Texas Economic Resilience Summit: Signs of Optimism for Texas
A prominent line-up of national economic and business leaders see promising indicators for a Texas rebound following their comments at the Texas Economic Resilience Summit. The Summit, sponsored by the Texas Bankers Association, is a two-day virtual program created to explore the critical relationships banks have with every sector of the Texas economy and to discuss the kinds of policies necessary for Texas to lead the economy out of the COVID-19 pandemic.
The program included discussions with Robert Kaplan, president and CEO of the Federal Reserve Bank of Dallas; Larry Kudlow, assistant to the president and director, National Economic Council; Charles Schwab, chairman of the Charles Schwab Corp.; as well as messages from U.S. Sens. John Cornyn and Ted Cruz.
Schwab, the financial services innovator, serves as the chairman of Charles Schwab Bank, SSB and Charles Schwab Premier Bank, SSB. He explained why these banks moved their charters to the Lone Star State. “Optimism is fundamental in our company and I’ve found that to be true in all my business in Texas.” The Schwab brand will eventually employ approximately 6,000 employees in Westlake.
Texas Savings and Mortgage Lending Commissioner Caroline Jones, who introduced Schwab, mentioned that the headquarters move increased Texas thrift assets by more than $300 billion.
In a discussion on the national economy pre-and post-COVID-19, Kudlow was interviewed by Donald Luskin, chief investment officer for Dallas-based TrendMacro.
Even as a volatile political environment contributes to uncertainty, Kudlow said the nation is seeing solid recovery signs – positive numbers in housing, retail, automobile sales, manufacturing and unemployment. The V-shaped recovery, Kudlow said, is “self-sustaining and will carry us to better than 20% growth in the third and fourth quarters.”
Kudlow said the Texas economy is in far better shape than other states. “Texas will come out of this pandemic as strong as ever – maybe even stronger – thanks to its pro-business and pro-entrepreneurial attitude,” that he added is “attracting people from all over the country.”
Kaplan gave an update on the U.S. economy, pointing out that it is the Dallas Fed’s view that the U.S. economy will grow at a rate of 30% annualized in the third quarter, which is a “big rebound,” and will experience healthy growth in the fourth quarter.
He predicts the economy will end 2020 with around 7.5% unemployment rate, and the economy will experience above trend growth – above 3% -- in 2021. “When you put all that together, we’re recovering,” he said.
He also addressed the need to keep the Fed funds rate at zero until the nation weathers the pandemic. He credits the economic rebound in part to the Paycheck Protection Program and the rapid implementation of unemployment benefits that helped many impacted families keep spending.
Texas banks made the majority of over 400,000 PPP small business loans in Texas, totaling over $41 billion and saving millions of jobs. The banks have been fighting for Congress to provide simplified loan forgiveness for PPP small business borrowers.
Sens. Cornyn and Cruz also addressed the economy during the pandemic, with Cornyn pointing out that Texas still boasts one of the best economies in the world due, in part, to policies that make Texas one of the most business-friendly economies in the world.
Cruz said the No. 1 priority of Congress needs to be reopening the economy and helping people get back to work. That’s why he introduced the Recovery Act, which, he said, would reduce taxes, repeal regulations, expand Covid-19 testing, deliver tax relief to employers and employees, bring supply chains back to the U.S. and eliminate burdensome regulations that hurt small businesses.
Texas Comptroller of Public Accounts Glenn Hegar led off the day. He said the state was able to better weather the pandemic storm than other states thanks to a healthy pre-COVID economy. The key, he said, to growing the Texas economy in the right direction is to instill confidence in consumers that the state is balancing health and safety needs with economic needs.
Based on a few months of data, Hegar said the two-year budget cycle, which ends in August 2021, went from a $3.4 billion surplus to a $4.6 billion deficit due to COVID. However, surprising increases in sales tax (home improvement and gym equipment as well as internet sales) and stimulus and unemployment assistance to consumers have added unexpected revenue to the state’s coffers.