Is the ‘governor effect’ real?
RICK PERRY of Texas is the latest in a long-line of governors who tout their states’ performance as evidence of their ability to supercharge the national economy. But how much impact does a governor really have?
While we can’t control statistically for every bit of luck, we can at least control for year-by-year changes in the national economy and long-term trends in a state - both of which affect state economies no matter what an individual governor does. With these corrections, it’s a mixed record for three Republican governors running for president: The Perry years look about average for Texas; Mitt Romney’s term looks bad for Massachusetts; and Jon Huntsman’s tenure seems better than the Utah norm.
Perry is essentially borrowing from Michael Dukakis’s playbook. Dukakis ran for president in 1988 playing up the “Massachusetts Miracle’’- our state’s remarkable transformation from post-industrial decline to technological innovation. Reasonable people can question how much credit either governor deserves, but there is no question that since the recession, Texas has dramatically outperformed the nation.
Between July 2007 and July 2011, non-farm employment in Texas increased by about 2 percent, adding over 218,000 new jobs. During the same four years, the United States as a whole lost almost about six and half million non-farm jobs, or about 4.7 percent of total employment. Texas’ unemployment rate is 8.4 percent, well below the US average.
But do those numbers tell us more about Texas or Governor Perry? Perry has been governor since December 2000. To get a better sense of whether the state’s success is because of a “Perry effect,’’ I looked at data on private employment growth and unemployment rates across all 50 states since 1990. If I control only for national economic conditions, it looks as if Governor Perry is associated with almost 1 percent more private job growth every year.
But well before Perry came along, the Texas model, with low taxes, limited regulations, and energy-related resources, has proven remarkably attractive to businesses and migrants. Wages in Texas are 20 percent below Massachusetts’ incomes, but a relatively unregulated building environment has kept housing prices strikingly low, so that living standards are higher than wages alone suggest. Between 2000 and 2010, Texas’ population increased by 20.6 percent, more than double the US average. But Texas’ population grew at an even faster clip, 22.8 percent, during the 1990s.
When I also control for Texas’ tendency since 1989 to add jobs more quickly, the Perry effect on employment growth drops below one-tenth of 1 percent. So while Perry can claim to be a faithful representative of the Texas model, he hasn’t outperformed his state’s history.
I’ve done a similar analysis for Romney and Huntsman, each of whom served for four years. Given their shorter tenures, I focus only on post-1999 data. Controlling only for the state of the national economy, the Romney effect on private employment is negative 1.5 percent per year. That effect actually becomes more negative when I control for his being in Massachusetts, where the longer-term economic trends have otherwise been fairly strong.
Under Huntsman, meanwhile, job growth in Utah was 1.6 percent higher than the national norm, and the unemployment rate was 1.4 percent lower - an impact much greater than the Perry effect. Even when I control for Utah’s generally strong performance since 1999, he’s still associated with more than 1 percent faster job growth and 1 percent lower unemployment rates.
Even these numbers only go so far. I would give more credit to Utah’s smart workers and entrepreneurs than to Huntsman for the state’s success during Huntsman’s tenure from 2005 to 2009. And I wouldn’t blame Romney, who served from 2003 to 2007, for Massachusetts’ slowdown after the tech boom. The economist Justin Wolfers has found that voters reward governors for lucky economic breaks, like oil price increases in energy states. We should guard against our tendency to give either governors or presidents too much credit for the economy.
Still, even if Perry isn’t an economic miracle worker, it is reasonable to think that he will try to make America a bit more Texan - and that Huntsman will import a little of Utah into Washington. Romney has worked hard to dispel the view that he represents Massachusetts values. That’s a shame, since Massachusetts, with its high wages and unemployment rate of 7.6 percent, also has something to teach the country.
Edward L. Glaeser, a professor of economics at Harvard University, is author of “The Triumph of the City.’’ His column appears regularly in the Globe.