Columbian.com - Washington View: Texas Economy Shining Brightly Despite Recession
By Don Brunell
The federal government is borrowing a trillion dollars to fund its massive stimulus plan, California is broke, the feds have taken over car companies and banks, and the national unemployment rate is 9.5 percent and rising. Nevertheless, bills moving through Congress would spend an additional $1 trillion on health care reform -- an expenditure President Obama says is crucial to the nation's economic recovery. This, say supporters, is the only way to return the U.S. to prosperity.
Really? Perhaps they should take a look at what's happening in Texas
In Texas, business is booming. In 2008, 70 percent of all jobs created in the United States were created in Texas. That same year, Texas was named America's Top State for Business in CNBC's second annual study that scored states on 40 different competitiveness measures. Texas now surpasses New York as home to the most Fortune 500 companies, and Texas dominated Forbes' "Best Cities for Jobs in 2008" list with five cities in the top 20.
While the nation's unemployment rate is 9.5 percent, the rate in Texas is 7.5 percent. And while our state faces a $9 billion deficit, Texas has a $9 billion surplus. Instead of raising taxes, Texas is cutting them.
How did they do it? Gov. Rick Perry says holding the line on taxes, having a reasonable regulatory structure and offering economic development incentives such as the Texas Enterprise Fund and Texas Emerging Technology Fund have attracted hundreds of employers to Texas. He notes that 7,300 new jobs were created in Texas in November 2008 alone.
"We set the state up for it back in 2003," says Perry, "when we came in here and had about a $10 billion budget deficit. We were able to cut that deficit without raising taxes, passed the most sweeping tort reform in the nation, and people paid attention."
In fact, new businesses and doctors have flooded into the state in the wake of the lawsuit abuse reform legislation, which capped non-economic damages at $250,000. According to the Dallas Morning News, the average award prior to tort reform was $1.21 million; now it is $880,000.
Malpractice lawsuits have plummeted. In 2003, in a last-minute rush before lawsuit reform took effect, 1,108 medical liability suits were filed in Dallas County. Only 142 cases were filed the following year. In 2007, 184 cases were filed.
To ensure protection for patients, the legislature beefed up the power of the Texas Medical Board and disciplinary actions against doctors have nearly tripled since 2001.
Holding the line
Lawsuit reform has had a major impact on the state's economy. In addition to the influx of new businesses, more than 7,000 doctors have moved to Texas in the past three years. According to the Texas Medical Association, malpractice insurance premiums for Texas doctors have dropped more than 30 percent since 2003 and 15 new insurance companies have entered the Texas market. Regrettably, the federal health care reforms moving through Congress include nothing about lawsuit reform.
In addition, Gov. Perry is adamant about holding the line on costs. In fact, in the face of intense federal pressure, he refused to accept $550 million in unemployment insurance payments as part of the stimulus plan because it would have mandated a permanent expansion of unemployment benefits. "There was going to be a mandated tax on our small businesses of $75 million a year. And I said no."
Granted, Washington has also said "no" -- no to major tort or lawsuit reform legislation, including efforts to adopt damage limits.
But we've also said "yes" to the unemployment money in the federal stimulus package and the resulting future increase in employer costs. And yes to energy policies that ignore hydropower, one of our most abundant natural resources and strongest competitiveness factors. And we're toying with other issues that might further erode our attractiveness to employers -- cap and trade, paid family leave and employer gag rules, just to name a few.
There's an old proverb: "nothing succeeds like success." Before our state and our nation mortgage our children's (and grandchildren's) future on costly experiments, they should consider adopting some of the policies that have made Texas an economic powerhouse in the midst of a national recession.
Don Brunell is president of the Association of Washington Business, Washington state's chamber of commerce. Visit http://www.awb.org.