Spin and ideology are no substitute for good policy

The tax-cutters have a big microphone now but amplified volume does not substitute for good content.

Basic RGBBrace yourselves for public policy backed by nothing but spin and ideology in Iowa. A good example: tax policy.

Senator Bill Dix, who will be the new majority leader in the Iowa Senate with a comfortable nine or potentially 10-vote edge, offers a strident approach for the coming legislative session in this story by veteran Statehouse reporter Rod Boshart:

“The states that are growing the fastest today are the ones that have recognized that economic policy and tax policy makes a big difference,” he said. “High income tax punishes people who want to work, save and make investments in our state. We need to recognize that. States that have grown the fastest the last couple of decades across our country today are the ones that have either lowered their rates, broadened their base and kept things simple or moved to no income tax at all.”

The tax cutters have a big microphone now but amplified volume does not substitute for good content. Research is clear. So are the facts, and Senator Dix is missing them.

On IPP’s GradingStates.org website, Peter Fisher sorts out the fact from fiction with so-called “business climate” rankings that are certifiably unreliable. But they get a lot of attention from legislators who want something to back their ideological approach to policy.

Senator Dix is one of three Iowa state chairs for the American Legislative Exchange Council, or ALEC, which peddles much of the nonsense about tax cuts promoting economic growth.

Notes Fisher about the ALEC analysis, “when we can compare states ranked the best by ALEC with states ranked the worst, it turns out that ALEC’s 20 ‘best’ states have lower per capita income, lower median family income, and a lower median annual wage than the 20 ‘worst’ states. ALEC’s ‘best’ states also have higher poverty rates: 15.4 percent on average from 2007 through 2014, vs. 13.8 percent in the ‘worst’ states. The states favored by ALEC include the likes of Utah, North Dakota, and North Carolina, whereas ALEC’s ‘worst’ states include New York, California, and Vermont.”

Even if the prescriptions for lower taxes, etc. were right, they would not apply in Iowa. Our state has repeatedly been shown to be average or below average by any measure on taxes paid. In fact, few states can get below Iowa on corporate taxes, something the business lobby will not admit. So we start the legislative session with competitiveness not an issue for Iowa except in the minds of well-placed lobbyists and certain legislators.

And another angle not on their agenda: accountability on the large number of tax breaks already in Iowa law — something the Cedar Rapids Gazette noted today in an excellent editorial:

Over the years, lawmakers from both parties have given away tax exemptions, deductions and credits to an array of special interests lobbying for a break. Individually, the cuts look small. Added together, they have a significant budgetary impact.

They’re sold as an economic boost, but there’s rarely any follow up to find out if the tax cuts actually delivered on those promises.

And the real path to growth — the path lined with investments in human capital and public infrastructure? We’ll see how many of those demonstrated, positive approaches to prosperity even get a hearing in 2017.

owen-2013-57Posted by Mike Owen, Executive Director, Iowa Policy Project

Contact: mikeowen@iowapolicyproject.org

Wrong again: ALEC can’t pick its own ‘winners’ among states

The 20 states that performed best on the four measures of income actually score much worse on ALEC’s ranking than the 20 states with the lowest income.

ALEC — the American Legislative Exchange Council — persists in peddling “research” that knocks down its own policy ideas.

In its latest edition of Rich States, Poor States, just released, ALEC’s Economic Outlook Ranking scores states on 15 measures reflecting ALEC’s preferred policies towards business. Our Grading the States analysis has exposed the flawed methodology of ALEC’s report, but the authors have not changed it for the 9th edition.

ALEC’s dilemma: The index purports to predict which state economies will perform the best, but in fact there is no relation between a state’s score and how well the economy grows subsequently.

Since the first edition in 2007, it remains the case that ALEC’s “best” states — the ones with the highest rankings — are actually poorer on several measures than the supposedly “worst” states. The graph below has been updated to reflect the 9th edition rankings and the latest income data.

Basic RGB

The 20 states that performed best on the four measures of income (the actual rich states) actually score much worse on ALEC’s ranking than the 20 states with the lowest income (the actual poor states).

In its fervent anti-government bias, the report offers a package of policies — for fiscal austerity, suppressing wages and imposing proportionately higher taxes on low-income people — with a promise of economic growth, when it really is a recipe for economic inequality, declining incomes for most citizens, and starving public infrastructure and education systems of needed revenue.

