Are Red States in Denial About Improving Economic Prospects?

Many of them are more interested in pandering to hungry corporations than they are in making investments in their citizens.

Indiana,State,Capitol,Building,In,Indianapolis,,Indiana,,Usa.
Indiana's state capitol building in Indianapolis.
(Shutterstock)
Red states love to tout how business-friendly they are. But you don’t hear them boasting about being citizen-friendly.

The traditional Republican formula for success at the state level has been low taxes and light regulation. The theory is that this will attract businesses and residents. The formula has worked in Texas, Florida and Tennessee. Having no income tax appears to be a major draw.

But get outside the Sunbelt, and the same approach doesn’t have such a great track record. Kansas enacted deep income tax cuts in 2012 under Republican Gov. Sam Brownback, along with cuts in spending on education, foster care and other social services. But the tax cuts were rolled back after falling revenues created a fiscal crisis and no economic boom at all. Kansas has also run what the Kansas City Star labeled “one of the most secretive state governments in America,” so much so that they fired the state DOT spokesman for truthfully stating that the state didn’t have enough funds to rebuild a dangerous stretch of road. The Star found that 90 percent of state legislation was written by anonymous authors. Job growth in Kansas badly trailed the nation over the past decade and 86 percent of Kansas counties are losing population.

Or look at Indiana. It has had Republican governors since 2005 and full Republican control of the state for over a decade. Its leadership loves to boast that its growth rate in population and jobs beats surrounding states, but that’s a low hurdle to jump. In reality, most of Indiana is stagnating or declining. Over half of the state’s counties are losing population, and the forecast for the prime working age population is grim: Virtually the entire state is projected to have a declining workforce in coming years. Indiana’s per capita income is only 86.2 percent of the national average, and that’s lower than it was when the GOP took over the governorship and the Legislature. Under Republican management, the state started out poor and got even poorer.

Why these poor results in states with the full panoply of red state best practices? It’s because the entire philosophy of governance in Kansas, Indiana and quite a few other Republican states is based on a fundamentally mistaken view of progress. Rather than investing to build up the skills and enhance the well-being of their citizens, they engaged in a race down to the bottom as a strategy to attract corporations.

This too often can turn into an outright anti-citizen mindset, with governors and legislatures prostrating themselves before the worst sorts of parasitic industries and special interests. For example, when a series of reports by the Indianapolis Star detailed horrific conditions in local rental properties, the city passed an ordinance requiring that tenants be given notification of their rights (e.g., to have functional plumbing, safe wiring and heat in the winter – the very basics). The state Legislature promptly overturned it at the behest of the property owners’ lobby.

Indiana is a great place to be a slumlord, but not such a good place to be a citizen who rents. This is a pattern that recurs all too often. The Indianapolis Star also exposed how the state’s nursing home industry had become a giant scam. County hospitals nominally own most of the state’s nursing homes, which allows them to bill Medicaid at a higher rate. Over $1 billion was siphoned off from nursing homes to fund hospital building projects and ballooning salaries for county hospital executives while the state was ranked 48th in the nation in nursing home staffing. Over 20 percent of COVID-19 patients in Indiana nursing homes died, compared with a 13 percent national rate. The state’s response to this? A bill providing expansive immunity from liability for nursing homes that kill.

It’s a different story when it comes to pro-citizen changes, which get a much more skeptical look. In addition to overturning tenant protections, Indiana has flirted with canceling a transit expansion in Indianapolis that has been supported overwhelmingly by the voters, and gutted a bill that would have required employers to provide basic accommodations to pregnant women. (Expectant mothers can now ask for accommodations, but employers don’t have to actually provide any). Perusing the list of bills working their way through the state Legislature, it’s hard to see much that could even plausibly make a material improvement in the life of Hoosier citizens.

Too many red states like Kansas and Indiana are great for the well-connected but bad for the average citizen. It should be the opposite. They should make being a “citizen-friendly state” their North Star. They should work to make life much better for the people who call them home, whether they be renters, pregnant women, nursing home residents, people who don’t own cars or anybody else for that matter.

One would think that’s the primary duty of a state government. But it’s also good business sense. The most important factor in attracting high-wage employers is the availability of a skilled labor force – talent. Rather than a race to the bottom, these states should be investing in building up their people. And creating the kind of environment in which people want to move there on the merits of the state – not just because it’s cheap. This will be doubly critical in a post-coronavirus world where more workers will have the flexibility to live wherever they want.

Becoming a Texas-like magnet for migrants may never be in the cards for most northern red states. Population growth has been heavily associated with warm winter temperatures, natural amenities and no income taxes. That’s what Texas, Tennessee and Florida have. The northern red states don’t have all of these. But by being citizen-friendly, they can make themselves more attractive to newcomers than they are today and improve the quality of life for the people who already live in them.



Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
An urban analyst, consultant and writer. He can be reached at aaron@aaronrenn.com or on Twitter at @aaron_renn.