1. Economic Freedom: Where We Rank and Why It Matters DEAN STANSEL ASSOCIATE PROFESSOR OF ECONOMICS FLORIDA GULF COAST UNIVERSITY HTTP://WWW.DEANSTANSEL.COM

2. 1)Where do we rank (Arkansas, and Little Rock)? 2)Why are we so low? 3)Why does it matter? 2

3. “It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” -- Murray Rothbard, Austrian Economist 3

4. Economic Freedom Project What is it? An initiative to help publicize the findings of the Economic Freedom of the World Report and the Economic Freedom of North America Report and economic freedom in general. 4

5. How Do We Rank? U.S. is down to 12 th place from 7 th in 2008 and 2 nd in 2000. Arkansas ranks 36 th,(below all of its neighbors) down 7 places over the last 6 years. It ranked as high as 17 th in 1991. Who was leader in 2000 & 1991? Available at: www.freetheworld.com www.freetheworld.com 5

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7. An Economic Freedom Index of U.S. Metropolitan Areas Dean Stansel Florida Gulf Coast University dstansel@fgcu.edu Journal of Regional Analysis and Policy, 43, 1 (2013): 3-20. http://www.jrap-journal.org/http://www.jrap-journal.org/ or http://t.co/xfKmP2VHjOhttp://t.co/xfKmP2VHjO

10. Summary of Results All of top 10 are in states with no tax on labor income (FL, NH, SD) 9 of bottom 10 are in California or New York (and 15 of bottom 20)

11. Economic Freedom in Little Rock Little Rock ranked 116 out of the 384 metropolitan areas in the U.S. It ranked 1st out of 6 metro areas in Arkansas... …but behind 3 of 8 in MO, 2 of 3 in OK, 9 of 10 in TN, and 19 of 26 in TX 11

12. Why Has Economic Freedom Declined? Federal spending has doubled since 2000 and tripled since 1990. Personal income has only gone up by less than half since 2000. We have an over-spending problem, NOT an under-taxing problem.

13. 13 Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (in millions of dollars) Year Total ReceiptsOutlays Surplus or Deficit (−) 19901,031,9581,252,994-152,639 20002,025,1911,788,950236,241 20041,880,1142,292,841-412,727 20082,523,9912,982,544-458,553 20122,450,1643,537,127-1,086,963 2014 estimate3,001,7213,650,526-648,805 Source: Historical Tables of the Budget, FY2015, Office of Management and Budget. http://www.whitehouse.gov/omb/budget/Historicals

14. Spending & Deficits at Post-WW2 High As a percent of GDP, federal spending hit a post-WW2 high of 25.2% in 2009. The federal deficit as a percent of GDP has also been at its highest level since WW2. It hit 10.1% in 2009. It has exceeded 5% five years in a row. Source: Historical Tables of the Budget, FY2014, Office of Management and Budget. http://www.whitehouse.gov/omb/budget/Histo ricals 14

15. Debt as % of GDP at Post-WW2 High 15

16. Entitlement Spending Cato Institute found that welfare pays more than: the starting wage for a secretary in 39 states. the average first year wage for a teacher in 11 states. an entry-level computer programmer in the 3 most generous states.

17. Obamacare AKA, The Unaffordable Care Act Higher taxes Higher spending Regulatory uncertainty Unintended consequences 17

18. Tax Freedom Day The Tax Foundation Was April 21 st this year. 3 days later than last year. 11 days later than in 2009. If we include deficits, which require higher future taxes, it was 15 days later (May 6) 18

19. The President’s $1 Trillion Tax Hike 19

20. Expanding Tax Code 20

21. Cost of Tax Compliance $37 billion in 2012 preparing federal individual, business, and employment tax returns. 3.24 billion hours The equivalent of 369,858 years Source: McCaherty, “The Cost of Tax Compliance,” Tax Foundation, Sep. 2014. 21

22. According to the OECD “the United States has the most progressive income tax system among industrialized nations. … The richest 10 percent of households in the United States (those making $112,124 or more) contribute a greater share of taxes ( 45.1 percent of all income taxes) than their counterparts in any other industrialized nation.” The OECD average is 31.6 percent. The next highest is Italy at about 42%. Only a handful of others are above 35%. Source: http://mercatus.org/publication/progressivity-taxes-oecd- countries-mid-2000shttp://mercatus.org/publication/progressivity-taxes-oecd- countries-mid-2000s 22

23. Source: Dan Mitchell, Cato Institute, http://danieljmitchell.wordpress.com/http://danieljmitchell.wordpress.com/ 23

24. International Tax Competitiveness The U.S. ranks 32 nd out of the 34 OECD countries. Highest corporate tax rate Double taxation of capital gains and dividends 1 of only 6 with a “worldwide system of taxation” Source: Pomerleau & Lundeen, "2014 International Tax Competitiveness Index," Tax Foundation, September 15, 2014. 24

25. Regulatory Burden Is High and Rising The Federal Register contains 81,000 pages of regulations. It would take more than 2 years to read through all of it. 25

26. Cost of Federal Regulations $2 trillion in 2012 $9,991 per employee, all industries $19,564 per employee in the manufacturing industry $34,671 per employee in the manufacturing industry (small businesses, < 50 employees) Source: Crain & Crain, “The Cost of Federal Regulation to the U.S. Economy, Manufacturing & Small Business,” National Association of Manufacturers, Sep. 2014. 26

27. Sen. George McGovern (D-SD) “ I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender. ” Source: George Mc Govern, “A Politician's Dream Is a Businessman's Nightmare,” Wall Street Journal, 6/1/92. 27

28. Arkansas - Taxes According to the Tax Foundation, Arkansas’ 2011 tax burden of 10.3% ranks 12 th highest out of 50 states. It ranks 35 th overall in state business tax climate. 28

29. Arkansas - Business Arkansas had the 2 nd most burdensome occupational licensing requirements on the Institute for Justice “License to Work” report. $212 in fees and 689 days of education and experience www.ij.org/licensetowork According to Chief Executive, Arkansas ranks 29 out of 50 on the 2014 Best & Worst States for Business Rankings. 29

30. Arkansas - Business Arkansas was one of four states to pass an increase in the minimum wage at the polls last week. The increase will put Arkansas above the federal minimum wage. Combined with the occupational licensing restrictions, this will make it even harder for low-skilled workers to find a job. 30

31. Arkansas - Economy Arkansas ranks only 37th in 2012- 2013 population growth The U.S. average is twice as high The average for the South is three times higher. 31

32. “And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government.” -- Milton Friedman 32

33. Economic Freedom Why does it matter? Areas with more economic freedom have higher: GDP, GDP growth, Income of the poorest 10%, Income share of the poorest 10%, political freedom, civil liberties, life satisfaction, literacy, life expectancy, and cleaner environments And, lower: unemployment, child labor, infant mortality rates, and corruption 33

34. Per Capita Income Is Much Higher in Nations with Higher Economic Freedom

35. 35 Per Capita GDP Growth Is Positively Correlated with Economic Freedom in States

36. Unemployment Is Much Lower in Metro Areas with Higher Economic Freedom

37. “…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 37

38. Source: Dan Mitchell, Cato Institute, http://danieljmitchell.wordpress.com/http://danieljmitchell.wordpress.com/ 38

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40. Consumer Power in Health Care Lasik surgery Not covered by most health insurance plans Price has fallen dramatically over the years Cosmetic surgery is another example. “Price” of other medical procedures has risen much faster than inflation 40

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43. Prescription for Growth INCREASE ECONOMIC FREEDOM 1.Rein-in spending 2.Lower taxes 3.Reduce the regulatory burden 43

44. The Good News… 44

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46. Nation’s Leader Rejects Keynesian Economics, Acknowledges that Real Jobs Are Created by the Private Sector “We need to put an end to illusions: it’s not the public sector that creates jobs. To believe that injecting billions … [into the economy] is the key to growth is an idea of the past.” 46

47. Nation’s Leader … Acknowledges that Real Jobs Are Created by the Private Sector That quote was from Alexander Stubb, the Prime Minister of Finland, not the President of the United States. Source: https://danieljmitchell.wordpress.com/2014/10/0 3/nations-leader-rejects-keynesian-economics- acknowledges-that-real-jobs-are-created-by- the-private-sector/ https://danieljmitchell.wordpress.com/2014/10/0 3/nations-leader-rejects-keynesian-economics- acknowledges-that-real-jobs-are-created-by- the-private-sector/ 47

48. “Capitalism has been the most effective ideology we have known in taking people out of extreme poverty.” -- Bono 48

49. Economic Freedom: Where We Rank and Why It Matters DEAN STANSEL ASSOCIATE PROFESSOR OF ECONOMICS FLORIDA GULF COAST UNIVERSITY HTTP://WWW.DEANSTANSEL.COM HTTPS://WWW.FACEBOOK.COM/DEAN.STANSEL.1 HTTPS://TWITTER.COM/DEANSTANSEL