February 1, 2023

JOHANNES HAUBE

RALEIGH – North Carolina faces many challenges. You and I may not agree on how to classify these challenges or what to do about them, but we share a belief that our state could be a better place than it is today.

This reformist impulse is right and useful. But we shouldn’t let that make us overly and unrealistically grumpy. Few states can match what North Carolina already has – which is why few states match or exceed our growth rate.

For example, the latest population data from the US Census Bureau shows that North Carolina’s population grew by around 133,000 last year to 10.7 million residents. Only Texas (471,000) and Florida (417,000) increased more in population during this period. In terms of annual growth rate, North Carolina ranked 9th at 1.3%, with Florida (1.9%) topping the list.

America’s fastest growing states are primarily in the Southeast and in the mountains to the west. That has been the case for some time. The places with the largest population declines in the past year were also rather predictable. New York, California and Illinois saw six-figure population declines. The fastest declining states in percentage terms were New York, Illinois and Louisiana.

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In terms of gross domestic product, North Carolina’s economy has recorded a compound annual growth rate of 2.8% since the beginning of 2020, adjusted for inflation. This is significantly higher than the national (1.6%) and regional (2.1%) average. Idaho (4.2%) ranked first in this category, followed by Tennessee (3.8%), Florida (3.6%), Utah (3.6%), and New Hampshire (2.9%). Our state is in 8th place.

Which countries are weaker in growth? Well, Louisiana’s GDP actually shrank at a compound annual rate of 3%. Other places with negative net growth since January 2020 were Alaska, Wyoming, North Dakota, Oklahoma, Hawaii, New Mexico, West Virginia and Maryland.

As it should come as no surprise to anyone, I believe that the last decade of free market reforms and fiscally conservative policies have made North Carolina a more attractive place to live, work, invest and create new jobs. We have evolved from one of the worst designed tax systems in the country to one of the best. Under legislation already enacted by the General Assembly, our personal income tax rate will decrease to 3.99% by 2027. Our corporate tax will disappear completely by 2029. I also owe infrastructure improvements and a series of regulatory reform measures to improve North Carolina Climate’s business.

A Canadian think tank, the Fraser Institute, offers a handy way to track these changes over time. North Carolina was ranked 9th in the most recent edition of the Economic Freedom of North America Index. That’s a significant improvement from 19th place in 2010. By the way, which state currently ranks first for economic freedom by Fraser’s measure? Florida.

However, it is important to remember that government is not the primary driver of economic decisions – for better or for worse. All other things being equal, states with smaller, less intrusive, and more effective governments tend to grow faster than average. That’s the conclusion of most (though not all) of the scientific studies that have been published over the last few decades.

However, where the rubber meets the road, all other things are never the same. States differ significantly in geography, natural resources, population density, and economic structure. Many of the factors that determine growth over time can be influenced only slightly, if at all, by public policy.

Look again at this list of states with shrinking economies. While some of them are “blue” states with relatively high tax and regulatory burdens, others like Wyoming and North Dakota don’t fit that description. States overly dependent on industries like oil drilling, mining and tourism have had a rough few years. Even Texas, a popular destination for migrating families and businesses alike, only matched the national average in GDP growth (1.6%).

North Carolina’s economic portfolio is more diverse—and will continue to be more diverse over time. Is there room for improvement? Secure. But we already have a lot to thank for.

John Hood is a board member of the John Locke Foundation. His most recent books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).

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