As Americans lose ever more jobs and economic clout to China, the pressure's mounting for us to become more Chinese. Enter Texas Governor Rick Perry, whose 2012 presidential campaign slogan might as well be, "If you can't beat 'em, join 'em." In many ways, Texas is the China in our own backyard, a big, brash upstart that's created thousands of jobs by playing economic hardball. Admirers of the Lone Star State have dubbed its economy the "Texas Miracle," but maybe a better name would be the "Texas Tiger."
Red states: China: Deflates the value of its currency by 40 percent to subsidize exports and job creation.
Texas: Since 2003, has doled out $732 million in tax credits and subsidies to companies that relocated to the Lone Star State.
Eco-impunity: China: World's top carbon emitter would rather burn cheap coal than sign a climate treaty.
Texas: Nation's top carbon emitter was only state to refuse to comply with new federal regulations on greenhouse gas emissions.
Tea party: China: Effective corporate tax rate of 16.6 percent is less than half the US rate.
Texas: Top corporate tax rate of 1% is fourth lowest among US states. Bonus: No personal income tax.
China: Tainted milk, poisonous toys, glow-in-the-dark pork: Product scandals are common. Court convictions, not so much.
Texas: "Hurt? Injured? Need a lawyer? Too bad!" writesTexas Monthly, pointing out that the state's tort reforms force everyone from the hospitalized to homebuyers to fend for themselves.
Of rice and men: China: Suffers from "a lack of adequate (even basic) social protection for a large portion of its 1.3 billion population," according to the International Social Security Association.
Texas: Ranks 46th out of 50 states in per-capita spending; new budget slashes another $15 billion from social services such as Medicaid, mental health centers, and legal aid for the poor.
Free-market cronyism: China: "Princelings" such as vice-president Xi Jinping and Chongqing party secretary Bo Xilai have gotten rich by trading on their connections.
Texas: "Good ol' boys" such as corporate raider Harold Simmons and real estate mogul Harlan Crow have gotten rich by trading on their political donations.
Pray for rain: China: Encroaching desert consumes a million acres of land a year.
Texas: The worst drought in history has turned large parts of the state into a moonscape.
Last night, PBS Frontline and the Center for Investigative Reporting aired "Pot Republic," a great documentary on the marijuana business in California. It kicked off with a scene from a party at WeGrow, the so-called Walmart of Weed, and a screen shot of my cover story, "Weedmart." True to Frontline's form, the segment turned up some dirt on how medical marijuana is providing a cover for drug smugglers who resell California pot for three times its local value in places like Dallas, Texas. The Mexican cartels are also getting in on the game. At 2:30 EST today Frontline will host an online chat with "Pot Republic" correspondent Michael Montgomery, WeGrow co-founder Derek Peterson, and law enforcement officials. You can watch the Frontline segment here:
Last year, executives for Mylan, the Pittsburgh-based generic drug maker, took the company's two corporate jets on hundreds of flights to vacation hotspots such as Las Vegas, Miami, and the California wine country. The worst offender was CEO Bob Coury, who racked up $535,590 in personal jet flights on the company dime. Of course, Coury's air travel perk pales in comparison to his overall pay package of $23 million, which included a big raise pegged to a 15 percent bump in the company's share price. As long as Mylan rakes in profits, should shareholders care that its execs expense a few fun-filled weekend getaways?
The short answer is yes, according to a new report from GorvernanceMetrics International, a corporate oversight consultancy. Lavish spending on corporate jets rarely theatens to break a company on its own, but "if you're looking for a red flag to provoke a wider look at a company's governance and accounting practices, unusually high corporate jet perks is usually a pretty good one," the report says. Among the Fortune 500 companies that doled out CEO jet perks last year, the top 10 percent of spenders, or 18 companies, all ranked worse than average on one or more measures of shareholder risk or excessive corporate pay.
Mylan, which also makes the EpiPen cure for severe allergic reactions, earned a "very high concern" rating from the Corporate Library executive pay consultancy and an "agressive" rating from Audit Integrity, which flags risks such as SEC violations. Mylan spent six times more on personal flights for its CEO than did larger drugmakers such as Johnson & Johnson and Pfizer. Only two other companies, Abercrombie & Fitch and the Wynn Resorts, shelled out more than Mylan on corporate jets last year.
