David R. Henderson  

We're Number 44! We're Number 44!

Would NGDP targeting lead to e... Debate Training: Deserve to Wi...

I've been looking at the pictures on the Mercatus web site for a study titled "Ranking the States by Fiscal Condition." It's by Mercatus Center senior research fellow Eileen Norcross and was released two days ago.

Just aesthetically, the pictures are beautiful. More important, they communicate the measures nicely. Here's the abstract:

Based on the fiscal year 2013 Comprehensive Annual Financial Reports of the 50 states, this study ranks states' fiscal solvency using 14 metrics that assess whether the states can meet their short-term bills and long-term obligations. State finances are analyzed according to five dimensions of solvency: cash, budget, long-run, service-level, and trust fund. These five dimensions are combined to produce an overall ranking of state fiscal solvency.

So, of course, an immediate question to ask is: Overall which states are in the best fiscal shape and which are in the worst?

The five best, from first to fifth, are:
North Dakota
South Dakota

The five worst, from 50th to 46th, are:
New Jersey
New York

Of course, I was most interested in the state I live in: California.

California is 44th best or 7th worst.

Although Norcross doesn't point it out in the study, an editorial in the Investor's Business Daily pointed out an interesting political pattern. The editorial is titled "Red States Outperform Blue In Managing Taxpayer Money."

The editors write:

There's only one factor these fiscal winners and losers share in common. And that's their political leanings. Of the top 10 states in the Mercatus ranking, just two -- Florida and Ohio -- voted for the Democratic presidential candidate in the past four elections, and just one -- Montana -- has a Democratic governor. Even if you look at the 25 best-performing states, only three could be considered reliably liberal.

At the other end of the list, just two of the 10 lowest-ranked states -- Kentucky and West Virginia -- have voted for the Republican in the past four presidential elections. And while four of them have Republican governors, they all are in solid blue states and all were elected to clean up messes left by their Democratic predecessors.

This is more evidence for a claim I made last month: contrary to what George Wallace said, there is more than a dime's worth of difference between Democrats and Republicans.

Comments and Sharing

CATEGORIES: Fiscal Policy

COMMENTS (12 to date)
Chris writes:

Seems to match up reasonably close with net federal tax dollars sent/received - the states in top fiscal shape are all net takers from the feds, and the states in worst fiscal share all net givers to the feds.

I'm not sure of what we're supposed to learn from that though...but it's a curious thought exercise nonetheless. Alaska receives around $1.80 in federal spending per $1 of federal taxes paid, while California receives 78 cents per dollar paid. If California received the same amount per capita as Alaska, that would be an additional $300 billion a year in federal spending! That might help plug a few fiscal holes...or it might just be flushed down the toilet.

I'd be interested in seeing these Mercatus numbers over time, and matching that up with shifts in federal spending. Texas would probably be a decent big state to look at, as they've gone from a taker to a giver over the last few decades.

TMC writes:

Mercatus could look into the bogus "net takers" and "net givers". Blue states have expensive real estate, not a great place to put an Army base. And people pay into social security all there lives in New York, then retire to Florida to collect social security.

Anon writes:

It's unfortunate that the debate on the study will be focused on it's source. The only thing that truly matters is: does the formula being used (the weights given to the various components) have the most predictive power possible? In the same vein, if the answer is "yes", then the question of inter-state wealth transfers is irrelevant.

ChrisL writes:

I also would like to see a more critical analysis of that net giver/taker claim. I suspect it's a lot more nuanced than they're claiming.

D. F. Linton writes:

There's more than a dime's worth of difference between the Crips and the Bloods, that doesn't mean you want either of them running your neighborhood; even if you got to vote on the choice.

RPLong writes:

The giver/taker thing is a pretty big deal in Canada. (There, they call it "have" vs. "have-not" provinces.) If anyone is interested in probing the issue from a theoretical perspective, using another country as a proxy, there is a lot of information out there.

Here is an article from the Fraser Institute, from a few years ago, just as an example.

Daublin writes:

The story is even better if you click through to the individual measures of solvency. It's easy to mistrust a high level "solvency" measure that combines several other measures in some mysterious ways.

They are all variatios on the theme of having enough money to pay for all the things the state government has promised. Most of them look at a time scale into the future (a year, multiple years, less than a year). One of them--debt--looks into this question on a historical basis.

Ann writes:

Is there a fossil fuel extraction component at work here? Producers v. users?

Levi Russell writes:

Unfortunately the data are from 2013, so in states like Kansas where some big changes have occurred in the last few years, this analysis may not reflect current conditions.

As a native of Kansas, I'll be interested to see how the state fares in this analysis over the next couple of years.

R Richard Schweitzer writes:

@ David R. Henderson:

Surprise, surprise, surprise there is a libertarian inclined individual who will argue (from recollection) that George C. Wallace, Jr. was not wrong at the time and in the context of his statement on the national political parties.

His assessment in 1966, related to the significant personalities he designated for that assessment, are not congruent to subsequent developments in the national parties, particular the Republican (note the subsequent opposition of Reagan to Gerald Ford, e.g.) Things change - ask Maynard Keynes. That does not mean he was wrong then.

At those times, then in my mid-40s, my law practice was based in Birmingham, AL. Many of the active political figures in those campaigns were known to me personally. One would have been hard put to differentiate among them other than by party labels.

I'll offer a test: How different would you say Earl warren was from the Democrats of his day - 25cents - a dime? How about from those of today - 5 cents?

It's a matter of times and context.

Derek writes:

I think the accounting data is a little distorting/misleading; government accounting requires unfunded pensions to use discount rate, expected return- say 7.5%= instead of a more conservative approach used in the private-sector, double-AA corporate bond. 4%. This understates expenses and long-term liabilities. If i recall, GASP, the govt accounting setters, are changing the discount rate rule?

Michael Stack writes:

My take:

There is not much difference between the parties, *given the same general voting population*.

So with the federal elections, I do not expect much to change either way, regardless of whether we elect a Republican or Democrat.

However, for areas that have strong preferences for redistribution, it's more likely Democrats will be elected repeatedly (and vice versa), and you can see the results. However that is due to voter preference, not the elected officials *per se*.

Comments for this entry have been closed
Return to top