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For Economic Growth, It Matters Who Governs

Red States grow faster than Blue States.

Ever heard the observation that “states are laboratories of democracy” and are able to implement variants of economic and social policy without harming the nation as a whole? It’s a truth revealed by evaluating the economies of Red States and Blue States, as does a research report published by The Heritage Foundation.

In the “laboratories” of the states, effective economic policy leads to a better quality of life for residents in the metrics of employment, income, education and economic freedom. Long story short, it matters who governs because it matters which policies are used to govern.

In “1,000 People a Day: Why Red States are Getting Richer and Blue States are Getting Poorer,” Stephen Moore, a distinguished visiting fellow at Heritage, and Dr. Arthur Laffer, Ronald Reagan’s chief economist, expand on a wealth of research they have conducted regarding the impact of state policy. In generalized terms, their research indicates the states and local governments led by the Left are bringing economic and social woes upon their citizens, while the opposite is true of conservative policy.

Analyzing “15 policy variables that have a proven impact on the migration of investment capital and human capital — the basic ingredients of growth — into and out of states,” the authors demonstrate that “states that spend less (especially on income-transfer programs) and states that tax less (particularly on productive activities such as working or investing) experience higher growth rates than states that tax and spend more.” Thus, Red States are growing while higher tax Blue States are losing population, jobs and businesses.

In a decade-long retrospective, the Heritage scholars compared all 50 states with two policy levers determined to be “most essential to state population growth and economic growth as measured by gross state product.” These two will come as no surprise to conservatives: low income taxes and right-to-work laws.

Moore and Laffer compare the nine states with no income tax to the nine states with the highest income tax states, and the results are stark: “On average, no-income-tax states experienced double the jobs growth rate, one-fifth faster income growth, and double the population increase compared with the highest-income-tax states,” proving the thesis that both human and investment capital are impacted by tax policy.

Pro-growth tax policy — in which businesses and workers keep more of their hard-earned money — not only serves as a magnet for companies that create jobs but also for workers who spend their earnings on homes, cars and other items that keep money flowing in a healthy economy.

The two esteemed economic giants continue to consolidate facts in comparing right-to-work states versus forced-union states. Right-to-work laws protect workers from mandatory union membership but don’t prohibit unions.

Isolating states in “flyover country” that have in years past been unionized — such as Michigan, Indiana and 10 others — the five states that have adopted pro-worker policies preventing forced unionization recorded job growth of 11.1% from 2002 to 2012. The remaining seven states shrunk 1.9% in employment during that same 10 years.

The facts are undeniable: While the Blue State Left focuses on income inequality and seeks to remedy that through redistribution policies or, what 19th century French economist Frederic Bastiat astutely called “legal plunder,” the Red State Right is improving its citizens’ economic standing through lower taxes and pro-worker laws.

Indeed, states may wisely elect leaders in their capitals, counties and cities that embrace proven policies that work in serving their citizens. Yet too many of those “laboratories” of the states also produce abject failure at the expense of their residents. These Blue States deem the government as the economic engine — taking from those who produce to redistribute to those who don’t.

A final thought regarding the Blue State Left’s argument for and practice of redistribution. Seeking better financial standing and wealth is part of the American Dream. Utilizing the state to “equalize” the financial status of all is the antithesis of the greatness of America.

Laffer and Moore, again, validate the truths of effective economic policy that benefit society and expose the harmful consequences of redistribution. Our efforts must be redoubled to elect those who understand and animate such economic policy. It does, indeed, matter who governs.

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