- Sep 26, 2000
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http://www.nytimes.com/2011/01/07/opinion/07krugman.html?_r=1&hp
The Texas Omen
By PAUL KRUGMAN
These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas.
Wait Texas? Wasnt Texas supposed to be thriving even as the rest of America suffered? Didnt 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 cant make it there, it cant make it anywhere.
How bad is the Texas deficit? Comparing budget crises among states is tricky, for technical reasons. Still, data from the Center on Budget and Policy Priorities suggest that the Texas budget gap is worse than New Yorks, about as bad as Californias, but not quite up to New Jersey levels.
The point, however, is that just the other day Texas was being touted as a role model (and still is by commentators who havent been keeping up with the news). It 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 theres 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 many people were talking about even a few months ago?
Part of the answer is that reports of a recession-proof state were greatly exaggerated. Its true that Texas job losses havent been as severe as those in the nation as a whole since the recession began in 2007. But Texas has a rapidly growing population largely, suggests Harvards Edward Glaeser, because its liberal land-use and zoning policies have kept housing cheap. Theres nothing wrong with that; but given that rising population, Texas needs to create jobs more rapidly than the rest of the country just to keep up with a growing work force.
And when you look at unemployment, Texas doesnt seem particularly special: its unemployment rate is below the national average, thanks in part to high oil prices, but its about the same as the unemployment rate in 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 in the face of a serious structural budget deficit that is, a deficit that persists even when the economy is doing well. When the recession struck, hitting revenue in Texas just as it did everywhere else, that illusion was bound to collapse.
The only thing that let Gov. Rick Perry get away, temporarily, with claims of a surplus was the fact that Texas enacts budgets only once every two years, and the last budget was put in place before the depth of the economic downturn was clear. 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 wasnt lying about those tough conservative decisions: Texas has indeed taken a hard, you might say brutal, line toward its most vulnerable citizens. Among the states, Texas ranks near the bottom in education spending per pupil, while leading the nation in the percentage of residents without health insurance. Its hard to imagine what will happen if the state tries to eliminate its huge deficit purely through further cuts.
I dont know how the mess in Texas will end up being resolved. But the signs dont look good, either for the state or for the nation.
Right now, triumphant conservatives in Washington are declaring that they can cut taxes and still balance the budget by slashing spending. Yet they havent been able to do that even in Texas, which is willing both to impose great pain (by its stinginess on health care) and to shortchange the future (by neglecting education). 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 were seeing right now is a future that doesnt work.
Cliffs:
Texas faces huge deficits.
The "conservative" fiscal policies of Texas have resulted in the same problems as states like New York, California and New Jersey.
Texas has the same unemployment rate as New York and Massachusettes.
Texas spends the least on student education and leads the nation in having the LEAST amount of people with health insurance.
The serious problems in Texas are only now coming to light because Texas has a two year budget and only now is the recession being factored in.
Well, I guess its time to mess with Texas!
The Texas Omen
By PAUL KRUGMAN
These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas.
Wait Texas? Wasnt Texas supposed to be thriving even as the rest of America suffered? Didnt 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 cant make it there, it cant make it anywhere.
How bad is the Texas deficit? Comparing budget crises among states is tricky, for technical reasons. Still, data from the Center on Budget and Policy Priorities suggest that the Texas budget gap is worse than New Yorks, about as bad as Californias, but not quite up to New Jersey levels.
The point, however, is that just the other day Texas was being touted as a role model (and still is by commentators who havent been keeping up with the news). It 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 theres 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 many people were talking about even a few months ago?
Part of the answer is that reports of a recession-proof state were greatly exaggerated. Its true that Texas job losses havent been as severe as those in the nation as a whole since the recession began in 2007. But Texas has a rapidly growing population largely, suggests Harvards Edward Glaeser, because its liberal land-use and zoning policies have kept housing cheap. Theres nothing wrong with that; but given that rising population, Texas needs to create jobs more rapidly than the rest of the country just to keep up with a growing work force.
And when you look at unemployment, Texas doesnt seem particularly special: its unemployment rate is below the national average, thanks in part to high oil prices, but its about the same as the unemployment rate in 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 in the face of a serious structural budget deficit that is, a deficit that persists even when the economy is doing well. When the recession struck, hitting revenue in Texas just as it did everywhere else, that illusion was bound to collapse.
The only thing that let Gov. Rick Perry get away, temporarily, with claims of a surplus was the fact that Texas enacts budgets only once every two years, and the last budget was put in place before the depth of the economic downturn was clear. 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 wasnt lying about those tough conservative decisions: Texas has indeed taken a hard, you might say brutal, line toward its most vulnerable citizens. Among the states, Texas ranks near the bottom in education spending per pupil, while leading the nation in the percentage of residents without health insurance. Its hard to imagine what will happen if the state tries to eliminate its huge deficit purely through further cuts.
I dont know how the mess in Texas will end up being resolved. But the signs dont look good, either for the state or for the nation.
Right now, triumphant conservatives in Washington are declaring that they can cut taxes and still balance the budget by slashing spending. Yet they havent been able to do that even in Texas, which is willing both to impose great pain (by its stinginess on health care) and to shortchange the future (by neglecting education). 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 were seeing right now is a future that doesnt work.
Cliffs:
Texas faces huge deficits.
The "conservative" fiscal policies of Texas have resulted in the same problems as states like New York, California and New Jersey.
Texas has the same unemployment rate as New York and Massachusettes.
Texas spends the least on student education and leads the nation in having the LEAST amount of people with health insurance.
The serious problems in Texas are only now coming to light because Texas has a two year budget and only now is the recession being factored in.
Well, I guess its time to mess with Texas!
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, raise the property tax rates (which they've already said they would do), maybe dip into the state's rainy day fund (which has $8B in it), raise some fees and close the gap.
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