More than any other likely presidential contender, Rick Perry has hitched his political ambitions to the story of his home state’s economy. And he’s had a very good tale to tell: Texas consistently ranks among the fastest-growing, best places to do business in the country — a place that added jobs while the rest of the country was in a recession.

“We have the potential to create jobs at a far higher rate than we have been today,” Perry said during a speech Friday at the Republican National Committee winter meeting in San Diego. “And I know this because in Texas, we’ve been doing it. In Texas, we respect the private sector, we respect private enterprise. We respect work.”


What Perry doesn’t mention is the extent to which Texas’ economy rises and falls with the fortunes of the oil industry. And now, plummeting oil prices threaten to complicate Perry’s rationale for why Republican voters should give him a second look after his ill-fated 2012 bid for president.

“There’s talk about how diverse the Texas economy is, talk about how strong the Texas economy is,” said Patrick Jankowski, the senior vice president of research at the Greater Houston Partnership, a business-focused group in an oil-centric part of Texas. “I guess we’ll find out if that’s true or not.”

The full effect of dropping oil prices on Texas’ energy-dominant economy — and questions about how long they’ll stay low — may not be known for months, experts say. By then, Perry may be in the midst of a heated presidential primary campaign, where one of his key talking points will likely be that his stewardship of the Texas economy offers a model for the rest of the country.

But a troubled oil sector could muddle Perry’s portrayal of the Lone Star State as a beacon of economic prosperity, especially if it triggers significant layoffs. Just ask Michael Dukakis, who ran for president in 1988 touting the “Massachusetts Miracle.” When the economy there turned south, George H.W. Bush pounced, using that language to mock Dukakis, who went on to lose.

“Clearly one of my strengths was being governor of a state that had come from a terribly deep hole and was doing exceedingly well,” Dukakis said in an interview. “I certainly wasn’t going to hide that under a bushel. At the same time, I want to caution that these things can change. You’ve got to prepare people for that.”

The Federal Reserve Bank of Dallas on Tuesday predicted that the rate at which the state is adding jobs would slow — and the effects of plunging oil prices would ripple through the rest of the state economy. The Fed maintains, however, that Texas is in a better position to handle falling oil prices now than in previous years, especially compared to the oil crisis of the 1980s, when Texas was ravaged by a downturn in oil prices. That, coupled with a downturn in the real estate market, crippled the state’s economy for several years.

In his farewell address to the state legislature on Thursday, Perry suggested that he has helped develop a bulwark against economic forces beyond his control — such as low oil prices, over which he has no power.

“The difference between the great recession of the last decade and the recession of the 1980s is that we have built a more diverse economy able to survive even those inevitable slowdowns,” said Perry, the state’s longest-serving governor, who will leave office next week after 14 years.

Perry’s political spokesman, Travis Considine, noted to POLITICO that Perry has done everything in his power to boost the economy where he can.

“Under Gov. Perry’s leadership, Texas has made long-term efforts to build a broadly diversified economy that allows job creators from a variety of sectors and industries to thrive here,” he said. “This economic diversity is what has made Texas America’s job creation leader over the past 14 years and what will allow the state economy to weather the inevitable ups and downs of the economic cycle better than less diversified economies.”

Experts differ on how bad things will get in Texas, but most agree there will be a slowdown. If that’s the case, that may cut into Perry’s ability to display the Lone Star State as the jobs juggernaut he’s depicted in the past. At the same time, even if Texas stops creating jobs at the breakneck pace it has for the past several years, the Fed still predicts growth — which not every state enjoys.

“[Low] oil prices, held low for a long time, will lead to lesser job creation here,” Richard Fisher, president of the Dallas Fed and a former Clinton administration official, wrote in an email. “But because the Texas economy is far more diversified than the stereotypical view of foreigners (non-Texans), economic growth here, while reduced, will be positive and will likely match that of the rest of the U.S. rather than significantly outpace it as it has for such a long period. We’ll see.”

Fisher noted that oil and gas jobs make up only 2.6 percent of Texas employment, though they contribute significantly more to the state’s output. At the same time, he said, restaurants and airlines headquartered in Texas will benefit from those falling prices, as will lower-income people who will have more cash on hand when they save money at the gas pump.

Other experts are predicting more dire consequences: A JPMorgan Chase economist told The Wall Street Journal the state could be headed toward a recession.

As oil prices have tumbled, some Texans are having flashbacks to the 1980s crisis.

“I was just happy I didn’t get shot,” said Democrat Mark White, who was governor at the time and lost after one term — in part because of controversial education reforms he enacted, but also due to the economic climate at the time.

White also falls into the camp that says the Texas economy is far more diverse and less reliant on oil than it was when he was in office — due in part to steps he and others took, he says. But White previewed the skepticism Perry may face from critics if he seeks to take credit for the strong state of the Texas economy during his tenure, as he almost certainly will.

“Hundred dollar [a barrel] oil would create a miracle in almost any state,” White said.

Stephen Moore, a conservative economist who has been talking with several of the likely presidential candidates, met with Perry last week at a forum in Texas and said he asked about the impact of the falling oil prices on the Lone Star economy. Perry told him that the state will survive and continue to grow, Moore said.

“My view is, it’ll take some of the sheen off Texas,” Moore said. “But the rest of the economy is going to benefit from this. He could say, ‘Look, you’re benefiting … gas prices are down!’”