Local Media Fooled By Discredited Economic Competitiveness Report

Local media outlets across the country published uncritical reports highlighting a conservative influence group's so-called economic competitiveness report, despite criticism of previous editions of the report over its methodology and findings.

On April 15, the American Legislative Exchange Council (ALEC) published the 2014 edition of its annual “Rich States, Poor States” economic competitiveness ranking, which claims to be “a forward-looking measure of how each state can expect to perform economically.” For the seventh consecutive year, Utah was given the top spot for future economic outlook in 2014; New York was ranked last, and has never risen past 49th place.

Local media outlets quickly picked up the report and mainly discussed their own state's rankings and the rankings of neighboring states. Conservative radio station WOAI in San Antonio, Texas, published a blog detailing the report; including a quote from co-author and Heritage Foundation economist Steven Moore whom WOAI referred to as an “ALEC analyst”:

A conservative group says Texas is tops in the country in economic activity today, but the American Legislative Exchange Council warns that the state's economic performance in the future will be rocky, largely because state government is spending too much money.

 “That wasn't the good budget,” ALEC analyst Steven Moore told 1200 WOAI news about the budget approved by the Legislature in 2012.  “Not withstanding [sic] all of the very good things that are happening in Texas, and with the very big increase in the size of the economy.”

 ALEC ranks Texas no better than 13th nationally in terms of future economic performance.

Despite the uncritical, often glowing, pick-up by local media outlets, ALEC's competitiveness report has received scrutiny in the past, mostly due to evidence showing that economic data does not comport with the results of their study.

A joint project between the non-partisan, non-profits Good Jobs First and The Iowa Policy Project explained in an expansive November 2012 report reviewing several years of ALEC studies, actual economic performance data contradicts ALEC's projections and analysis. In fact, states with a higher ranking by ALEC standards performed worse than predicted in terms of economic growth, income growth, and job creation:

A hard look at the actual data finds that the Alec-Laffer recommendations not only fail to predict positive results for state economies -- the policies they endorse actually forecast worse state outcomes for job creation and paychecks. That is, states that were rated higher on ALEC's Economic Outlook Ranking in 2007, based on 15 “fiscal and regulatory policy variables,” have actually been doing worse economically in the years since, while the less a state conformed with ALEC policies the better off it was.

That is true whether the outcome is growth in jobs or growth in per capita or median income. There is virtually no relationship between the ALEC ranking and state Gross Domestic Product (GDP). Further examination of the predictive power of other key components of ALEC's rankings (income tax rates, existence of an estate tax, overall tax levels, and right-to-work status) shows that none had a statistically significant effect on growth in state GDP, non-farm employment, or per capita income.

This led the public policy organization Demos, to call the study “worthless,” while Erika Eichelberger of Mother Jones said that “ALEC's fortune-telling” is “pretty much the opposite” of economic realities in the states.

According to the Center for Media and Democracy (CMD), ALEC's report is less about which states are competitive economically and more about creating a “scorecard ranking states on the adoption of extreme ALEC policies that have little or nothing to do with economic outcomes.” The CMD guide uses the example of Wisconsin, which ranked 15th on the 2013 ALEC list while ranking 44th nationally for new job creation according to the Bureau of Labor Statistics. Republican Wisconsin governor Scott Walker was, and remains, a strong supporter of ALEC and its model legislation:

Moreover, the 2013 Rich States Poor States appeared highly politicized, ranking Scott Walker's Wisconsin 15th in the nation at a time the state was ranked 44th for new job creation by the Bureau of Labor Statistics. Laffer and his colleagues, which included Stephen Moore (formerly of the Wall Street Journal, now at the Heritage Foundation), seem intent on rewarding Republican governors who pursue austerity agendas even if that agenda hurts economic growth. Wisconsin's Governor Scott Walker is a former ALEC member who signed 19 ALEC bills into law in his first two years in office, slashed government spending and eviscerated state unions prompting mass protests in February 2011.

Highlighting the absurdity of ranking uncompetitive states higher than competitive ones, Business Insider's Joe Weisenthal called the rankings “silly” saying that “dynamic economies like New York and California are ranked near the bottom, while un-dynamic economies like Indiana and Wyoming are ranked near the top.” Weisenthal went on to say:

Obviously ALEC is ranking states based on each state's level of deregulation and awarding the most deregulated states, but the outcomes seem to have very little bearing in where companies actually want to launch and do business.

ALEC has a history of advancing its agenda through local media unabated despite their discredited record nationally.