“Don’t mess with Texas,” warn some Texans.You definitely can’t mess with the strength of its economy.
Dallas Fed governor Richard Fisher spoke before the Texas Manufacturers Summit today in San Marcos and boasted not only of how well the state has braved the financial crisis but of the political forethought that made this possible.
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Fisher said that this might be an inconvenient truth for residents of other states:
Our record of job growth and the fact that people and companies have been voting with their feet and relocating to Texas from other states illustrate what for some is an inconvenient truth. The citizens of Texas and the Eleventh Federal Reserve District operate under the same monetary policy as do the rest of our fellow Americans. We have the same mortgage rates, pay the same rates of interest on commercial and consumer loans, and our businesses borrow at the same interest rates as our brethren in the rest of the country. Which raises an important question: If monetary policy is the same here as everywhere else in the United States, why does Texas outperform the rest?
The answer? The effective dosage of “responsible and disciplined fiscal and regulatory policy”:
One might draw two lessons here.
The first is that Germany’s finance minister, Wolfgang Schäuble, is right when he says, “If you want more private demand, you have to take people’s angst away” by having responsible and disciplined fiscal and regulatory policy. Clearly there is less angst involved in conducting business in Texas.
The second is a broader, macroeconomic truism: That fiscal and regulatory policy either complements monetary policy or retards its effectiveness as a propellant for job creation.
I have noted that under the same monetary policy regime that equally affects all 50 states, Texas has managed to return more quickly to peak employment. I attribute this to several factors but underscore that prudent fiscal and regulatory policy has facilitated our recovery from the Great Recession and for at least two decades, under both Democratic and Republican governorships and legislatures, has helped make Texas a leader in job creation and economic growth.
The Texas economy has outperformed almost all the rest of the country by a long shot, surpassing previous peak employment levels.
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