The Real Significance of What Happened on Nov. 8
If politics and policy were twin babies, politics would be first out, screaming for food and attention. Policy would be busy thinking of life beyond the crib. Where politics looks for quick fixes, policy seeks long-term solutions.
If ever there were a time for the second-born twin to shine, and to get on with the task of promoting a comprehensive pro-growth agenda, it is right now — in state capitals around the country.
We are coming to the end of a long period of ever-increasing centralization of political and economic decision-making power in Washington, D.C. — and to the beginning, we believe, of a new era of the states and smaller units of government acting as true “laboratories of democracy.”
If that is so, no state has more to gain than Missouri.
Why is that? Three reasons —
First, after years and years of under-performance relative to other states, we have a lot of catching up to do — and there’s no reason to think we can’t do it, and fairly quickly, too, given the right mix of policies.
Second, politically speaking, this looks like an opportune time for bold action, with the strong possibility that the Governor’s Mansion and the Missouri Legislature may (at long last) be ready to join together in supporting a far-reaching, pro-growth policy agenda.
And third, this is one time when Missourians won’t be swimming against the national tide — like the Hollywood actress who reacted to the Nov. 8 election of Donald Trump as our next president by saying that she would move to Jupiter… or like the Silicon Valley investors who voiced similar outrage in saying that California should secede from the United States (giving rise to a would-be movement called “Calexit”).
How did Donald Trump — who often boasted of his own wealth and the freedom that it gave him in speaking his mind — manage to tap into the deep vein of frustration and dissatisfaction of the large majority of voters feeling that America was “on the wrong track”?
Surely, one of his secrets was an unabashed delight in self-made success — and a sense of its importance in relating to ordinary people when he talked about “making America great again.”
A second factor that stands out was his willingness to wage war against political correctness — in refusing to think or act with the usual restraint, or self-censorship, of many traditional conservatives, when challenging holier-than-thou liberal orthodoxies on a wide variety of issues (ranging from energy and the environment, to abortion and religious freedom, to law enforcement, and to health, education, and welfare).
One does not have to agree with the President-elect’s views in any one or all of these areas to think that his election could have a profoundly liberating effect upon political discourse for years to come.
So let us now turn to the question —
What’s Wrong with Missouri?
Here’s the simple answer: We aren’t growing fast enough.
Several decades ago, Missouri ranked in the middle of all states in annual GDP growth. We weren’t doing great, but we weren’t doing too badly either. That began to change in the late 1990s. From 1997 to 2015, Missouri ranked near the bottom of the barrel (48th out of the 50 states) with an average annual growth rate of just 1.0 percent, or about half the state’s average annual growth in preceding years. We had the dubious distinction of having a lower growth rate than every one of eight bordering states.
Why does this matter?
With an average annual growth rate of 1.0 percent, it would take Missouri (or any other state) 70 years to double its income. With 2.0 percent growth, that falls to 35 years, and with 4.0 percent, it drops all the way to 18 years.
Under the “rule of 72,” you can calculate the number of years it takes to double income by dividing the number 72 by the annualized growth rate (e.g., if a state or country is growing at a rate of 9 percent, it will take only eight years for it to double its standard of living).
Yes, Virginia, there is a Santa Claus: It’s called compounding.
However, what caused the decline in Missouri’s growth rate?
Though there is no simple answer to that question, the best place to begin is with the state’s economic and fiscal policies.
There is one area in which Missouri has (quite shamelessly) outperformed all but a handful of other states. The Mercatus Center at George Mason University has identified Missouri as one of the top nine states that rank as “the corporate welfare kings of America.” According to Mercatus, Missouri has promised or distributed more than $5.2 billion in subsidies to private businesses over the past couple of decades.
So what is our comprehensive plan for reigniting growth in the Show-Me State?
Setting a Pro-Growth Agenda for Missouri
Looking forward to the 2017 session of the Missouri Legislature, we at the Show-Me Institute have set seven major objectives in the policy arena:
One is to call for a stop to corporate welfare. Ideally, we would like to see Missouri reduce annual spending on state tax credits for targeted economic development from more than $350 million per year down to zero.
Two is to slash state income taxes by 50 percent over the next three years. There is a wealth of statistical evidence showing that people and businesses vote with their feet. They move out of states where the “tax price” of living, working, or running a business is too high and into states where it is lower. If you include the 1 percent earnings tax in our two biggest cities, Missouri has a top income tax rate of 7 percent, which is more than all but 11 states.
Three is to put an end to compulsory unionism as a condition of employment. Six out of eight neighboring states have passed right-to-work legislation. Missouri should join them in embracing greater freedom and competition in the workplace.
Four is to promote public sector union transparency and recertification. Missouri should close the loophole that allows government unions and public officials to conduct collective bargaining in closed sessions. At the same time, our state should give public sector employees the right to say “yea” or “nay” to continued union representation every two years.
Five is to encourage greater competition and choice in health care. We look forward to the repeal and replacement of the woefully misnamed Affordable Care Act (aka Obamacare). We support converting much of Missouri’s Medicaid program into health savings accounts (HSAs). After purchasing catastrophic health care plans (to provide the safety net that Medicaid was meant to be), beneficiaries would be free to tailor their spending to their needs and roll over unspent money from one year to the next.
Six is to promote like-minded reforms in education — also keyed to creating more competition and choice. Missouri lawmakers should pass legislation allowing charter schools — now limited to the Kansas City and Saint Louis areas — to expand throughout the state. Further, Missouri should follow the lead of other states that have adopted innovative programs for expanding education access, such as education savings accounts and tax credit-funded scholarships.
Seven is to help welfare recipients escape the poverty trap by eliminating a major disincentive to work — the loss of public welfare benefits that too often results from finding gainful employment. We support the reallocation of a portion of public welfare spending into earned income tax credits (EITCs).
Missouri entered the union as our country’s 24th state on Aug. 10, 1821. Less than five years from now, we will celebrate the state’s 200th birthday. It should be a rollicking party — if our lawmakers take full advantage of the opportunity to make exceptional progress across a broad range of important public policy issues.
Rex Sinquefield is president of the Show-Me Institute, a St. Louis-based free-market think tank. Andrew B. Wilson, a long-time contributor to The American Spectator, is resident fellow and senior writer at the Institute.
Photo: North-looking view from the Jefferson City Missouri state capital rotunda. The Missouri river appears on the left side. (Gvolik/Wikimedia Commons)