2 MIN READ - CO is pleased to introduce the newest addition to the growing embarrassment of riches that is the roster of Cautious Optimism Contributing commentators. Herein (in the header text, not the link) is the inaugural installment from the journal of the Cautious Optimism Correspondent at Large for Economic Affairs (and other egghead stuff)
As CO recently posted, Texas’ economy boomed in the first quarter with 3.9% GDP growth as California “flatlined” at 0.1%. So does anyone remember this recent doozy from New Keynesian economist Paul Krugman? ("Lone Star Stumble")
The uber-smug Nobel Laureate/New York Times columnist pronounced in 2015 that Texas was entering a long-term slump while California had transitioned from comeback to prosperity.
As evidence he cited California’s budget in surplus (after years of chronic deficits), a surplus that turned out to be only a mirage of rosy projections—based on the 2013 top income tax hike to a US-highest 13.3%—as Jerry Brown is now warning of a return to $1.6 billion deficits next year.
Krugman also cited “employment growth in Texas dropping well below the national average.” Now that’s a funny twisting of statistics. Yes, it’s harder to post rapid job percentage gains when you’re already at full employment—as opposed to when your economy is still mired in high unemployment.
Anyway this became his condemnation of “reverse Robin-Hood economics” and he asked “Will anyone on the right take heed? Probably not… …Still, the spectacle of the Texas economy coming back to earth, and Kansas sliding over the edge should at the very least make right-wing bombast ring hollow.”
Well a mere two years later Texas is still booming (not that it ever stopped) with 3.9% GDP growth, no income tax, and routine balanced budgets with a much higher bond rating than California—even with $46 a barrel oil—while California limps along at 0.1% GDP growth and returns to deficits even with the highest taxes in the nation. So we should pose Krugman’s own question back to him: “Will anyone on the left take heed? Probably not…”