by Gail Collins
Let’s take a look at what Texas has been up to.
Given its let’s-whack-California inclinations, the Perry administration was particularly thrilled to announce in 2005 that Hilmar Cheese Company of central California was going to build its new plant in Dalhart, on the Texas panhandle. The lure, said Hilmar officials, was Texas’s “common-sense approach to regulation.” They were presumably thinking of the record $4 million fine Hilmar had gotten in California for befouling the local drinking water with the waste from its cheese-making. The wells of Hilmar’s neighbors were contaminated with arsenic, barium, and salts, and the water had become undrinkable. When people in the Hilmar zone washed themselves or their laundry, the salt content in the water was so high that “it leaves a residue of white, chunky crystals,” reported Environmental Health News.
It wasn’t as if California regulators had been going out of their way to crack down on Hilmar, whose co-founder was Governor Arnold Schwarzenegger’s undersecretary of agriculture. Water quality enforcers had pretty clearly been looking the other way until the Sacramento Bee published a story with the uncheery title “The World’s Biggest Cheese Factory Fouled Air and Water for Years.” Then came the fine—which Hilmar settled for $3 million—and next thing you knew, the firm’s chairman, Richard Clauss, was in Texas, saying he had “never got a welcome like that in California.”
Which was probably true, since Perry’s Enterprise Fund gave Hilmar $7.5 million to build its new factory in the panhandle, a move the cheese-makers said would create 376 new jobs and another 1,586 “associated” jobs at dairies that would naturally spring up to supply Hilmar. Three years later, the new factory had actually produced 169 direct jobs and 326 associated jobs.
WHEN TEXAS OFFICIALS brag about their hatred of business-unfriendly restrictions, they don’t generally point to, say, lax enforcement of laws against water pollution—although the state didn’t claw its way up to the number one spot in toxic discharges into the waterways without a good deal of effort. And God knows what they say in private to chemical firm executives looking to move. But in public, the emphasis is often on the way the state has clamped down on frivolous lawsuits.
“The most important thing that’s happened to us is tort reform,” Richard Fisher, the head of the Federal Reserve’s Dallas branch, told Rick Wartzman in that Los Angeles Times piece. Fisher added that he believed companies like John Deere have expanded in Texas because they were “largely driven by steps the state has taken to cap non-economic damages in medical malpractice suits and to make it harder to bring product liability and class-action cases.”
Tort reform was one of George W. Bush’s big issues in his 1994 campaign against Governor Ann Richards, the famous race in which Bush astonished the political world with his ability to make the same four points over and over without collapsing from boredom. (The other three, in case anyone ever asks, involved juvenile justice, schools, and welfare.) And he had a point. Even people who believed strongly in the importance of civil suits in protecting the public against defective products and services sometimes admitted that the Texas system could indeed use a little reining in. After Bush was elected reforms ensued, limiting the amount juries could award in punitive damages and making it harder for lawyers to go venue-shopping for the most sympathetic locations for their trials.
Then in 2003, the legislature went tort reforming again, and threw out the proverbial baby with the judicial bathwater.
“Here is what can happen to you in Texas today,” Mimi Swartz of Texas Monthly wrote in 2005. “If you go to an emergency room with a heart attack and the ER doctor misreads your EKG, you must prove, in order to prevail in a lawsuit, that he was both ‘wantonly and willfully negligent.’ ” Swartz went on to a long list of depressing and distressing outcomes. (“If your child is blinded at birth because of medical malpractice, there is a good chance that her only remedy is to receive a few hundred dollars a month for the rest of her life.”) Then she pointed out that even getting a tiny settlement was dependent on being able to find a lawyer—a difficult project, since under the new regime, few lawyers were willing to take on clients who could only pay a percentage of their final court settlement. Finally, Swartz added that if you did manage to find a lawyer and miraculously win the case, the other side could always appeal. In which case, the odds of your winning were about 12 percent.
And there you are. “Our tort policy has improved the business climate,” said state representative Mark Strama of Austin. “But it’s also the reason one of the mothers in my district whose four-year-old daughter checked into the hospital with a cold and never checked out can’t even get a lawyer to find out why.”
The caps on malpractice awards were supposed to draw more doctors to Texas, and it is true that they’re flocking in. But the rural areas that were underserved by physicians when George W. Bush was governor are still pretty much in the same boat. “The doctors are by and large coming to the places that already had them,” said Alex Winslow of Texas Watch, a consumer advocacy group. The undersupply of doctors, Winslow argues, was never really due to malpractice issues as much as to the state’s low Medicaid reimbursement rates, which discourage doctors from going to any part of the state where there are a lot of poor people—especially a lot of poor people spread far apart. “And overall health care spending has risen more in Texas than the national average,” he added.
(The idea that Texas is innately efficient when it comes to health care delivery lies in the same category as the idea that it has a right to secede. In a much-noted article in The New Yorker in 2009, Atul Gawande pointed out that the border town of McAllen was the second most expensive health care market in the country after Miami, despite what would seem to be a relatively low cost of living. “In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average,” Gawande wrote. “The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.” The reason, Gawande found, was simply that medical practitioners and their suppliers organized everything to maximize financial returns—“a medical community came to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers.”)
