Tue January 6, 2015 7:14 pm By Erica Grieder

Earlier today John Boehner was re-elected as Speaker of the United States House of Representatives, despite the defection of 25 Tea Party-type Republicans, who split their votes among three other candidates: Ted Yolo, Daniel Webster, and Texas’s own Louie Gohmert.

The charge against the incumbent was, basically, that he is insufficiently conservative. And the effort was clearly quixotic. Had the conservative faction been able to muster a few more votes they could have forced a second round of voting. (Boehner needed a simple majority of the chamber to get elected, but Democrats, the minority party, had voted for Nancy Pelosi.) Even if Boehner had got spooked and dropped out, though (which was apparently the plan, such as it was), the conservative Republicans never had an endgame here, because a schism in the majority would have ultimately yielded a moderate. That is, of course, how Joe Straus became Speaker of the Texas House in 2009. The chamber’s Republican majority was divided between several candidates; Democrats, seeing which way the wind was blowing, voted as a bloc in favor of the Republican they found most palatable. 

For some conservatives, was a black mark against Straus, and a number of subsequent Republican primaries have hinged on which candidate would work hardest to oust Straus. However, conservatives didn’t manage to unseat him in 2011 or 2013, they’re not going to do so in 2015, and by fighting on this particular hill they’re ultimately hurting themselves rather than the so-called RINOs. The same will be true of national conservatives if they decide to think of today’s vote as a litmus test.

So in case grassroots activists are going down that path, here’s why it’s a bad idea. 

1.The math was never going to work. The number of “real conservatives” in the House may have grown since Boehner was first elected, but the Speaker is elected by the House as a whole, not the majority party. As long as Republicans hold fewer than, say, 400 seats, a Tea Party candidate would have to win a supermajority of the Republican caucus to offset the inevitable coalition of Democrats plus RINOs.

Conservatives in Texas have been trying to relitigate this logic since 2009, to no avail. This year, for example, Tea Partier Scott Turner is planning to challenge Straus when the Lege reconvenes next week. There’s no reason Turner shouldn’t throw his hat in the ring—it’s a free country—but as a result of the math he’s not going to win, and anyone insisting otherwise is setting themselves up for disappointment. 

​2.On a substantive level, the opposition to Boehner confused ideology and process. Despite the job title, public speaking is an optional part of the Speaker’s job. In the US House he makes committee assignments, directs the workflow, and helps arrange the order of business. In other words, the speaker’s management skills are at least as important as his ideology—especially, one would think, for the people who actually have to work with the guy. The same is true in the Texas House, which is why Giovanni Capriglione, despite being a Tea Party guy, has pledged to support Straus over Scott TurnerThat’s presumably why some Tea Party Republicans, such as Idaho’s Raul Labrador, voted for Boehner. The vote doesn’t mean Labrador thinks John Boehner is the greatest Speaker of all time; no one thinks that. It has a more narrow meaning—viz, that he thought Boehner was a better option than Gohmert. That’s hardly unreasonable, politics aside. 

​3. Over the short term, the Congressional conservatives damaged their negotiating position within the Republican caucus by staging a record vote on an issue that inspires legitimate disagreement within their faction. Since 2012 Boehner has clearly been afraid of antagonizing the Tea Party. That’s less likely to be the case now that the Tea Party caucus has demanded that they be counted. It’s possible that on certain issues the conservative faction of the Republican caucus may be able to muster more than 25 votes against the RINOs, but it was the Tea Party, not Boehner, who described this as a defining issue. And in light of the results, it’s the Tea Party that’s now on the back foot in the chamber. Similarly, in the Texas House, the Tea Party Republicans never amounted to a majority of the caucus, much less the chamber. But in 2013, at least, the small size of that subset wasn’t clear until the final weeks of the session, when a handful of hardliners voted against the budget. This year, if there is a record vote on the Speaker’s race, the size of the Tea Party faction will be clear from the beginning of the session—and that’s why it’s Straus’s supporters, not Turner’s, who want the record vote.

For those reasons, the grassroots conservatives who called on Congressional Republicans to oppose Boehner were effectively asking them to go to bat for a losing cause–and a politically damaging one. It wasn’t necessarily an unworthy cause; no one owed Boehner a vote. Similarly, Texas representatives who genuinely think Scott Turner would be a better Speaker than Straus have the right to vote that way, and it would be petty of Straus to penalize them.

