Texas is Evidence That Freedom Works
by VANCE GINN, Texas Public Policy Foundation
Feb 27, 2018 | 2519 views | 0 0 comments | 9 9 recommendations | email to a friend | print


Critics often claim Texas’ prosperity is based on abundant oil and natural gas production. Others suggest it’s a “miracle.” Evidence, however, proves the Texas model, based on conservative fiscal policies, that ranks second best in economic freedom according to the Fraser Institute supports sustained human flourishing. 


With less than 10 percent of the U.S. population, Texans have created 26 percent of all jobs added nationwide since December 2007. Texas’ two million new jobs exceed the combined populations of Wyoming, North Dakota, and Vermont.


This historic job creation has contributed to a near record low unemployment rate of 3.9 percent rate in December 2017. That rate marked the 42nd straight month of an unemployment rate at or below 5 percent, which some economists consider full employment.


There’s no doubt oil and gas played a role.


History shows Texas’ economy boomed when oil prices spiked in the 1970s, then bust when they collapsed in the 1980s. But Texas’ economy is more resilient to oil price fluctuations today.


The mining sector, dominated by oil and gas activity, accounted for roughly 20 percent of real private output and 5 percent of workers in the 1980s. Now, oil and gas activity directly represents only about 10 percent of output and employs just 1.8 percent of the labor force.


The drop in oil prices from nearly $110 in 2014 to around $60 today should have led to a severe recession in Texas had critics been correct. Instead, Texas’ real private economy grew by an annual average of 3.3 percent amidst the oil bust helping almost single-handedly pull the U.S. average growth up to 2.3 percent.


Contributing to Texas’ resiliency is diversification into healthcare, financial, and other professional sectors with high-paying jobs. Jobs in the lowest wage quartile increased by about 33 percent while the top two wage quartiles each increased by 25 percent in Texas from 2005 to 2014 according to the Federal Reserve Bank of Dallas. Comparatively, Texas’ job creation exceeded that for the rest of the nation in each income quartile, rebutting critics’ arguments that Texas creates only low-wage jobs.


The free enterprise system in Texas provides jobs for workers with all skill levels and experience — a key to individual prosperity.


Some point to Texas’ nearly worst ranking in the Census Bureau’s official poverty measure as evidence of a failed model. That measure, however, doesn’t include regional variations such as cost-of-living differences or non-cash government benefits, like housing and food assistance. The Bureau’s new Supplemental Poverty Measure does correct for these exclusions, putting Texas’ poverty rate instead at the national average of 14.7 percent, down from 14.9 percent in the previous report.


The Texas model has performed well over time.


The last major federal tax reform before what Congress just passed was in 1986. Since then Texas has practiced more fiscally conservative policies. A result was Texas’ real private economy quadrupling from 1987 to 2016. This translates to a compounded annual growth rate of 4.9 percent, which was 40 percent faster than the rest of the nation’s 3.5 percent rate.


The Texas model of reducing government barriers to competition lets people prosper more—a big reason why more people move here. In 2017 alone, Texas’ population increased by almost 400,000 from births and migration from other countries and states, particularly those from big government states noted by recent U-Haul migration trends


Texas has taken strides to limit government’s growth and empower Texans in recent years. But there’s more to do.


The Foundation has launched the Texas Prosperity Promise (www.texasprosperitypromise.com/) campaign to promote and sustain the prosperity of all Texans by focusing on areas ripe for major reform. These areas include property taxes, education, spending restraint, government accountability, and self-governance.


But let’s not fool ourselves as we cast our ballots for folks offering a path towards greater prosperity, Texas is prime evidence that freedom works.


Vance Ginn, Ph.D., is Director of the Center for Economic Prosperity and Senior Economist at the Texas Public Policy Foundation.



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