‘Rich States, Poor States,’ Red States, Blue States

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Map of red states and blue states in the United States. Credit: Wikicommons

Last month, The American Legislative Exchange Council (ALEC) — a corporate lobbying group that Common Cause says is masquerading as a nonprofit charity — published its sixth annual “Rich States, Poor States” report. The publication is coauthored by Dr. Arthur Laffer, often called the father of supply-side economics, and it ranks U.S. states according to their “economic outlook” — a measure based on 15 different ALEC-selected criteria. Basically, the lower a state’s taxes, the fewer public services it offers and the less hospitable it is to labor unions, the higher it will be ranked. It also helps to have a really low minimum wage. Utah took this year’s top slot, with Vermont landing at number 50.

Many local news outlets are touting the report as a concrete source for assessing their state’s economic performance. But it appears that ideology is what gets a state to the top — or the bottom — of the rankings.

Before we get to why that is, some background: ALEC — a self-proclaimed “nonpartisan” organization with an overwhelmingly Republican political membership — is where corporations and politicians can meet each other away from the prying eyes of taxpayers and voters. Together, ALEC’s members draft model laws that promote a corporate, profit-driven agenda that simultaneously seeks to dismantle a state’s public services and workers’ rights. With this in mind, any “reports” that ALEC issues must be scrutinized with a magnifying glass, lest the conclusions drawn from its hand-picked data be taken as objective reporting.

For example, it’s no surprise, given the nature of its model bills, that ALEC’s report favors states offering low taxes and minimal government regulation. Whether or not those things create a strong economic climate, they are certainly favored by corporations. And red states — surprise, surprise — greatly outrank their blue brethren: of the ten states on which ALEC bestowed the honor of greatest economic outlook, all but Virginia have a Republican governor and a Republican-controlled legislature. (The Virginia Senate is split equally among Democrats and Republicans.) Eight of the report’s lowest-ranking states are governed by Democrats.

Some in the press are eating all this up. A recent Louisiana headline reads: “State-By-State Economic Report Shows a Lackluster Louisiana,” followed by an article that treats the state’s economic ranking as emanating from a disinterested authority. (Louisiana came in at #28 on ALEC’s list — the first time it hasn’t placed in the top 25.) North Dakota’s Jamestown Sun, claiming that “the assessment of North Dakota’s business friendly economy is being made again and again by independent out-of-state analysts,” cites ALEC as offering the latest of these “independent” analyses. Maryland’s WUSA9 essentially endorses “Rich States, Poor States” in a short “Your Money” report, pointing to ALEC’s recent “bad report card for Maryland – especially for your tax credit.” And then there’s Utah’s Deseret News, which exclusively interviews supporters of “Rich States, Poor States” – without once mentioning any of the report’s very vocal critics. (Utah, remember, is number one.)

Dr. Arthur Laffer, Economist and professor at University of Southern California, with "Laffer Curve" on blackboard, Feb. 23, 1981. (AP Photo)

Dr. Arthur Laffer, Economist and professor at University of Southern California, with "Laffer Curve" on blackboard, Feb. 23, 1981. (AP Photo)

A state’s employment numbers, population growth and gross domestic product are all used to arrive at its ALEC ranking. But since the first “Rich States, Poor States” was issued in 2007, some groups have criticized the ALEC-Laffer criteria. Peter Fisher of The Iowa Policy Project is leading the charge. In partnership with Greg LeRoy of Good Jobs First, a nonprofit organization founded to promote accountability in economic development, Fisher recently released his own 2013 report critiquing the ALEC-Laffer rankings — and explaining why “Rich States, Poor States” might just be a fool’s gold treasure-trove of unreliable data. Fisher and LeRoy’s “Grading Places: What Do the Business Climate Rankings Really Tell Us?” offers a counterpoint to the economic ranking criteria ALEC relies on in its report. That there’s even such a thing as a measurable business climate is, the report claims, “nonsensical.” It explains: “The needs of different businesses and facilities vary far too widely. Besides, states are not the meaningful unit of competition 
in economic development: metro areas
 are, and conditions can vary more among metro areas within a state than they do between states.”

“Grading Places” goes on to disparage using population growth, tax cuts, and anti-union “right to work” laws as measures for a state’s economic outlook. Despite the ALEC-Laffer report’s “aggressive claims,” Fisher and LeRoy say that the document still “fails to predict job creation, GDP growth, state and local revenue growth or rising personal incomes. Empirical evidence does not support its claims that estate taxes or graduated personal income taxes cause rich people to move and thereby retard economic development.” Their report goes on to illustrate that small negative correlations sometimes exist between ALEC-endorsed economic policies and a state’s positive economic outcome.

