Fiscal Conservatism and the Soul of the GOP

The Texas governor on Arnold, Sarah, ObamaCare and the future of his party.

By EMILY ESFAHANI SMITH
Austin, Texas

California needs a strong leader, says Texas governor Rick Perry. That strong leader, Mr. Perry thinks, needs to go to Sacramento and “take special interests out” of government. He needs to “make massive cuts” in spending and taxes. And he needs “to make major changes in the constitution,” including tort reform.

What about Arnold Schwarzenegger? “Arnold—I think Arnold squandered that chance.”

Six years ago, Mr. Perry’s state underwent a critical tort reform that was codified in the state constitution. The payoff is that Texas is now outpacing California economically. According to the Texas Public Policy Foundation, between 1997 and 2006 Texas’ economy grew an average of 4.3% while California’s grew at a rate of 3.7%. But as of 2002 (to 2007), with tort reform in place, Texas’ annual economic growth jumped to 5%, while California’s remained essentially the same at 3.6%.

With a tan baseball cap hanging off one knee, Mr. Perry is proud to report that “Texas created more jobs in 2008 than the rest of the states—combined.” As of July, the state, which taxes neither capital gains nor income, had an unemployment rate of 7.5%, two points below the national average, while California’s hovered at 11.5%, two points above.

No wonder over half a million people flooded into Texas between 2000 and 2007. Meanwhile, 1.2 million residents left California in the same seven-year period.

The bottom line? Tax-and-spend governance is as bankrupt as California’s bank account. By way of illustration, the governor replays a conversation he had with Rudy Giuliani during the presidential primaries.

They were talking about Michigan. “The Michigan governor was making statements about having to raise taxes so [they could keep] services at the level they were, instead of, like we did in Texas, cutting, not raising, taxes and cutting spending. There was a great difference in political philosophy. In Michigan, a liberal democrat raised taxes and kept their government programs at the same level. And guess what? Their economy continued into the toilet, it continued down.

“Our economy on the other hand [improved]—let me give you a great example: We had a $10 billion budget deficit when we got here in January of 2003. We cut that budget deficit; we did not raise taxes; we came back in ‘05, and we had an $8 billion surplus. That’s how fast it can happen.

“That’s the reason I have hope, not only for the country, but for states like California that are in dire financial predicaments. You can turn it around in a hurry, but you have to make hard, principled decisions.”

Mr. Perry insists that Texas’ success “is a broader story than just tort reform.” As governor, Mr. Perry has honed in on four policy issues he believes are drawing people and businesses to the state in record numbers. Businesses like Medtronic and Caterpillar, to name two, are “coming here [because] we haven’t spent all the money, the taxes are low, the regulatory climate is fair—they won’t be frivolously sued—and they know when they get here that they’ll find a skilled work force.”

But do Mr. Perry’s pro-business, low-tax policies mean that Texas’ investments in education and other crucial areas are lagging behind? Just the opposite: While California slashed education funding this year, Mr. Perry notes that a Texas “grant program for kids to go college and university . . . expanded by 44%” this last session. In that same session, the Lone Star State cut taxes for small businesses.

And when it comes to the Obama administration, Mr. Perry doesn’t mince words: “To me, this is one of the great Frankenstein experimentations in American history. We’ve seen that movie before. It was from 1932 to 1940.”

Click here to continue reading.