With Rick Perry now officially in the presidential race, there’s a spate of coverage and commentary about how much credit the governor of the Lone Star State can claim for the purported “Texas miracle”—the fact that during the dismal recovery of the last two years, the state has accounted for somewhere between 30 and 50 percent of total job growth in the United States. Tuesday’s New York Times featured a front-page story that was skeptical of Perry’s role, while Paul Krugman’s Monday column rejected the idea that there’s a “miracle” to take credit for. Both are recommended reading, as is Kevin Williamson’s biting response to Krugman in National Review, and further thoughts from Felix Salmon and Tyler Cowen.
But there’s an important fact about Texas’s economic record that isn’t really emphasized in any of those articles or blog posts, though it has been flagged in some other sharp coverage lately. Which is: while Perry’s economic vision is undoubtedly conservative, public-sector jobs have played a key role in supporting the Texas labor market.
As he ramps up his presidential campaign, Perry likes to outline an economic strategy that depends on low spending, predictable regulation, and constraints on litigation. It’s an outlook that, at least rhetorically, privileges private-sector work over government jobs.
But as The Wall Street Journal reported last month, during Perry’s decade-long stint as governor, more than 300,000 government jobs have been created in Texas. That’s nearly 30 percent of the state’s overall job growth during that time, and about one-fifth of all new public-sector jobs nationwide.
For much of that decade, the unemployment rate in Texas was actually higher than the rest of the country’s; it didn’t dip below the national average until the beginning of 2007. And that improvement came as the public sector accounted for an even higher share of total job growth. Government employees are about one-sixth of Texas workers, but from early 2007 to the end of 2010, the public sector accounted for 47 percent of new jobs in the state, according to the Center for Public Policy Priorities, an Austin-based think tank. Factor out federal government jobs, and state and local government were still responsible for over 40 percent of the gains.
The picture has changed a little in the wake of the recession. But government work accounted for about 12 percent of all job growth in Texas over the past two years, according to an article last month in the Austin American-Statesman. (Yahoo!’s Zach Roth, also on this beat Tuesday, put the figure at 13 percent.) Since the start of 2009, The Fiscal Times reported last week, state and local governments in Texas have added 66,000 employees. And to focus on the even more recent past, state and local employment grew by half a percentage point in Texas from spring 2010 to spring 2011, according to a recent report by the Rockefeller Institute.
That last figure doesn’t sound like much—until you see data from the Bureau of Labor Statistics showing that, nationwide, the state and local workforce fell by nearly 1.5 percent over that period. This shrinking public sector is, to a considerable extent, why the unemployment rate remains stubbornly high, even though the economy is technically in a recovery. After the mass layoffs of 2008 and 2009, private-sector employment has been growing modestly since early 2010. But strapped state and local governments continue to shed jobs, and the decline is only accelerating as federal stimulus aid runs out. The fact that Texas has moved against this tide means the state has avoided a powerful drag on its job market.
Why has the state’s public sector grown so much and held up so well? Don Baylor, a senior policy analyst for CPPP, said the biggest reason is rapid population growth, which has both spurred demand for public services and generated taxes to pay for them. (As the Journal story noted, more than half of the government jobs created over the past decade are in public schools.) In addition, the state, which escaped the worst of the housing bubble, didn’t start to feel the recession’s effects until fall of 2008—not long before federal stimulus kicked in. And though natural resources play a diminishing role in Texas’s economy, a boom in the oil and gas industries has helped support state and local budgets.
But Texas’s public sector won’t be insulated much longer. As many of the stories mentioned here report, Perry and the state legislature recently approved a new two-year budget that cuts state spending by 8 percent, with $5 billion in cuts from education alone. (Like the recent federal debt ceiling deal, it was an all-cuts, no-new-taxes package.) Time will tell what the impact on employment is, but CPPP projects the loss of more than 5,000 state jobs, with another 49,000 jobs in K-12 schools at risk unless local districts raise property taxes to make up for lost revenue.
For a number of reasons, it’s vital that the press tells this story—and that it keeps a close eye on Texas as these developments play out. On one level, it’s an accountability story: Does the tale Perry tells about his tenure check out? On another, it’s a chance to re-examine past debates: If the federal government had continued to support other state and local governments with extraordinary aid, what might the unemployment picture look like?
But most importantly, it’s a test of an economic strategy that Perry says he wants to bring to the White House. If Texas’s private sector proves strong enough to pick up the slack even as the state slashes public employment, it’ll be a point in his favor. If not, there will be more questions about the Texas miracle.