Producers—or creators of new wealth—are moving to the states where they are treated well and abandoning the states that treat them badly. The cover of the 2014 edition of Rich States, Poor States says it all: a clean, vibrant cityscape in Charlotte, North Carolina (ranked 6th) is juxtaposed with a crumbling, empty, littered street in Chicago, Illinois (ranked 48th):
The American Legislative Exchange Council (ALEC) publishes this state economic competitiveness index each year. The authors state, “Generally speaking, states that spend less—especially on income transfer programs, and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that tax and spend more.”
The report’s economic outlook methodology includes “15 policy variables that have a proven impact on the migration of capital—both investment and human—into and out of states.” It is quickly apparent when reviewing ALEC’s state rankings that big-government policies such as oppressive tax burdens, a minimum wage higher than the federal requirement, a large public debt load, and a disproportionately large number of employees on the public payroll are causing the most productive residents of states with a propensity for those policies to pack up and leave.
States that were once economic powerhouses are hemorrhaging productive taxpayers. New York, which has the most burdensome corporate tax rate, and Illinois, where property taxes, public debt, the minimum wage, and workers’ compensation costs are all sky high, both lost population in the 2010 census.
Those losses cost New York two seats in the House of Representatives and cost Illinois one seat. Illinois ranked 48th out of the 50 states in the ALEC study. New York ranked dead last. California, with the highest state personal income tax rate, ranked 47th.
While California managed not to lose any congressional seats, it’s still losing wealthy taxpayers, who are leaving in droves for friendlier states like Texas, Washington, Arizona, North Carolina, Georgia, and Florida—states that have low taxes and treat businesses well. Since California didn’t have an overall decline in population but ranks near the bottom of the ALEC rankings, it appears that these exiting producers are largely being replaced by those who are a net drain on the state’s economy.
This phenomenon—net producers being replaced by net consumers—is at its ugly worst in Detroit. Detroit provides us with a valuable foreshadowing of what’s in store for much or all of the United States, if we stay on the socialist, big government, collusion-with-cronies path we’re on.
Detroit Packard Plant
Frosty Wooldridge witnessed Detroit’s death from the seat of his 18-wheeler tractor trailer as he moved people out of every sector of decaying Detroit. In a 2009 article, he stated that…
“Mayor Coleman Young, perhaps the most corrupt mayor in America, outside of Richard Daley in Chicago, rode Detroit down to its knees. He set the benchmark for cronyism, incompetence and arrogance. ….
As a United Van Lines truck driver for my summer job from teaching math and science, I loaded hundreds of American families into my van for a new life in another city or state. Detroit plummeted from 1.8 million citizens to 912,000 today [October 2009]. At the same time, legal and illegal immigrants converged on the city ….
As Coleman Young’s corruption brought the city to its knees, no amount of federal dollars could save the incredible payoffs, kickbacks and illegality permeating his administration. ….
High school flunk out rates reached 76 percent, according to NBC’s Brian Williams. Classrooms resemble more foreign countries than America. English? Few speak it! The city features a 50 percent illiteracy rate and growing. Unemployment hit 28.9 percent in 2009 as the auto industry vacated the city.”
TIME Magazine’s Daniel Okrent, a Detroit native, identified one of the “killers” of Detroit as white flight, the exodus of white Detroiters to the suburbs after the July 1967 riots. In his October 4, 2009 article, “The Tragedy of Detroit: How a great city fell and how it can rise again,” Okrent condemned Detroit’s first black mayor, Coleman Young, for his focus on the “politics of retribution” rather than the politics of rebuilding. He condemned the relationship between the auto industry and union leaders and Michigan’s politicians in Congress, who collectively made Detroit uncompetitive and stagnant. It’s not hard to see the disturbing parallels between this failed city and our failing nation.
Detroit Mayor Coleman Young
Dr. Mark Hendrickson, another Detroit native, told of politicians who
“…believed that they could create a ‘fairer’ city by raising taxes on businesses and productive individuals and redistributing wealth to favored political constituencies, particularly the public sector unions. In doing so, they killed the goose that laid the golden egg.
The more aggressive the policies to take the wealth of the productive … the more people and businesses left the city to avoid the city government’s predations.”
Hendrickson also made this astute observation:
“This is the social and political pathology that Ayn Rand portrayed so vividly in Atlas Shrugged. One of her novel’s central themes was that when a society, instead of respecting (and perhaps even being grateful for) those who produce the wealth that sustains and enriches our lives, treats society’s economic benefactors as enemies to be plundered, a society embarks on a destructive path that, if unchecked, leads to doom. ….
Just as individuals sometimes resolve to change their ways so that someone who has departed has not died in vain, the demise of Detroit may not be in vain if we learn its grim lesson and reform city, state, and the federal government from their destructive predatory policies. Atlas has shrugged in Detroit.”