U.S. states are grappling with reduced levels of economic freedom,
a decline that mirrors the sharp drop in the United States' global
economic freedom ranking, according to a new report released today
by the Fraser Institute, Canada's leading public policy think-tank.
"Economic freedom is a key ingredient in creating prosperity.
States with high levels of economic freedom provide families with
higher standards of living," said Nathan Ashby, professor at the
University of Texas at El Paso and co-author of Economic Freedom of
North America 2012.
"The heavy-handed regulation and extensive overspending by
Washington in response to the domestic and European debt crises not
only caused America's global economic freedom level to drop, it's
now affecting economic freedom levels at the state level."
The Economic Freedom of North America 2012 report examines key
indicators of economic freedom in the U.S. states and Canadian
provinces based on size of government, taxation, rule of law and
property rights, and regulation using data from 2010 (most recent
year available); a separate chapter compares the economic freedom
levels of the Mexican states. Economic freedom represents the
ability of individuals and families to make their own economic
decisions, free from government interference.
Earlier this year, the United States saw its global economic
freedom ranking drop to 16th out of 144 nations and territories,
its lowest-ever showing and a sharp drop from the second overall
position in held in 2000.
The 2012 edition of Economic Freedom of North America includes a
"world-adjusted" index for the United States and Canada at the
all-government level that incorporates data from the Fraser
Institute's Economic Freedom of the World: 2012 Annual Report to
capture the broad decline of economic freedom in the United States,
particularly in areas of regulation, legal system, and property
rights.
The 10 states with the highest levels of economic freedom are:
Delaware (2nd overall), Texas (4th overall), Nevada (5th overall),
Wyoming (6th overall), Colorado (7th overall), South Dakota (8th
overall), Illinois (11th overall), Georgia (12th overall), Nebraska
(13th overall), and Utah (14th overall).
The states with the least economic freedom are: New Mexico (59th
overall), West Virginia (58th overall), Mississippi (57th overall),
Vermont (55th), Kentucky (54th), Maine (53rd), Montana (52nd),
Arkansas (51st), Rhode Island (49th), and Hawaii (48th).
While the United States' national decline in economic freedom is
now being felt at the state level, Canada's 10 provinces have seen
their economic freedom scores improve, the result of Canada's
fifth-place ranking in the Economic Freedom of the World Index.
The Canadian province of Alberta had the highest level of
economic freedom in North America with Saskatchewan ranked third.
Overall, Canadian provinces lead U.S. states in average economic
freedom with provinces averaging a score of 6.8 out of 10 compared
to 6.7 out of 10 for U.S. states.
"The link between economic freedom and prosperity is clear:
states that support low taxation, limited government, and flexible
labor markets benefit from greater economic growth," said Fred
McMahon, Dr. Michael A. Walker Research Chair in Economic Freedom
(Fraser Institute) and co-author of the report.
"In contrast, states with reduced levels of economic freedom see
lower living standards for families and fewer economic
opportunities."
Reinforcing the connection between economic freedom and
prosperity, the report notes that the average per-capita GDP in
2010 for the top 10 states was $51,737 compared to $44,889 for the
remaining states.
The gap is more significant if only the bottom 10 states are
examined, where average per-capita GDP in 2010 was $38,017,
compared to the $51,737 among the top 10 states-a difference of
$13,720.
Delaware, the most economically free state, ranked first among
all states for having the smallest size of government and most
flexible labor market, while Alaska, Delaware, and Texas impose the
lightest tax burdens overall.
The states with low scores on these measures have corresponding
low levels of economic freedom. New Mexico and West Virginia score
worst for size of government; New Jersey and Rhode Island score
worst for taxation; while West Virginia, Alaska, and Hawaii score
worst for labor market freedom at the all-government (comprising
federal, state/provincial, and municipal/local) level.
The Economic Freedom of North America report is an offshoot of
the Fraser Institute's Economic Freedom of the World index, the
result of a quarter century of work by more than 60 scholars,
including three Nobel laureates.
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The Fraser Institute is an independent Canadian public policy
research and educational organization with offices in Vancouver,
Calgary, Toronto, and Montreal and ties to a global network of 85
think-tanks. Its mission is to measure, study, and communicate the
impact of competitive markets and government intervention on the
welfare of individuals. To protect the Institute's independence, it
does not accept grants from governments or contracts for research.
Visit www.fraserinstitute.org.
Contacts: University of Texas at El Paso Nathan Ashby Assistant
Professor of Economics (915) 747-7791njashby@utep.edu Fraser
Institute Fred McMahon Dr. Michael A. Walker Research Chair in
Economic Freedom (416) 363-6575 ext. 226 or Mobile: (416)
727-7138fred.mcmahon@fraserinstitute.org Fraser Institute Dean
Pelkey Director of Communications (604)
714-4582dean.pelkey@fraserinstitute.org www.fraserinstitute.org