Policy Documents

Rich States, Poor States: ALEC-Laffer State Economic Competitive Index

Arthur B. Laffer, Stephen Moore –
May 1, 2012

Almost four years after the Great Recession of 2008, we’re left wondering what could spur an economic recovery.

States are facing budget shortfalls and unfunded pension obligations as far as the eye can see. These financial obligations clearly were not caused by a shortfall of taxes, as state tax receipts have now recovered to pre-recession levels. The Mercatus Center at George Mason University found that from 2000-2009 alone, real state and local spending had grown 90 percent faster than real private sector gross domestic product. Unquestionably, these trends in state spending are unsustainable.

Faced with these daunting circumstances, many states have taken the lead in identifying and implementing pro-growth economic policies, and have limited the economic suffering. In this fifth edition of Rich States, Poor States, Arthur Laffer, Stephen Moore, and Jonathan Williams contrast the states that are enjoying growth with the states that continue to struggle, namely, the tax-and-spend states. They provide an economics 101 lesson, discussing the theory of incentives, and the evidence suggesting that taxpayers respond to misguided policies by voting with their feet and leaving states that become inhospitable.