Protestors to Wisconsin Gov. Scott Walker's proposal to eliminate collective bargaining rights for many state workers listen in the rotunda at the State Capitol in Madison, Wis., Wednesday, Feb. 16, 2011, to testimony during a Joint Finance Committee meeting . (AP Photo/Andy Manis)

Protestors to Wisconsin Gov. Scott Walker's proposal to eliminate collective bargaining rights for many state workers listen in the rotunda at the State Capitol in Madison, Wis., in 2011, to testimony. (AP Photo/Andy Manis)

Wisconsin is one of the more interesting examples to look to for such statistical disparities. ALEC ranked the state #15 for economic outlook, even as the Bureau of Labor Statistics gave Wisconsin the 44th spot on their ranking for private-sector job creation. The U.S. Chamber of Commerce was recently busy ranking Wisconsin at 44th, too—this time, for overall economic performance. It might seem strange that a state that ranks so poorly on two separate economic rankings (one endorsed, as it were, by the U.S. government) would fare so well on a list disseminated by a “nonpartisan public-private partnership of America’s state legislators, members of the private sector and the general public.” But a quick tour of Wisconsin’s statehouse suggests a reason why: nearly one-third of Wisconsin legislators have ties to ALEC, and the state’s governor, Scott Walker, is an ALEC alum.

In the coming year, it wouldn’t be surprising if certain legislators attempted to pass off the “Rich States, Poor States” document as sound evidence in favor of changing their state’s economic policies. But citizens might do well to beware: as Greg LeRoy recently pointed out: “The real agenda is a policy or political agenda. It’s about trying to get states to lower taxes.”


Laura MacomberLaura Macomber is an associate producer at Okapi Productions. She is a former employee of Newsweek & The Daily Beast, where she produced news stories for the company’s live journalism events, Women in the World and The Hero Summit.
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  • bjoy

    Great article. As the law “Stand Your Ground” was being debated her in Fla. Alec was mentioned and people were amazed at such an organization existed. It didn’t hold their attention long.

  • http://plus.google.com/u/0/111051039748078110427/about novenator

    Corporate front groups like ALEC continue to try to push failed conservative economic theories like Starve The Beast, Supply-Side (Voodoo) economics, tax cuts for the rich, Trickle Down, outsourcing and unregulated trade agreements, etc.

    It is self-serving. The more conservative economic policies like this they can ram down America’s throat, the richer the rich and corporations get. The rest of us, we just get screwed into working longer, harder, and faster for less to fuel these elitist “entitlements.”

  • Anonymous

    Thank you Laura.

  • Joel Palmer

    ALEC = National Socialist Party aka Brownshirts

  • Kurt

    It’s like Forbes does their “best places to live in the US” lists. Basically their main criteria are taxes. Makes for a very odd list indeed.

  • Jennifer

    While I am neither affirming nor condemning the specific ALEC report in question, I will say on a broad note that after spending time today in a session on upcoming tax law implementation at a conference on accounting and legal matters, I am outraged again by our current taxation situation. Beyond sheer waste of hard-earned citizens’ money to write these laws, the federal regulations impose unbelievable burdens for compliance and reporting and shamefully waste human energy and capital that could be massively better spent on innovation, actual work, and real problem solving. It was enough to make even a CPA’s stomach turn.

  • proletariatprincess

    The more liberal the community, the more livable. Locations with conservative politics are less livable. The more taxes people are willing to pay on a community level, the more is invested in the community and the quality of life is better for everyone…rich and poor.

    This is not rocket science. Just take a drive down the coast of California, for instance. Towns like Pacifica and Half Moon Bay, have conservative values and the the franchises are everywhere including the beachfront. The buildings are cheaply made. There are few bike trails and you see more blight. People are not very friendly. There is little art and what there is in more commercial. Further down the coat to Montara, Santa Cruz, and Carmel, you see fewer if any franchises, more public beaches, better maintained buildings, much better art, lots of bikes and bike trails, healthy food outlets, clean streets and happier people. Crime rates, quality of schools, environmental issues…all better blue than red.

    So maybe the bosses and the corporate scumbags like the red state values better, but where would you like to live? Yeah. Me too. Funny thing is, so do they and that raises the housing costs in the most livable areas. Then the politics start to change in the blue places too. It ain’t right.

  • Anonymous

    Businesses go where they can make the most money. Pretty simple. Blue states like mine (Massachusetts) look at business like it is a cash-cow to be milked. Raise taxes and businesses (like Fidelity Investments) leave. Lower them, businesses come back. Not a hard concept.

  • Neil Forte

    The Gop has learned the lesson of all propagandists and advertisers, create a myth and make it glitzy and professional sounding and people will believe it

  • art w

    Quite correct – where they can make the most money and people be damned. Recent case in point, Smithfield Farms, a giant pork products producer, just sold out to a huge Chinese outfit. As it happens this outfit has a well documented track record of adulterated and dangerous food shipped to the US. Smithfield smiles, the Chinese Communist/Capitalists smile, while the rest of us have to worry about what is in our bacon and pork chops. Too bad the sweethearts at Fidelity didn’t want to pay Massachusetts for the good and important things taxes make possible. They and their employees will really enjoy Mississippi or Alabama or some other pit where sub minimum wages do indeed enhance the profit margin.