But neither was the cause necessarily virtuous. It can easily be understood as an administrative matter rather than a referendum on values. It’s therefore risky for grassroots conservatives to interpret a vote on a speaker’s race as a statement of principles, and to treat it as a purity test in subsequent primaries. Texas’s conservatives should have realized this years ago. National conservatives should learn from our example, congratulate Boehner and quietly move on. 

(AP Photo/J. Scott Applewhite)

Wed December 31, 2014 8:53 am By Paul Burka

I was surprised to read that Wendy Davis intends to make another run at public office, as yet unspecified. Among other things, she has retracted her support for open carry. But it is hard to see what kind of future Davis has, particularly when Battleground Texas proved to be as much of a disaster as the rest of the Davis organization. If Battleground has no future, what is the point of Davis running?

Read More
Tue December 30, 2014 10:39 pm By Paul Burka

That didn’t take long. Jeb Bush is the “clear Republican frontrunner for president,” according to a new CNN/ORC poll. Bush received 23% of Republicans surveyed in the nationwide poll, ten points ahead of his nearest competitor, New Jersey governor Chris Christie, who tallied 13%. Physician Ben Carson ran third, with 7%, and Rand Paul and former Arkansas governor Mike Huckabee tied for fourth with 6%.

As I’ve written before, Jeb is going to be hard to beat. He is backed by the prodigious clout of the Bush family and their nationwide fundraising ability. No one else on the GOP wannabe list is very attractive, especially since Christie’s popularity has waned in recent months. It’s hard to envision anyone else matching Jeb’s positives as a candidate.

Mon December 29, 2014 8:29 am By Paul Burka

It appears that Governor-elect Abbott is considering some form of Medicaid expansion. If this is indeed the case, it is incredibly good news for Texas. Rick Perry’s rejection of Medicaid expansion was petulant and extremely damaging to the state.

Read More
Mon December 22, 2014 4:12 pm By Erica Grieder

In 2014, the United States became the world’s largest producer of oil, and Texas, of course, is the single biggest oil-producing state in the country. Over the past three years, production has nearly doubled to more than three million barrels a day, a volume not seen in this state since the late 1970s.

All of which raises the question: how screwed is Texas right now? Since October, oil prices have dropped by half. As Aman Batheja and Jim Malewitz explain over at the Texas Tribune, that has a lot of people nervous. Some are reporting painful flashbacks to the 1980s, when a collapse in oil prices sent Texas plunging into a lonely and seemingly punitive recession. 

Here’s my take: Don’t worry. Or at least, don’t worry about a recession. Oil prices have measurable effects on the state’s revenue streams, its employment numbers, and its overall output. But in all three of those areas, Texas is less vulnerable than it once was and less vulnerable than one might think.

My main concern, at this point, is that politics (like energy markets) are affected by beliefs and expectations as much as events. With the 84th regular session set to begin in a few weeks, the last thing we need is panic in the ranks. Conversely, if the price drop prompts thoughtful reflection, that would be good. So here’s the case for calm.

Revenue:  In Texas, the oil production tax is set at 4.6% of market value, and a quarter of those taxes flow into the general fund. Put differently, oil taxes generally bring in several billion dollars a year. That’s not pocket change, but neither is it a huge driver of the budget. In FY 2013, for example, which was a good year for the industry, the state’s oil production tax brought in about $3bn—about 3% of Texas’s overall revenues collected that year [Correction: As detailed at the link, the oil production tax accounted for about 3% of revenues collected that year, not 3% of tax collections, as I initially stated. Thanks to commenter Jackson for the catch.]. Sales tax receipts, by contrast, added up to about $26bn, or more than half of all tax collections.  

Meanwhile, a drop in oil prices means a drop in the price of energy, and cheap energy tends to goose consumer spending. That’s why Fitch Ratings, in a December 15th analysis, was relatively sanguine about Texas’s budgetary prospects (behind a paywall, but take my word for it): “States that host large oil production operations but derive a modest share of revenue from oil production, like California, Colorado, and Texas, benefit from significant economic diversity and losses in oil revenue will likely be offset by boosts in consumer-driven tax revenue.” Per the Legislative Budget Board’s most recent estimates, that’s what’s happened to Texas’s revenue streams thus far: the drop in oil receipts has been more than offset by sales tax growth.

