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March 03, 2014 9:57 AM The Original Voodoo Economics

By Ed Kilgore

In the cover article for the new March/April/May issue of the Washington Monthly, Phillip Longman definitively debunks one of the most important propaganda memes of American politics: the “Texas Economic Miracle.” Hyped endlessly by Rick Perry but echoed by most conservative media at one time or another, the idea that the Lone Star State has found the formula for limitless growth and prosperity by making itself an unregulated playground for job creators has not only encouraged race-to-the-bottom competitors in the large number of states governed by Republicans after the 2010 GOP landslide, but has served as a rationale for similar policies at the federal level as well.

As Longman explains, a lot of the “Texas Miracle” talk is based on simple misinformation. For one thing, a big part of Texas’ current stretch of growth is based on the same old boom-and-bust economics of the oil and gas industry that has always blessed and cursed the state, not anything attributable to state policies.

Outside the energy sector, are Americans really “voting with their feet” for the governing policies of Rick Perry by moving to the Lone Star State in vast numbers? Not exactly:

[A]ccording to Census Bureau data, 441,682 native-born Americans moved to Texas from other states between 2010 and 2011. Sounds like a lot. But moving (fleeing?) in the opposite direction were 358,048 other native-born Americans leaving Texas behind. That means that the net domestic migration of native-born Americans to Texas came to just 83,634, which in a nation of 315 million isn’t even background noise….
Net domestic migration to Texas peaked after Hurricane Katrina devastated Louisiana and Mississippi, and has been falling off ever since.
Moreover, those supposedly fleeing to refuge to Texas from godless socialist places like California aren’t actually experiencing relief from higher taxes, unless they are very wealthy:
Texas has sales and property taxes that make its overall burden of taxation on low-wage families much heavier than the national average, while the state also taxes the middle class at rates as high or higher than in California. For instance, non-elderly Californians with family income in the middle 20 percent of the income distribution pay combined state and local taxes amounting to 8.2 percent of their income, according to the Institute on Taxation and Economic Policy; by contrast, their counterparts in Texas pay 8.6 percent.
And unlike in California, middle-class families in Texas don’t get the advantage of having rich people share equally in the cost of providing government services. The top 1 percent in Texas have an effective tax rate of just 3.2 percent. That’s roughly two-fifths the rate that’s borne by the middle class, and just a quarter the rate paid by all those low-wage “takers” at the bottom 20 percent of the family income distribution. This Robin-Hood-in-reverse system gives Texas the fifth-most-regressive tax structure in the nation.
Middle- and lower-income Texans in effect make up for the taxes the rich don’t pay in Texas by making do with fewer government services, such as by accepting a K-12 public school system that ranks behind forty-one other states, including Alabama, in spending per student.

Even businesses (if they aren’t large enough to feed from the state’s various corporate welfare troughs) don’t necessarily find Texas hospitable:

The business case for Texas does not speak for itself. It may be a great place to be a big oil or petrochemical company, or a politically favored large corporation able to wring out tax concessions. Its state laws are also hostile to unions, and its wage levels are generally lower than in much of the rest of the country. But for the vast majority of businesses, which are small and not politically connected, Texas doesn’t offer any tax advantages and is in many ways a harder place to do business. This is consistent with Census Bureau data showing that a smaller share of people in Texas own their own business than in all but four other states.

All in all, economic conditions in Texas are hardly miraculous:

The state may offer low housing prices compared to California and an unemployment rate below the national average, but it also has low rates of economic mobility, minimal public services, and, unless you are rich, taxes that are as high or higher than most anywhere else in America. And worse, despite all the oil money sloshing around, Texas is no longer gaining on the richest states in its per capita income, but rather getting comparatively poorer and poorer.

You should read all of Longman’s takedown of the “miracle” myth. What I’d mainly add is that all this new enthusiasm for Texas-style economic policies obscures the fact that their central thrust is old, old, old, and goes right back to the Reconstruction-era belief that the capital-starved South could only make a comeback by marketing its many weaknesses as business advantages for external investors. Cheap labor, cheap land, low taxes, eager-to-please government, natural resources ripe for exploitation with no questions asked—it was all part of formula that made aggressive self-abasement closely identified with economic development strategies throughout the former Confederacy. The idea that desperately poor people and communities were irresistable to “job creators” helped buttress Jim Crow for many decades, and created a climate where institutions like labor unions were violently opposed as race-mixers who’d destroy the South’s comparative advantage of a cheap, supine work force.

Rick Perry’s shuck is really no more than an updated version of that same old Song of the South. It’s the original Voodoo Economics, designed to seduce people into sacrificing their self-interest on the altar of “job creation.” It’s profoundly depressing to me that this moonlight-and-magnolias approach to economic development that we used to mock in the South a quarter century ago is now making a big comeback as New and Cool, and as central to the economic policies of one of our two major national parties.

Reading Longman’s piece is a very good first step for those afflicted by this ancient madness.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

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