Obama, Perry And The True Source Of The Texas Jobs Miracle

There's a scramble to claim credit for the Texas miracle, and now President Obama has jumped in with both feet.

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US President Barack Obama speaks with Texas Governor Rick Perry (L) after arriving on Air Force One at Austin-Bergstrom International Airport in Austin, Texas, May 9, 2013.

Here’s a fact: Texas has been a monster job creator over the past ten years, a non-stop, high-rev employment machine. Look at these charts from the Bureau of Labor Statistics, which show steady employment growth despite massive increases in the state’s labor pool and a spike in unemployment in 2009.

Now, since it is an immutable rule of politics that nothing good ever happens except thanks to humble, hardworking politicians, there has been a Texas-size dog-pile over who should get to take credit for the jobs boom. King of the Hill has been Texas Governor Rick Perry, whose truncated run for the White House in 2012 was predicated almost entirely on his job creation claims. Texas is responsible for a large percentage of the jobs created in America since the recession ended in June 2009, and while its unemployment rate has ticked up slightly in recent months to 6.4% thanks to labor market growth, it continues to generate work in everything from construction to manufacturing to financial activities to mining.

It was always somewhat awkward for Perry to stake that claim, since to do so he had to argue that government policy could create jobs, specifically by funneling tens of millions of tax dollars to stimulative public investment funds. And then there was the problem that sizeable chunks of Perry’s funds seemed to have a way of benefitting his campaign contributors.

But that didn’t get in the way of the general scramble to claim credit for the Texas miracle, and now President Obama has jumped in with both feet, traveling yesterday to Texas for the second time in a week to unveil some job-creation proposals that look a bit like Perry’s approach. In particular, Obama announced $200 million in funding from five different agencies for three manufacturing hubs, a proposal that would receive $1 billion under his budget that is languishing on the Hill.

(MORE: Why is Texas Governor Rick Perry in Illinois?)

While Obama deserves credit for a clever bit of political jiujitsu—seeing Perry’s pro-government job creation claims and raising them $200 million—there’s one problem: the Texas jobs miracle has little or nothing to do with the policies implemented by either the state or federal governments, at least not in this country. Rather, they’re the result primarily of three things: geology, demography and geography.

First geology. You’ve heard that Texas has oil and gas. Well, thanks to the technological leaps allowing the extraction of oil and gas from shale formations, Texas has a lot more of both. From 2011-12 its Eagle Ford shale formation tripled its oil output, and oil production statewide could double by 2020.

Next, demography. Texas has benefited from that biggest of political hot potatoes, immigration. Rather than being a drag on the state’s economy, the steady influx of workers has fueled growth–according to economists [pdf] at the Dallas Federal Reserve–giving the state new, eager workers across a variety of employment areas.

Finally, Texas has benefited from geography. With its long land border with Mexico and its port access to the Gulf, Texas is a trade giant with Latin America, which has been on a GDP winning streak  for all but one year of the last decade, per this chart:

Latin America Growth

Trading Economics

True, Texas has low regulatory burdens compared to California, for example, and is a “right to work” state. And it did pass tort reform under Perry, which the head of the Dallas Federal Reserve has argued was crucial for business growth in Texas. But if you think a couple of publicly financed investment funds and some tweaks to the legal code can generate the kind of jobs growth Texas has seen over the years, I have a rugged, inarticulate and somewhat forgetful presidential candidate for you.

The truth is the big drivers of job creation in Texas, and the ultimate source of its miracle, have been beyond the control of government policies, Republican or Democratic. Just don’t expect Governor Perry, or Barack Obama, to admit it.

MORE: America’s Forgotten Economic Challenge