Paul Krugman: The Texas Omen

The "modern conservative theory of budgeting" isn't working in Texas. "If the theory can’t make it there, it can’t make it anywhere":

The Texas Omen, by Paul Krugman, Commentary, NY Times: These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas.

Wait — Texas? Wasn’t Texas supposed to be thriving even as the rest of America suffered? Didn’t its governor declare, during his re-election campaign, that “we have billions in surplus”? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years.

And that reality has implications for the nation as a whole. For Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere. ...

Texas was ... the state the recession supposedly passed by, thanks to its low taxes and business-friendly policies. Its governor boasted that its budget was in good shape thanks to his “tough conservative decisions.”

Oh, and at a time when there’s a full-court press on to demonize public-sector unions as the source of all our woes, Texas is nearly demon-free: less than 20 percent of public-sector workers there are covered by union contracts, compared with almost 75 percent in New York.

So what happened to the “Texas miracle”...? Part of the answer is that reports of a recession-proof state were greatly exaggerated. ... Texas doesn’t seem particularly special: its unemployment rate is ... about the same as ... New York or Massachusetts.

What about the budget? The truth is that the Texas state government has relied for years on smoke and mirrors to create the illusion of sound finances... When the recession struck, hitting revenue in Texas just as it did everywhere else, that illusion was bound to collapse. ... Now the next budget must be passed — and Texas may have a $25 billion hole to fill. Now what?

Given the complete dominance of conservative ideology in Texas politics, tax increases are out of the question. So it has to be spending cuts.

Yet Mr. Perry wasn’t lying about those “tough conservative decisions”: Texas has indeed taken a hard, you might say brutal, line toward its most vulnerable citizens. ...Texas ranks near the bottom in education spending per pupil, while leading the nation in the percentage of residents without health insurance. It’s hard to imagine what will happen if the state tries to eliminate its huge deficit purely through further cuts. ...

Right now, triumphant conservatives in Washington are declaring that they can cut taxes and still balance the budget by slashing spending. Yet they haven’t been able to do that even in Texas... How are they supposed to pull it off nationally, especially when the incoming Republicans have declared Medicare, Social Security and defense off limits?

People used to say that the future happens first in California, but these days what happens in Texas is probably a better omen. And what we’re seeing right now is a future that doesn’t work.