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Image: Rick Perry, Anita Perry
Charles Dharapak  /  AP
Republican presidential candidate, Texas Gov. Rick Perry and wife Anita head back to the campaign bus after a stop at D.C. Taylor Roofing in Cedar Rapids, Iowa.
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updated 8/16/2011 7:48:54 PM ET 2011-08-16T23:48:54

The latest GOP presidential contender has started running with the wind at his back. Unlike most other candidates — including President Obama — Texas Gov. Rick Perry can claim a measure of economic success over the last several years.

Texas has bucked some dispiriting national trends, with an unemployment rate that's lower than the national average and an economy that has held up relatively well during the devastating downturn. Perry's mission is to convince voters that if elected, he can replicate the "Texas Miracle" on a national scale.

U.S. News & World Report: 10 ways to create jobs

But like most things in politics, the details of Perry's record during more than a decade as governor of Texas aren't as convincing as the sound bites. In fact, as voters, campaign contributors and key interest groups scour his record, they may notice that he's not the small-government conservative they want him to be, and that his economic policies are somewhat airy. Here are four economic vulnerabilities Perry will have to overcome to earn the Republican nomination:

1. He's a big beneficiary of big-government
Perry's No. 1 talking point as a presidential candidate is job creation in Texas. He claims correctly that Texas has created more than one-third of all jobs in the country since the economic recovery began in mid-2009. What he doesn't mention is that virtually all of that job creation was in government, not in private industry.

Story: Perry's vulnerabilities with the right

Here are the numbers, which come from the federal government's Bureau of Labor Statistics: Between the beginning of 2008 and the end of 2010 (the latest data available), Texas created about 75,000 jobs. That makes it one of the few states with any job creation at all over that time. But federal, state and local government hiring accounted for 115,000 new jobs in Texas, while private industry shed about 40,000 jobs. The private sector has definitely held up much better in Texas than it has elsewhere. Since 2008, private-sector employment has shrunk by 6.6 percent nationally, but only by 0.5 percent in Texas. Still, Perry can't credibly claim that private industry has been responsible for job growth in Texas, since it has actually shed jobs.

U.S. News & World Report: How Rick Perry created jobs in Texas

Perry and his state have also benefited significantly from the kind of federal spending he's now trashing as a presidential candidate hoping to appeal to conservative Republicans. Federal spending in Texas amounts to more than $200 billion per year, according to the New York Times, on account of several big Army bases, a heavy NASA presence, and other federal installations. That's about 5.2 percent of all federal spending.

Texas also accepted $6.4 billion in federal funds from the unpopular 2009 stimulus program championed by President Obama, according to the Washington Post. There's nothing wrong with Texas or any state getting its share of funding from Washington. The problem for Perry is that the facts don't support the small-government credentials he's now trying to establish.

2. The "Texas Miracle" is unraveling
Texas has been able to delay the kinds of sharp cutbacks in government payrolls and services that most other states have been forced to undertake, partly because of a strong energy sector that helped sustain the state's tax revenues during the early part of the recession. But Texas now seems poised for steep cuts in government services, just like many other strapped states.

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In fiscal 2011, for example, Texas increased spending by 15.4 percent, the biggest hike among all 50 states, according to the National Association of State Budget Officers. But in fiscal 2012, which begins in September, Texas will cut spending by 8.5 percent, which will be the second biggest cut of any state, after Nevada. As in other states, the biggest cuts in Texas are slated for education and health care. Texas is also pushing off several big problems until 2013, which means more spending cuts are probably on the way. That could help Perry burnish his small-government cred, but it will almost certainly entail job cuts too — and make the Texas Miracle look a lot less miraculous by this time next year.

3. What's good for Texas is bad for America's drivers
When oil and gas prices rise, the Texas economy gets a big boost. According to the Federal Reserve Bank of Dallas, every 10 percent rise in oil prices boosts annual economic output in Texas by half a percentage point, and employment by 0.36 percentage points. Texas isn't nearly as dependent on energy as it was in the 1980s, when a sharp energy bust sent the state into a deep recession. But the state has clearly benefited from rising oil prices that have pushed gas prices well over $3 per gallon and caused distress for many American families.

U.S. News & World Report: Fears of a fresh recession are overblown

Since Perry became governor in 2000, oil prices have tripled, rising from about $30 per barrel to roughly $90 today. Not surprisingly, that coincides with a Texas economy that has outperformed the national one for the last decade. Again, there's nothing wrong with Texas or any state profiting from worldwide economic trends. But Perry can't exactly boast about an economy that has boomed at the expense of ordinary drivers. And if the recent drop in oil prices sticks, it will detract from the Texas economy and further undermine the gains that Perry is campaigning on now.

4. He sounds clueless about monetary policy
Perry's first pronouncement on the Federal Reserve as a presidential candidate was a convoluted mouthful of economically illiterate posturing. When asked his opinion of the Fed, Perry said of chairman Ben Bernanke, "If this guy prints more money between now and the election ... we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous—or treasonous."

To Tea Partiers and government-bashers, Perry's jabs at the Fed might sound like a welcome challenge to an omnipotent federal agency that routinely manipulates the economy. But if Perry wants to be taken seriously by business leaders and investors — who control a wee bit of the campaign money he'll no doubt be asking for — he might want to take a crash course on the Fed and monetary policy.

