Don’t Mess With Texas! Protecting Policies That Bring Freedom and Prosperity

Transcript

Linda J Hansen: Thank you for joining us today. Ideas have consequences and policy matters. Every action has a reaction and every policy has a result. My guest today is E. J. Antoni. E. J. is an economist at the Texas Public Policy Foundation whose research focuses on fiscal and monetary policy. His research has been featured with the Daily Caller, Fox Business, the Wall Street Journal, National Review, the Show-Me Institute, the Heartland Institute, the Arizona Chamber Foundation, FreedomWorks, and the Committee to Unleash Prosperity, where he is a visiting fellow. He has taught courses ranging from labor economics to money and banking. E. J. earned his masters and doctorate in economics from Northern Illinois University.

I’ve had the chance to work with E. J. because he often works closely with economist Steve Moore, a long-time friend and advisor to me with Prosperity 101®. E. J. provided valuable assistance when Steve and I were adding updates to my latest book before publication last fall. So with that I welcome you, E. J. Thank you for taking time for the interview.

E.J. Antoni: Linda, of course. It’s a pleasure to be with you and your audience.

Linda: Well, thank you so much. The Texas Public Policy Foundation is a 501-C3, nonprofit, nonpartisan, research institute. I see from the website the Foundation’s mission is to “promote and defend liberty, personal responsibility, and free enterprise in Texas and the nation by educating and affecting policy makers in the Texas public policy debate with academically sound research and outreach.” Can you let our listeners know what you do there and the issues on which you are most focused?

E.J. Antoni: Absolutely. So my role here is largely a support role. What I mean by that is we have various campaigns at the Foundation, various issues on which we work, but economics largely serves to support those other roles and those other campaigns. That’s why I say that it’s more like a service department. So for example, even in things you might think of as belonging to the field of economics such as tax policy and government spending policies, those would fall largely under Remember the Tax Payer Campaign. So whenever I do work for that campaign on things like new tax rates or new tax plans, it’s always at the service of that campaign as opposed to just economics for the sake of economics.

So largely what I do in my personal role is running the numbers. So we try to figure out, “Okay, we want to change this policy from A to B. What are the changes that are going to result from moving from A to B?” Sometimes we have existing models that we can use; sometimes we have to devise new economic models, but at the end of the day, that is essentially my role here.

Linda: Well that’s really great to know. The economist has such an important role because numbers don’t lie, but sometimes we see them misrepresented at times. I know that you work very hard to provide accurate information and credible research. I really appreciate the work of the Foundation and you personally. Having worked with you before on a few things, it’s just great to see what you’re doing there at the Texas Public Policy Foundation.

You know, I chose to interview you for your expertise, but also because Texas has been in the news so much with so many businesses and individuals changing their residence or place of business to Texas. So many people are moving to Texas for lower taxes, for more freedom. Can you address this shift in migration to Texas from other states around nation?

E.J. Antoni: Certainly. I’d be happy to. Actually that was one of the chapters in my dissertation was looking at how state tax rates affect domestic migration patterns. So Texas and I believe Florida as well, but I know Texas, has over a thousand people a day moving into the state. I mean, it really is incredible the flood of people that are coming here. It’s a combination of they are fleeing to Texas and they are also fleeing from the bad policies in the states from which they came.

So for example, Illinois has just been hemorrhaging people in the last several years. Illinois has had as many people move away as die every year in the state. I mean, it’s staggering. So when you look at a figure like that, you realize the state has essentially twice the death rate of the national average, effectively, right? Obviously those people aren’t dying. They’re getting a new lease on life when they move to Texas, but at the end of the day incentives matter.

Tax rates matter. Public policy matters because many things are just going to be the same no matter where you live as long as you are living in the United States. The basic freedoms and protections that we enjoy for the most part don’t change from place to place, but a lot of other things do. How free you are to start and run a business, that changes dramatically based on state regulations, based on state taxes, and not just the overall level of taxation, but how those taxes are collected also varies tremendously from state to state. One of the things that we’ve witnessed over the last decade, in fact more than the last decade looking back, is we can see the states that collect taxes in the least burdensome way have prospered much more than other states all else being equal.