"If a board can't say "no" to a CEO's request that the company pay for his or her vacation, or taxes, or tax advice (to list just a few examples), that board may not be exercising very strong oversight of CEO performance," the report concludes. In other words, corporate directors who can't keep their execs out of the honey pot are liable to get stung. And in Mylan's case, an EpiPen probably won't save them.
Corporate compensation and shareholder risk ratings for the biggest spenders on corporate jet perks:
Libertarian-leaning Texas Congressman Ron Paul has called his state's governor "very much the status quo," but don't tell that to Rick Perry, who has been talking as of late like he's a bona fide Ron Paul Revolutionary. On Friday, Perry earned national headlines (and condemnation from some Republicans) when he said that allowing same-sex marriages in the Empire State "is New York's perogative." And in his new book, "Fed Up!," Perry writes that legalizing marijuana "ought to be California's decision."
While conventional view of Perry as a Bible-thumping arch-conservative holds true, his willingness to condone some liberal-friendly policies outside of Texas puts him in close company with Paul, who has never overtly supported gay marriage or drug use but argued that regulating them should be left up to the states. Perry's position allows him to say that he agrees with conservative voters without pissing off progressive ones too much. It's smart politics, says conservative Washington Post columnist Jennifer Rubin. "At some point, you have to trust the voters," she writes, "and if you can't persuade them, then learn to live with the results of policies that you don't favor."
Perry has also taken a libertarian stance on a major national security issue, urging the Texas legislature to pass a bill that would ban the Transportation Security Administration from conducting invasive airport searches. The bill had no chance of passing—the feds had threatened to shut down Texas airports if it did—but it was straight from Paul's playbook. Last year, Paul introduced the American Traveler Dignity Act, an anti-TSA bill nearly identical to the one later introduced in Texas.
Though Perry is still far from a libertarian on many issues, he may see in Paul a model for courting the GOP's small-government and social conservative bases simultaneously. In Texas, a tea party stronghold where both Perry and Paul are better known than in the rest of the country, a major poll last month found that Perry would lose a 2012 presidential race in the state to President Barack Obama but that Paul would beat Obama by 5 percentage points. Texans may be fed up with the feds, or they may just be fed up with Perry, but either way, the Governor clearly has much to gain by becoming Paul's apostle.
On a gritty street in Galveston, Texas, a few blocks from the Gulf of Mexico, stands a prime example of the largesse of Republican Rep. Ron Paul. Workers here are putting the finishing touches on a new home, one of about 180 that will be built, at taxpayer's expense, for residents who lost their abodes to Hurricane Ike back in 2008.
The money for this project came from a federal Community Development Block Grant that the libertarian-leaning congressman helped direct to Galveston, the seat of Galveston County, and the most populous part of Paul's district. "Federal dollars are key," city spokeswoman Alicia Cahill tells me as a trailer arrives with boxes of new appliances. "Not only to help rebuild these homes, but also for so many infrastructure projects."
Thanks for the digs, America! Photos by Josh Harkinson
As a libertarian, Paul says he opposes federal disaster relief, but one of Paul's staffers told me that his office has shepherded hundreds of FEMA claims, ensured the reconstruction of the county's seawall, and won federal funding for an extensive beach nourishment project. Indeed, between 1999 and 2009 (the most recent year available), federal spending in Galveston County quadrupled to more than $4 billion. In 2009, the county received $14,707 per resident, topping average per capita federal spending in 46 of the 50 states. Paul earmarked some $60 million for projects in and around the city that year.
These local projects illustrate a central irony of Ron Paul's career: Even as the 12-term congressman has become the Cassandra of governmental overreach, he has enabled a deepening dependence on the federal government at home. Paul, who last week announced that he will retire at the end of 2012, will on one hand be remembered as "Dr. No," the politician who always voted "nay" on new spending, and on the other, as "a politician like all the rest," as Galveston GOP precinct chair Josh Daniels described him to me last week, noting that Paul's Janus-faced approach to federal spending "just doesn't sit well with me."