As for the rest of the oil production tax revenues—the other three-quarters—those flow into the Rainy Day Fund. That’s bad news insofar as everyone who’s proposed new spending lately has proposed that the state find the requisite funding in the Rainy Day Fund. But it’s not catastrophic; a joint select committee recently agreed to keep at least $7bn in the piggy bank, so they weren’t planning to make many withdrawals anyway.

(Worth highlighting in this context is that in November voters overwhelmingly approved Proposition 1, a measure that will divide future severance taxes between the Rainy Day Fund and the State Highway Fund. In other words, road funding is more vulnerable to swings in oil production taxes than it was before. On the other hand, Prop 1 was never presented as anything more than a partial solution to the state’s pressing road funding needs, and transportation funding was already tipped as a major priority for the session; the drop in oil production taxes may help focus the Lege’s attention on it.)

Employment: The drop in oil prices could mean layoffs in the energy industry. And in theory, mass layoffs in one industry can have ripple effects across the state. The mitigating factor is that oil and gas production is capital-intensive rather than labor-intensive. Texas has about 12.4 million jobs. Per the Dallas Fed, about 200,000 of those jobs, or 2% of the total, are in oil and gas production, extraction, and support services. In the 1970s and 1980s, the oil industry had a much bigger footprint on Texas. A 10% increase in the price of oil translated to a 1% increase in total employment—and between 1981 and 1987, industry employment was halved; the state lost some 212,000 jobs. Today we don’t have that many oil and gas jobs to lose.

In addition, industry employment is tied to production levels rather than prices, meaning that the employment effects of a drop in oil prices will appear on a delay (if at all). The last time oil prices dropped was in late 2008, but per the BLS, industry employment in oil and gas extraction continued to grow. Not until late 2009, when prices were rebounding, did employment levels drop a bit.

Output: In terms of both revenue and employment, then, Texas is more well-positioned to power through an oil bust than it was in the 1980s. Output is where we’re more vulnerable. Oil and gas extraction, again according to the Dallas Fed, drives about 11% of the state’s total economic output. If oil production falters, that could lead to losses in sectors like manufacturing, transportation, and construction.

Even here, though, I think it’s too soon to sound the alarms. In the 1970s, as the Dallas Fed puts it, Texas was “dependent” on oil and gas. Today we’re not. Back then, a 10% shift in oil prices moved state GDP by 1.9%. Between 1997 and 2010, a 10% increase in oil prices would yield a 0.3% increase in GDP. Next, as David F. Prindle puts it in his 1981 study of the Texas Railroad Commission, “the oil industry is not like other businesses”:

In most other trades, supply and demand come into relative balance more or less automatically. Manufacturers of shoes, for example, estimate how many of units of their product will sell in the coming year and adjust their output accordingly. If there is a greatly increased demand for shoes, established firms increase their output and new firms enter the market; when demand falls, output is cut back and inefficient firms may fail…This is how classical economic theory views the ideal market. People are forced to act rationally by the discipline of the market, and society benefits.

The theory, as he goes on to explain, doesn’t really apply to oil. The laws of supply and demand, for one thing, are distorted by considerations about things like geopolitics, infrastructure, financing and the physical properties of oil itself, such as the fact that it flows around underground. If the price of shoes falls in half, that might suggest that demand has halved, and shoemakers will respond accordingly (by making half as many shoes). Oil people don’t have analogous reasoning. Their production decisions are also shaped by finding costs and production costs, by price hedging agreements (such as futures contracts) and by long time horizons: a company may drill at a loss, for example, to hold onto an advantageous lease. 

Texas, too, has taken some precautions against oil drama. That’s why we have the Rainy Day Fund in the first place. It was established in the 1980s after the big bust, on the premise that oil money should be treated as a bonus, not the baseline. That decision, as discussed above, helps explain why Texas is now more well-positioned to weather drops in oil prices. And the reasoning that informed it may, in itself, be another reason for optimism. The 1980s oil bust left a legacy of dread. Things probably aren’t going to get that bad again.  But the spectre of the bad old days may spur some serious reflection in the Lege. At moments like this, can any legislator afford to clown around?  

(Flickr | Reto Fetz)