Texas and the Perry record

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Since jumping into the race for the Republican presidential nomination in mid-August, Texas Gov. Rick Perry has stirred things up.

Most notably, according to polls in late August, Mitt Romney, former Massachusetts governor, had been dethroned as the GOP frontrunner by Perry.

Is this a good thing for the business community, especially given Romney’s business success in private equity?

Well, Romney’s position with free market and conservative Republican primary voters always has been precarious. In his “Tonight Show” monologue on Aug. 29, Jay Leno captured the problem: “The rhetoric is heating up between Republicans Rick Perry and Mitt Romney. These two do not like each other. Perry has opposed many of Romney’s positions — but to be fair, so has Romney.”

Romney ran as a liberal Republican when he lost to U.S. Sen. Ted Kennedy in 1994, and when he won the Massachusetts governorship in 2002. But as he turned his attention to the White House, Romney began moving rightward. He ran as a conservative during the 2008 presidential primary season, and has continued along these lines heading into the 2012 contests.

But beyond various flip-flops on issues, the biggest problem for Romney has been Romney-Care in Massachusetts, which, with its individual mandate for health care coverage, expansion of government, increased costs, and higher taxes, was a clear forerunner of Obama-Care. It’s kind of hard to argue against misguided and costly Obama-Care — one of the president’s biggest errors — when you pushed for and implemented many of the same policies as governor.

Rick Perry’s story in Texas has been different from Romney’s Massachusetts experience.

In terms of background, Perry served in the Air Force from 1972 to 1977, and has worked his family’s ranch. As a conservative Democrat, he served in the Texas House of Representatives, but switched parties and won election as the state’s agricultural commissioner in 1990. In 1998, Perry won the lieutenant governor race by a 50 percent – 48 percent margin.

In 2000, when George W. Bush gained the White House, Perry became governor. He won the governorship himself with 58% of the vote in 2002, and subsequently with only 39 percent in 2006 in a race with four major candidates, and with 55 percent in 2010. Perry is the longest serving governor in the history of Texas.

From a business, investor and jobs standpoint, Texas ranks as one of the top states in the nation. According to the most recent annual edition of the Small Business & Entrepreneurship Council’s “Small Business Survival Index” (I am the author of this study), which ranks the 50 states and District of Columbia according to their public policy climates for entrepreneurship and small business, Texas came in third best. Texas benefits enormously from the lack of any personal income, individual capital gains, corporate income, corporate capital gains, and death taxes. In addition, the Lone Star State has very low workers’ compensation costs, and a relatively low level of state and local government spending.

The economic results have been impressive. According to the Census Bureau, for example, Texas saw the largest increase in population between 2000 and 2010. Even more interesting are net domestic migration numbers, which factor out births, deaths and international migration to arrive at population movements between the states. While California and New York — both high-tax, regulatory, big-government states — were the biggest net exporters of people from 2000 to 2010 (-1.51 million and -1.69 million, respectively), Texas was the biggest gainer in terms of net domestic migration at +848,702.

On jobs, as Bill Peacock of the Texas Public Policy Foundation reported in an August 2011 analysis, “Texas leads the nation in job creation since 2001 with more than 1.2 million net new jobs. Nobody else comes close. In fact, without Texas, the U.S. would have lost 713,000 jobs over the last decade.”

Bottom line: Texas attracts business, capital, people, and jobs due to its favorable policies.

As for Perry’s key actions, they’ve been, on balance, positive. For example, he got medical malpractice reform in 2003, with caps non-economic damages, and signed “loser pays” tort reform into law this year, which allows for the early dismissal of frivolous lawsuits.

Tax changes in 2006 were mixed, but generally positive. For example, property taxes were reduced, and an effective 4.5 percent income tax on businesses was eliminated. Those are big positives. However, a franchise tax largely based on total revenue replaced the business income tax, and cigarette levies were increased.

In a recent opinion piece for USA Today, Perry concluded: “I believe this common-sense model will benefit our nation: Control spending, keep regulations fair and predictable, and simplify the tax code to once again spark job creation. The alternative is economic ruin.”

Indeed, out-of-control spending, ever-expanding regulation, increased taxes, and the threat of even higher taxes down the road have damaged the U.S. economy over the past few years. The right solution in fact must include a smaller federal budget, deregulation, and tax relief and reform. Several candidates are talking this way, the challenge, of course, is figuring out who would actually carry through on such an agenda.

One thing we surely know is that Gov. Perry is critical of both Obama-Care, which he has pledged to repeal, and Romney-Care, which he recently called a “total debacle.” Mr. Perry is much clearer on health care policy than is Mr. Romney.

Raymond J. Keating is the chief economist for the Small Business & Entrepreneurship Council, and author of Warrior Monk: A Pastor Stephen Grant Novel.