Longform

Rick Perry's Manufactured Miracle

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"For somebody to think that major state universities like Texas A&M should focus on teaching and not research is to grossly misunderstand the importance of fundamental research to the economy of the state of Texas.

"So if a governor's only claim to fame is his ability to improve the economy of Texas and he doesn't get that, then there must be a critical difference between how the Texas economy got where it is and that governor's role in it."

If the state's relationship with education and research has appeared a little schizoid — Here, take the money, no, give us back the money — what effect has all of that had on the hardiness of the overall Texas economy? It's hard to draw direct links, but the available studies suggest it's not nearly as robust as Perry depicts.

An October 2005 analysis by economists at the Federal Reserve Bank of Dallas looked closely at how Texas recovered from the post-9/11 recession. They concluded that the Texas economy was significantly slower to heal and more jobless in its rebound than the national recovery, for a variety of reasons.

Perry's critics often say he benefits from all that "oil in the ground," but oil and gas jobs have waned. Meanwhile, a wider shift from manufacturing to government employment — especially all those education jobs added before Perry helped gut them — required major retraining of laid-off workers. According to the Fed study, that shift left the state's economy more susceptible to the punch it's taking now, and to the roundhouse represented in the recession's potential double-dip. But in the end, the report called Texas' poor performance in overall job creation "a bit of a mystery."

It was less mysterious in a report published two years later, by the conservative Kauffman Foundation. The group's "New Economy Index" measures growth and innovation in information technology. It examines an array of measures — patent applications, initial public stock offerings, immigration of knowledge workers, workforce education and other indicators — to see where the new technology economy is hot and where it isn't.

Of the 50 states, Texas earned a second-tier overall ranking in the 2007 report — 14th place — but with low marks in the areas of workforce education (34th), high-tech manufacturing (35th) and desirability as a destination for knowledge industry immigrants (44th). The 2010 version reported that Texas had slipped from an overall national ranking of 14th place in 2007 to 18th in 2010. And while Texas got a much better mark as home to high-tech manufacturing, moving up from a national rank of 35th four years ago to 10th place in 2010, Texas' overall rank was dragged down by rankings in the 40s in two key areas: workplace education and the immigration of knowledge workers.


What if Perry's critics are right? What if a strong public school system and prestigious university research programs were keys to Texas' economic success? If those legs of the Texas miracle are being sawed off, what's left?

Another important plank in Perry's Texas miracle platform is his portrayal of Texas as a low-tax state. The way he tells it, low state and local taxes are what are drawing businesses and people to his state. Like so much in Perry's portrait of Texas, the notion may be more wishful than real.

Weinstein, at SMU, now confines himself to the economics of energy, but for 25 years he was the state's best-known business recruitment and expansion consultant, hired by cities all over Texas. During that time most tax incentives in Texas amounted to state government giving local governments permission to give away their own tax bases to woo companies. It's a practice Weinstein now questions.

"All the research on economic development I'm familiar with over the last 60 years has found that state and local incentives are a fairly minor factor in the business site selection calculus," he says. "And that's understandable, because state and local taxes for a lot of companies are fairly minor costs of doing business."

Plus, he says, "every other state does the same thing."

But, as Weinstein points out, cutting those local taxes can hurt the localities that do it.

"[Those businesses are] still going to have kids in school," he says. "They're still going to need the roads and the water. Somebody else has got to pay for the cost of providing services to that business that isn't going to be paying its fair share of the taxes."

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Jim Schutze has been the city columnist for the Dallas Observer since 1998. He has been a recipient of the Association of Alternative Newsweeklies’ national award for best commentary and Lincoln University’s national Unity Award for writing on civil rights and racial issues. In 2011 he was admitted to the Texas Institute of Letters.
Contact: Jim Schutze