Thursday, August 25, 2011

Meet the candidates--Lonestar edition

Continuing something of a series, we'll continue to examine presidential candidates and see if their pronouncements on the economy make any sense. Considering what the country has been going through the last several years, picking a candidate that understands how economics and finance work is of the utmost importance. Sadly, things thus far have looked bleak.

First, while we were away, Tim Pawlenty dropped out of the race, after finishing third in the Ames straw poll... probably doing himself and his family a favor. Basing his decision on one straw poll, however, is a bit odd, as who's to say that idiosyncratic Iowans accurately represent the country's mood (Michelle Bachmann came out on top, for crying out loud).

While we'll work our way through each candidate and pick apart their policies, today we'll be focusing on a recent (apparently formidable) entry, Rick Perry. He's been the governor of Texas since 2000 (right after Bush left) and, over the last 11 years, has presided over a huge population and jobs boom, that's become a much-debated microcosm representing the effects of conservative policy thinking in general. While the unemployment rate in Texas is currently 8.4% (right in the middle, in terms of state rankings), the job growth there has been phenomenal in recent years. In fact, from 2007 to 2010 the Lonestar state accounted for 47% of all job growth in the US (albeit many of those were government jobs). The reason for the mediocre unemployment rate is that Texas' population is growing like gangbusters. Recent estimates put the state's population growth at ~2%, which doesn't sound like much, but when you consider the state's population is ~24m, that means it's adding ~half a million people a year, which is about the population of Wyoming. With that many people flocking in looking for work, it's tough to get the unemployment rate to drop.

Paul Krugman isn't buying the Texas miracle, however. He points out that wages in Texas lag the national average and thus the kind of jobs Perry is creating aren't the kind the nation really needs. Nevertheless, politicalmathblog cites data that shows Texas jobs have enjoyed wage gains that are 6th highest in the nation. Perhaps Krugman's biases are showing through here and he's auto-denigrating the low-tax, freewheeling land of Bush. Politicalmathblog does an impressive job of running the numbers (do read the whole thing) and concludes by saying they're against Perry, personally, but...
My advice to anti-Perry advocates is this: Give up talking about Texas jobs. Texas is an incredible outlier among the states when it comes to jobs. Not only are they creating them, they're creating ones with higher wages.
Well, there you have it. Texas appears to have done quite well at putting people to work. By other common metrics, however, it has failed quite miserably. In terms of health insurance coverage it ranks dead last among states, with an unbelievable ~27% of its people without coverage. It's hard to say how much of an impact a governor has on any of these statistics, but it is something to chew on.

Oh, and finally, Rick Perry recently threatened to beat up Ben Bernanke, the Chairman of the Federal Reserve. See the video here. He also called it treasonous for Bernanke to be printing more money. Umm, I'm not sure what Perry thinks the Federal Reserve usually does, but that is firmly within its job description. That is how the Fed lowers interest rates to get people to buy stuff (well, at least that's how it usually works--now, not so much). Learn more here and here about how the money supply (what the Fed controls) affects the economy. Learn why a devalued dollar can actually be a good thing here. It appears that Perry doesn't understand basic economics. This is the kind of thing we try to learn from watching the candidates and, unfortunately for Perry, he let us in on this secret early on. He can now be discarded as a serious candidate for president.

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