Michigan’s Rank Position

In a previous post, I described a new Federal Reserve study that found an empirical link between economic liberty and employment growth. I also noted that two economic freedom indexes (one of which was used by the Federal Reserve authors) had found that Michigan ranks low in measures of state economic freedom, and that our ranking has fallen over time.

Those two indexes (from the Fraser Institute in Canada and the Pacific  Research Institute in California) are not the only analyses that attempt to rank state well-being. The American Legislative Exchange Council in Washington, D.C., produces an annual report called, "Rich States/Poor States," and the Beacon Hill Institute in Massachusetts publishes one called the "State Competitiveness Report."

In the 2010 edition of the ALEC report, Michigan is ranked 50th in economic performance. That is not a surprise. What was a surprise is that as late as the 2008 edition, the authors had assessed Michigan's economic outlook as 17th best among the 50 states.

How can this be? The 2008 edition was based on information assembled prior to this state's imposition of a $1.4 billion tax hike in late 2007. When the increased income and business tax extractions were incorporated into the next edition, our ranking tanked to 34th place. The 2010 edition shows Michigan's future prospects climbing to 26th place, but don't celebrate just yet: The relative improvement appears to be a function of other state governments catching up with our race to the bottom by imposing their own boneheaded policy choices.

The Beacon Hill Institute has published nine editions of their index, which ranks competitiveness on factors including fiscal policy, infrastructure, technology and environmental policy. Since the first edition in 2001, Michigan has fallen from 26th to 33rd place, but it hasn't been a straight line descent. At one point — in 2007 — Michigan was ranked as low as 41st place.

As these somewhat confusing cross-currents illustrate, there is no perfect method known for measuring a state's economic well being, or forecasting its future prospects. Nevertheless, over time many scholars using different methodologies have presented a relatively consistent picture: Michigan's economic performance and outlook have trended in a negative direction since their first reports.

It's not hard to understand why: Lawmakers here continue to stifle growth with counterproductive policies. If the policies improve, then economic outcomes will also, because there is nothing inherent in Michigan's lands or people that require this state to remain an economic basket case.

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