Conservative Media Edit Out Government's Role In Texas Economy


Conservative pundits have attributed economic growth and job creation in Texas to the success of conservative policies like low taxes and small government. But government has played a significant role in Texas' recent economic record: Federal spending helped balance the state budget, and strict regulation helped shield it from the housing bubble.

Conservatives Tout Texas' "Embrace" Of "Fiscal Conservatism"

Wash. Times' Kuhner: "Embrace" Of "Fiscal Conservatism" Led To "Stellar Economic Record." From The Washington Times:

[Perry] also has a stellar economic record. From June 2001 until June 2010, Texas added more jobs than the other 49 states combined. Since June 2009, it has generated nearly 40 percent of all net jobs in America. His formula is simple: Embrace fiscal conservatism. His administration has controlled spending, balanced budgets and slashed burdensome regulations. Texas is a right-to-work state. It does not have a personal income or capital gains tax. It is a magnet for businesses, job creators and investment capital. [The Washington Times, 8/18/11]

Fox & Friends' Carlson Repeats "Lowering Taxes And Regulations" Has Led To Texas' Job Growth. From Fox & Friends:

GRETCHEN CALRSON (co-host): So what has happened in Texas? The governor says it's simple. It's all about lowering taxes and regulations. And look at what's happened as a result. Texas has added 37 percent of all U.S. jobs since the recovery began. That's astounding. And Governor Perry makes no bones about it. He's like, "Look, yeah, I've gone to other states like California and tried to recruit people to come and work in Texas," because he believes it's a better environment to work in Texas. Keep in mind, no state income tax there as well.

BRIAN KILMEADE (co-host): Yeah, no state income tax. In fact, they have tort reform. [Fox News, Fox & Friends, 6/15/11]

WSJ Editorial: "The Government In Austin Is Small, Taxes Are Low, Regulation Is Stable," Which Is "A Magnet For Private Investment And Hiring." From a Wall Street Journal editorial:

Some of this Texas growth is due to high birth rates, some to immigration. But it also reflects the flight of people from other states. People and capital are mobile and move where the opportunities are greatest. Texas is attractive to workers and employers alike because of its low costs of living and doing business. The government in Austin is small, taxes are low, regulation is stable, and the litigation system is more predictable after Mr. Perry's tort reforms -- all of which is a magnet for private investment and hiring. [The Wall Street Journal, 8/19/11]

Weekly Standard's Hemingway Cites "Tax" And "Regulatory Climate" As Reasons For Texas Job Growth. From a Weekly Standard blog post by Mark Hemingway:

[Paul] Krugman's paragraph here explains a lot about why "Keynesian" should probably be a bigger slur than "former Enron adviser." For one thing, job creation is not a zero-sum game. Texas hasn't created over 40 percent of the country's new jobs just by taking them away from other states. A lot of those jobs wouldn't exist, period, if Texas didn't create a tax a regulatory climate to encourage them -- Texas added 732,000 jobs in the last decade, and no other state created more than 100,000. If Krugman's unimpressed, that's because he's the one that's trading in fallacies here.


This isn't exactly a surprise, but Krugman's being spectacularly dishonest here. He also fails to mention that Texas has twice closed massive budget deficits under Perry's tenure as governor -- without raising taxes. The fact that Texas has its fiscal house in order, unlike just about every other blue state, surely has something to do with Texas' economic growth. The reality is that just about every other blue state is a governing basket case when compared to Texas, and the comparison is revealing and instructive. [The Weekly Standard, 8/15/11]

Hot Air's Ed Morrissey: "Jobs Got Created" In Texas "Because The State Government Got Out Of The Way Of Job Creation And Business Expansion." From Hot Air's Ed Morrissey:

Jobs didn't grow because people came to Texas. People came to Texas because jobs got created there. And jobs got created there, especially over the last two years, because the state government got out of the way of job creation and business expansion. In fact, the results have been so dramatic that other states have sent delegations to Texas to see how they can duplicate the success. [Hot Air, 7/26/11]

But Federal Spending, Public-Sector Jobs Have Buoyed Texas' Economy

BLS: Texas Has Added Around 100,000 Government Jobs Since Beginning Of Recession. From the Federal Reserve Bank of St. Louis, using data from the Bureau of Labor Statistics:

[, accessed 8/22/11]

Wash. Post: Much Of Texas' Economic Strength "Has Come Because Of Government, Not In Spite Of It." From The Washington Post:

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 Washington Post, 8/20/11]

CNNMoney: Texas' 2010-11 Budget Filled "Nearly 97%" Of $6.6 Billion Deficit With Federal Stimulus Funds. From CNNMoney:

Turns out Texas was the state that depended the most on those very stimulus funds to plug nearly 97% of its shortfall for fiscal 2010, according to the National Conference of State Legislatures.

