Politics & Policy

The Economic-Freedom Vote

The right way to view the Nov. 2 results.

The Monday-morning quarterbacks have been hard at it since the day after the election, purporting to know what caused the Bush win or the Kerry loss. As we all know, there have been way too many reasons given for the election outcome. It would be helpful if there were some information that tied the outcome of the election to a specific set of indisputable facts. At the very least, such information would allow the political parties to better tune their plans for the next big election.

The Pacific Research Institute, by way of its U.S. Economic Freedom Index, has gone a long way toward making this desire a reality. Simply, their index ranks states based on the economic freedom provided to the inhabitants of those states. Pacific uses “more than 100 variables, including regulatory and fiscal obstacles imposed on residents” to come up with their rankings.

This year, Kansas ranks first in terms of economic freedom and New York dead last. Kansas, of course, went Bush Red on November 2, and New York Kerry Blue. But more of that in a moment. Here are the rankings:

1. Kansas

2. Colorado

3. Virginia

4. Idaho

5. Utah

6. Oklahoma

7. New Hampshire

8. Delaware

9. Wyoming

10. Missouri

11. Arizona

12. Nevada

13. South Carolina

14. Indiana

15. South Dakota

16. Iowa

17. Texas

18. North Dakota

19. Georgia

20. Nebraska

21. Montana

22. Florida

23. Arkansas

24. North Carolina

25. Alabama

26. Tennessee

27. Maryland

28. Mississippi

29. Oregon

30. Maine

31. Washington

32. West Virginia

33. Alaska

34. Michigan

35. Hawaii

36. Vermont

37. New Mexico

38. Wisconsin

39. Kentucky

40. Louisiana

41. Massachusetts

42. New Jersey

43. Ohio

44. Minnesota

45. Pennsylvania

46. Illinois

47. Rhode Island

48. Connecticut

49. California

50. New York

Contributors to economic freedom are lower tax rates, lower state spending to gross state product, lower occupational licensing, less environmental regulation, more income redistribution, fewer right-to-work laws, lower minimum wages, and less aggressive tort laws.

The Wall Street Journal, a guardian of free markets, reported recently on the index. The paper concluded that “The Index highlights one of the great attributes of America that we can all be thankful for. States have to compete for their human capital and when they fail Americans can vote with their feet.”

One of the ways to measure whether or not Americans do in fact vote with their feet to secure economic freedom is to a look at the rankings of the states within the framework of the outcome of the presidential election. Specifically: Is there a correlation between states that voted heavily for Bush and a high economic-freedom ranking, and those that voted for Kerry and a low ranking?

This chart arrays the states by their economic-freedom rankings, and then color-codes the states either red if won by President Bush or blue if won by John Kerry. The chart makes clear that states with the highest level of economic freedom voted for George Bush by a wide margin, while states offering a low level of economic freedom went heavily for Senator Kerry. Across all 50 states, there is strong evidence to support the theory that people who believe in economic freedom have voted with their feet and migrated to states where economic freedom is high. On the other hand, states that have cultivated low economic freedom as defined by the Pacific Research Institute voted for the candidate that best espoused their principles (i.e., less economic freedom).

Those of us who live in red states certainly have a lot to be thankful for. As for those who relish economic freedom but live in blue states, there is an option: They can vote with their feet and move to a red state.

In the meanwhile, the next time you’re told why the red states went red and the blue states blue, you’ll know the real answer.

– Thomas E. Nugent is executive vice president and chief investment officer of PlanMember Advisors, Inc. and chief investment officer for Victoria Capital Management, Inc.

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