A lot of Texans need to borrow money. But state and federal regulators have made lending so expensive that only the well-to-do qualify for most bank loans these days.
Those less well-off have turned to lenders who charge higher rates to cover the cost of loaning to high-risk borrowers, only to find cities all across Texas — Arlington being the latest — further restricting their access to capital by making the cost of lending even more expensive.
These attacks on payday and auto title lenders are simply the latest predatory government policies designed to restrict economic opportunity — especially for low-income people attempting to raise themselves out of poverty.
By far the most effective way to get out of poverty is to increase one’s income. And the best way to increase one’s income is to get a job. This is why Texas’ poverty rate is so impressive compared to other big states — no state has come close to creating more jobs than Texas over the last 15 years.
Yet government policies continue to hunt down the out of work to ensure they stay unemployed.
The minimum wage is a perfect example. Despite an unemployment rate of about 20 percent for young black men, the federal government keeps them out of work through the minimum wage. Government efforts to push unionization on employees also increases unemployment — something the Texas Legislature failed to address when it didn’t adopt paycheck protection for state employees this year.
“Consumer protection” regulations also make it more expensive for businesses to keep workers — witness EZCorp’s recent decision to lay off about 100 Austin-area workers in response to “an increasingly challenging legislative and regulatory environment” in the payday lending market.
The Legislature did make significant headway toward reducing the cost of employment by cutting the state’s poorly designed margin tax. Eliminating it in 2017 is the next logical step toward increasing jobs.
Unfortunately, logic is not usually present in government poverty-fighting programs. The government’s typical response to poverty and unemployment it to give people money. Welfare often gives the poor just enough to get above the poverty line. While this makes government statistics look good, it often leaves people trapped at the subsistence level with little hope of gaining the experience and skills that would allow them to better themselves.
Quality education is another major factor in increasing income and escaping poverty. Texas’ relatively high test scores and graduations rates — with only moderate spending — is another reason why Texas is doing well in the battle against poverty.
However, the inability of Texas’ poor to access the benefits of an efficient education system through school choice contributes to the continuation of the semi-permanent underclass that President Johnson’s War on Poverty ushered in more than 50 years ago. Texas has fallen behind in this area and should promote greater economic opportunity by adopting innovative practices like education savings accounts.
On the other side of the ledger, predatory policies increasingly drive up the cost of living for consumers, especially those working to get out of poverty. Zoning makes housing more expensive for the rich and poor alike. Occupational licensing increases the costs of services like plumbing, haircuts, and transportation. And higher education subsidies keep driving the cost of tuition out of reach for all but the most wealthy.
Texas’ overall lower cost of living helps, but high property taxes, heavy regulation in cities like Austin, and attempts to shut down the sharing economy make it clear that there is room for improvement.
Coming at the economy from both sides, these policies create a pincer movement that prevent many Texans from escaping their current economic condition.
Texas has made significant progress against the predatory state. There is great hope here for economic progress across both racial and economic lines. To reduce poverty and increase opportunity for all, however, we need to clamp down on state and local regulations that would take that hope away.
Bill Peacock is the vice president for research and director for the Center for Economic Freedom at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. Reach him at [email protected].