Dollars and Sense: Texas serves up wealth while politicians dole out candy and veggies
Money | Warren Cole Smith
$X$W. I’ve spent most of this week at the South by Southwest Music, Film, and Interactive Festival in Austin, Texas, and it’s plain to see what an economic powerhouse it is. Just about every hotel room and rental car in town is booked, and at double the normal rates. It’s common to abbreviate the festival with the acronym SXSW, but if “South by” continues to grow, organizers might think about changing that to $X$W. A study done in 2011 said the festival pumped $167 million into the local economy. In 2012 that had jumped to $190 million. Pre-festival estimates put this year’s figure at more than $200 million.
Don’t mess with Texas. Thanks to the oil and gas industry, the Lone Star State is one of the few in the country that is actually enjoying high energy prices. Unemployment in Texas is about 6 percent, well below the national average. Last night I drove through a part of Austin called Barton Creek, which is one of the wealthiest neighborhoods in the nation. The median household income there is about $110,000, more than twice the national average. One reason for all the wealthy folk in Texas: no state income tax. That fact has made the state a magnet for entrepreneurs who, because they don’t have to pay taxes, are free to make yet more investments in yet more businesses, creating a “virtuous cycle” of economic growth. As a result, Austin is not only the self-proclaimed “live music capital of the world,” it is one of the nation’s hottest high technology start-up cities in the nation.
Record highs. If the stock market is any indicator, the rest of the country is doing great, too. The Dow keeps setting records, and hit 14,500 this week. Last week we noted that February’s unemployment rate had dropped to 7.7 percent. This week we found out that first-time claims for unemployment had dropped still farther, to 332,000, the lowest level in five years. Mark Hamrick of Bankrate.com says the rise in the stock market is one of a number of factors contributing to the job market’s health. Other factors are a decline in foreclosures in the housing market and rising consumer confidence.
What’s the catch? All this sounds great, but Washington’s still a mess and, ironically, all this good news may be hurting chances of getting a budget deal done. President Obama and the Democrats have enough evidence that the economy is doing better to cause them to dig in on their positions. The president, for example, told ABC News that a balanced budget was not a priority for him. On the other hand, House Budget Committee Chairman Paul Ryan is still hoping for a grand deal that reforms the entire tax code and gets us to a balanced budget. In the short term, the president likely has the upper hand. Ryan’s argument that the improvements we’re seeing in the economy are artificial and will result in massive long-term pain is a hard sell to Americans increasingly dependent on the government. Former senator and now Heritage Foundation president Jim DeMint told me last week, “The Democrats are giving away candy while the Republicans are trying to sell vegetables.” Those vegetables won’t start looking good until the Democrats run out of candy, or until the Republicans can figure out a more creative way to serve up the vegetables.
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