Once again, we should recall that these are our federal dollars. Which we are happy to see spent on seniors’ health, although not so much to maintain the high incomes of the medical community of McAllen. Particularly not if their state is going to constantly brag about how thrifty it is.
The Bush administration claimed tort reform would save consumers $3 billion a year in insurance premiums, but in 2010, Texas had some of the highest premiums in the country for family health insurance plans and also among the highest deductibles. “High premiums and skimpy coverage,” summarized Sara Collins, vice president for the Affordable Health Insurance program at the Commonwealth Fund. In 2010, Texas families spent a higher percentage of their household income on health insurance premiums than any other state but Mississippi and Arizona. Meanwhile, the pressure on other states to follow Texas’s example on tort reform—and then perhaps a second level of mega-tort reform—continued unabated.
“Don’t get hurt in Texas”
Next business-friendly example: Only one state in the union doesn’t require large employers to take part in a state-regulated workers’ compensation system, which provides people with medical benefits and support if they’re injured on the job. We will take a moment’s rest here while everybody guesses which state that is.
Not Vermont. Be serious.
Yes, in Texas—which has the lowest workers’ compensation coverage in the country—about a third of the businesses have left the state workers’ compensation system and gone off on their own. “There are two categories of employers who don’t carry workers’ comp,” says Rick Levy, the legal director for the Texas AFL–CIO. “One is small employers who operate on the margins. Unfortunately, that’s a lot of the most dangerous occupations, like construction. And incr
easingly, there are Fortune 500 companies.”
Since the late 1980s, the state legislature has reorganized, fiddled, and otherwise changed the workers’ comp system, always with an eye to reducing insurers’ costs and keeping the injured employees from getting legal representation. In Texas, as in many parts of the country, there is an ongoing war between the Republican Party and the trial lawyers, in part because Republicans connect the lawyers with business costs, and in part because the trial lawyers tend to be big Democratic donors. Texas law now limits lawyers’ compensation in these cases so drastically that few will take them. “Where previously hundreds of Texas lawyers had significant workers’ comp practices, there now are about 30,” wrote Terry Carter in the American Bar Association Journal. If an insurer wants to fight an injured worker’s claim—and the insurer has every reason in the world to give it a shot, or delay resolution for as long as possible—the worker is unlikely to have anyone on his side of the battle. Most Texas workers aren’t unionized, and now the chances of getting a lawyer are small, particularly for a low-paid worker with an unsensational injury.
“The moral of the story is, don’t get hurt in Texas,” said Richard Pena, a former president of the state bar of Texas, who still takes some workers’ compensation cases. Pena said that in the cases for which he gets paid at all, he typically receives about $630 per case—for nine weeks’ work and hearings.
Big employers in Texas often set up their own privatized workers’ compensation system, Levy said. Those plans aren’t under state regulation. They often provide limited benefits and have narrow windows of opportunity to qualify. In some, workers have to file a written complaint before the end of the shift in which they’re hurt.
As an example, Levy cited a woman who worked for a hospital, and hurt her back doing lifting. The woman told her supervisor, who suggested she go see a doctor. Leaving work for the day, she saw the doctor, went home to rest, and woke up the next morning unable to move. “She needs surgery,” said Levy. “She filed and the company denied her any benefits because she didn’t report it in writing on the day she was injured.
“It’s an unregulated Wild West,” he continued. “The employer gets to make up all the rules. And what’s interesting now is, we’re seeing these companies attempting to export this model to other states. It’s like rolling back the clock ninety years.”
And yes, the corporate community sees this as a model for improving the business climate in the rest of the nation.
“It’s all about air conditioning”
If deregulation and low taxes were the real keys to job growth, wouldn’t Mississippi be setting records? Before anybody joins in the race to out-Texas Texas, we’d better consider the possibility that there are other reasons for job growth there. And there are plenty. If your state really wants to follow Texas’s lead, it probably ought to:
Have oil. When energy prices go up, the economy suffers. Unless you happen to be in a state that’s pocked with oil wells and shale drilling sites. In the long run, the Texas economy tends to follow the price of oil.
Avoid being in the Snowbelt. The most spectacularly boring explanation for the Texas job surge is that it’s just a part of the long-running migration to the Sunbelt. “Because we have population growth down here, there’s a growth in leisure, health care—those are trends following the people,” said Christopher King, an economics professor at the University of Texas at Austin. “So really, it’s all about air conditioning.”
Abolish sex education. Texas’s population is also young—the state median age is 33.2, compared to 36.8 for the country as a whole—and everybody knows that young people like to spend money more than seniors. Besides immigration, Texas’s secret is a booming birth rate, which was propelled along in part by that abstinence-only sex education in the schools and the antipathy toward family planning funding in the state legislature.