2010-PFw5464Posted by Peter Fisher, Research Director of the nonpartisan Iowa Policy Project and developer of IPP’s Grading the States website, GradingStates.org.

 

 

ALEC Gets it Backwards in Rich States, Poor States

ALEC’s report is a recipe for economic inequality and declining incomes for most citizens and for depriving state and local governments of needed revenue for infrastructure and education — the underpinnings of long-term economic growth.

We hear a lot about business climates from people who are looking for ways to cut taxes. But they usually get it wrong. One example is the Rich States, Poor States analysis produced by the American Legislative Exchange Council, or ALEC, an organization frequently considered a “bill mill” for corporate-friendly legislation.

The centerpiece of Rich States, Poor States is the “Economic Outlook Ranking,” which ranks states on their conformance to ALEC’s preferred policies, with the best state ranked number one. But when we can compare states ranked the best by ALEC with states ranked the worst, it turns out that ALEC’s 20 “best” states have lower per capita income, lower median family income, and a lower median annual wage than the 20 “worst” states. ALEC’s “best” states also have higher poverty rates: 15.3 percent on average from 2007 through 2013, versus 13.7 percent in the “worst” states. The states favored by ALEC include the likes of Utah, South Dakota, and Idaho, whereas ALEC’s “worst” states include New York, California, and Vermont.

Basic RGB*Best and worst states according to the average Economic Outlook Ranking in Rich States, Poor States, 2007-2015. Income measures are an average over the period 2007 to 2014 (2013 for Median Income).

Looking at it another way, the 20 states that performed best on the four measures of income (the actual rich states) actually score much worse on ALEC’s ranking than the 20 states with the lowest income (the actual poor states).

151130-ALEC-poor-rich

*Average ALEC ranking of the 20 states that performed best on four measures of income — per capita income, median family income, median annual wage, and poverty rate — vs. average ALEC ranking of the 20 poorest states. An ALEC ranking of 1 is best. ALEC ranking is the average of the state’s rank in the first through eighth editions of the Economic Outlook Ranking; rich and poor states are defined on the basis of their average ranking on the four income variables from 2007 through 2013 or 2014.

While Rich States, Poor States purports to provide a recipe for economic growth and “policies that lead to prosperity,” it actually advocates measures to lower wages and reduce opportunity for most Americans. To attain the highest EOR would require a state to have no individual or corporate income tax, no estate or inheritance tax, no state minimum wage, severe tax and expenditure limits, limited public services, and weak labor unions. The evidence and arguments cited to support these policies range from deeply flawed to nonexistent.

We conclude that the actual purpose of Rich States, Poor States is to sell the ALEC-Laffer package of policies — fiscal austerity, taxing lower income people more than the wealthy and wage suppression — in the sheep’s clothing of economic growth. In actuality, the book provides a recipe for economic inequality and declining incomes for most citizens and for depriving state and local governments of the revenue needed to maintain public infrastructure and education systems that are the underpinnings of long- term economic growth.

2010-PFw5464Posted by Peter Fisher, Research Director of the nonpartisan Iowa Policy Project

Bad research never gets good

When ALEC “analysis” is dissected, it becomes clear that its conclusions are faulty, and its policy prescriptions are no more valid.

It might be a stretch to say that good research never gets old — at some point you might need an update — but one thing is certain: Bad research never gets good.

Fisher-GradingPlacesIPP’s Peter Fisher is one of the nation’s experts on rankings of state business climates. In two reports published in the last two years by our colleagues at Good Jobs First, Fisher lays out irretrievable problems with the Rich States, Poor States analysis periodically offered by the American Legislative Exchange Council, or ALEC.

Fisher tested ALEC’s claims against the actual economic performance of states, finding that states following ALEC-favored policy did more poorly than other states.* He also found serious flaws of methodology, including comparisons of arbitrary states instead of all 50.

As Good Jobs First’s executive director, Greg LeRoy, wrote in the preface to the 2013 Grading Places report:

Indeed, the underlying frame of these studies — that there is such a thing as a state “business climate” that can be measured and rated — is nonsensical. The needs of different businesses and facilities vary far too widely. … Given these realities, “business climate” studies must be viewed for what they are: attempts by corporate sponsors to justify their demands for lower taxes and to gain public-sector help suppressing wages. …

To borrow Oscar Wilde’s witticism about cynics, these “business climate” studies know the cost of everything and the value of nothing.

