“Texans Believe in Free Enterprise”
An interview with Fiona Sigalla, regional economist with the Federal Reserve Bank of Dallas
Fiona Sigalla is a regional economist for the Federal Reserve Bank of Dallas, responsible for monitoring the economy of the 11th Federal Reserve District, which consists of Texas, northern Louisiana and southern New Mexico. A graduate of the University of Washington and the University of Minnesota, she has been with the Federal Reserve since 1988. Fiscal Notes recently sat down with Sigalla to discuss the problems and opportunities facing Texas.
Fiscal Notes: Thank you for talking with us today. So will the Texas economy continue to more closely resemble the nation’s economy?
Sigalla: That’s right. Our service sector will continue to grow faster than goods industries. That’s a national trend, and it will make knowledge more important.
FN: And that highlights the importance of education.
Sigalla: Oh, yes. As we become more of a knowledge-based society, it’s important to educate all of our residents. The income earned by service workers in Texas will depend on the level of education and skills they have.
It’s important not only to put the money in there, but to make sure it’s spent in a way that produces the best-educated workers we can. And that means making sure that they’re getting the math and science they need to contribute to the work force.
That’s already a constraint for some firms in the state. They’re having trouble getting the skilled workers they need. So we need to be sure that they can find the workers they need here, or they may choose to expand somewhere else. If we want the high-skilled, high-paid jobs, we’ve got to be sure that we have the workers to fill them.
FN: What about higher education? The same concerns apply there, right?
Sigalla: Of course. In particular, though, we have to make sure we have enough universities to keep as many talented Texas graduates in the state as we can. I’m talking about top-tier universities that are competitive with any across the country, that produce the research and technology that attract high-tech firms. Graduates of those universities tend to stay around and start companies, so top-flight universities have a lot of positive effects for our economy.
FN: Looking ahead for the next 20 or 30 years, what do you think will be some of the main forces shaping our economy?
Sigalla: One of the obvious trends is that oil and gas extraction is going to continue to shrink. Even though technology and very high prices have allowed us to extract previously unprofitable resources, like the natural gas in Texas’ Barnett Shale formation, it’s a limited and dwindling resource. We’ll continue to be a global supplier of energy equipment and services to drillers around the world, though.
FN: As a regional economist, you’ve done a lot of work on border issues and international trade. What are the key issues Texas faces in that area?
Sigalla: We’re in a global economy, of course, and Texas is the No. 1 exporting state. That has been a very important source of growth and diversification for us. The U.S. economy has slowed recently, but we’ve continued to export to a broad mix of countries. Anything that slows down our trade will slow our economic growth, and anything we can do to speed it up will stimulate our economy.
FN: And that’s where public policy can help us.
Sigalla: Yes indeed. Texas has gained a lot from sharing a border with Mexico. Cross-border trade of goods and services stimulates our businesses.
We need that border to function efficiently, to maximize trade and economic growth. It’s important that we use technology that will allow goods and trusted travelers to get across the border efficiently, so that our economy will continue to benefit from trade with Mexico. That’s been one of the state’s biggest sources of growth.
FN: How about the environmental issues the state faces? How can they affect our economy?
Sigalla: One of the problems we’ll have to address in the next few years is the air quality issue. It’s quickly becoming an issue that can limit our growth.
With federal air quality standards, and global warming restrictions that may be put into place, because we’ll be limited in the total amount of pollution we can generate. If we’re generating all our pollution through roads and cars, that leaves less that can be generated by our factories and businesses.
We’ll have to make some decisions about how we’re going to manage air emissions, so that businesses can continue to work here – because otherwise, they’ll go somewhere else.
FN: That said, I know you’re positive about the long-term prospects for the Texas economy. What would you say are our key strengths?
Sigalla: Other assets include our proximity to Mexico, which has been and will continue to be important. And our excellent distribution network – our roads, the Port of Houston, our rail lines and our airports, all of that has helped us take advantage of the global marketplace.
We have lots of inexpensive land and relatively low costs of living and doing business. It’s very easy to build here, and get a new company started quickly, and workers can live very well. That has made many of our industries very competitive with the rest of the world.
And Texas is known for being pro-business, with smart regulations that are not overly burdensome or inappropriate, and relatively low taxes. Most Texans believe in free enterprise and allowing business to make the decisions necessary to compete. FN
For a look at economic data on the Federal Reserve’s 11th District, which includes Texas, northern Louisiana and southern New Mexico, see the most recent “Beige Book” at www.dallasfed.org/research.
Future issues of Fiscal Notes will feature more interviews with business leaders and professionals who chart the progress of the Texas economy. Watch for them!