For better or worse, Paul has always cauterized his anti-government views with old-fashioned cronyism. Knowing that most appropriations bills will pass despite his nay vote, he often loads them with earmarks. In this way, he has managed to please both small-government conservatives and pork-loving constituents. From 2008 through 2010, Paul won nearly $125 million in earmarks, most of them for spending in his district. Last year, he was one of just four House Republicans who refused to abide by their party's voluntary earmarks ban. Trying to justify his projects in a 2009 Fox News interview, Paul said, "If they are going to allot the money, I have a responsibility to represent my people." Asked to elaborate on Paul's position, his spokeswoman pointed to a statement on Paul's website arguing that eliminating earmarks "would further consolidate power in the already dominant executive branch and not save a penny."
Welcome to Galveston County GOP headquarters.Over the years, being Ron Paul has not gotten any easier. Take, for example, the window of the Galveston County GOP headquarters, a squat building along Interstate 45 south of Houston, where a campaign sign reads, "Ron Paul: The Taxpayers' Best Friend." Less than a block away is the site of a future Park and Ride facility, courtesy of Paul's $750,000 earmark—never mind that Paul claims to oppose public transportation. Of course, Paul isn't entirely a hypocrite. He has long advocated privatizing NASA, a major employer in Galveston County. Obama is now doing just that; the only problem is that there's another sign in the window of GOP headquarters, reading: "Save NASA, Stop Obama."
For Paul's would-be successors, inhabiting his political wheelhouse is about as desirable as living on Saturn. None of the Texas Republicans vying to replace him in Congress—school administrator John Gay, politically connected attorney Michael Truncale, and state legislator Larry Taylor (who on Wednesday announced he would drop out of the race)—consider themselves libertarians. When I met Truncale at a GOP social hour at a yacht club in Kemah, an affluent resort town on Galveston Bay, he told me that a number of Paul's positions "may be a bit extreme for me." And Gay gripes that Paul wants to shrink government to the point that it's "almost like no government." In fact, nobody I met at the club described themselves as full-fledged Ron Paul supporters.
Part of Paul's duality may stem from his district's shifting political landscape; this year, the Texas Legislature redrew the district to include a swath of Democratic-leaning Jefferson County and larger parts of Galveston County. Paul's turf, once predominately rural, now must draw more conservative votes from the metastasizing Houston suburbs around League City, where billboards advertise new subdivisions with names like Tuscan Lakes and Trails at Bay Colony. Many voters in those places look to the government to provide quality roads, public schools, and law enforcement. "Growth in League City is mainly Republicans," says Daniels, the Galveston County precinct chair. "A lot of the core libertarian voters are not in that district."
"He's just not that popular around here," says a resident of Paul's old neighborhood.
To be sure, Paul still has plenty of loyalists. At Smithart's Downtown Grill in Lake Jackson, where he used to stop in for the signature half-pound burger, I found Sandra Smithart standing barefoot behind the counter, her toenails painted bright red. She told me that everyone knew Paul because, in his former career as a physician, he'd delivered thousands of babies around the county. "I like his honesty," she said, after calling out an order for a big man named Bubba. "He's a politician who won't ever vote for anything he doesn't believe in."
Yet on the leafy streets around Paul's old ranch-style home, yard signs in support of his presidential campaign were hard to come by. "He's just not that popular around here," explains retired engineer Jim Struthwolf, stepping off his riding mower to talk. Though Struthwolf has seen Paul speak at the Lions Club and his wife worked with Paul's wife on the Girl Scouts 20 years ago, he doesn't consider himself a supporter. "He went off a different way when he became a libertarian."
If all politics are local, as the famously liberal House Speaker Tip O'Neill liked to argue, then the Ron Paul revolution may be destined to fizzle. Back home, Paul never fully walked his libertarian talk. Struthwolf recalls Paul's early days in Congress, when he lambasted O'Neill for riding around Washington in an expensive, state-issued Lincoln Town Car. Well, the last time Paul showed up at his house, Struthwolf tells me with a chuckle, he showed up in, yes, an official Lincoln Town Car. (Paul's spokeswoman said the car could have belonged to someone else). "Tip O'Neill," Struthwolf says, "is probably laughing in his grave."