Texas, which crafts a budget every two years, was facing a $6.6 billion shortfall for its 2010-2011 fiscal years. It plugged nearly all of that deficit with $6.4 billion in Recovery Act money, allowing it to leave its $9.1 billion rainy day fund untouched.

"Stimulus was very helpful in getting them through the last few years," said Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers, said of Texas. [, 1/24/11]

CNNMoney: With Stimulus Funds Drying Up, Texas Faces $31 Billion In Cuts In Next Budget Cycle, Hitting Schools, Colleges, Medicaid, And Social Services For The Needy. From CNNMoney:

Unfortunately for Texas, and for most other states in the union, the stimulus safety net has dried up. So they are now facing draconian spending cuts as they try to close yawning budget gaps for fiscal 2012, which starts July 1 in most states.

Texas is in trouble too. State lawmakers last week unveiled an austere budget for the 2012-2013 fiscal years that cuts $31 billion in spending. Schools, colleges, Medicaid and social services for the needy will be hit especially hard. [, 1/24/11]

Wash. Post: Population Growth Has Necessitated Public-Sector Growth In Texas, Including "More Teachers, Budget Analysts, Compliance Officers, And Police Officers." From The Washington Post:

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." [The Washington Post, 8/20/11]

Wash. Post: Texas Received "More Than $227 Billion In Federal Spending In 2009" And "The Third-Highest Amount Of Stimulus Money In the Nation." From The Washington Post:

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. [The Washington Post, 8/20/11]

Strict Home-Loan Regulation Helped Shield Texas From Housing Boom And Bust

Wash. Post: "Tight Regulation Of Home Equity Loans" And "Tightly Regulated" Mortgage Lenders Helped Shield Texas From Housing Bubble. From The Washington Post:

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. [The Washington Post, 8/20/11]

Wash. Post: Housing Problems In Texas "Are Orders Of Magnitude Less Than They Would Have Been Without The Home-Equity Limits." From The Washington Post:

But there is a broader secret to Texas's success, and Washington reformers ought to be paying very close attention. If there's one thing that Congress can do to help protect borrowers from the worst lending excesses that fueled the mortgage and financial crises, it's to follow the Lone Star State's lead and put the brakes on "cash-out" refinancing and home-equity lending.

A cash-out refinance is a mortgage taken out for a higher balance than the one on an existing loan, net of fees. Across the nation, cash-outs became ubiquitous during the mortgage boom, as skyrocketing house prices made it possible for homeowners, even those with bad credit, to use their home equity like an ATM. But not in Texas. There, cash-outs and home-equity loans cannot total more than 80 percent of a home's appraised value. There's a 12-day cooling-off period after an application, during which the borrower can pull out. And when a borrower refinances a mortgage, it's illegal to get even a dollar back. Texas really means it: All these protections, and more, are in the state constitution. The Texas restrictions on mortgage borrowing date from the first days of statehood in 1845, when the constitution banned home loans.


Until 1998, Texans couldn't take out home-equity loans at all. The roots of this fierce resistance to debt's temptations go deep in Texas history. Seven years before the republic joined the Union in 1845, many homesteaders lost their property because of a bank panic and the resulting foreclosures. Drawing from Mexican codes protecting landholders, the new constitution of the state of Texas forbade lenders from peddling mortgages to homesteaders.

The home-equity restrictions have not only helped keep cash-out refinances a rare breed in Texas; other risky mortgages were scarce there, too. The home-equity borrowing restrictions helped keep home prices from overinflating, and home buyers therefore didn't need to turn to exotic mortgages with such features as 2/28 ARMs, interest-only payments, or negative amortization in order to buy a home. Even when they did, Texas law requires these risky features to be clearly disclosed. Fewer than 20 percent of Texas subprime mortgages included any of them.

That's not to say that Texas borrowers didn't get into bubble trouble. Plenty bought overpriced houses, which is why one in eight Texans now owe more than their home is worth. And it was easy enough for lenders to get around the home-equity borrowing limits by using creative appraisals that pretend a home is worth more than it really is. But the casualties are orders of magnitude less than they would have been without the home-equity limits. [The Washington Post, 4/4/10]

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