ALEC fires back, but proves its ‘pro-business’ state index is bogus

Plainly stung by the chorus of ridicule that has greeted their latest attempt to paint anti-union policies and tax cuts for the rich as pathways to economic nirvana, the folks at the American Legislative Exchange Council have struck back with a “response to the critics.”

If you don’t know ALEC, you should. It’s a right-wing think tank funded by big business and the Koch brothers to promote enactment of conservative nostrums by state legislatures. Aside from the make-the-rich-richer economic policies listed above, ALEC is also behind the “stand your ground” gun laws that have done so much to spread bloodshed across the American landscape.

Recently it issued the seventh edition of “Rich States, Poor States,” a state economic competitive index concocted by conservative economist Art Laffer. This index is something of a gold standard in bogus economic policy claims, purporting to link state economic growth to policies that happen to favor big business and the wealthy, ALEC’s backers. Pure coincidence, we’re sure.

But as Menzie Chinn of the University of Wisconsin and many others have shown, the 15 competitive “factors” promoted by ALEC don’t show any correlation with economic growth. If anything, these low-tax, low-service policies show a correlation with economic decline.

Hence ALEC’s “response to the critics.” It’s a curious document that ends up proving the critics’ point. Take the point made by Chinn and by Peter S. Fisher of the Iowa Policy Project that the correlation between ALEC’s policies and economic growth is largely negative.

To begin with, ALEC wants to have things both ways. It claims that there’s empirical evidence that its “pro-business” policies work, but it also acknowledges that in many of the states it identifies as top 10 in economic performance “many of the [“pro-business”] policies these states have adopted have not had time to substantially effect (sic) economic performance.”

Well, what is it, ALEC? Your policies do affect performance, or they don’t, or you can’t tell?

ALEC also concedes, “we make no claims that state economic health is the only factor that affects state economic performance.” Among the other factors they’re willing to acknowledge are “quality governance and basic public services, beautiful weather, natural resource endowments, the presence of innovation hubs, and the prevalence of talented labor and entrepreneurs matter.”

They insist that “there is extensive evidence that economic freedom does matter to economic performance and that politicians can do little to alter the other factors that affect economic growth.”

Is that so? Politicians can’t influence “quality governance and basic public services”? Can’t implement policies that attract “innovation hubs” and “talented labor and entrepreneurs”? Evidently these things are deposited upon lucky states by meteorite.

More seriously, this passage appears designed to deal with one state that falls well out of ALEC’s imaginary world: California. According to its index rank, California should have the 47th worst economic performance in the country. Yet its recent economic performance is sterling -- the state suffered mightily from the recession, but its recovery has outpaced much of the rest of the nation, thanks in part to its innovation hubs, talented labor and tops-in-the-nation cadre of entrepreneurs, and despite its (gasp!) tax-increasing governor.

ALEC’s only comeback to that is to sniff that innovation, high-quality labor and entrepreneurs have nothing to do with policy. “Policymakers ... largely have free market policy reform as their only viable path towards greater prosperity,” ALEC insists. Sure, if you leave out all the other things that actually do produce greater prosperity. Nice try.

ALEC is on especially shaky ground when it attempts to tie individual policies to economic outcomes. Take anti-union “right to work” laws, a proud arrow in the ALEC quiver. We matched these laws against state level real gross domestic product growth 2009-12, as reported by the Bureau of Economic Analysis.

The worst performance of all, at -3.51% was turned in by right-to-work Wyoming. (ALEC might say that was because of Wyoming’s dearth of entrepreneurs.) The best performance, a gain of 31%, came from another right-to-work state, North Dakota. But of course North Dakota is experiencing an oil boom, and its anti-union stance may have something to do with its rank as the most dangerous state for workplace fatalities, as was reported Friday. The second-fastest-growing state is Oregon, which doesn’t have a right-to-work law.

On average, right-to-work states trailed their union-friendlier brethren in GDP growth over the period. The 22 right-to-work states ranked an average 26.5 in growth among the 50 states and the District of Columbia. The average rank of the others was 23.7.

Nor was this a case in which right-to-work laws haven’t had the chance to do their magic. Of the 22 states, 11 enacted their laws in the 1940s, seven in the 1950s and the remaining four between 1963 and 2001.

If they aren’t surpassing the other states in growth by now, they probably never will. On the other hand, they’re making their employers richer at the expense of their employees. And that probably suits ALEC just fine.