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Rick Perry’s Job Boom Rick Perry’s Job Boom

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Need to Know: Economy

Rick Perry’s Job Boom

The Texas governor and possible GOP presidential contender boasts a great record on jobs, but it isn’t a lesson in conservative principles.

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Conjurer: Gov. Rick Perry’s economic miracle is not what it seems.(Justin Sullivan/Getty Images)

NEW ORLEANS—Texas Gov. Rick Perry has a few favorite talking points: Between April 2001 and April 2011, his state added more private-sector jobs than any other. In the past year, Texas has gained jobs at a 2.5 percent clip, the fastest rate among the nation’s 10 largest states. And, according to the Federal Reserve Bank of Dallas, the Lone Star State has created 45 percent of all U.S. jobs since the recession.

“I credit our conservative leadership [in Texas] for unmatched job creation,” Perry told 2,000 activists at the Republican Leadership Conference last weekend. “We’re the No. 1 exporting state in the nation. We’ve got a balanced budget, too. That’s what happens when you’ve got conservative leadership that’s willing to take a beating from the liberal Left and their friends in the media.”

 

At first blush, that’s a compelling picture of a chief executive who knows how to revive the economy—an enticing prospect for Republicans looking to bring down President Obama amid a sluggish national recovery. But that picture ignores some key details that could haunt Perry if he decides to run for president.

For one thing, Perry had the good fortune to become governor of the nation’s leading oil-producing state just as a decade-long surge in the price of crude was beginning. Since 2005, Texas has added about 100,000 jobs in the mining sector, a category that includes oil drilling. In the past year alone, employment in mining and drilling jumped 15.6 percent, more than triple the growth rate of any other job category. It’s a good bet that the oil boom also indirectly spurred much of the employment growth in the rest of the state’s economy.

Texas also owes much of its comparative economic health to two seemingly improbable forces: strict regulation and expanding state government. Since December 2000, when Perry became governor, the state has benefited from an abnormally stable housing market that largely escaped both the bubble and the bust.

 

Part of the reason, many economists contend, is that the state had high property taxes and strict rules that put a damper on real-estate speculation. Texas boasts tough restrictions that make it hard for homeowners to extract cash from their properties by borrowing against the accumulating equity. That reduced both the allure of and the money available for flipping houses, and it meant that home prices didn’t skyrocket. Data compiled by the Federal Housing Finance Agency show that home values statewide rose much more slowly than the national average during the 1990s and 2000s. As a result, home prices in Texas remained almost flat when the national housing bubble burst. That’s good news for Texans now, but the reason for it—high taxes and strict regulation—is not exactly a tea party rallying cry.

Many of Perry’s signature legislative accomplishments have been geared toward creating a friendly business environment by stripping away regulations. His best claim for success is that over the past decade, Texas has created 731,000 private-sector jobs, a 9 percent increase. During that same period, private-sector employment in the nation as a whole fell by 2 percent. If Perry joins the presidential race, none of the former governors he will face—Mitt Romney, Tim Pawlenty, or Jon Huntsman—will be able to match his job-creation numbers.

But Perry’s opponents might have a field day with the one job-growth statistic that no GOP governor wants on his or her record: expanding government. Texas has had a net increase of 236,000 government jobs under Perry, an 18 percent jump. By contrast, the nation as a whole added only 306,000 state-government jobs during the same period, according to data compiled by the Bureau of Labor Statistics. In other words, Texas is responsible for three out of every four state-government jobs created during the past decade.

Taxes are another possible rub in the GOP primaries: Perry says that his efforts to lower rates have been key to attracting new business, and it is true that Texas imposes a smaller tax burden on companies than almost any other state. The Tax Foundation, a Washington think tank that champions lower taxes, consistently ranks Texas as having one of the best business climates in the country. But it’s a different story for individual taxpayers: Under Perry’s administration, their tax burden has actually increased to 7.9 percent from 7.1 percent in 2000, the last year that George W. Bush was governor.

 

And although Perry’s record would stand up well when measured by job creation, it’s weaker when measured by wages.

In January 2007, the average private-sector worker in Texas earned $21.30 an hour—slightly above the national average. By May of this year, however, the national average had climbed 11.5 percent, to $23.08, while the hourly wage in Texas rose only 3 percent, to $21.95. Put another way, wages in Texas during Perry’s tenure have slipped from slightly above average to slightly below.

Finally, there is the not-so-small matter of Texas’s budget deficit. The state Legislature has already slashed the budget by 5 percent across the board, including a cut of $73 million for higher education. But Texas still faces a $9 billion shortfall for fiscal 2012, according to the Center on Budget and Policy Priorities, a liberal think tank. That’s a 20.5 percent shortfall, bigger than any state except California, New Jersey, and New York.

Perry’s economic record is a major reason he excites Republicans, and his audience in New Orleans leaped to its feet as he touted it last week. It’s a great message. If only it were so simple. 

This article appears in the June 25, 2011 edition of National Journal Magazine.

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