Government policies affect states of growth

Raymond Keating
Raymond Keating

Overall economic growth has been abysmal in the United States. But what about differences among the states? Are there states showing strong growth relative to the rest of the nation?

The Bureau of Economic Analysis released its estimate of first quarter state gross domestic product. National state GDP growth registered 1.2 percent. As for the states, real growth ranged from a 3.9 percent gain in Arkansas to an 11.4 percent drop in North Dakota. In terms of the states experiencing big negative numbers in the first quarter, they were largely energy states β€” not only North Dakota, but also Alaska, Louisiana, Montana, West Virginia and Wyoming.

On the positive side, four states experienced growth of 3 percent of better β€” Arkansas, Oregon and Washington at 3.9 percent and Colorado at 3 percent. As for states growth in the 2 percent to 2.9 percent range, there was New Hampshire at 2.9 percent, Arizona and Michigan at 2.6 percent, Utah at 2.4 percent, Maine at 2.3 percent, Florida and Mississippi at 2.1 percent and California and Kansas at 2 percent.

As for all of 2015, national state GDP growth was reported at 2.4 percent.

Particularly poor growth was registered in North Dakota at a negative 2.1 percent, Alaska at a negative 0.5 percent, West Virginia at 0.1 percent, Kansas and Vermont at 0.2 percent, Maine and Wyoming at 0.4 percent, Connecticut at 0.6 percent and New Mexico and Mississippi at 0.7 percent.

On the flip side, the top growth states in 2015 were California and Oregon at 4.1 percent, Texas at 3.8 percent, Colorado at 3.6 percent, Montana at 3.5 percent, Utah at 3.3 percent, Florida at 3.1 percent, Washington at 2.9 percent, Nevada at 2.8 percent and North Carolina 2.7 percent.

A large number of factors affect economic growth, from industry specific developments to policy matters. But growth also has been hindered by increased burdens and uncertainties imposed at the federal level in terms of tax, regulatory, government spending, trade and monetary policies.

Policy comes into the equation at the state level as well. The Small Business & Entrepreneurship Council publishes the Small Business Policy Index and Small Business Tax Index to focus on policy and policy related costs affecting entrepreneurship, small business, investment and growth.

Over a longer period of time, the link between policy and growth is clear. Real annual economic growth from 2011 to 2014 among the top 25 states ranked in the 2016 Small Business Policy Index averaged 1.68 percent, 29.2 percent faster than the 1.3 percent average rate for the bottom 25 states.

Things can vary in a particular quarter or year. But it’s worth highlighting that in the first quarter of 2016 and during 2015, four of the six states that ranked among top growth states during each period ranked highly on both the Small Business Policy Index and Small Business Tax Index β€” Washington, Florida, Utah and Colorado.

While many factors affect growth, policy is a big one.