Poor and uninsured. Why the Texas economy is all hat and no cattle.

Texas has the world’s 8th largest economy, with its sights on No. 7 France, and has been a model of strength and resilience for decades. Since the pandemic, it has had higher GDP growth and a lower unemployment rate than most states.

It is also, according to the personal-finance website WalletHub, the state with “the most people in financial distress.” This top ranking came as a surprise to a lot of people — but not to me, a Texas native and resident. For all the impressive statistics, Texas doesn’t generate sufficient income or economic security for its residents.

First, it’s always wise not to take any ranking of states too seriously, though WalletHub’s does include tangible and relevant metrics such as credit score and bankruptcy filings, as well as less concrete ones such as searches for the word “loan.” And the Census Bureau’s more conventional (if dated) statistics show Texans have wealth and debt levels similar to the U.S. average.

Inward fragility

The larger issue, as the Dallas Federal Reserve has noted, is that Texas’s aggregate strength masks an inward fragility.

Per capita personal income in Texas, for example, as measured by the Bureau of Economic Analysis, was about $68,000 last year. That’s less than the national average and the lowest of the so-called “Big Six” states with economies larger than $1 trillion: California, New York, Illinois, Pennsylvania, Florida and Texas.

To be fair, the cost of living varies considerably across those states. Even after adjusting for that, however, Texas’s income remains below all the Big Six except Florida.(1) So it’s clear that, despite having the second largest economy in the US, Texas isn’t generating the same level of income as other big state economies.

Another dubious distinction is that Texas boasts an economic precariousness that the rest of those states can’t match. Texas is the only state in the U.S. with double-digit rates of uninsurance for children (11.9%). It also has the highest uninsurance rates for working-age adults and elderly adults. And since being uninsured is often associated with having unpaid medical bills, it’s unsurprising that Texans have low credit scores.

And keep in mind, Texas is poor. It has a much higher poverty rate, 13.7%, than the U.S. overall (12.5%). That sounds close, but for perspective: The U.S. has about 40 million people in poverty. If it had Texas’s poverty rates, there’d be about 45 million.

Nor is Texas’s poverty a rural problem. For all the talk of Rust Belt decline and the loss of manufacturing, or East Coast cities riddled by crime and blight, the metropolitan area with the highest poverty rate in the U.S. is Houston, followed by Detroit and then San Antonio. Having two of the three most impoverished cities, especially when those cities are experiencing booming population growth, is its own kind of economic miracle, if an ignominious one.

The Texas government — distinct from the Texas economy — also distinguishes itself with its poor performance when it comes to the Supplemental Nutrition Assistance Program, or food stamps. Across the U.S., about 88% of all individuals eligible for food stamps receive benefits. Pennsylvania and Illinois are among the 20 states where participation hovers near 100%, Texas is 46th, with just 74%. Keep in mind, it’s a federally funded program, so missing SNAP recipients is leaving money on the table that could be in the Texas economy.

No doubt Texas leaders prefer to focus on their state’s place at or near the top of lists like States With the Strongest Economies or Top States for Business. Indeed, there is a whole subgenre of economic commentary devoted to making the case that the Texas economy is better than California’s.

And truly, Texas’s economy is incredible, especially considering where it came from. Forty years ago, it was a state often at the mercy of the oil and gas industry. Since then, Texas has diversified across sectors, become a large exporter, is home to a growing number of companies, and was a net receiver of internal migration during the pandemic. The tailwind of a growing population certainly helps economic growth as much as it reflects it.

Growth isn’t enough

Yet nothing inhibits introspection quite like success. Texas leaders coasting on the growth that they see are ignoring the potential — both bad and good — that they can’t.

Ideally, Texas’s ranking in this WalletHub survey should serve as a warning: If left unaddressed, the problems of its most vulnerable residents are just as much a threat to Texas’s economic strength as the boom and bust of the oil and gas industry was several decades ago. Back then, the state’s leaders realized that leaving Texas dependent on one industry would limit its potential and were motivated to diversify.

If they want to make Texas truly the strongest state economy, they will need to bring that same motivation and sense of purpose to addressing this era’s fragility: the poverty and economic insecurity of so many of its residents. Growth isn’t enough, and the job is not done.