Truth About Rick Perry's 'Texas Miracle'

Texas Governor Rick Perry has been on a Bernanke-bashing binge this week, demanding on Wednesday that the Federal Reserve "open their books up."
That comment comes after Perry said earlier this week that it would be "treasonous" if Chairman Ben Bernanke used Fed policy to stimulate the economy before the election.


But what books exactly does Perry want opened?
The Federal Reserve already publishes its balance sheet online every Thursday for the entire world to see.
Not only that, it is audited regularly. Every year, an external accounting firm audits the financial statements of the Federal Reserve and all 12 of its regional banks. Last year, that firm was Deloitte and Touche, but PricewaterhouseCoopers and KPMG have also done it over the years.
Those financial statements are also posted online.
"Every aspect of the Fed's financial dealings are wide open -- wide open," Bernanke remarked at the National Press Club in February. "There is no sense in which the Fed has secret financial dealings."
Despite that public information, anti-Fed criticism seems to be the latest craze on the Republican campaign trail. On Tuesday, Rep. Michelle Bachmann criticized the Federal Reserve for not being "subject to transparency."
Those comments echo similar sentiments from Rep. Ron Paul, a renowned Fed critic in his own right, who over the years has repeatedly called for audits of the central bank and even a review of all the gold in Fort Knox. Paul introduced a bill in the House earlier this year, called the "Federal Reserve Transparency Act of 2011.


The Lone Star State is rich in natural resources such as oil and natural gas, so when the rest of the country was struggling with high energy prices at the onset of the recession, Texas companies were turning big profits and, therefore, pumping tax revenue into the state coffers.


These high energy profits helped Texas stave off the brunt of the recession for about six months.


And while the state's economy is growing at twice the national rate, so is its population. Texas grew 20.6 percent from 2000 to 2011, while the country's population only increased by 9.7 percent. With more people comes more purchasing power, which leads to job growth.


Regardless of whether Perry can personally take credit for the jobs created, critics claim the numbers are just smoke and mirrors because the new jobs are primarily low-wage.


"What Texas shows is that a state offering cheap labor and, less important, weak regulation can attract jobs from other states," New York Times columnist Paul Krugman wrote Sunday. "What you need to know is that the Texas miracle is a myth, and more broadly that Texan experience offers no useful lessons on how to restore national full employment."


Texas is tied with Mississippi for having the highest proportion of hourly workers earning minimum wage or less, according to Bureau of Labor Statistics data. Overall, Texans earned about $2,300 less than the national average, according to 2009 Census Bureau data.


These low-paying jobs usually do not come with health insurance, which is part of the reason why Texas has the highest rate of uninsured people in the country. One of every four Texans lives without health insurance.


Depending on which measure is used, the jobs picture in Texas can be painted in radically different ways. On one hand, more Texans are getting a paycheck, on average, than in any other state. But on the other hand, those paychecks are more often from low-wage jobs without insurance in a state that has fewer social benefits than most others.


"People focus on the wage and, yeah, that's important, people need to support their families," said Lisa Givens, a spokeswoman for the Texas Workforce Commission. "But sometimes it's about looking down the road, looking at an area where there are going to be opportunities for me and for my family and for growth.

Perry Sticks by His Bernanke Attack

Texas Governor Rick Perry introduced himself to the U.S. electorate Monday night by offering the country a little monetary advice.

Asked about the Federal Reserve at a campaign event in Cedar Rapids, Iowa, Perry said of Fed Chairman Ben S. Bernanke: “If this guy prints more money between now and the election, I don’t know what you all would do to him in Iowa, but we would treat him pretty ugly down in Texas.”

And what would move amiable Texans to such ugliness? “Printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous -- in my opinion.”

Let’s give him the benefit of the doubt, and ascribe the violent rhetoric to the passions of a new campaign. Does the underlying sentiment reveal anything important about the governor’s grasp of monetary policy? Or his political strategy? Unfortunately, yes -- and the two are related.

If Perry intended to say that a third round of quantitative easing -- the Fed’s program for purchasing Treasury bonds to encourage lending -- was unwise, he may have had an argument.

But he didn’t. He said “printing more money” is close to treason. If he believes this, he either doesn’t understand the Fed’s function, or is a peculiar kind of monetary extremist. As economies grow -- and jobs are created, and demand for goods and services increases, and people have children -- the demand for dollars also grows. To meet this demand, the Fed prints money electronically in good times and bad, under Democratic and Republican presidents. In times of stress, like the last few years, it can add significantly more money to the economy through quantitative easing and other methods.

If the Fed didn’t print any more money at all, we’d soon be relying on a cumbersome and rather inexact form of exchange known as the barter system. Perry surely understands all this.

He also said that printing more money would be “devaluing the dollar in your pocket, and we cannot afford that. We have to learn the lessons of the past three years, that they’ve been devastating.” This would be a more compelling argument if inflation weren’t low by historical standards and unemployment above 9 percent. The Fed’s response to the recession has certainly been aggressive, and not always adequately transparent. But blaming the Fed’s monetary policy for the “devastating” effects of the financial crisis is like blaming the doctor for aggressively treating a smoker’s lung cancer.

Voters may not care as much, but investors, like the chattering class, expect a candidate to know what he's talking about when he talks about the Fed," he said. "It's one thing to oppose what the Fed is doing, but it's another to call it almost treasonous."

The flap may draw the clearest distinctions yet between the Republican establishment and the tea-party ground troops. Mitt Romney, a former private equity executive and the favorite of many Republicans on Wall Street, stayed quiet Tuesday. But last spring he said on CNBC that he wouldn't attack the Fed. "I think Ben Bernanke is a student of monetary policy. He's doing as good a job as he thinks he can do," he said.

Mr. Bernanke, a Republican economist first appointed to the Fed by Republican President George W. Bush and then reappointed by President Barack Obama, doesn't elicit strong opinions in many quarters of the electorate.

In January 2010, as Mr. Bernanke was facing a confirmation fight for a second term, 64% of Americans said they either felt neutral toward him or had no opinion, according to a Wall Street Journal/NBC News poll. Eighteen percent felt somewhat or very negative about him.

But feelings were much stronger among self-identified tea party sympathizers, a third of whom said they felt negatively about the Fed chairman, and half of whom said he shouldn't be granted a second term.

Mr. Perry's critique struck a chord with some voters. "If the words sound harsh and it's the truth, then I'm all for it," said Maureen Saul, a 66-year-old from Cedar Rapids, who drove to Ames this weekend to cast a write-in vote for Mr. Perry.

A parade of mainstream Republicans, however, rushed to criticize Mr. Perry.

Peter Wehner, a top policy maker in George W. Bush's White House, said the governor's comment was "not helpful to our country."

Conservative John Podhoretz, writing in Commentary, labeled the comments "a thoughtless blunder, an unforced error" and "a serious rookie mistake."

"We're now going to spend a couple of days discussing whether he was summoning violence on Ben Bernanke's head or not, which is of absolutely no use to Perry. He is, or was, moments away from becoming the race's frontrunner," Mr. Podhoretz wrote.

Mr. Perry was less sharp-tongued Tuesday. He made a passing reference to the Fed at a business roundtable, saying, "Not only do we have a problem with spending money in Washington, D.C. We have a problem with printing money."

Ray Sullivan, Mr. Perry's communications director, sought to soften the message. "I would just say it was the end of the long day. Today is a new day. But the message about fiscal responsibility is the same and one often repeated in this campaign," he said.

Asked if the campaign would work to keep Mr. Perry more disciplined, he said, "Whenever an individual takes a step and jumps to a new level, whether it's a career business decision or, in this case, political, there are always new things to learn.