Few surprises in new ALEC-Laffer report: Ky still not competitive

The new 2011 edition of the ALEC-Laffer State Economic Competitiveness Index is now out. But it contains no surprises for Kentuckians.

Both Kentucky’s economic outlook and performance rankings occupy the same spots from last year at No. 40 and No. 31 respectively. Neighboring Tennessee ranks below Kentucky on ten-year economic performance at No. 36, but much above Kentucky on economic outlook at No. 8.

Tennessee’s absence of a state earned income tax and its status as a right-to-work">right-to-work state has provided Tennessee with the eighth highest absolute domestic migration in the nation over the past ten years.

Kentucky’s dismal economic outlook is based on 15 equally-weighted factors including highest marginal personal and corporate income tax rate (8.2%), debt service as a share of tax revenue (11.8%), percent of workforce in public sector (5.6%), average workers’ compensation costs (2.29% of total payroll), the imposition of the inheritance tax and forced-union status.

The ALEC-Laffer economic outlook index makes clear where Kentucky needs to make serious changes to improve its long-term economic condition: the top marginal personal income tax rate is the tenth highest in the nation; the miscellaneous tax burden (excluding income, sales, and property taxes) is twelfth highest; the ratio of debt service to tax revenue is third highest; and the quality of Kentucky’s legal system (based on tort litigation treatment, judicial impartiality, etc) is the second worst in the nation.

Click here for the full report.

According to this report card, Kentucky has ample room for serious fiscal improvement.

By Phil Impellizzeri, Bluegrass Institute intern

What do Utah, South Dakota and Virginia have that Kentucky doesn't?

According to the soon-to-be released fourth edition of the ALEC-Laffer State Economic Competitiveness Index, Utah once again ranks as the state with the best economic outlook in the nation.

South Dakota ranks second while Virginia leaped five spots from last year to third. The bottom three consists of the usual suspects: Maine, Vermont and New York rank No. 48 to No. 50 respectively.

Until the full report becomes available on Wednesday, we won’t know for sure if Kentucky has improved from last year’s ranking of No. 40. However, if we can get any indication from former Reagan administration economist Arthur Laffer’s repeated comparisons of Kentucky with neighboring Tennessee, a region free of state income taxes, Kentucky’s odds of significant improvement are long.

The ALEC-Laffer State Economic Outlook ranking is a forecast based on level of current state spending, mode of taxation, and what the states are actually spending on. Here is a link to the 2010 report.

Urging advocates to continue the good fight against excessive state taxation, Laffer left reporters with an unexpected nod to the Rastafarian, Bob Marley: “Those who are trying to make the world worse never take a day off. How can we?”

Visit back this Wednesday for an update on Kentucky’s 2011 economic outlook.

By Phil Impellizzeri, Bluegrass Institute intern

EPA now using a 'strangulation by regulation' approach

Having failed to get its radical anti-fossil fuels agenda passed through legislative means, the EPA is using regulation to bypass the will of the people and enact -- and enforce -- measures that will bring great harm to Kentucky's coal industry and its economy.

Click here to read the latest Bluegrass Beacon.

Border states have a 'Dragnet' for Kentuckians and their money

According to a recent report released by the WKU Center for Applied Economics, Kentucky lags behind most of its neighboring states in income, population and economic development. Jim Waters analyzes what the numbers mean.

Click here to read the latest Bluegrass Beacon.

Government's 'un'fair share

According to WKU economists Steve Lile and Brian Goff, "the public sector accounts for a larger share of the KY economy than is the case of most neighboring states."

In a paper on the new WKU Center for Applied Economics Web site, Lile and Goff offer the results of their research comparing the share of government activity that consumes states' gross state product (GSP), which like the national GDP, is a leading indicator of states' economic vitality.

Of the seven surrounding states, only Virginia and West Virginia -- both of which house large federal government agencies -- exceed Kentucky in the percent of their GSPs accounted for by government.


That's one of the reasons why it's so hard to believe the claims being made by Gov. Beshear and his get-along, go-along big spenders in the Kentucky General Assembly when they say that there's no need for spending cuts immediately to deal with the ongoing Medicaid mess.

In one sense, they're right. They should have been cutting the size of government a long time ago.

Tennessee: Your difference is showing

If you check out Western Kentucky University's new Center for Applied Economics online, here's some things you will find out about the commonwealth and its economic vitality:

• Kentucky's economy relies more heavily on manufacturing than all of the surrounding states other than Indiana. The commonwealth is 59 percent more dependent on manufacturing than the national economy.
  
  
• Notice how Kentucky's growth lags behind neighboring states:

• Persistent small differences in growth rates become a big deal over time. For instance, while Tennessee only grew at a 1.4 percent rate higher than Kentucky per year between 1997 and 2008, it added up to a 16 percent gap -- or a per capita income difference of $29,000 (Ky.) and $33,000 (Tenn.) during that decade.
  
  
• Kentucky and Tennessee share 350 miles of border and are similiar in terms of size, geographical features and historical/cultural similarities. Yet Kentucky lags behind:
  
  
  • Ky's "aggregate personal income" has dropped from 86 percent of Tennessee's to 64 percent over the last 45 years.
    
    
  • Ky's per capita income has dropped from 98 percent of Tennessee's to 92 percent.
    
    
  • Ky's population has dropped from 82 percent to 70 percent of Tennessee's.
    
    
  • Between 2000 and 2005, more than three times as many people moved to Tennessee as moved to Ky. Could it be that lower tax rates, a reliance upon the sales tax rather than punitive income taxes, school choice and a right-to-work law really do have consequences?

Labor and learning: Keys to Kentucky's future

Outdated labor laws and an inferior education system offer a bleak forecast for Kentucky's economic future.

Click here to listen to the 90-second audio commentary.

Dr. Eric Schansberg on Milton Friedman

Dr. Eric Schansberg discusses how he believes Milton Friedman would view the current economic climate.  This video was taken from the "What would Friedman do?" event at the University of Louisville, hosted by the Bluegrass Institute for Public Policy Solutions, on July 30, 2010.

Dr. Eric Schansberg - July 2010 from freedomky on Vimeo.

Bluegrass Institute event theme: 'What would Friedman do?'

The late Nobel laureate Milton Friedman will be remembered as one of the great champions of freedom at an event on the University of Louisville campus this week.

Click here to read the news release.

Where Are The Jobs?

The Mercatus Center gives us a true picture of the state of our economy.

"Long-term unemployment has risen dramatically during the course of the recession – this increase is one of the most dramatic and important unemployment trends. In a healthy economy, we should expect to see a short duration of average unemployment. This signal indicates an economy where workers’ skills are transferrable and they are able to quickly move in and out of sectors of an economy in flux. During the 50 years from 1950 to 2000, this was the nature of unemployment in the United States, with an average of 12.4% of total unemployment lasting for periods less than or equal to 27 weeks.

Last month, over 44.1% of unemployed workers (over 6.5 million workers) had been unemployed for 27 weeks or more. This is the highest relative level of long-term unemployment in the United States since the beginning of BLS records in 1948; at the start of 2008 only 18.3% of unemployed workers fell into this category. Importantly, these measures of unemployment exclude workers who desired employment but were, for various reasons, not included in BLS’s unemployment calculations – an estimated 5.8 million workers. When these workers are included in the overall totals of the unemployment, the relative percentage of long-term unemployed workers is certain to increase as well as the absolute number of unemployed.

This trend has continued unabated despite numerous jobs bills and policy interventions."