Linda: That’s really a great fact, too, because I know you and I both believe that the smaller the government the better, (chuckling) as long as it can run efficiently and accomplish the purpose of taking care of the citizen and protecting the safety and well being of the citizens. However when it comes to tax policy and economic policy, we both agree that a limited government that allows for free enterprise and more personal responsibility and freedom is really what will help individuals, businesses, and states and nations to flourish.

E.J. Antoni: Absolutely. I really like one of the subtle points that you just made, Linda, and that’s it’s not simply a matter of “the government is best that governs least or the smaller the government the better.” That’s not the universal. Now does that happen to be the case today? Very often, yes, because government is too big today. But you really hit the nail on the head when you said the word “efficiency,” because can government do this efficiently? And very often the answer is no, which is why most things should be left to the private sector and not to government. But we don’t want to have this knee-jerk reaction that some people who may be, I don’t know if they would describe themselves as libertarian or what, but the idea that, “Oh, as long as we just get smaller government, that’s fine. That’s better. Government is best which runs least.” Well, no, not necessarily. That’s really not what the numbers tell us and we don’t want to be driven by an ideology; we want to be driven by the data. We want to be driven by the numbers. We want them to tell us the story. So it’s definitely the case though, that today, because government has overreached so far, that they are terribly, terribly inefficient at the things they try to do that they have no business doing. One of the real heartbreaks is that while they attend to all these things which they have no business doing, they tend at the same time to fail in the very things that they should be doing.

Linda: Could you restate that because that’s such a profound statement?

E.J. Antoni: Sure. Absolutely. As the government continues to expand and continues to take on roles which it was never intended to do at all, it not only does those things poorly, but then it tends to fail in the things which it should be doing. So if you just look at our criminal justice system. I mean in many ways, 2020 showed us what—it’s just, it’s in complete shambles. It’s completely ineffective. That’s true from a law standpoint and an order standpoint. The entire judicial system from first contact with the police officer to sentencing and everything in between is terribly, terribly broken. But that’s a fundamental role of government. We need government to set the rules of the game and to enforce those rules. We don’t need government to be a player in the game which is what they many, many times try to do. As they get more and more concerned with being a player and less and less with being a referee, they tend to do the referee job much worse.

Linda: Good points. Good points. What are some of the policies in particular that have drawn people to Texas? What makes Texas so strong in terms of its economic prosperity and opportunity for individuals?

E.J. Antoni: Well, no income tax is a really good place to start. So we can check that box. If you look at—Dr Arthur Laffer actually has done some really great analysis on this. If you just look at the states that have no income tax and compare them to the states that have not only income tax, but the most progressive of the income taxes, in virtually every single category of economic performance, the no income tax states blow away the highly progressive income tax states. So clearly there’s a pattern there. Now can you attribute that to some other factors? Possibly, but once you start accounting for those other factors, you begin to see that more and more of the income tax does actually play a big role in that.

One other way is the regulation aspect of it. So as we saw with the Trump administration, as great as the Trump tax cuts were, they actually weren’t that substantial. There were several other points in the last hundred years that we can point to where there were far more substantial tax cuts and yet, why were the Trump tax cuts so effective? Because they were coupled with such deep regulatory cuts. So in many cases the cost of regulation on a business is more than their tax bill. That’s really, really something to stop and think about. If a business pays tens of thousands or hundreds of thousands in taxes, how much more does it cost them to comply with all kinds of regulatory requirements? That may be things that they have to purchase for their business or things that they are not allowed to purchase for their business. It may have to do with how they treat their employees and I don’t mean that they treat them well or treat them poorly, but you may have to provide them certain benefits. You may not be allowed to require them to work a certain number of hours past forty hours a week, whatever the case may be. But all those things add up to extra costs on the business. Even if it’s not a direct cost, it could be an indirect cost in terms of lost production, lost profits, whatever the case may be. So with Texas being such a low regulatory environment, that’s a tremendous boon for businesses and businesses which literally might not be successful in another state, but can be successful in Texas because of those lower costs.

