As a quick followup to my post yesterday on California's ballot proposal to rob from the rich, a great piece (via Radley) that looks at how these policies actually affect the states that pursue them. The meat:
Of the approximately $48 billion in accumulated budget shortfalls that the 29 states with projected deficits are facing, $33 billion, or two-thirds of the gap, is concentrated in those five states considered by corporate executives to be the least friendly to business [New York, California, New Jersey, Michigan and Massachusetts].
While it is a crude measure that doesn't take into account state populations, relative shortfall per capita would probably be better. The more unsettling part is when Malanga lays out a mechanism by which the shenanigans in California and New York cost us all:
States that have taxed and spent themselves into a bind want everyone else to pay for their excesses. Even as Gov. Paterson excoriated his former colleagues in the state legislature for failing to recognize the magnitude of New York’s budget problems, last week he traveled to Washington, D.C., to urge the federal government to help bail out the state. Paterson argued creatively that the rest of the country should come to his aid because the Empire State is home to the country’s financial markets and thereby contributes disproportionately to the America economy--although I can imagine that there are many states that would gladly take those financial institutions off of New York’s hands if the governor considers them such a burden.
While it would be disastrous to those states experiencing the flight, this type of regulatory competition is a more certain way to realize gains in liberty than any exogenous shift of national sentiment. Connecticut has already lured a good share of the lucrative Hedge Fund industry, by being in close proximity to New York and offering more reasonable tax rates. Massachusetts is currently involved in some regulatory competition over movie industry business. Hopefully as localized hostility to business increases, and relocation costs fall, we as a nation will experience a race to the bottom of the best kind.
