The State of Our State Economies

Date: September 13, 2013

It’s easy to lump all 50 states under one umbrella when it comes to the nation’s economic performance. We likely forget that the United States is a union of 50 “countries,” three of which—California, Texas and New York—are among the 15 largest in the world based on output produced.

The economic performance of our 50 states is not identical. Some are doing very well, some not so well.

Some differences in performance are due to natural resources like seaports and rivers. But the strength of a state’s elected leadership—and the policies it creates that affect small business—typically determine whether the state struggles or flourishes economically.

The Good and Bad of State Leadership

The key to doing well is still a government that understands and values the market system, one that knows only the private sector—particularly small business—can create wealth and jobs.

Also, states with strong economic performance successfully elect officials to Congress who can get re-elected for long enough to gain positions of power, allowing them to favor their states in the spending of taxpayer funds.

Take defense spending, for example. Nearly 15 percent of Hawaii’s gross domestic product comes from defense spending, 11 percent for Alaska and 10 percent for Virginia. Some of this is due to strategic geography, but much is due to political power.

Doing Our Part

Government policies can create an exodus of workers and capital when too burdensome, but people and capital vote with their feet. As economic policies change, so too will the fortunes of these states—and the small businesses that help them thrive.

 

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