Paul Krugman: The Texas Unmiracle

The claim that conservative policies caused an economic miracle in Texas, and that the same policies would fuel growth for the nation as a whole, relies upon a myth and a fallacy:

The Texas Unmiracle, by Paul Krugman, Commentary, NY Times: ...Rick Perry,... governor of Texas, has announced that he is running for president. And we already know what his campaign will be about: faith in miracles.

Some of these miracles will involve things that you’re liable to read in the Bible. But ... his campaign will probably center on a more secular theme: the alleged economic miracle in Texas, which, it’s often asserted, sailed through the Great Recession almost unscathed thanks to conservative economic policies. And Mr. Perry will claim that he can restore prosperity to America by applying the same policies at a national level.

So what you need to know is that the Texas miracle is a myth,... that Texan experience offers no useful lessons on how to restore national full employment. ...

So where does the notion of a Texas miracle come from? Mainly from ... faster population growth than the rest of America — about twice as fast since 1990. Several factors underlie this rapid population growth: a high birth rate, immigration from Mexico, and inward migration of Americans from other states...

But what does population growth have to do with job growth? Well, the high rate of population growth translates into above-average job growth... At the same time, the rapid growth in the Texas work force keeps wages low — almost 10 percent of Texan workers earn the minimum wage or less, well above the national average — and these low wages give corporations an incentive to move production to the Lone Star State. ...

Still, does Texas job growth point the way to faster job growth in the nation as a whole? No.

What Texas shows is that a state offering cheap labor and, less important, weak regulation can attract jobs from other states. I believe that the appropriate response to this insight is “Well, duh.” The point is that arguing from this experience that depressing wages and dismantling regulation in America as a whole would create more jobs — which is, whatever Mr. Perry may say, what Perrynomics amounts to in practice — involves a fallacy of composition: every state can’t lure jobs away from every other state. ...

So when Mr. Perry presents himself as the candidate who knows how to create jobs, don’t believe him. His prescriptions for job creation would work about as well in practice as his prayer-based attempt to end Texas’s crippling drought.