John Hood writes here about the academic research on which state-level policies lead to economic growth –– and which do not. The evidence is clear, and the evidence discredits Leftist ideas we hear touted regularly and with fervor.
Two years ago, I began accumulating a database of every recent study I could find about state economic policy that had been published in a peer-reviewed academic or professional journal. The list started out as a few dozen studies, then grew to about a hundred. As I continued to expand my search for articles on state and local taxes, government spending, regulation, energy prices, infrastructure, education, and other potential drivers of economic growth, the database doubled in size, then doubled again.
An initial version of the research appeared in my 2012 book Our Best Foot Forward. I shared an updated version with a national audience in the February 2014 issue of Reason magazine. Now JLF has published the final version of my literature review. It reflects 1,389 different findings from 681 different studies published since 1990. Here’s what I found.
First, the Left’s view of economic-growth policy lacks any substantial empirical support. States and localities can’t boost their economies simply by boosting public budgets. Only 15 percent of the relevant studies found that higher state or local spending was associated with higher economic growth. The results were particularly horrendous for spending public-assistance programs such as Medicaid, which was associated with lower economic growth in the vast majority of cases.
Ideas have consequences, as Richard Weaver has explained.