Bethany Blankley

Montana Ranks 16th: Freedom, Base of Economic Strength

25 January 2020
Behany Blankley
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By Bethany Blankley, Central Square

Montana’s economic freedom demonstrated the very slightest of improvements over the past year, according to the 2019 Economic Freedom of North America report.

Historically, economic freedom has been declining in North America, according to a new report published by the Economic Research Center at The Buckeye Institute in partnership with Canada’s Fraser Institute.

However, the report indicates that several U.S. states are faring better.

The most economically free state in the U.S. is New Hampshire, followed by Florida, Tennessee, Virginia and Texas, according to the report. Montana ranks 16th, reflecting a four-year trend of improvement.

The least economically free state is New York, followed by West Virginia, Alaska, Vermont, and Oregon.

“As the size of government expands, less room is available for private choice,” the authors of the report conclude. “When the government taxes one person in order to give money to another, it separates individuals from the full benefits of their labor and reduces the real returns of such activity.

“When government owns what would otherwise be private enterprises and engages in more of what would otherwise be private investment, economic freedom is reduced,” they add. ““Policymakers should seize the chance to prioritize workers by lowering their tax burdens and level the private sector playing field with smart regulatory reforms that promote job creation and business investment.”

Over regulation is Montana’s greatest threat to freedom.

“Residents of Big Sky country enjoy ample personal freedom and good fiscal policy, but regulatory policy has seen a worrying, long-term decline in both absolute and relative terms,” said the report.

The report ranks every state and province in North America based on economic freedom, as measured by government spending, taxation, and labor market restrictions. The current rankings are based on data from 2017.

“Economically free states encourage and allow families and businesses to pursue economic prosperity,” the Ohio-based Buckeye Institute said in a statement accompanying the report. “Although governments can never ensure economic success for every citizen, policymakers can take meaningful steps to make success more likely.”

Montana’s tax burden is well below the national average. Insurance freedom is middling, as the state imposes some restrictions on rating criteria but has gone to “file and use” for most lines. It joined the Interstate Insurance Product Regulation Compact in 2013–14. There is a general ban on sales below cost, and medical facilities and moving companies both face entry barriers. On lawsuit freedom it is slightly above average (less vulnerable to abusive suits). State taxes have held steady over the last several years at about 5 percent of adjusted personal income. Local taxes spiked in FY 2009 but have settled down since to about 3.1 percent of income. Montanans have virtually no choice in local government, as counties control half of local taxes. Montana’s debt burden has fallen from 20.2 percent of income in FY 2007 to 12.2 percent now. Government employment and consumption have fallen since the Great Recession and are now slightly better than average. Overall, Montana has posted consistent gains on fiscal policy over the time period we analyze.

Land-use freedom and environmental policy have deteriorated since 2007. Building restrictions are now more onerous than average. Eminent domain reform has not gone far. The state’s renewable portfolio standards are among the toughest in the country, raising the cost of electricity. The state has a fairly high minimum wage for its median wage level. Overall, Montana is one of the least free states when it comes to the labor market. Health insurance mandates are extremely expensive. Montana has gone from one of the least regulated states for occupational licensing in 2000 to one of the more regulated today. However, licensing was trimmed in 2016, and nurses enjoy substantial practice freedom. Montana is one of the better states for gun rights, although it has fairly extensive limits on where one may carry within cities. Montana also does well on gambling, where it has an unusual, competitive model for video terminals that does not involve casinos. On criminal justice, Montana is above average. Drug arrests are more than one standard deviation below the national average, but the incarceration rate is about average, when adjusted for crime rates. The state is schizophrenic on cannabis, with a reasonably liberal medical marijuana program but also the possibility of a life sentence for a single cannabis offense not involving minors and a one-year mandatory minimum for any level of cultivation. Montana reformed its terrible asset forfeiture law in 2015 but has not touched the equitable sharing loophole. Tobacco and alcohol freedoms are subpar, with draconian smoking bans, higher-than-average cigarette taxes, and state monopoly liquor stores. Educational freedom is slightly better than average, with fairly light regulation of private schools and homeschools and, since 2015, a strictly limited tax credit scholarship law. The state was forced to legalize same-sex marriage in 2014, and its oppressive super-DOMA was therefore also overturned.

The institute argues that policymakers can improve a state’s economy by reigning in government spending, reducing “needless regulations,” and simplifying a state’s tax structure.

The Fraser Institute has measured economic freedom in every state and province in the United States, Canada, and Mexico for 15 years, “creating a comprehensive assessment of trends in economic freedom.” The Buckeye Institute and its Economic Research Center co-published the report for five years in a row.