Linda: Those are really good points. I’ve done a lot of regulatory reform work in my life and you can see the damaging effects on over regulation. We could all say that regulation can be a good thing. Just like we were saying before, all government isn’t bad. It’s just bloated government and over-inflated government. The same with the regulatory environment is that regulations can be a good thing for the protection of citizens; however, they can overreach and become so heavy-handed that they cost the business more than they can absorb. Oftentimes regulations are what put businesses out of business.

E.J. Antoni: Absolutely. Right. That’s one of the things that we’re seeing not only as Texas maintains a low regulatory environment, but as other states have a more and more burdensome regulatory environment. As those burdens increase, that is what is driving people to Texas because, let’s be honest, moving is not free. There is a tremendous expense when an individual uproots their entire life and moves to another state. Having done it personally, I can tell you from firsthand experience, and then if you have a business, even more so. Now some modern-day businesses—if you’re all online maybe or if it’s a service industry—it’s not as much of a concern, but even still, it very often is the case when you move a business location, you can lose your clientele and you need to establish an entirely new clientele.

Linda: You could also lose many of your employees…

E.J. Antoni: Absolutely. Right.

Linda: …and have to train new staff. The expenses are enormous, but people are taking that risk to come to a state that offers more opportunity for growth and development.

E.J. Antoni: Right. Right. Exactly. Another thing that businesses are finding as they watch all those around them, for example, leave California. All of a sudden you’re looking around in the neighborhood and saying, “Where have all of my customers gone? Oh, they all fled to Texas or to wherever else.”

Linda: Right.

E.J. Antoni: So some of these businesses also are doing it not only because of the regulatory environment, but they are watching their own customer base just be hollowed out as all these people flee these states because of the taxes and regulations imposed in these different places.

Linda: Right. It’s amazing especially after Covid, through Covid, you’ve seen the attraction in states like Texas, Florida, South Dakota. There has been such enormous growth in these states and it’s because of these less-restrictive policies that are enacted in the states.

I’d like to touch on something else that touches Texas but really touches everybody in every city and state across the country. That is the immigration policy and how it’s affecting the Texas economy and what your recommendations are in terms of immigration policy, but also how we move forward from this current mess that has been created by the current administration and some of the economic impact regarding this influx of immigration, illegal immigration, I should say.

E.J. Antoni: Well, how we move forward is a very, very interesting question because thus far we haven’t. So exactly how to move forward in a situation wherein the federal government does not want to, but the state does, that is a very, very tough question. I know there’s a big push here in Texas for us to say, “You know what, forget you D.C. We’re going to build the wall on our own and we’re just going to eat the cost of it.” In large part, not entirely, we do want to help the country at large, but in large part this is tremendously damaging to the state of Texas. I mean tremendously. It causes a tremendous amount of economic harm.

You have the crime associated with it. You have—and not just the direct crime of an individual let’s say coming across the border and committing a crime like murder, but there is a tremendous amount of drug trafficking that’s happening as well. There are a myriad of crimes that are associated with drug use. So that is all increasing. Overall there really is essentially no good that’s coming about from it, I should say, this porous border situation.

It was really sad to see the Vice President come down and claim that she visited the border and she didn’t even visit the border. She went to a town without actually physically going to the border; she went to a town that is a very, very long distance away from the epicenter of this crisis where most of the illegal migrants, illegal aliens, are actually crossing into Texas and into the United States.

So it brings up a lot of, I guess existential would probably be the best word; it brings up a lot of existential questions, things like, “What is the point of being part of a sovereign union if it’s no longer sovereign?” I mean …

Linda: Good question.

E.J. Antoni: …you can’t have sovereignty if you don’t have borders. So is this union really sovereign, because states are sovereign. That’s a really, really important point to federalism. States are sovereign institutions and those states essentially hand over—they forgo certain rights—they hand those over to the federal government for the sake of forming a stronger union. Then you have the question of the dissolubility of that union. Is there much of a point to staying in the union that does not actually protect you, that does not actually safeguard the rights which you voluntarily handed over to it?

