The Regressive State of America Federal income data offer a tragic lesson in bad policy: Connecticut.
https://www.wsj.com/articles/the-regressive-state-of-america-1524699571?mod=cx_picks&cx_navSource=cx_picks&cx_tag=collabctx&cx_artPos=6#cxrecs_s
The 50 American states have long competed for people and business, and the 2017 tax reform raises the stakes by limiting the state and local tax deduction on federal returns. The results of bad policy will be harder to disguise.
A case in point is Connecticut’s continuing economic decline, and now we have even more statistical evidence as a warning to other states. The federal Bureau of Economic Analysis recently rolled out its annual report on personal income growth in the 50 states, and for 2017 the Nutmeg State came in a miserable 44th.
The progressive paragon’s performance is even worse when you look at the details. The nearby chart shows that the state’s personal income grew at the slowest pace among all New England states, and not by a little. Governor Dannel Malloy’s eight-year experiment in public-union governance saw income grow by a meager 1.5% for the year, well below Vermont (2.1%). The state even trailed Maine (2.7%) and Rhode Island (2.4%), which are usually the New England laggards.
The only states to do worse than Connecticut were Alaska (0.4%), which is heavily dependent on oil and gas production, and Kansas (1%), Nebraska (1.4%), Iowa (0.3%) and North (-0.3%) and South Dakota (1.4%), all farm states that struggled with low commodity prices. National income growth was 3.1%.
The data are even more depressing if you strip out dividends and government transfer payments and consider only wages and salaries. Connecticut had essentially no growth (0.1%), which was worse than every state save Alaska (-1.6%). The figure for the U.S. was 3.3%. Total nonfarm earnings in Connecticut were also the second worst in the country after Alaska.
Lest you think this was a one-year anomaly, we looked at the personal income figures for every year since 2011. That’s the year Mr. Malloy took office, and the state rebounded well from the recession with 4.9% income growth, the best in New England.
It has been downhill from there. In personal income growth, Connecticut was 49th out of 50 states in 2012, 37th in 2013, 39th in 2014 and 2015, and 33rd in 2016. The consistently poor performance, especially relative to its regional neighbors, suggests that the causes are bad economic policies, not the business cycle or a downturn in a specific industry.
In Mr. Malloy’s case this has included tax increases starting in 2011 and continuing year after year on individuals and corporations that eventually drove GE to move its headquarters to Massachusetts. Unfunded pension liabilities continue to grow in Hartford without reform, in contrast to Rhode Island, where Democratic Gov. Gina Raimondo has put public pensions on a more stable footing.
The personal income figure isn’t a macroeconomic abstraction. It is the measure of rising or falling living standards—whether someone can afford a new car, or a family vacation, or send the kids to summer camp.
The fact that Connecticut, which is next to America’s financial capital, has grown so poorly amid an expansion that was especially good for financial assets is a damning indictment of its political leadership. It is a particular tragedy for the state’s poorest citizens who may not be able to flee to other states that aren’t run by and for government employees. Maybe we should call it the Regressive State.
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