Medicaid Expansion = “Medicare for All Lite”

25 January 2020
Behany Blankley
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By Bethany Blankley, The Center Square

A new report by the nonpartisan think tank The Foundation for Government Accountability (FGA) says that Medicaid expansion through the Affordable Care Act is like “Medicare for All Lite,” which has created nothing but “disastrous results.”

If the remaining non-expansion states were to expand Medicaid under Obamacare, FGA argues, about 2 million able-bodied adults risk losing their private insurance. They would then be shifted onto Medicaid and receive less quality care, placing a larger financial burden onto taxpayers.

In “Forced Into Welfare: How Medicaid Expansion Will Kick Millions Of Americans Off Of Private Insurance,” the authors note that the majority of able-bodied adults targeted to enroll in Medicaid already have affordable private insurance through an exchange program.

According to an earlier FGA analysis, nearly 54 percent of potential Medicaid expansion enrollees were already insured, and in some states like Wisconsin, the number was as high as 71 percent.

Chris Jacobs, senior fellow at the New Orleans-based Pelican Institute for Public Policy, reported on the crisis of Louisiana residents being forced to drop their private insurance to enroll in Medicaid, creating a phenomenon known as “crowd out.” After reviewing public records from the Louisiana Department of Health (LDH), Jacobs found that 15,000 people dropped their private insurance to enroll in Medicaid every month throughout 2017.

“Crowd out populations pose big potential costs for Louisiana taxpayers,” Jacobs said. “In 2015, the Legislative Fiscal Office assumed that if Louisiana expanded Medicaid, the state would spend between $900 million and $1.3 billion over five years providing Medicaid coverage to individuals with prior health coverage.”

The average expansion enrollee cost per person is $6,286.20 per year in Louisiana, Jacobs calculates based on LDH testimony given to the House Appropriations Committee earlier this year.

Multiplying this average cost-per-enrollee by the number of individuals who dropped private coverage, according to last year’s LSU Health Insurance Survey, the Pelican Institute estimates the potential cost to state and federal taxpayers is $461.6 million per year.

Similar patterns are occurring nationwide, the FGA report notes. Economists, including Obamacare architect Jonathan Gruber, have concluded that Medicaid expansions in the late 1990s and early 2000s created a crowd-out effect of roughly 60 percent. In other words, for every 10 new Medicaid enrollees, six left private insurance plans, FGA said.

Americans’ View of Economy is Highest in 19 Years

14 October 2019
Behany Blankley
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By Bethany Blankley, The Center Square

A continuing robust job market has also boosted U.S. consumer confidence to an all-time high in nearly two decades, according to data released by The Conference Board’s index.

Bloomberg News reports the data exceeded all estimates in its survey of economists, with the highest views on the current economic climate at their highest since November 2000.

The index “shows hiring and income gains are keeping consumers upbeat and assuaging concerns about the economy’s prospects in light of slowing global growth, volatile financial markets and escalating U.S.-China trade tensions,” Bloomberg reports.

The majority of respondents saying jobs are plentiful jumped to 51.2 percent, the highest since September 2000, according to the index, while those saying jobs are hard to find declined to the lowest level in three months.

“While other parts of the economy may show some weakening, consumers have remained confident and willing to spend,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement. “However, if the recent escalation in trade and tariff tensions persists, it could potentially dampen consumers’ optimism regarding the short-term economic outlook.”

The report comes after record job numbers were published by the U.S. Department of Labor and record highs were reached by the Dow Jones and S&P 500 in mid-July.

Within a record-setting 24-hour period, the S&P 500 surpassed 3,000 for the first time since its founding in 1896, and the Dow Jones Industrial Average topped 27,000 for the first time since its founding in 1885.

In the first six months of 2019, the Dow rose by 16 percent and the S&P 500 by 20 percent.

In April, 263,000 nonfarm jobs were added to the economy, with hourly wage growth up by two-tenths of a percent and unemployment at 3.6 percent, its lowest level since December 1969. In June, 224,000 nonfarm jobs were added, far more than what economists predicted.

In July, nonfarm payroll employment rose by 164,000, with an unchanged unemployment rate of 3.7 percent.

Positive responses also came after President Donald Trump said in August that he was considering indexing capital gains to inflation. Conservative groups argue this will build on the success of the 2017 Tax Cuts and Jobs Act (TCJA) that spawned economic growth, job creation and wage increases.

“Indexing is something that a lot of people have liked for a long time and it is something that would be very easy to do,” Trump said. “I can say that a majority of the people in the White House, at the level that does this kind of thing, they like indexing. So it is something I’m thinking about.”