  • Anonymous

    Great article. As the law “Stand
    Your Ground” was being debated her in Fla. Alec was mentioned and people
    were amazed at such an organization existed. It didn’t hold their
    attention long.­ ­http://mybestfriendmakes65dollarsper&#46qr&#46net/kkEj

  • Anonymous

    So don’t eat pork. And don’t use Fidelity’s services if you find their business model not to your liking. I’m sure you can find locally raised, humane pork products, and well as an investment firm that is socially conscious. Is someone making you buy these things?

  • libbutnotTHATkind

    You must not live in CA. Orange County is probably the last bastion of conservative politics in the state – and one of the most affluent places to live. The idea that as more money is drained out the populace and funneled into the government the standard of living increases is absurd. LAUSD teachers are the highest paid in the country, with a 50% drop-out rate. CA has 12% of the US population and nearly 30% of the nation’s welfare recipient. The highest income taxes in the nation with rates as high as 13% for a single-earner making 45k a year, and yet some of the largest income disparities. If there is ever a place that Leftist economic polices has NOT worked, it’s CA. As a Libertarian, I love CAs social freedoms, but the political machine of Sacramento is controlled and paid for by special interests and too-powerful government unions and we citizens of the state are suffering for it. Worst of all, it is the poor and disenfranchised who suffer the most when they are simply paid lip service without any real actions or common-sense reforms.

  • Paul

    We who live in Wisconsin know all too well what Scott Walker and his cronies are doing in the name of policies based on some sort of blind faith as opposed to any type of real analysis, from tax policies to charter schools. To exacerbate the problem, the Democrats seem so unable to put forth strong candidates with strong voices to take on this ignorance. Scott Walker holds office not because of his charm or intellectual prowess, but because Democrats have allowed it to happen through their complacent capitulation to these nonsensical buffoons, and through an unwillingness to develop real policies that they seem to be willing to stand for.

  • Anonymous

    The idea that Orange County is representative of conservatives in CA is laughable. The OC (and SD to some extent) tend to be the places that the wealthiest of California conservatives tend move to (especially from out-of-state), however the vast majority of CA’s homegrown conservatives live in pretty much every OTHER county east of the I-5.

  • Commenter

    The picture caption says 2001 – fix to 2011

  • jack

    Is someone paying you to hate democracy?

  • Anonymous

    Yes, Jack. Yes. Do you think I’ll have to pay taxes on my earnings?

  • northierthanthou.com

    I think the notion that we are talking about an overall economic outlook is one of the more critical problems with this kind of research. Even if we assume the measure is actually making an accurate prediction of the states overall economic outlook, the value of that outlook may not reach far into the lives of its own citizenry. The shear quantity of business done in a given state doesn’t tell us much about how much those numbers impact lives. ….other than the elites that is.

  • Socorro

    Considering the United Citizens decision,I wonder if any of the U.S. Supreme Court justices are members of ALEC.

  • Christine Bush

    Dr. Seuss books ARE NOT IN THE PUBLIC DOMAIN. Remove the red fish, blue fish artwork from this post.

  • Pppatticake

    true but they need to bilk as much cash for themselves as possible since demographics have changed and they will never be able to win the White House again via free and fair elections, so they must purchase elections via fraud , intimidation, voting machine rigging, gerrymandering and outright corruption of the airwaves, scooping up all media and spending billionaire’s citizen united funds to slander their opponents.

  • Polish Princess

    So “rich states” means good for the rich and “poor states” means not especially good for the rich because other citizens can get advantages as well.
    Do I have that about right?

  • Anonymous

    Yes, of course. Who would try to screw the rest of us and not pay their fair share? Surely not you, patriot!

  • Anonymous

    I’m happy to pay taxes in my state. I’m happy to pay taxes at the federal level for the things that are actually in the Constitution. I’m not happy to pour my income into the maw of Washington so it can be redistributed by confused little Progressives like you.

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  • Anonymous

    Detroit is a wonderful example of Democrat leadership. Last GOP Mayor was 50 years ago

  • Dencal26

    Dear Red States:

    We’re ticked off at your Neanderthal attitudes and politics and we’ve decided
    we’re leaving.

    We in New York intend to form our own country and we’re taking the other Blue
    States with us.

    In case you aren’t aware, that includes California, Hawaii, Oregon, Washington,
    Minnesota, Wisconsin, Michigan, Illinois and the rest of the Northeast.

    We believe this split will be beneficial to the nation and especially to the
    people of the new country of The Enlightened States of America (E.S.A).

