Rick Perry: Economic Wizard?

The truth about job creation and government spending in the Lone Star state

Texas Gov. Rick Perry electrified liberal and conservative pundits by entering the GOP presidential primary. But both will be disappointed. Liberals because Perry's economic record—his main selling point—is more defensible than they want to believe, and conservatives because it is less than they do.

Compared with the rest of the country, Texas has been a job-creating machine. After Perry assumed office in 2000, Texas gained more than a million jobs, while the nation lost 1.5 million. Nearly 40 percent of all new jobs since the recession officially ended have been created in Texas. "We are home to one in 10 Americans, but four of 10 jobs are in our state," boasts Perry.

He attributes the job spurt to his commitment to low taxes, business-friendly regulations, controlling government spending, and tort reform. His liberal detractors credit the sun, the moon, and the tides.

They claim that Texas' job growth has little to do with Perry's policies and more to do with Texas' vast reserves of oil, the growing demand for which triggered an economic boom. But by that logic, California should be a jobs mecca, as it is the country's third-largest oil producer after Texas and Alaska. What's more, California is blessed with fertile soil and other natural resources that Texas lacks. Yet Texas has added 165,000 jobs in the last three years and California has lost 1.2 million.

The inconvenient truth is that the jobs boom in Texas has something to do with its being No. 1 in ease of doing business—and the job bust in California has a great deal to do with it being last. Indeed, in the first four months of this year, 70 businesses shut their doors in the Golden State, with 14 of them making a beeline for Texas.

What's true for businesses also is true for workers. Liberals sneer that many of Texas' new jobs pay minimum wage without benefits—jobs that no self-respecting American should have to accept, especially given the pathetic social services Texas provides. This may be true, but the 1,100 or so Americans who move to Texas daily don't give a fig.

Texas ranks rock-bottom in per capita social spending. But it also has one of the lightest personal tax burdens in the country and a low cost of living, which are hugely attractive to out-of-work Americans. Their flocking to the state has bumped up Texas' unemployment rate to 8 percent, prompting Rachel Maddow to jeer on the air that Perry's jobs record is not a whole lot better than many other states. What she refuses to see is that while in those states high unemployment is due to anemic job growth, in Texas it is due to robust population growth. If anything, Texas offers proof that people prefer jobs, even low-paying ones, to lavish social benefits—repudiating the liberal tax-and-spend economic model.

However, if liberals underestimate Perry's jobs record, conservatives overestimate his fiscal record. Perry boasts that he has plugged the recession-induced hole in the state budget three times without raising taxes. Still, for the 11 years Perry has been in office, overall government spending has gone up by 4.2 percent every two years, compared with 2.3 percent under George W. Bush, after controlling for inflation and population growth. Perry's supporters dismiss that comparison, noting that nearly half of this spending is tied up in federal programs he can't control. The general revenue spending that he does control, they claim, has gone down for the first time since World War II. 

But if Texas has lost control over its budget, the blame lies with Perry—and his Republican legislature—both of whom have aggressively scavenged for federal grant dollars. Indeed, Perry has habitually touted the great subsidies he has extracted from Uncle Sam for state programs ranging from homeland security to disaster relief. Even as Perry condemned President Obama's stimulus and bailout package, he actively courted these funds, plugging the $6 billion hole in his previous budget almost entirely with stimulus money. Moreover, Perry patched the 2011-2013 buget less with long term structural reforms and more with one-time fixes and budgetary gimmicks such as deferring payment to public schools by one day so that it isn't technically due till the next budget cycle.

Perry's problems extend beyond his mediocre fiscal performance. He also has a crony-capitalism problem. Grants from two funds he created, ostensibly to seed tech startups and lure companies, found their way into the pockets of his campaign contributors. This won't go down well with voters weary of government waste and abuse, especially since Perry had final authority over the funds, and not an independent agency as is usually the case. Worse, Perry refused to axe these programs even to plug the deficit.

There is something else that ought to miff Perry's conservative base about these funds: They legitimize an "industrial policy" economic approach that empowers government to pick economic winners and losers. Indeed, Perry defends these programs on grounds that they helped create jobs. But if he can use government money to generate jobs in Texas, can he credibly oppose Obama using stimulus money to generate jobs around the country?

With President Obama out of ideas for an out-of-work nation, Perry's strong jobs record will appeal to voters. His challenge won't be convincing them that he has the right ideas—it will be convincing them he has the scruples to make the right calls.

Shikha Dalmia is a Reason Foundation senior analyst and a columnist at The Daily, where this column originally appeared.