Americans for Tax Reform (ATR) President Grover Norquist said, “Taxing inflation is wrong and unfair,” adding that ending the taxation of inflation on capital gains would strengthen the economy.

A coalition of 51 conservative groups sent President Trump a letter earlier this year urging him to end the inflation tax on savings and investment. They maintain, “American families and job creators should not have to pay taxes on phantom income.”

ATR notes that because of the TCJA, 90 percent of American wage earners have higher take-home pay.

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Grasping Size of US Economy

21 July 2019
Press Room
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U.S. Worker Production Dwarfs Most Countries – big time!

By Bethany Blankley, The Center Square

American workers out-produce workers worldwide, a fact that is readily reflected in gross domestic product (GDP) numbers.

The U.S. GDP is more than $21 trillion, dwarfing the economies of most other countries in the world. China’s GDP hovers over $14 trillion; Japan’s over $5 trillion.

The U.S. is neither the largest country by land mass nor population (4.4 percent of the world’s population) yet its GDP represents 24.2 percent of the global GDP.

“That’s a testament to the superior, world-class productivity of the American worker,” says Mark J. Perry, professor of finance and business economics at the University of Michigan-Flint and scholar at The American Enterprise Institute.

Most Americans can’t appreciate or comprehend how large these GDPs are, explains Mark J. Perry, professor of finance and business economics at the University of Michigan-Flint and scholar at The American Enterprise Institute. That’s why he creates a map every year comparing economies of states to countries to “help people understand how enormously large the U.S. economy is,” he told The Center Square.

Four states, California, Texas, New York and Florida, produced more than $1 trillion in output. If they were each countries, they would have ranked in the world’s 16 largest economies in 2018.

California’s GDP was greater than the United Kingdom of England, Wales, Scotland and Northern Ireland (U.K.); Texas’ was larger than Canada’s; New York’s was larger than Russia’s, and Florida’s is comparable to Indonesia’s.

Combined, they produced nearly $7.5 trillion in economic output in 2018, which would be the third-largest economy in the world.

GDP broadly measures a nation’s overall economic activity, representing the monetary value of all completed goods and services produced in that country within a specific time period. GDPs are calculated annually and quarterly.

Samuel Stebbins and Grant Suneson at the financial website 24/7 Wall St. point out that the majority of U.S. states are smaller in both population and landmass than their GDP comparable-countries. They also compared state GDPs to countries in a similar report to Perry’s.

Because U.S. states have far more developed economies, their GDPs per capita are higher, they note. U.S. consumer spending and highly developed industries backed by advanced technology also contribute to states’ economic advantages over their country counterparts.

Perry’s analysis compares the nominal GDP of each state and the District of Columbia to the nominal GDP of a country over the same time period based on Bureau of Economic Analysis and International Monetary Fund data.

The state with the greatest GDP is California.

With $3 trillion worth of economic output in 2018, California as a country would have been the 5th largest economy in the world, greater than the UK’s $2.81 trillion, France’s $2.79 trillion, and India’s $2.61 trillion worth of economic output.

California’s economic output is greater despite the U.K.’s labor force being nearly double. Perry argues the U.K. would need a 75 percent larger labor force of 14.5 million more people to produce the same economic output last year as California.

The second largest state economy and the world’s 10th largest economy last year was Texas’ $1.8 trillion worth of economic output. The Lone Star’s GDP was slightly greater than Canada’s $1.71 trillion GDP. In order for Canada to produce the same amount as Texas, it would need 6.2 million more workers, Perry notes.

Despite California’s output, California leads the nation in out-migration, and more of its residents are leaving for Texas. It costs more to leave California for Texas than it does to leave Texas for California, Perry found.

“There is a huge premium for trucks leaving California for Texas and a huge discount for trucks leaving Texas for California,” he says.

A one-way truck rental from Los Angeles to Houston costs $3,965; from Houston to Los Angeles, $967. A one-way truck rental from San Francisco to Dallas costs $4,275; from Dallas to San Francisco, $1,282.

U-Haul’s one-way truck rental rates are market-based, he argues, which is why truck shortages in California increase costs. There are also more trucks in Texas and there is a relatively low demand to go to California from Texas.

In the same analysis conducted in 2016, the ratios for the same matched cities were much smaller, 2.2 to 2.4 to 1, which he says suggests that “the outbound migration from California to Texas as reflected in one-way U-Haul truck rental rates must have accelerated over the last three years.”

The third and fourth largest GDPs were New York and Florida, respectively.

Pennsylvania’s GDP of $788 billion and Illinois’ GDP of $864 billion were greater than oil rich Saudi Arabia’s $782 billion.