Rick Perry's Texas Fantasyland

Rick Perry's Texas is a job-makin', low-taxin' oasis of economic growth. It's also a fantasy.

These major demographic shifts, continental in dimension, have provided Texas with significant windfalls, Weinstein says. Perry claiming credit for these is like the baton major strutting in front of the circus parade and pretending he's the one deciding where to turn.

"At least for the last 40 years, Texas has led the nation in population growth and job creation," Weinstein says. "So if there is a Texas economic miracle, it started long before Rick Perry."

Does saying that Texas is "business-friendly" mean the state is unlike the rest of the country in some significant way, something important enough to make Texas more prosperous than America? Academic studies and the testimony of people involved in shaping the state's economy say no. Instead, Texas is much more like the rest of the country than it used to be but maybe a little worse at being that way than others.

A pimple on Perry’s résumé: his help to Merck.
Zuma Press
A pimple on Perry’s résumé: his help to Merck.

Since the financial collapse of 1987, Texas has been doing what everybody else has been doing: seeking new high-tech and information-based industries, in large part by investing in public education and research. Not only does Perry not get credit for that effort but also his critics, and even some of his friends, worry that he is presiding over a Tea Party–inspired dismantling of it.

Texas used to be different but not in a way many people in the state remember fondly. The collapse of the state's economy in the late 1980s laid bare a parochial business climate that had failed to keep its own house in order. In the run-up to the crisis, local banks took cash from an oil boom and used it to play real estate poker. They made many bad bets. When the bubble burst, almost all of the locally owned banks in the state's major cities collapsed, and real estate values disappeared into the dirt. It was a sobering time.

After the bust, Weinstein says, talk shifted to the state's need to diversify, to get off the oil and real estate bottles. Looking back, he says the devastation wrought by the bust sort of took care of the diversification issue on its own. "The economy diversified itself," he says, "because as energy and real estate and agriculture shrank, the state's economy de facto became more diversified."

In attempting to diversify, though, Texas became much more like everybody else in terms of public policy. There was "a rush to the adoption of public policies to stimulate economic growth," Weinstein says. "So we got legislation in Austin allowing local government to give away tax base.

"Prior to the energy bust and the real estate collapse, we didn't have things like economic-development sales taxes and property-tax abatements, emerging technology funds, the Texas Enterprise Fund," he says of states' efforts to lure companies across their borders. "We didn't do that stuff. A lot of other states did, but we didn't, because, number one, we never needed to, and number two, well, gosh, that's state socialism. But nonetheless, we started doing all that stuff."

In its pursuit of new industries, the state didn't just give away tax money. It also levied record-high new taxes and put the new revenue into public education and university research. At roughly the same time, an important court ruling forced the state to share education funding more equitably among rich and poor school districts.

Paul Colbert, now an education consultant in Houston, served in the Texas legislature with Perry in the late '80s and early '90s. He points to a legislative session in 1987 in which Perry, then still a Democrat, joined a majority in both parties in passing a record-setting tax increase. With that money, Colbert says, "we did several things that turned the economy around, intentionally. One of them was that we didn't cut funding for public education.

"Number two, we made a conscious effort to focus on payments to higher education in the areas of research funding, in particular in the areas of creating spin-off from university research and economic development that basically resulted in creating what they now refer to as the Silicon Hills of Austin."

As a result, companies started moving headquarters or significant operations to the Austin area, including Dell Computers, NVidia, 3M, and Apple Inc.—so many that the direct American Airlines flight from Austin to San José, California, now discontinued, was called the "Nerd Bird."

There were other payoffs from the state's investment in education. Texas public school students made significant strides on achievement tests. "If you go back to the early 1990s," Colbert says, "there was a Rand study, the first of a number of Rand studies, that indicated that Texas had basically jumped well ahead of the pack in education. If you went demographic subgroup by demographic subgroup, we were well ahead."

Texas has not remained faithful to these efforts under Perry. Lawmakers in recent years have relentlessly dialed back support for public education and devised ways to escape court-ordered revenue-sharing for poor districts. Some of the big test-score gains of the '90s turned out to be based on cheating. Still, achievement seems to be headed south. And that was all before this year.

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