Strengthening Constitutional Self-Government

No Left Turns

If They Come, You Will Build It

Slate's Annie Lowrey writes that the Texas economy really is pretty strong - growing twice as fast as the overall national economy, and generating 40 percent of the jobs created since the recession officially ended in 2009, despite having 8 percent of the national population.  The governor of Texas, presidential candidate Rick Perry, deserves credit for none of this, however.  Indeed, she argues, public policy is largely irrelevant to the state's economic strength.  Perry can't take credit for rising prices for oil and natural gas, which have helped a state where energy remains one of the biggest industries.  Nor did he have much to do with keeping in place the restrictions on over-leveraged home mortgages, put in place after the Savings and Loan wipeout of the 1980s.  As a result, Texas never had the run up in home prices and subsequent real estate meltdown, which has debilitated other Sunbelt states, including Arizona, California, Florida, and Nevada.

So far, so good.  But then Lowrey asserts, "Texas' economy is growing because Texas is growing. Indeed, the state's population has swelled more than 20 percent in the last decade,  by 4.2 million people. And it has added residents faster than any other state since the recession started. In this case, supply creates its own demand. All those folks buy food, pay rent, and drive cars, helping to support local businesses and create jobs."

Huh?  The normal understanding of causal flow would be that places that have strong economies are attractive places to raise families and operate businesses.  Lowrey contends that any old place where a lot of people start showing up acquires a strong economy by virtue of their presence.  Michigan - the only state that had fewer residents in 2010 than in 2000 - had a strong enough economy, according to this logic, until people started leaving the state.  Maybe they had lived through enough of its winters, or gave up on the Detroit Lions ever having a winning season.  Whatever the motives, it was the declining numbers of people buying food, paying rent, and driving cars that harmed local businesses and destroyed jobs. 

So the key, apparently, is to get people to come to your state, and then the economic problems will more or less solve themselves.  Lowrey attributes the increasing numbers of Texans to a "growing economy, nice weather, great barbecue, and cheap real estate," none of which Gov. Perry had anything to do with.  The mystery of people voting with their feet seems to track with a couple of other coincidences, however.  According to the 2010 census, the nation's population grew by 9.7 percent in the decade after 2000.  Five states grew more than twice that fast: Texas, Idaho, Utah, Arizona, and Nevada.  All five of them are "right to work" states, where private-sector unions are vestigial.  Of the five states that had the slowest rates of population growth - Michigan, Rhode Island, Louisiana, Ohio, and New York - only Louisiana has a right-to-work law.  Its population barely grew during the past decade because of Hurricane Katrina in 2005 - that is, unless you think the outflow of population from Louisiana caused the hurricane.

Here's another coincidence that has no cause-and-effect impact on the population shifts that ignite economic growth: In 2009, according to the Tax Foundation, the burden of state and local taxes was, for the nation as a whole, 9.8 percent of per capita income.  Of the five states with the lightest tax burden - Alaska, Nevada, South Dakota, Tennessee, and Wyoming - only South Dakota's population grew more slowly than that of the nation as a whole.  Of the five states with the highest state and local tax burdens - New Jersey, New York, Connecticut, Wisconsin, and Rhode Island - Connecticut had a population growth rate that was barely half the national rate, and the other four grew significantly more slowly.

The moral of the story is clear: States' populations grow and shrink for mysterious, idiosyncratic reasons.  A strong economy results from, but does not cause, these population shifts.  Since a vigorous economy does nothing to attract and retain residents, states are wasting their time trying to strengthen their economies through public policies like right-to-work laws and tax reductions.  Since those policies have nothing to do with economic strength or population growth, states should go ahead and elect as many Democrats as possible, hoping the random variable of a growing population will just happen to favor a state pursuing high-tax, pro-union policies, and a booming economy will magically follow.   

Discussions - 6 Comments

Remember, these are the same brain trusts that think food stamps grow an economy. Detroit, Chicago, and all the other liberal strongholds are their model for growth.

Slate Magazine should change their name from Slate to Slanted Towards the Left Magazine...

I'll bet you a dollar to a sour Liberal donut that Slate's Annie Lowrey thinks murdering the unborn is also a terrific idea.

By this reasoning, third world countries, with their higher birthrates, should have the best economies of all, and thus have no need to send immigrants to the United States.

Do third world countries have a safety net, which enables citizens without jobs to countinue to spend thus stimulating aggregate demand?

I am not dismissing the idea that states can create attractive enviroments that attract population from other states, or that the lack of an income tax makes Texas an advantageous state.

"supply creates its own demand. All those folks buy food, pay rent, and drive cars, helping to support local businesses and create jobs." This is true, but the sentence that says supply creates its own demand could be rewritten demand creates its own supply.

That is a stronger consumer, buys up more product, which reduces inventories and increases profit margin and thus leads to inventory replentishment, and a faster reload time on credit cycles.

It is the C component of G+C. Who is Demanding what? who is Supplying what? The outflow of population from Louisiana did not cause the hurricane:) But the outflow of population from Louisiana did cause a boom in Houston. It caused a boom even in Oklahoma.

In part because there was a safety net, so these folks didn't just come to Texas or OK broke, but with some insurance money, and the ability to stimulate aggregate demand.

Bastiat's broken window fallacy applies to the destruction wrought by the Hurricane, but if you are interested in selling new houses or selling new windows, it isn't a fallacy but just plain ole demand.

Also in terms of pop growth aggregate demand boosting, Texas benefits from having a big border with Mexico. Texas is 38% latino, and this segment grew 42% since 2000.

The so called cost of immigration is also a benefit. That is the money spent on immigrants tends to get spent in states where they live. You want to increase border security, that is money that will get spent in Texas.

Lets close down all our foreign bases and put the troops on the Mexico border. #duhwinningtexas!

Ever heard of a woman named Ester Boserup, Mr. Voegeli? Or how about Julian Simon? I'm not saying I agree with Ms. Lowrey (many factors have helped Texas), but people DO come, and they DO build it. That's the story of every major city you've ever heard of. They start homely and become Chicago, New York, Tokyo, etc. Why? Well, people have to make a living, and when they find themselves in competition with lots of other people they have to get creative. I think it's called entrepreneurship.

On the other hand, economies don't just spring up out of nowhere and attract immigrants. It takes people to build wealth.

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