Chart of the Day: Deleveraging and the Texas Miracle

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

In my summary post yesterday about Texas job growth, I mentioned that one big factor in Texas’s relative economic success during the recession was its strictly regulated housing market. Texas has long had strong mortgage regulations, and these regulations restricted the growth of both home mortgages as well as home equity loans during the go-go years of the aughts. As a result, Texas didn’t have much of a housing bubble and Texans, as a whole, didn’t go very deeply into debt.

But how big a role did this play? Debt overhang is a big factor in our protracted economic downturn: when overleveraged consumers cut back on spending, this reduces demand for goods and services and gives businesses no reason to expand production. So economic growth stagnates and unemployment stays high. Today, Mike Konczal updates his look at deleveraging across the country, and the chart below quantifies this story of deleveraging and unemployment. Texas didn’t have a housing boom thanks to its strict mortgage regulation, its debt overhang has therefore stayed low, and its unemployment rate, far from being exceptional, is right where you’d expect it to be.

This isn’t the whole Texas story, but it’s a big part of it. The 2008 financial collapse was primarily a story of a housing bubble caused by mortgage lenders run amok, and Texas mostly avoided that. This means it’s also avoided the worst of the unemployment crisis. No miracle. Just common sense financial regulation. Mike has more details at the link.

What’s ironic about this is that most of the things that have helped Texas during the recession aren’t really exportable to the rest of the country. Not every state can be in the Sun Belt, not every state can have lots of open land and low housing prices, not every state can have a thriving energy sector, and a regulatory race to the bottom doesn’t do the country as a whole any good. But one thing that is exportable is tighter government regulation of the mortgage market. It works! Even though Texas is a fast-growing, warm-weather state, it avoided most of the housing madness. But that’s the one thing you’ll probably never hear from Rick Perry. Too bad.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate