Economic Freedom of North America: Overview & US in Focus Dean Stansel Research Associate Professor O’Neil Center for Global Markets and Freedom www.deanstansel.com www.oneilcenter.org

O'Neil Center for Global Markets & Freedom The O'Neil Center was established in 2008 by William J. "Bill" O'Neil (BBA, '55) and his wife Fay C. O'Neil to study the impact of competitive market forces on freedom and prosperity in the global economy. O'Neil is an American entrepreneur, stockbroker, and writer, who founded the business newspaper Investor's Business Daily and the stock brokerage firm William O'Neil & Co., Inc. He bought a seat on the NYSE at age 30 (the youngest at that time ever to do so).

Economic Freedom of North America (EFNA) Fraser Institute’s ranking of the U.S. states and Canadian provinces. First published in 2002. The 2016 report was the 12th edition. Included Mexican states for 3rd time. I have been the primary author of the last four editions.

What Is Economic Freedom? “Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others.”

Area 1: Government Spending 1A: General Consumption Expenditures by Government as a Percentage of Income Total Direct Expenditures MINUS: Capital Outlays; Transfers to Persons, Businesses, and Other Governments; Interest on Public Debt; and Expenditures on State Liquor Stores & Utilities 1B: Transfers & Subsidies as a Percentage of Income Includes transfers to persons & businesses such as: Welfare Payments, Grants, Agricultural Assistance, Food-stamp Payments, and Housing Assistance 1C: Insurance & Retirement Payments as a Percentage of Income Includes payments for: Employment Insurance, Workers Compensation, and various pension plans

Area 2: Taxes 2A: Income & Payroll Tax Revenue as a Percentage of Income Personal & Corporate Income Taxes & Payroll Taxes 2B: Top Marginal Income Tax Rate and the Income Threshold at Which It Applies 2C: Property Taxes & Other Taxes as a Percentage of Income Includes all taxes other than income, payroll, & sales taxes. 2D: Sales Tax Revenue as a Percentage of Income All Sales & Gross Receipts Taxes (including excise taxes on specific goods).

Area 3: Labor Market Freedom 3Ai: Minimum Wage Annual Income as a Percentage of Per Capita Income 3Aii: Government Employment as a Percentage of Total Employment 3Aiii: Union Density

Calculations Each variable given value b/w 0 and 10 score = ((Max-Obs)/(Max-Min))*10 Each variable equally weighted within each area Each area equally weighted Overall score is average of 3 area scores

Best & Worst Most Free Least Free 1-New Hampshire, 8.3 50-New York, 5.7 2-Florida, 8.1 49-California, 5.9 3T-South Dakota, 46T-Alaska, New Mexico, Texas, 8.0 Hawaii, 6.2 5-Tennessee, 7.9 42T-Vermont, West 6-Virginia, 7.8 Virginia, Minnesota, 7T-Georgia, Missouri, Oregon, 6.3 Oklahoma, Arizona, 40T-Mississippi, Nebraska, North Kentucky, 6.4 Dakota, 7.4 38T-Ohio, Maine, 6.5

Average EFNA Score, U.S. States, 1981-2014

Why Does It Matter? Areas with more economic freedom have higher: GDP, GDP growth, Income (& income share) of poorest 10%, political freedom, civil liberties, life satisfaction, literacy, life expectancy, and environmental quality And, lower: unemployment, child labor, infant mortality rates, and corruption

Per Capita Income Is Much Higher in States with Higher Economic Freedom Most Free ……………. Least Free

Per Capita State Income Growth Is Positively Correlated with Economic Freedom

Higher Population Growth Of the 4 largest states, Florida and Texas have seen population grow 2.5 times faster than New York & California in recent years. Employment & income also faster FL & TX rank 2 & 3 on EFNA; NY & CA rank 50 & 49

EFNA Impact Has been cited in over 230 academic journal articles and policy papers. Compared to other state indices: Has been produced the longest Is the only one updated annually Has the most years of data (34)

“…no human wisdom or knowledge could ever be sufficient … for the proper performance of … the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.” -- Adam Smith, The Wealth of Nations

Short Video https://www.youtube.com/watch?v=XbuFFZ0je_U

Economic Freedom of North America: Overview & US in Focus Dean Stansel Research Associate Professor O’Neil Center for Global Markets and Freedom www.deanstansel.com www.oneilcenter.org