January 30, 2014

AVIK ROY: On Inequality, Obama Fails His Own Test.

During President Barack Obama’s 2014 State of the Union address on Tuesday night, one section stood out. “After four years of economic growth,” said the president, “corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled.” But Obama left unstated the most important point of all: Under his watch and thanks to his policies, those at the bottom of the ladder face fewer and fewer opportunities to get ahead. Worse still, most of the policies he proposed during his address would make social and economic mobility even harder.

I just returned from a three-day trip to Austin, Texas. Spend a few days in Austin and you feel as though you are in a different America from the one described by the president. In the next two years, downtown Austin’s hotel capacity will increase by 57 percent. In the last 20 years, Austin’s population has increased by an astounding 71 percent. The state of Texas hosts four of the 11 largest cities in the country: Houston (4), Dallas-Fort Worth (5), San Antonio (8) and Austin (11). The biggest problem in Austin is not the economy or unemployment — it is the traffic.

Texas is booming and drawing opportunity seekers from all over North America who want a better life. According to the Missouri Economic Research and Information Center, Texas ranked 10th nationwide in a measure of states with the lowest costs of living. That is because the state has a predictable and relatively light regulatory regime that drives down the cost of doing business, and thereby the cost of consumer goods and services.

Add to that the fact that Texas has no state income tax. Immigrants to the state know that every dollar they make goes much further in the Lone Star State than it would in places such as California, New York or D.C. For four straight years, Texas has led the nation in job growth. From 2001 to 2011, it added 732,800 jobs to its economy. No other state topped 100,000.

The president likes to think of himself as an empiricist, a nonideological believer in what works. So why is it that his policy approach is the opposite of the one that has worked in Texas and elsewhere?

Because he really cares about control, not economic growth or reducing inequality.

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