    To sum up briefly:

    You get Texas, Oklahoma and all the slave states.

    We get stem cell research and the best beaches.

    We get Andrew Cuomo and Elizabeth Warren. You get Bobby Jindal and Todd Akin.

    We get the Statue of Liberty. You get OpryLand.

    We get Intel and Microsoft. You get WorldCom.

    We get Harvard. You get Ol’ Miss.

    We get 85 percent of America’s venture capital and entrepreneurs.

    You get Alabama.

    We get two-thirds of the tax revenue. You get to make the red states pay their
    fair share.

    Since our aggregate divorce rate is 22 percent lower than the Christian
    Coalition’s, we get a bunch of happy families. You get a bunch of single moms.

    With the Blue States in hand we will have firm control of 80% of the country’s
    fresh water, more than 90% of the pineapple and lettuce, 92% of the nation’s
    fresh fruit, 95% of America’s quality wines (you can serve French wines at state
    dinners) 90% of all cheese, 90 percent of the high tech industry, most of the US
    low sulfur coal, all living redwoods, sequoias and condors, all the Ivy and
    Seven Sister schools plus Harvard, Yale, Stanford, Cal Tech and MIT.

    With the Red States you will have to cope with 88% of all obese Americans and
    their projected health care costs, 92% of all US mosquitoes, nearly 100% of the
    tornadoes, 90% of the hurricanes, 99% of all Southern Baptists, virtually 100%
    of all televangelists, Rush Limbaugh, Bob Jones University, Clemson and the
    University of Georgia.

    We get Hollywood and Yosemite, thank you.

    38% of those in the Red states believe Jonah was actually swallowed by a whale,
    62% believe life is sacred unless we’re discussing the death penalty or gun
    laws, 44% say that evolution is only a theory, 53% that Saddam was involved in
    9/11 and 61% of you crazy bastards believe you are people with higher morals
    then we lefties.

    We’re taking the good weed too. You can have that crap they grow in Mexico.

    Sincerely,

    Citizen of the Enlightened States of America

  • Anonymous

    Interesting post since I never made that one. Someone is playing games

  • Anonymous

    Nice excuse since Detroit is an auto industry based city and by all Obama reports our auto industry was saved.

  • Tarik Dean

    Orange County was initially a very conservative place but immigration has changed the demographics but it sill leans easily to the right because of it’s roots and that’s California history 101. and it’s also backed by historical political demographic data.

  • Tarik Dean

    ALEC is one of the most insidious organizations ever on this planet.

  • Griffin Kearns

    The best weed comes from Utah, so go ahead.

  • Anonymous

    If only Ms. Macomber knew more about economics, she might not have made this article. Wisconsin is currently at a 6.1% unemployment rate as of January, which is considerably lower than the 6.6% national average and even further below California’s 8.1%. But I’m sure it’s partisan politics that put Wisconsin in an above-average rank, Texas (5.7) at the top, and California, New York (6.8), and Oregon (7.0) at the bottom rankings.
    Yep.
    Thanks for showing us the dangers of bias, Ms. Macomber.

  • MV

    Who ever said “Business Men” were known for their humanitarian ethics? It’s not just taxes they write off onto the workers, it’s also the Low Wages. They most often pander to the party of “No Minimum Wage Increase.”

  • MV

    Notice No Mention of the Humanitarian, or Workers, or Civic portion of the statement you so critique.

  • MV

    See: Clinton Economy vs. GayGun/Bush & Bush/Cheney. Targeted taxes, Higher minimum wage, Increased benefits, Strong Unions, Record Economy, Jobs, Education, Peace, Home sales, Home values, Infrastructure, 401-K’s, Zeroed Out the RayGun Deficit, replaced it with TWO Surpluses! And the filthy Rich complained as they scraped the cream off the top with both arms. Then what happened? De-Regulations, bush tax cuts for the rich, Illegal War(s), Un contested War Profiteers, Record Deficit & Debt to the Communists. And now “Big Business” wants a redux.

  • MV

    And thus the targeted resentment by lobbyists & Big Crony Money to tank Det. (see “Let Det. Rot On the Vine!”)

  • MV

    You need to check the taxes in comparison to NJ & NY. Also, Many unmentioned considerations to take when talking taxes. What was the welfare rate before the bush debacle? Of course you fail to mention that he took CA. & the US from Surplus to Cesspool. Yet criticize “Leftist economic policies” Not Working? dare to Compare! Waiting.

  • MV

    Where did bush De-regulations & tax cuts get us? He started with a double surplus.

  • MV

    EXACTLY!

  • MV

    Remember how they screwed ACORN?

  • Anonymous

    Big Crony lobbyists ? Such as?

  • Anonymous

    Right-Wingers always have to make stuff up, in order not to be wrong about everything, all the time. It is embarrassing to even talk to Conservatives these days.