04.08.12

The Texas Model – low wages, poverty, wrecked safety net, crumbling infrastructure, while the rich prosper

Posted in Around The State, Commentary, Inequality, Poverty, The Budget, The Economy at 9:21 pm by wcnews

This recent Center for Budget and Policy Priorities paper on the “Texas Model” tells the tale pretty well, The Texas Economic Model: Hard for Other States to Follow and Not All It Seems. As it states Texas just has some built-in advantages that most states don’t have.  From the introduction:

Whatever its boosters may say, Texas is not a helpful model for economic growth for the rest of the country. True, the number of people and jobs in Texas has been expanding, causing other states to wonder whether Texas holds important lessons for state policies that can generate similar growth elsewhere. The answer is no.

  • Texas has unique geographic and demographic characteristics that have helped lift its economy in recent years. Its border location encourages trade and immigration and helps fuel population and job growth.
  • A combination of available land and lending regulations have kept housing prices comparatively low and helped Texas avoid the real estate depression that dragged down many other state economies.
  • Though Texas’ economy has diversified in recent decades, the state’s abundant oil and gas resources remain a valuable asset - especially when prices for those commodities are high - that most other states lack.
  • Even if it were possible for other states to replicate these features, the fact that so many Texans have failed to benefit from them - with poverty, low-wage jobs and lack of health insurance all above the national average - makes Texas a less-than-desirable model to follow.

The Texas growth narrative is well-known by now. Texas’ population grew by 11 million people (79 percent) between 1980 and 2011, more than double the rate of growth of the nation as a whole. (See figure 1.) With that population growth came job growth. Since the 1990s, the rate of Texas job growth has been a full percentage point or more above the national average most years.

The American Legislative Exchange Council, among others, has suggested that other states should adopt policies that will make them more like Texas in order to grow their economies. One example from the introduction to ALEC’s recent Rich States, Poor States report: “[M]any governors are looking at Texas, which has led the nation in job growth over the past three years, as the state with the best policy to emulate.” [1] In particular, ALEC notes the state’s tax policy as a plus.

But if those governors look closely, they won’t find much they can emulate. The reality is that much of Texas’ growth results not from its policies but rather from factors that state officials cannot control. For example, Texas has been benefiting from cheap and plentiful land, a location that enables international immigration and trade, abundant natural resources such as oil and gas, and other advantages that cannot be exported.

Even with all those natural advantages, Texas’ economic picture is not entirely rosy, and it may not be able to retain the advantage it currently holds over other states for much longer. Beyond population and job growth, Texas continues to lag behind the rest of the country in other important measures of economic success. About one in ten hourly wage jobs in Texas pays at or below the minimum wage ($7.25 per hour), more than in any other state, and Texas has the nation’s 11th-highest poverty rate. Such high levels of poverty and low-wage employment make the Texas economy a dubious model for the nation. [Emphasis added]

In other words, regulation kept Texas from having a housing bubble.  It’s geography, placement on the map, not the austerity measures of our politicians, are responsible for Texas’ current economic situation.

Texas invests less than other states in its infrastructure and in educating its workforce. This, too, could cause problems for the Texas economy in the future.

Other states should think twice before they make major changes in their tax and budget policies in an effort to generate the growth that Texas has seen in recent years. This growth is a result of the interaction of a host of factors that cannot be replicated by other states, and perhaps should not be replicated even if they can be. In addition, there are many reasons to believe that Texas’ economy will not continue to shine so brightly relative to other states.

That’s similar to the harsh reality Harvey Kronberg wrote about in his recent YNN column, Legislative candidates avoid issues that matter to Texas economic growth.

There isn’t much good news in all of this for the voters.

Although our economy is reviving and revenue is pouring into state coffers, most of it will have to cover the billions in hot checks written by the last Legislature.

Meanwhile, the things that make Texas so attractive for luring business are all quickly eroding.

We don’t have enough electric power to support a growing economy. Electric deregulation had the unintended consequence of increasing the financial risk for investors to build new power generation plants. So for the most part they didn’t. Brownouts are likely to become depressingly routine if next summer is as hot as the last one.

Our road infrastructure is a mess. The Legislature won’t find the money to repair current roads much less build new ones. If business can’t move goods and services efficiently, it will eventually go somewhere else.

Our construction industry is fueled by residential and commercial building. But new development needs water. The Legislature has actually devised a good water plan including new reservoirs, but our politicians refuse to pay for it.

Our biggest growth is coming from our newly revived oil and gas industry. The problem is that it has been so effective it is driving the price of natural gas down so far it is now increasingly not profitable to produce.

And that’s before we even talk about the seed corn for business — Public schools and higher education.

Voters will be hard pressed to find a single candidate talking about these threats to Texas business in the primary. Not when it is so much easier to talk about Washington — an issue over which state senators and representatives have absolutely no control.

Today the Center for Public Policy Priorities released their annual report Kids Count, and the news isn’t good, 25% TX children live in poverty.

Here’s the link to the data and report.

But things aren’t bad for everyone, In Texas and U.S., income inequality is growing as the rich get richer.

In these mean economic times, it’s no surprise that a lot of people are worse off than they were several years ago. The surprising part comes from the most affluent segments of society, who seem to be richer than ever.

New federal reports show that the top 20 percent of earners made more in after-tax income between 2005 and 2007 than the other 80 percent combined, with the gulf between rich and poor growing ever wider.

Texas and other states with very diverse populations stand at the head of the lists comparing the nation’s haves and have-nots.

None of this is likely to change in the next legislative session. But that’s not a reason sit on the sidelines. Much of the work that needs to be done to reverse this will take years, and can’t be fixed in one election cycle.  This didn’t get this way overnight, and it won’t be fixed overnight.  Get involved, check out Progress Texas, the Texas Democratic Party and Save Texas Schools, just to name a few.

2 Comments »

  1. Eye on Williamson » TPA Blog Round Up (April 9, 2012) said,

    April 9, 2012 at 12:21 pm

    [...] WCNews at Eye On Williamson shows that the “Texas Model” isn’t all it’s cracked up to be, The Texas Model – low wages, poverty, wrecked safety net, crumbling infrastructure, while the …. [...]

  2. Texas Progressive Alliance Weekly Round Up « Doing My Part for the Left said,

    April 9, 2012 at 3:28 pm

    [...] WCNews at Eye On Williamson shows that the “Texas Model” isn’t all it’s cracked up to be, The Texas Model – low wages, poverty, wrecked safety net, crumbling infrastructure, while the …. [...]

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