Share a border with Mexico. “Texas does a huge amount of trade with Mexico, and Mexico is the gateway to the rest of Central and South America,” said Michael Brandl, an economics professor at Ohio State University who spent much of his career in Austin. A lot of that is the result of the North American Free Trade Agreement. NAFTA’s impact on, say, Michigan may have been problematic, but in Texas everything’s good. “NAFTA, that’s the export story,” said Mine Yücel of the Dallas Fed. “We send about a third of our exports to Mexico. That’s taken off since NAFTA.”
The total impact of Mexico on the Texas economy is impossible to account, given that billions of it involves the illegal drug trade. But on the legal side, just the trade between violence-torn Juarez, Mexico, and El Paso (fourteen murders in 2011, lowest crime rate for any American big city) is more than $70 billion. And, if you want to be really, really depressed, there’s the revenue from the sale of guns to Mexican drug lords.
Hitch a free ride. Finally, the whole idea that other states could do what Texas is doing is flawed by the fact that Texas is doing it on their backs. Take higher education. Texas doesn’t spend much on it, relatively speaking. The state has only two tier-one public universities, while California has ten and New York eight. All the four-year institutions in Texas only graduate about 140,000 people annually, but the state has been able to lure in another 170,000 graduates a year from elsewhere. “People in Ohio and Wisconsin and Pennsylvania provide the great education, and then the graduates leave, and Texas gets this educated population for which they don’t have to pay anything,” said Brandl.
In other words, if all the states started bribing businesses to move from other states, saving tax money by skimping on higher education, and filling high-end jobs with college graduates from other states, the whole shebang would implode. It’s what economists call the fallacy of composition. “A classic example is when you’re driving down the road and the sign says, ‘Left Lane Closed,’ ” Brandl continued. “If everybody sticks to the right lane, things are fine. If you as an individual go in the left lane, all the way to the orange barrel, and then cut back over, you’ll be in front. But if everybody tries to do it, it’s gridlock.”
“Government doesn’t create any jobs”
Just as an aside, let’s remember that a big source of new employment in Texas is the dreaded government.
“In Texas, public employment makes up about 17.8 percent of the workforce, compared to 16.9 percent in the country as a whole,” said Leslie Helmcamp of the Center for Public Policy Priorities. Moreover, she added, “The Texas public sector created over 47 percent of the net new jobs since the beginning of 2007.”
Counting in a different way, as these issues seem to demand, the Wall Street Journal estimated that Texas gained more than a million jobs since the end of 2000, about 300,000 of which were in government, mainly in public schools.
In some parts of the state, these jobs are on the federal government’s tab, in the form of military bases. In 2008, the Texas comptroller estimated that Fort Hood alone added $10.9 billion to the state’s economy. And in 2011, the federal government announced plans to move 6,000 more soldiers to Fort Bliss, outside El Paso, beyond the 14,000 it had added over the previous three years. Meanwhile, in yet another interview on Glenn Beck, Governor Perry told his host, the soon-to-be-Dallas resident, “Government doesn’t create any jobs. They can actually run jobs away.”
Our men in uniform aside, you can see why Perry liked that government-has-no-relation-to-job-creation thought stream, since school districts were about to start laying people off in Texas to compensate for state budget cuts. (A gubernatorial spokesman told the Wall Street Journal that the cuts wouldn’t hurt the state economy because “the key to prosperity is the growth of the private sector, not the government sector.”)
But let’s at least remember that Texas was built by government assistance of one kind or another. A massive federally funded infrastructure, including the great New Deal rural electrification and the Eisenhower-era roads, brought the state out of the semifeudal condition it had existed in from the time of Sam Houston. For m
ost of American history, Texas was a place that sent raw material off for some more advanced place to turn into valuable products. The federal government lifted it out of that trap, all the while subsidizing the crops it produced, and doling out massive tax credits to the oil it pumped from the ground.
Not looking for thanks, really. Or maybe just a little.
“Everybody else is baking these muffins”
Let’s go back to the Texas recipe for national prosperity: Spurred on by the wholesome national competition to steal each other’s employers, every state in the union should repeal all income taxes, make it extremely difficult for people to sue the company that sold them the canned hash flavored with ground glass, relocate to somewhere in the Sunbelt, preferably with a border on Mexico, and sneak into the left lane until they get as close to the orange barrel as possible.
Then we will be going like Texas! Jobs jobs jobs. Our governors, too, will be saying the word in every sentence.
But about those jobs . . .
One of the economic Oscars that Texas hasn’t been bragging about is its long-standing first-place ranking for jobs at or below minimum wage—although in 2011, it finally managed a tie with Mississippi for the honor.
Nearly 10 percent of the workers who are paid by the hour in Texas (and Mississippi!) get $7.25 an hour or less, which translates into less than $300 for a forty-hour week. Of all the jobs Texas added in 2010, 37 percent were in this category—which is also, of course, the group that winds up paying 12 percent of their income in state and local taxes.
California, Florida, and Illinois combined did not have as many people as Texas did earning the minimum wage or less in 2010. In part, that’s because the state makes it very hard for workers to unionize—a factoid that always gives it a bump on those best-state-to-do-business polls.