly come to an abrupt halt when state budget cuts take effect this year. In July, a dip in government jobs contributed to a spike in the state’s unemployment rate, which went from 8.2 percent to 8.4 percent.

“I think we are about to find out what the jobs picture looks like” without growth in the public sector, Baylor said.

The Texas economy also has benefited from the huge sums spent by the federal government. The state is home to several large military installations as well as NASA, which helped Texas reap more than $227 billion in federal spending in 2009 — more than double its 2001 total, according to the Census Bureau. Texas is the nation’s second-most-populous state, behind California, where the federal government spent almost $346 billion in 2009.

In the wake of the Great Recession, the state has raked in nearly $25 billion in federal stimulus money, which has gone to everything from road projects and unemployment benefits to helping to balance the state budget. Befitting its population, Texas has received the third-highest amount of stimulus money in the nation, behind California and New York.

“It is not like Texas does not benefit from Washington,” said Richard W. Fisher, president and chief executive of the Federal Reserve Bank of Dallas. “We get ours. But still, the driving force of the Texas economy is the private sector.”

Company executives and economic development officials credit Texas’s economic successes to what they call a pro-business culture. Texas is a right-to-work state, has relatively low business taxes and has no state income tax. They also applaud Perry for pushing through a series of tort reform measures, which limit medical malpractice lawsuits, impose fees on unsuccessful plaintiffs and make it easier to dismiss cases deemed to lack merit.

Texas also has abundant land for development and limited land-use restrictions, making development cheaper and easier than in many places.

Fluor, a global firm that designs and builds complex industrial plants, moved its corporate headquarters to the Dallas area from Orange County, Calif., five years ago. Alan Boeckmann, who was Fluor’s chief executive at the time, said the corporation was eager to take advantage of what Texas had to offer.

“Most of the reasons fall into the category of corporate efficiency,” he said. “We had very little in the way of clientele and business issues in California. Also, it was very difficult to recruit people to California because the cost of living scared them away.”

Texas’s relatively soft landing after the recession has helped its other assets, which include a booming energy sector, world-class airports, Gulf of Mexico ports and burgeoning trade with its southern neighbor, Mexico. Trade with China also is up sharply.

Housing prices in check

Texas was shielded from the worst of the housing-market bust by the state government’s tight regulation of home equity loans, which were not permitted until the late 1990s and are limited to 80 percent of a homeowner’s equity. Elsewhere, property owners often took out riskier home equity loans and mortgages that left them financially crippled when housing prices collapsed, causing damaging ripples across the economy.

At the same time, mortgage lenders in Texas are tightly regulated, which prevented abuses that were prevalent in many parts of the country. Taken together, the regulations helped keep Texas housing prices in check.

Because of early and robust regulation, We never had that disconnect between incomes and home prices that you saw elsewhere at the height of the housing bubble,” said Douglas B. Foster, commissioner of the Texas Department of Savings and Mortgage Lending. “So there was no need for exotic mortgage products.”

Perry’s campaign called the mortgage regulations appropriate. “Governor Perry is not against all regulations,” Miner said. “He is against regulations that kill jobs and harm the economy.”

James C. Oberwetter, president of the Dallas Regional Chamber of Commerce, says that, overall, the state’s economy has benefited from a light hand of government — even if that has allowed social problems to fester.

“There are some conservative principles at work, which, true enough, cause problems for funding some of our social programs,” he said. “Yet, on the other hand, it leads us to great job creation.”

Many educators and others say that trade-off is evident in many social indicators. More than a quarter of the state’s population lacks health-care coverage. Texas is last in the country when it comes to the number of adults with high school diplomas. It is 44th in the country in school spending per pupil, and its rate of income inequality is the ninth- highest in the country.

The Census Bureau says 9.5 percent of the Texas workforce is paid at or below the federal minimum wage of $7.25 an hour, tying it with Mississippi for the largest share of minimum-wage workers in the country. Many restaurant workers are among those who earn less than the minimum wage.

“In Texas, as anywhere else in the nation and in all capitalist societies, you earn what you learn,” Fisher, the head of the Federal Reserve Bank of Dallas, wrote in a June op-ed piece in the Dallas Morning News, calling for educational improvements. “Income is directly correlated to educational attainment.”

In Longview, in the oil- and gas-producing heart of East Texas, the economy is growing swiftly, and employers are struggling to find qualified workers.

“We can’t get enough production welders,” said Aaron Lowe, a welding engineer at Trinity Rail, a railroad car manufacturer that has been expanding briskly in recent months after shrinking during the downturn.

The same is true at other employers. Eastman Chemical, which manufactures coatings, adhesives and other products, has seen a huge boom in sales with the drop in natural-gas prices. The two local medical centers also are hiring.

Still, education officials worry about the future of a city where only half of the high school graduates go on to higher education. “Every independent school district in Texas is underfunded,” said James Wilcox, superintendent of schools in Longview.

And that, he said, will hurt in the short run. Wilcox said he recently had to cut 20 of the school system’s 1,100 jobs to accommodate state budget cuts.

He also said it will hurt in the long run by leaving many of his students unprepared for the evolving job market.

“If kids go right to work from high school, they are only going to get pretty much minimum-wage jobs,” Wilcox said. “They have to be able to get some training that would make it so they don’t have to start at the bottom.”

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