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.

 

 

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:

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