Those are very deep and very interesting questions. I’m not sure that we have time to get into them thoroughly here, but I can definitely speak a little more concisely to the economic issues. That is, number one, the crime that is causing increased costs. But number two, the low-wage labor that’s coming into the country is not in and of itself bad. Just because there are low-wage migrants is not in and of itself a terrible thing. We had low-wage immigration for essentially the entirety of this country’s history. Most people came to this country. They had low skills. They had no money in their pocket. They had the clothes on their back and that was it.

But what was different? Back then if you didn’t work, you didn’t eat. There was no social safety net. So if you came to this country, you were not a burden on this country. You might die in the street, but you weren’t a burden. Now most people did not die in the street because while we didn’t have as robust a government social safety net, we had very robust private social safety net. You had private charities and private churches that were much more involved back then than they are today. A lot of government so-called charitable work has crowded out private charitable work. But today we’re now in a situation where people can come to this country and essentially immediately start receiving public assistance and the economic costs of that are terrible.

Linda: It’s enormous. You brought up how the government has kind of shoved out a lot of the private social services organizations and things and some of that goes into what we were talking about before—regulatory policy or different policies that demand certain ways. I know some religious institutions are denied their tax-exempt status from time to time because they are religious organizations, whether they want to be a foster-care organization or an adoption agency, something like that. Sometimes they’ve had to fight for that and that’s hard. So when they are constantly jumping over government regulatory hurdles, it decreases the private sector ability to do that and increases the demand on the government, the economy of the government, and the tax payers.

E.J. Antoni: Absolutely. The other issue is you start getting into some conflicts of interest where, if you look at…what’s a good example? Catholic social services, I believe they get almost half of their revenue from the government, from the federal government. So when you’re dependent on Uncle Sam for 50% of your charity, you most likely are going to hesitate before you do anything to make Uncle Sam mad. So what do you have? You have Catholic bishops who don’t want to stir the hornet’s nest. Don’t get me wrong. There are some very good Catholic bishops in this country and there some very terrible ones, too.

Linda: Just like anything.

E.J. Antoni: Right. Exactly.

Linda: Like any organization or group.

E.J. Antoni: Precisely. But even the good ones—the bad ones they’ll just go along with whatever a terrible President says; they don’t really care—but even the good bishops are going to think twice before speaking out against a politician who is handing them money.

Linda: You know, this is really a good point. This goes back to that monetary policy and how our money is used from the federal, state, and local governments. As tax payers, as business owners, we need to pay attention to that. My goal was always to help people to understand how policy affects paycheck, but also really to connect those dots. Because so many people, I contend again, so many people go to the voting booth and vote themselves right out of a job because they are voting for people who will not vote for policies that will help the employer to provide that job. Or the self-employed person—we look at even the PRO Act or different things in the Congress now that would severely limit some of the income-earning potential and freedom of self-employed individuals.

So all these things come into play and when we talk about adding immigration, we’re adding all these people in untold numbers to our society. It’s not cost effective and Texas has had to bear the brunt of so much of that. You mentioned some of the costs that are there for Texas welcoming these immigrants but at the same time I’ve heard from ranch owners whose livelihoods, whose homes, their property, their safety, and their livelihoods are being endangered through the influx of not only the immigrants, but more importantly, the crime cartels—the cartels that are coming through and creating violence and mayhem all along the border. You look at that. You think of all of the businesses, individuals all throughout who’ve had their livelihoods upended because of some of this. What would you recommend people do to one, learn more about this issue and how it affects them, whether they live in Texas or any other state, but also what they can do to impact policy on this, to help the economies of Texas and other states?

