You have read a lot on Your Survival Guy about how states that treat residents like customers rather than like piggy banks to withdraw funds from are winning. Your Survival Guy’s 2023 Super States features a group of states that put residents ahead of politicians’ personal agendas by focusing on lower taxes, and smaller government. Now, William Ruger and Jason Sorens explain the results of the ongoing “competition between the states.” They write:
Between $1.9 trillion in pandemic relief, an extra half trillion in the infrastructure bill, and just under a trillion in the Inflation Reduction Act, President Joe Biden has signed into law unprecedented increases in federal spending. All this has blown out a massive budget deficit and caused debt to climb as a share of the economy. Fortunately, there’s an alternative to big government. It’s found at the state level and, critically, it’s working for regular people.
Red states are putting a lid on spending and debt while expanding economic freedom — and enjoying marked gains in prosperity. Even many blue states aren’t going as far as the Biden administration in growing government. A comprehensive index just released by the Cato Institute shows as much.
First, look at the numbers right before the pandemic. The average state and local debt burden stood at 17% of income in fiscal 2019. According to the latest figures, it is already down to 15%. The state and local government sector’s share of the economy in 2019 averaged 10.1%, but it has ticked down since then.
Given that state and local governments spend almost as much money as the federal government does, it is remarkable that their debt burden is a small fraction in comparison. That’s because they can’t make the Federal Reserve buy their debt, so they have to be more careful.
States also have to compete for business and taxpayers, so they need to keep their tax burdens lower and more proportional than the federal government. Even states such as Massachusetts that have raised taxes on high earners have often tried to offset these hikes with cuts elsewhere. States such as Vermont and Washington that have passed legislation authorizing single‐payer healthcare have declined to implement it in the face of the daunting tax hikes that would be required.
According to the Cato study, the most significant gainers of economic freedom since the turn of the century include Florida, Wisconsin, South Dakota, Idaho, and Georgia.
Florida’s gains have been the largest in the country, concentrated in the last 13 years. When Rick Scott took over as governor in 2011, Florida’s economic freedom level was about where it stood in 2001, and the state was fifth in the country on that score. Florida’s economic freedom immediately began to grow rapidly, and by 2017, it was ranked No. 1.
Action Line: If your state isn’t putting your interests ahead of those of its political leaders, it may be time to look for a better America. Begin your search with Your Survival Guy’s 2023 Super States, and click here to subscribe to my free monthly Survive & Thrive letter to be among the first to receive updates to the Super States map.
