[not mentioned is the slautary fact that Texas, home of US oil, is now a net energy *importer*. Mark] ------------ Prospects for rich and poor in Bush's home state Jane Martinson in Austin Thursday January 11, 2001 An ugly yellow cafe stands on a hill amid empty space and boarded buildings. But alongside the Victory Grill, a large billboard offers a sign of hope ahead - an artist's impression of a multi-million dollar redevelopment plan with "Coming Soon" plastered across it in bright red letters. After several years of false starts, the redevelopment of the depressed eastern half of Austin is coming just as the US economy has hit the brakes. Yet few locals seem to care. "I definitely see the signs of a recession on the horizon, but I just don't think it will affect us," says Mark Rogers, project director of the neighbourhood development corporation. "It's like my parents talking about the Depression. It wasn't as if they lost anything because they didn't have anything to begin with." To an even greater degree than America as a whole, Austin has enjoyed phenomenal levels of overall economic growth for much of the past decade. But the strong performance has masked a widening gap between rich and poor, a gap highlighted by recent signs of a slowdown. An interstate highway cuts Austin in half. On one side is the wealthy, western half of the city which is already showing the first signs of an economic downturn. On the poor eastern side, thing have remained more or less as they were a year ago. The Centre for Public Policy Priorities, a non-profit research group in Texas, issued a report last year which suggested that low unemployment levels had done little to raise many of the black and Mexican families in the city above the poverty line over the past decade. In addition, the Texas policy of raising funds through sales taxes and property taxes rather than through a tax on income disproportionately penalises the poor. Eva de Luna Castro, a researcher at the centre, says: "Gentrification is a real concern here, not recession." Although oil revenues still contribute a quarter of the gross state product in Texas, much of the growth over the past five years has been driven by the expansion of hi-tech companies and exuberant consumer spending. Most of the recent evidence in the home state of the president-elect, George W Bush, as well as in America as a whole is that the fast-paced local economy of the past few years is slowing down rather than reversing. Texas Perspectives, a consultancy which provides an economic indicator, has estimated that this basket of economic measures would decline from 5% growth two years ago to 2% in 2000. The Federal Reserve Bank of Dallas puts employment growth rates at similar levels, while unemployment in the state and nationally is still very close to a 30-year low. Travis Tullos, a regional economist at Texas Perspectives, says: "People have started to talk of a recession. A recession is two quarters or more of negative growth and we simply do not see that happening in the US, much less in Texas." What he does predict is a rapid decline in consumer confidence and falling sales for non-essential goods. After just a year as a real estate agent for the luxury end of the market, Kevin Scanlan is also surprised at how quickly things have changed. Having moved from Alaska, his first summer in Texas was hot in more ways than one. One buyer so badly wanted a house that he signed a blank cheque and asked the seller to simply add $10,000 (#6,700) to the highest bid. Another smallish two-storey home in the pretty neighbourhood of Cat Mountain attracted more than 10 offers on its first day and eventually sold for $359,000 - three times the average house price in the state and much more than its list price. "And it was nothing special," adds Mr Scanlan. "It wasn't like a mansion or anything." Now, far fewer customers are phoning Mr Scanlan's number. "In the last three months of last year, things slowed down considerably. It's only homes in areas where things don't come on the market very often that are going very quickly." Not that Mr Scanlan is complaining: "It's still a good real estate market, it's just not last summer." Like some US economists, Mr Scanlan blames the sharp fall in the value of hi-tech shares for the slowdown in spending. "The fact that those types of companies are doing so badly has had a big impact on the market," he says. The largest state employer is Dell, a homegrown company and the world's largest direct seller of computers. The increasing number of so-called "Dellionaires" in Austin helped push up house prices in the area as well as feeding many of the smartest shops, restaurants and car showrooms. Michael Dell, the Texan founder of the company and a man who bought his first BMW at 17, has done his bit to boost spending levels in the state. But, the company, which increased sales by almost 60% a year for most of the 1990s, has been hurt by the marked slowdown in computer sales, and Mr Dell's own estimated net worth has shrunk by about 60% since last summer. Undeterred by such statistics, Mark Rogers of the development corporation confidently predicts that building on the first phase of the redevelopment east of Interstate-35 will begin later this year after some $100m is found from the private sector. Special report on Bush's America at www.guardianunlimited.co.uk/bush _______________________________________________ Crashlist website: http://website.lineone.net/~resource_base