U.S. News & World Report: Politicians are wrecking the world economy

Most economists feel that the Fed's aggressive intervention in the economy since 2008 has been a necessary evil that helped prevent a financial panic and a full-blown depression. Maybe that's the sort of mayhem they welcome "down in Texas," but most businesses would rather retain access to credit, be able to count on a stable economic environment, and have customers who are willing to spend because they're not worried about looming calamity.

The Fed has in fact conducted the modern equivalent of "printing money," but it has done so in a way that hasn't yet produced the runaway inflation that Fed bashers have been warning about for years. The Fed has also helped boost stock prices and restore some of the household wealth lost since the recession began. Is Perry opposed to that? And is he opposed to the increased consumer and business spending that higher stock prices have generated?

The Fed is also the only part of the government that seems capable of doing anything at all to help the economy, since every other part of Washington is paralyzed by political dysfunction. Maybe Perry would like to hogtie the Federal Reserve too, and let the economy thrash around on its own. That's basically what has been happening since the Fed's latest stimulus program ended on June 30 — while Americans, meanwhile, have become profoundly upset with the direction of the economy and more disgusted with Washington than ever.

If Rick Perry intends to present himself as an antidote to that, he still has a lot of work to do.

Copyright © 2012 U.S.News & World Report LP

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Video: Looking at Perry’s jobs record

  1. Closed captioning of: Looking at Perry’s jobs record

    >> michael quinn sullivan is president of the nonprofit group texans for fiscal responsibility and joins me from austin. hey, michael, i think the group or you individually have endorsed governor perry 's re-elect. you've seen all sides of this. let's talk first of all about these comments. it certainly would resonate to tea partiers and it's not something it doesn't go very far beyond what ron paul and others have said although to call the fed treasonous for printing money and talk about we can get ugly with you ben bernanke if you get down to texas , that does seem to go too far, does it not?

    >> i have to be honest, i haven't spent too much time reading what governor perry said. i think probably best just to let governor perry and his campaign speak for governor perry . i think that when you look at the policies that the federal government and the federal reserve have pursued over the past couple of years, in texas we've had some different success than the rest of the country. we've seen texas doing pretty well over the past few years. i would suggest however one might choose to turn a frays, the policy results are what we should be looking at.

    >> words do matter when you're returning for president. karl rove said it was not presidential for governor perry to say that about the fed and ben bernanke .

    >> i think that probably every single person who's ever opened their mouth with a television camera or a microphone nearby has probably had something utter that some pundit somewhere can monday morning quarterback. hindsight is always 20/20. we all say things -- pundits are really good at coming in after someone says something on the fly. i think there's some truth to the idea over the next couple of weeks we're going to see the perry campaign shifting from the recognition of being if not the front runner one of the front runners , that does force some changes in operation.

    >> let me ask you about job creation and the economic record of governor perry , you know about this job creation fund that was created $16 million tech fund. what is your take on that? do you think it was appropriate to use government money, state government money to help create these private corporations which then helped enrich people who contributed to governor perry as campaign contributions ?

    >> well, i think there's been a fair amount of misreporting about this. i'm not a fan of these fund. my organization and i have long been on the record we don't like these kinds, don't like these funds. at the same time it's very important to make sure that we refer to them accurately. the governor of texas does not get to decide on his own who does and doesn't receive money. there are a lot more money who have given money to the governor, the lieutenant governor, our house speaker who have not received money from these funds than who have. and by the way, the governor doesn't make these decisions alone. it's the governor, the lieutenant governor and the speaker all of whom are elected independently and behave independently. it's important to recognize the way texas funds have been set up the governor doesn't have some carte blanche , doesn't get to jump out on his own. he has to have unanimous approval of the speaker and lieutenant governor.

    >> more broadly speaking on the economic record the unemployment rate is $8 pbt 2%. there is a mixed record, more jobs created by a big population growth and a lot of jobs were in government jobs . and jobs that are very low wage without benefits. it's a mixed record. is that an accurate way to portray it?

    >> i think texas has a very strong record. i think one, i would challenge someone to put forward the numbers because the real numbers are that over the past ten years, texas has had one of the top ten fastest growing wage numbers in the nations. we saw texas keeping pace doing better than the rest of the country in terms of employment versus unemployment. 40% of all the jobs created in the united states were created in texas because we have the right environment. texas has done the right thing creating an environment. i think that most folks looking at their may not be fashionable with the latte liberal crowd. at the end of the day most people would rather have a job than not have a job. the unemploymented of california and new york have been flocking to texas to look for a job because texas is a place that rewards job creators. it's a place where people can come and find work.

    >> aren't a lot of jobs in the energy sector that rising oil prices contributed to a lot of jobs.

    >> that's not accurate. about 25% of the job created --

    >> what is accurate?

    >> it's about 25% is the number of jobs created in the oil industry . if you back out all of the energy industry job creation texas would still be leading the country in job growth . now it's interesting to note with that 25% increase, let's not shove off the idea of energy related jobs as being somehow insignificant because the obama administration over the past couple of weeks has been pushing for policies that would eliminate those jobs whether through u.s. fish and wildlife department rulings to shut down oil and gas production or the recent rulings from the epa that would shut down big portions of our power grid pushing people out of jobs. again, i thought our focus was on creating jobs. texas has been creating jobs. creating jobs that people flock to texas to take. i guess the editorial pages may not like it, but people prefer to be employed. texas is a place where people can't have a great deal of assurance so they can find a job when they're looking for a job.

    >> thank you very much.

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