Is Texas ‘Crazy’ or Is It the Real America?

By John Fund

Sunday, February 08, 2015

Last week, everywhere I went in Washington it seemed as if the country’s cultural and ideological divisions came down to a debate over the state of Texas and whether or not it was “a crazy state” or the “place that is still most like America.”

Congressman Alcee Hastings, a Florida Democrat, started the rumble during a House committee meeting by saying that Texas’s refusal to join Obamacare’s exchanges made it “a crazy state.” He then refused to apologize to Representative Michael Burgess, a Texas Republican who challenged him.

Those became fighting words. Former governor Rick Perry, a likely 2016 presidential candidate, responded during a speech at the American Principles Project: “He is right! We are crazy!” he enthused. “We’re crazy about jobs, we’re crazy about opportunity, we’re crazy about liberty, we’re crazy about the Constitution!” Charles Murray, the libertarian American Enterprise Institute scholar who hails from Iowa, weighed in by saying, “I’ve always thought of Texas as the place that is still most like America,” pointing to the self-reliant, can-do spirit the state still represents. Florida governor Rick Scott also joined in, noting that he has often cited Texas as a tax-cutting role model; then he joked about out-dueling Perry as a jobs generator.

While the recent 50 percent drop in oil prices has taken some of the bluster out of Texas’s bragging, the state’s stats are still beyond impressive. Last month, it created 45,700 new jobs. Most of them were in parts of the diversified economy that aren’t related to energy. Texas continues to see solid job growth in trade and professional services as well as in the hospitality industry.

Indeed, between 2007 and 2014 — the period covering the recession and the slow recovery that followed — Texas created 1.4 million net new jobs. During the same period, the rest of the nation wound up losing 400,000 jobs. The falling nationwide unemployment rate is largely the function of people’s exiting the work force entirely.

Small wonder that in December, Canada’s Fraser Institute ranked Texas first of all the states in its level of economic freedom, as measured by the size of government, taxation, regulation, and the rule of law. Texas Public Policy Foundation Director of Policy Chuck DeVore says the study’s findings show that “Texas’s having America’s highest level of economic freedom is a strong confirmation that prosperity and freedom go hand-in-hand.”

Devore notes that critics of Texas often cite the fact that the jobs Texas creates often are entry-level — about 6 percent of the state’s hourly wage earners earned minimum wage in 2013. But that figure has been consistently dropping and obscures the fact that Texas is much more affordable than many states for those on the bottom of the income ladder.

“California has the third-highest cost of living, while Texas has the second-lowest,” says DeVore, a former California GOP state legislator who relocated to the Lone Star State. “A low-wage worker sees his money go a third further in Texas.”

One could even say that the high-tax, high-cost model of California and other states is a form of class warfare against their poorest residents.

Those at the top of the corporate ladder clearly recognize Texas’s strengths. For each of the past ten years, CEOs polled by Chief Executive magazine have rated Texas first in the nation for economic-development climate and job growth. What is the secret of Texas’s success? Rick Perry isn’t shy about sharing his thoughts. “It’s all about four points,” he told me. “First, don’t spend all the money. Second, keep the taxes low and under control. Then have regulations that are fair and predictable so business owners know what to expect from one quarter to the next. Finally, reform the legal system so that frivolous lawsuits don’t paralyze employers who are trying to create real wealth.”

Richard Fisher, the president of the Dallas Federal Reserve Board, told me that Texas has really benefited from the reform of its once-corrupt legal system. Texas has put curbs on frivolous lawsuits, implemented the first-in-the-nation system under which the loser pays all court costs in many lawsuits, reformed medical-malpractice law, and elected judges who are much more respectful of the rule of law.

Richard Weekley — the co-founder of Texans against Lawsuit Abuse — credits former governor Perry for resisting calls for watered-down reforms that wouldn’t have addressed the core problem. “Perry sent a signal that he wanted real reform and would stand his ground,” Weekley told me. “Soon the medical lobbyists playing footsie with the trial lawyers were gone, and the obstacles to real reform started falling.”

That said, Perry has shown less success in areas where he hasn’t focused his attention or priorities. Far from reducing subsidies to business, he has embraced them as a form of development aid to entice firms to move to Texas or expand if they are already in the state. He’s had mixed results with the subsidies. Greg Abbott, who succeeded him as governor, has reined in Perry’s Texas Enterprise Fund after reports that some of its deal-closing money to relocating firms went to entities that hadn’t applied for the funding or that were not required to directly create jobs.

You don’t have to spend much time in Texas to conclude that its residents think its story should be known nationally and that the country would benefit from having Texans at the top of the federal government. Three of the last nine presidents — Johnson, the elder Bush, and George W. Bush — have come from Texas, and it’s no surprise that the 2016 GOP primary field will have two Texas entrants, Perry and U.S. senator Ted Cruz.

Expect to hear a lot of bragging about Texas over the next few months, along with a lot of trash-talking from liberals that the “Texas miracle” is a mirage. “Well, it’s true you can’t explain miracles,” Perry told me last week in Washington. “But that’s not what we have in Texas. We have economic recovery, and the lessons from ours should be picked up by every other state.” Indeed, the fact that states such as Illinois, Massachusetts, and Maryland all defied their blue-state habits and elected Republican governors last fall shows that voters are concerned about how far they’re falling behind states like Texas.