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Mercatus Scholars: Federalism Matters, Freedom Works

By on 3.28.13 | 4:55PM

President Obama and his compassionate predecessor have undermined federalism in the governing system, overseeing considerable consolidation of political authority. Mercatus scholars William P. Ruger and Jason Sorens counter that the American federalist system allows for significant state discretion in policy issues that affect our daily lives. This point stood out Thursday afternoon as they presented their new report: “Freedom in the 50 States: An Index of Personal and Economic Freedom.”

The 2013 edition examines fiscal policy, regulatory policy, and restrictions of personal freedom on the state level, quantifying the value lost as a result of each to create a weighted, composite measure of individual liberty based on 2011 data. (It is unclear whether the District of Columbia and Democratic People’s Republic of Korea were excluded for the same reasons.) North Dakota (not to be confused with the Democratic People’s Republic of Dakota), South Dakota, and Tennessee top the overall rankings. However, fourth-place New Hampshire stands out by offering residents considerable personal and economic freedom. Rhode Island, Hawaii, New Jersey, and California scrape the bottom, but the Empire State truly inhabits it, finishing dead last by a crushing margin.

Ideological trends are general but surprising. Progressive states do not, in fact, offer greater personal freedom for a lack of economic liberty, nor do conservative states neatly fit the stereotype of laissez faire economics and stifling social policy. Highly progressive states tend to be the least free overall, but highly conservative states are not markedly freer than moderately conservative ones. And where a state stood in the 2011 or 2009 rankings was not predictive of its rise or fall.

The first major statistical claim made was that people vote with their feet, tending to migrate out of unfree states. Between 2001 and 2011, roughly one person a minute emigrated from the very worst states, according to the American Legislative Exchange Council’s Jonathan Williams, who was also speaking. The second claim was that for every indexed point of additional freedom, the real average personal income of a state can be expected to grow an additional 0.76% -- marginal, but enough to make a big difference over time.

However, your intrepid correspondent noted that in the latter case, the adjusted R-squared value, which measures how much of the variation in one metric can be explained by a linear relationship with another, was only 29.8%. Put plainly, only about 30% of economic growth can be attributed to freedom, as indexed by the authors. After recovering from the shock of hearing a journalist say “standard error,” Dr. Sorens noted that even if labor force participation demographics and global commodity prices et al. contribute 70% of the answer, the other 30% matters because policymakers control it. “Yes, the effects might be modest,” he argued, “but the substantive effects that we find are important.”

The fourth member of the panel, Virginia Delegate Jim LeMunyon (R-Chantilly), offered an anecdote that grounded Dr. Sorens’ point, and the animating purpose of his work with Dr. Ruger, in “how the real world works.” Last week Virginia Governor Bob McDonnell (R) purportedly vetoed a measure to increase hotel taxes in Arlington County, fearing that tourism dollars would flee across the Potomac into Washington, DC. Mr. LeMunyon, a businessman himself, noted that while it did not make the news, this example of a governor maintaining his state’s competitiveness represents the myriad small battles that determine the course of a state, and the prosperity of a society.

Dr. Ruger asserted in closing that the American system works best when political leaders at all levels of government jealously protect their authority, including state defiance of federal incursion. “I don’t think we should leave it to the federal government to protect our freedoms,” he said, adding that states have the power to do so. In the words of his co-author, “Freedom works across the fifty states, and that’s a good thing.”

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