E.J. Antoni: Well, to educate themselves, I would suggest first and foremost looking at our Foundation’s website, looking at the publications that our Foundation has produced and put forward. As well, look at the recommendations that our Foundation has made to our own state and to Washington D.C., to the nation at large. Because you’re right; this is not sustainable. This cannot continue and it’s also really, really sad, not only when you look at the impact that this is having on Americans, but when you look at the impact this is having on, for example, the children who are being smuggled here.

Linda: That’s horrible.

E.J. Antoni: Yeah, very often it’s not even that someone like, for example, it’s not that a parent is paying a coyote to smuggle their kid in because they say, “I just want my kid to get to America and have a better life for themselves.” No, these kids are sold into slavery very often or they’re stolen from their parents. They’re kidnapped and then they are used by the coyotes and constantly trafficked back and forth across the border in order to get their pretend parent—someone else who has paid the coyotes—into the country. It’s really absolutely terrible. It’s really shocking, too, the rate at which young women and young men actually, the rate at which boys and girls are molested and abused in that whole process. It’s sickening.

Linda: It’s so heartbreaking. People—I feel like the mainstream media has often hidden that fact from society where it’s taken a little more digging to really find out what’s actually happening at the border with cartels and the crime there and how they have infiltrated not just the border areas, but into every area of our country. This human trafficking, whether its sex trafficking or labor trafficking has become such a great problem. I just feel we need to stand up and shout from the rooftops that this is inhumane. We need to stop it. It’s not only bad economic policy as we’re talking about, but this is just hurting people of all ages and backgrounds. It hurts the immigrants. We’re putting them at risk by having that temptation that they come in by the cartels, the coyotes.

But it also—think about our society moving forward. We’ve got all these people who’ve experienced such trauma. They don’t have the training. They don’t have the proper assimilation into our society because they’ve just sort of been dumped here and they’ve got real needs. They’ve got emotional needs; they’ve got physical needs. It’ll take years for some of them to heal, if they do, from some of these traumas that they’ve been through. So that’s, those are things down the line we’re going to have to deal with as a society from this and I don’t think government is the perfect answer for that. I think that true help and assistance and compassion and empathy and real hands-on help and walking alongside people comes more from the private organizations than it does the government.

E.J. Antoni: Oh, certainly. In fact when you mentioned assimilation, there were several periods throughout our country’s history when we essentially decided as a nation, we’ve had enough people move here recently and we need time for everyone to assimilate because we do not want our culture to be diluted. We have this insane idea today that all cultures are somehow created equal. Please explain to me how the culture of 1930’s Nazi Germany was equal to the cultures of Belgium, France, Poland, and Britain at that same time. This is just insane, the idea that cultures are somehow, somehow have to be equal. It’s not the case. We should be proud as Americans of our heritage and we should be proud of our culture and we should seek to preserve both. The idea that we should tear down a statue of a person because he or she was imperfect is just absolutely preposterous. It’s the exact same kind of thinking that wants to dilute our culture today.

Linda: That’s so true. I think I’d like to have you back for another episode where we can talk a little bit about that—some of the cancel culture, many be a little of the CRT or critical race theory, and some of the things that are coming into our educational institutions and into our businesses that are affecting that culture, kind of diluting culture as you say. I think we’ll save that for another episode, but for now when we think about economic policy, what would you recommend to business owners as they hope to educate their employees on simple things that can help protect their job security as well as their prosperity?

E.J. Antoni: Well, I think work like you do with Prosperity 101® is so important in that regard. So that’s very, very important, really essential in getting through to workers that there is a difference between intention and result. So often we hear Policy A has a certain intention and then the results are precisely the opposite. The minimum wage—first of all we really need to rename it because the minimum wage cannot be set. The minimum wage is and always will be zero because when you get fired from a minimum wage hike your minimum wage is now zero because that’s what you are getting paid because you don’t have a job. Okay. So it’s a complete misnomer.

The minimum wage though is a great example of how you can try to force an employer to do something, but that’s all you can do is try. You can try to make the employer pay a higher wage to their entire staff, but they likely won’t, or if they do they are going to cut back hours or they’re going to replace some of them with machines and automation, whatever the case might be, or you might cause the employer to go out of business because he can’t afford those wage hikes, whatever the case may be.

