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Rick Perry's strength and weakness: Jobs

By David Frum, CNN Contributor
  • David Frum: Gov. Rick Perry's strength is job creation in Texas, but it's also an impediment
  • Many of the jobs created in Texas are minimum wage, Frum says
  • He says the challenge for U.S. is to create more middle-class jobs
  • Frum says intelligent investment by government, and tax policy change can help

Editor's note: David Frum writes a weekly column for A special assistant to President George W. Bush from 2001 to 2002, he is the author of six books, including "Comeback: Conservatism That Can Win Again," and is the editor of FrumForum.

Washington (CNN) -- Gov. Rick Perry enters the presidential race with one big advantage and one big impediment. The advantage: his record of job creation in Texas. His impediment? His record of job creation in Texas.

Through two years of weak economic recovery, Texas has led the nation in job creation. Of all the jobs created in the United States since 2009, 38% have been created in Texas.

But if Texas has created many jobs, it has failed to create good jobs. Many of the jobs created since 2009 pay only minimum wage, and Texas, along with Mississippi, has the highest percentage of minimum wage workers in the U.S.

Truth be told, it's unclear how much (if any) blame or credit Perry personally deserves for either Texas' good job creation or Texas' bad wages. Perry did not endow Texas with the oil that supports the Texas economy. Nor did he locate Texas next door to Mexico and the flow of legal and illegal immigration that drives down Texas wages.

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Yes, compared to the government-led economic development symbolized by President Barack Obama's stimulus spending, there is something to be said for the Texas approach. At least the Texas approach puts people to work. But must Americans choose only between the two ugly options: no jobs vs. low wages?

Here is the opportunity for one of the other candidates in the Republican race, Mitt Romney or Jon Huntsman perhaps, to speak for a different kind of approach: an approach that builds the American middle class.

The textbooks teach that higher wages come from higher productivity. Higher productivity comes from higher capital investment and improved human capital. Government has an important role:

• Government can rewrite its tax rules to promote investment -- by for example shifting from anti-investment taxes such as the corporate income tax to consumption taxes such as a value-added tax.

• Government can enhance the quality of the country's infrastructure. This is more than a matter of building roads and tunnels. If government could rationalize security procedures to speed travelers through airports faster -- or make spectrum available to improve the reliability of cellphone communications -- or change labor laws to encourage telecommuting -- it will enhance economic efficiency in cumulatively dramatic ways. Here was the tragedy of the Obama economic stimulus: that $800 billion boosted aggregate demand, sure, but because so much of it was spent to keep state and local government employees in their existing jobs, it did little or nothing to expand the nation's future output.

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• Government can attack monopolies, privileges and other sources of economic inefficiency. Must the country really spend 50% more on health care than its next competitor, for worse results? Can the United States continue to afford the world's biggest lawsuit industry? Is it really a favor to American young people to send so many to colleges they won't finish at a cost they must borrow to afford? Isn't it time to replace the 50 local regulators of industries like insurance and electricity with coherent national rules? Other countries collect taxes in ways that do not require ordinary middle-class families to pay professional tax preparers -- can't the U.S. government learn from their example?

Must Americans choose only between the two ugly options: no jobs vs. low wages?
--David Frum

• Government can enhance human capital. Americans understand this point when it comes to formal schooling, but schooling is only the start. Early nutrition programs can minimize the number of children who start life with learning impairments. Immigration policy can be crafted so as to recruit highly skilled workers and exclude the less skilled.

As governor, Perry himself recognized that effective government can contribute powerfully to the growth of the private economy. He offered companies large cash incentives to relocate to Texas. And he worked hard to build an ambitious cross-state network of new highways, energy corridors and high-speed rail.

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Most of the time, however, Perry upheld the traditional Texas economic model. If Perry is nominated for president in 2012, the Texas model is the model Republicans will again offer Americans, for the third time in the past four presidential elections. Compared with Obama's free-spending liberalism, it may seem the lesser evil. But you have to imagine that there are millions of Americans hoping for a third choice: an approach that balances budgets and holds the line on taxes -- but that also strengthens the private economy and supports a broad middle class.

That third choice is the kind of active, effective government Republicans have championed since Abraham Lincoln signed into law the transcontinental railway. Won't at least one Republican speak up for it now when it has rarely been more needed?

The opinions expressed in this commentary are solely those of David Frum.