Wednesday, August 17, 2011

Texas Trade-offs

Rick Perry is running on the platform that Texas has been out-performing the rest of the country economically. If he is elected president then he will do for the country what he did for Texas. This is a winning platform in a bad economy. Reagan and Clinton used variations of it to unseat incumbent presidents. Dukakis tried to use it in 1988 against George H. W. Bush.

The best defense is to puncture the challenger's claim. Bush did this with Dukakis, portraying the "Massachusetts Miracle" as the "Massachusetts Mirage". Ross Perot tried to do this with Clinton by pointing out that Arkansas was one of the worst states economically. Had Bush taken the same approach he might have stayed in office. Instead, Clinton ran ads pushing "My little state" as an example of economic rebirth.

In the few days since Perry announced, the left has started portraying Texas as a problem child. Harold Meyerson's Washington Post column is typical. Entitled "The sad facts behind Rick Perry's Texas miracle", Meyerson portrays Texas as a third world country that somehow manage to sneak into the US.

Rick Perry's Texas is Ross Perot's Mexico come north. Through a range of enticements we more commonly associate with Third World nations — low wages, no benefits, high rates of poverty, scant taxes, few regulations and generous corporate subsidies — the state has produced its own"giant sucking sound," attracting businesses from other states to a place where workers come cheap. 

[...] What Perry touts in his stump speech, however, isn't the oil boom but, rather, the low-tax, low-reg, handouts-to-business climate that prevails in Texas. It's the kind of spiel that businesses hear every day from leaders of developing nations — Mexico and, even more, China.

[...] Perry's economic vision is the kind of race-to-the-bottom mercantilism we've come to expect from developing nations in the globalized economy, although, as China, Brazil and India illustrate, many such nations have begun to provide citizens with more schooling and better jobs as they grow wealthier. No comparable developments can be seen in Rick Perry's Texas.

He goes on to list all of Texas's shortcomings which mainly consist of insurance (which he restates three different ways as if they were unrelated) and education.

What we have here is really a debate on trade-offs. Would you prefer to have a job that does not include insurance or no job at all? Can our society exist solely on a highly educated workforce (with crushing college debt) or do we still need people with less formal education? At what point do regulations become burdensome (keeping in mind that federal safety standards apply regardless of state regulations)? Is zoning worth higher real estate costs and housing shortages?

Meyerson is arguing that we can have it all. The Texas model says that we cannot and we have to decide what is most important. Meyerson indirectly cedes this point in his closing paragraph:

Perry wants to unravel the national social contract and once again have us go state by state, with the low-wage, low-reg states dragging down the others, much as Chinese mercantilism has dragged down wages and living standards across the United States. He is the 21st-century, homegrown version of the Manchurian candidate.
If the low-wage, low-reg states were so undesirable then they would be losing population instead of growing. Obviously they are offering something that people want.

I'll note in passing Paul Krugman's novel explanation for Texas's relative prosperity. He says that it is entirely caused by its population surge. The new influx of people creates new demand and jobs. This is only true if the new population can find jobs in the first place. If hoards of unemployed entered most states the only thing that would grow would be the welfare rolls. These people are going to Texas for good-paying jobs which let them spend money, creating the demand that Krugman sees.

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