The Laboratories of Democracy

Federalism is a beautiful thing. Under a federalist system, mixing decentralization with national principles of freedom, people are free to choose the state which best fits their lifestyle without giving up the defensive power of a large national government.

However, the freedom of choice is not the only benefit of decentralization. With differences in state-by-state policy, we get to see the effects of different policies under the same national setting. Comparisons between two different countries with two different cultures, and very different legal structures in many ways can be like comparing apples and oranges. On the other hand, states within the same nation are a bit more culturally similar while having an identical national governmental structure, controlling for certain factors. This can be helpful in determining through empirical data which policies are truly the best at bringing about certain goals.

So what are the effects of the different economic policies throughout the US? Art Laffer and Steve Moore have investigated this question and found an interesting result.

Apparently, the states with no state-level income tax have been growing rapidly for the last 40 years, whereas the states with the highest income tax rates have all either stagnated or are in decline. States like California, New York, Michigan, and Illinois achieved prosperity back in the 1960′s, but haven’t actually gained much since then. The blue-state model has brought about economic decline. Meanwhile, Texas and other zero-income-tax states are catching up in economic output and prosperity due to strong GDP growth and high job creation numbers. If we’re trying to restore economic growth and job-creation in the US, shouldn’t our national government be looking to follow the examples set by Texas, Florida, and Tennessee? The scientific approach would be to accept the data and modify policy according to the direction it leads us.

Furthermore, shouldn’t the European nations and others be looking at the results out of these laboratories of democracy and trying to learn from them?

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