Linda: Yeah. I just got a newsletter from a business in my area. It’s a nutrition store and they are not only, they are cutting back hours. They are hoping to expand this year, but they’ve had to cut back hours and hold off on things because one, prices have skyrocketed, supply chain issues have developed, and with so many people not wanting to work because they’re getting more money while they’re getting paid from the government, they are having a hard time finding enough help to stay open their regular hours. So they’ve had these major issues that have affected their ability to grow their business and to provide for their customers the way they’ve always wanted. Like you said, they can’t always do this. They can’t necessarily raise wages for everyone because there are fixed costs and then there are other costs. Labor and benefits are something that is somewhat flexible, whereas taxes, sometimes insurance, utilities, they’re not as flexible. If you are going to stay in business there are things that you have to pay and things you’d like to pay, but you can’t always.

E.J. Antoni: Absolutely. But something like the minimum wage, it doesn’t even pass the smell test for me if you just stop and think about it. If this was really a way to generate prosperity, then instead of giving how many billions and hundreds of billions of dollars in foreign aide to all these different countries around the world every year, why don’t we just tell Haiti to just raise their minimum wage? If that’s really going to generate prosperity, if that’s really going to lift people out of poverty, then just say, “Oh, Haiti, you just need to raise a minimum wage like we have and you’ll be fine.” But obviously that’s not true. Very often when you take these things to the nth degree, you can see the absurdity involved there.

Linda: Right.

E.J. Antoni: On the point you raise with people not being able to find anyone to work, you know Milton Freedman used to say that if the federal government was put in charge of the Sahara Desert in five years there would be a shortage of sand. Well, guess what? They did. The federal government did one better this time because in just five months, they took a booming V-shaped economic recovery in the labor market and they have blood-let this thing to no end. This has turned into the most anemic recovery in the labor market. Why? Precisely for the reasons you brought up. They have created incentives which have caused people to stay home instead of going back to work. So now at the same time as you have over nine million people unemployed, you have also over nine million unfilled jobs. Months ago Casey Mulligan from the University of Chicago, Steve Moore from Committee to Unleash Prosperity, and myself, the three of us, produced a study saying that this was going to add millions of people to the unemployment roles, and sure enough, here we are. The federal government has created a surplus and a shortage at the exact same time.

Linda: It makes no sense. We’ve seen, like you say; it’s only taken what, five months, six months for this to happen. It’s heartbreaking to see what’s happened to our nation’s economy and to our nation overall through these policies. It just reminds me of what I said at the beginning. Ideas have consequences. Policy matters. Every action has a reaction and every policy has a result, like you mentioned, regardless of the intention. Intentions may be great, but the results speak volumes.

If people want to get in touch with you, how should they do so?

E.J. Antoni: The best way to reach out would be via our website: texaspolicy.com.

Linda: Texaspolicy.com and you can look for E. J. Antoni. Is there anything you’d like to say to employers or employees before we close?

E.J. Antoni: Hang in there. (Chuckles) I wish I had better tidings I could give. This is part of the reason economists are universally disliked, is the good ones tell you what you don’t want to hear and the bad ones tell you what you do want to hear, but they are always wrong. (Linda chuckles) As Winston Churchill said, “I have nothing to offer but blood, toil, tears, and sweat.” So we’ve just got to hang in there and get through this.

Linda: Right. And I thought you were going to tell everybody to move to Texas, but… (Laughs)

E.J. Antoni: Well, that wouldn’t hurt too, but please if you do that remember why you’re moving and don’t vote for the policies that you are trying to flee from.

Linda: That’s a really good point and something that people don’t always consider. This migration of people, if they don’t have the education to understand what made the difference in these states, they could end up bringing those very same disastrous policies to their new state. It’s upon all of us to help people understand how all these policies affect their businesses, their jobs, their daily lives. Thank you for doing that. Thank you for taking time for the interview, E. J. We really appreciate it.

E.J. Antoni: Thank you for having me.