In the case of ALEC, others are noticing. Michael Hiltzik of the Los Angeles Times has written twice in recent days about the ALEC problem, citing the work of both Fisher and Professor Menzie Chinn of the University of Wisconsin.

See these pieces by Hiltzik:

In the latter, Hiltzik notes a recent “response to the critics” by ALEC:

It’s a curious document that ends up proving the critics’ point. Take the point made by Chinn and by Peter S. Fisher of the Iowa Policy Project that the correlation between ALEC’s policies and economic growth is largely negative.

When the ALEC “analysis” is dissected, it becomes clear that its conclusions are faulty, and its policy prescriptions are no more valid. And it is good for Iowa to have Peter Fisher on the case.

Owen-2013-57  Posted by Mike Owen, IPP Executive Director

 

 

*View Peter Fisher’s reports for Good Jobs First on business climate rankings including the ALEC claims:

With ALEC, it’s not just ‘Who?’ but ‘What?’ and ‘Why?’

Regardless of who belongs to ALEC, the bigger issue is whether ALEC belongs at the public policy table.

Some Iowa legislative leaders are taking issue with claims that all Iowa legislators are members of the American Legislative Exchange Council (ALEC).

See these links:

All of this calls to mind the words of the great comedian Groucho Marx, who is widely quoted:

“I don’t want to belong to any club that will accept people like me as a member.”

Groucho presumably was never a member of ALEC — like many Iowa lawmakers now protesting claims of their inclusion. But regardless of who belongs to ALEC, the bigger issue is whether ALEC belongs at the public policy table.

Iowa Policy Project analysis has refuted the value of legislative initiatives promoted by ALEC, which is essentially a bill mill backed by corporate interests. IPP’s Peter Fisher and the national group Good Jobs First, in their 2012 report “Selling Snake Oil to the States,” showed that states following ALEC proposals were likely to show worse economic results than other states.

As Fisher noted at the time:

“We tested ALEC’s claims against actual economic results. We conclude that eliminating progressive taxes, suppressing wages, and cutting public services are actually a recipe for economic inequality, declining incomes, and undermining public infrastructure and education that really matter for long-term economic growth.”

This recalls another quotation:

“Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.”

No, that is not the ALEC mission statement. Again, they are words widely attributed to Groucho Marx.

But if the shoe fits ….

Mike OwenPosted by Mike Owen, Executive Director

States should beware ALEC-brand snake oil

ALEC’s rankings are based on arguments and evidence that range from deeply flawed to nonexistent, consistently ignoring decades of peer-reviewed academic research.

Peter Fisher

Legislative sessions will be starting across the country after the first of the year, and with them, some very bad ideas for public policy.

The purveyor of many poor prescriptions is a very influential right-wing organization, the American Legislative Exchange Council, known as ALEC. The organization promotes policies to cut taxes and regulations in the disguise of promoting economic growth, but what they really do is reduce services, opportunity and accountability.

In short, the ALEC medicine show is a prescription for poor results, and states should beware.

Our new report, “Selling Snake Oil to the States,” examines ALEC’s proposals and the misinformed, primitive methodology behind the study that supports them. The new report, a joint project of the Iowa Policy Project in Iowa City and Good Jobs First in Washington, D.C., illustrates how ALEC’s prescriptions really offer stagnation and wage suppression.

In fact, we find that since ALEC first published its annual “Rich States, Poor States” study with its Economic Outlook Ranking in 2007, states that were rated better have actually done worse economically.

Find “Selling Snake Oil to the States” at http://www.goodjobsfirst.org/snakeoiltothestates.

We tested ALEC’s claims against actual economic results. We conclude that eliminating progressive taxes, suppressing wages, and cutting public services are actually a recipe for economic inequality, declining incomes, and undermining public infrastructure and education that really matter for long-term economic growth.

ALEC’s rankings are based on arguments and evidence that range from deeply flawed to nonexistent, consistently ignoring decades of peer-reviewed academic research.

What we know from research is that the composition of a state’s economy — whether it has disproportionate shares of high-growth or low-growth industries — is a far better predictor of a state’s relative success over the past five years. Public policy makers need to stick to the basics and recognize that public services that benefit all employers.

Posted by Peter Fisher, Research Director