Wednesday, January 2, 2008

Is Minnesota a state in decline?

Minnesotans have generally prided themselves on being progressive, on the cutting edge of positive social change and having a great quality of life, despite cold winters and mosquitoes in summer. However, the past few years there seem to be some chinks in our state's armor. We've witnessed substantial state budget deficits and economic growth lagging behind many other states. We may well lose one of our eight congressional seats after the next census because our population growth is too slow. And we witnessed the tragic Mississippi bridge collapse this past summer. A sign of technological failure and/or poor oversight. This all begs the question: Is Minnesota a state in decline or at the very least entering a period of economic and social stagnation? If so, why?

I just came across an interesting, fascinating study released by the American Legislative Exchange Council called "Rich States/Poor States: ALEC-Laffer State Economic Competitiveness Index. ALEC is a conservative, free market oriented organization working with state legislators to promote conservative public policy proposals.

The report looks at sixteen factors, e.g. the level of state spending and taxation, migration of people to and from states, minimum wage, debt, and education freedom and so forth, and then ranks states according to these factors.

The study points out that people are migrating out of high tax states, e.g. Northeast and Midwest states for Southwest and South states in record numbers.

They point to California, which has one of the most liberal, wackiest legislatures in the country, as a state now witnessing substantial out migration despite the appeal of beaches, ocean and warm weather. And they look at the "Irish Miracle" where in the 1990s, Ireland significantly cut back on their welfare state by cutting taxes and privatizing many government services resulting in a significant immigration of people to that country.

Where does Minnesota rank overall? According to their index 35 out of 50 states. Definitely below average. Minnesota is high on taxes and middle of the pack on migration of people out of Minnesota (24th), since 2002 we've had a net outflow of people every year, and our wage growth is 28th nationally. We're ranked well, top ten, only for our legal system (2nd) - tort litigation treatment, and judicial impartiality - and education freedom (5th) - school choice, educational options.

The report mentions that some people point to a third way between a true free market approach and a socialist approach. Where government raises taxes to invest in and grow the economy and provide vital public services. They say this approach was tried in Europe and was a failure.

I believe there is more to life and the quality of life than merely dollars and cents. However, I think if one doesn't get it right in the economic realm you probably won't it right in the cultural realm. Personal freedom, limited government go hand in hand with moral and cultural well-being. Both are essential. I think Minnesota's problems go beyond just economic to moral and cultural factors. The economic red flags indicate that not all is well in the land of 10,000 lakes.

1 comment:

Dave Gardner said...

Population growth is too slow? Perhaps you should bone up on sustainability. And consider that the more your population grows, the more you have to tax and spend in futile attempts to deal with transportation, carbon emissions, etc. Population growth is a losing proposition. Take a look at Atlanta - second worst traffic in the nation and no water. People are leaving California because it's become a cesspool. Cause of death in L.A. - breathing!

I would encourage Minnesota NOT to hang it's hopes on MORE people or BIGGER economy. Focus instead on quality of life (as you hint). You're right, you can't have an economy that's in the cellar. But you also can't have a perpetually growing economy. Take a look at Willits, California or Okotoks in Canada


Dave Gardner
Hooked on Growth: Our Misguided Quest for Prosperity