Column: Kentucky coming up lame in economic growth race

Column: Kentucky coming up lame in economic growth race
While Kentucky may resemble Authentic as the mecca of horse racing, we trail the pack when it comes to competing successfully in terms of economic growth against our competitor states. (Source: John P. Wise/WAVE 3 News)

(WAVE) - This year’s COVID-19 version of the Kentucky Derby featured an upset win by Authentic over heavily favored Tiz the Law, who came rocketing toward the winner in a furious homestretch battle but couldn’t overtake him.

It’s tough to catch a hungry horse, especially when he gets such a head start and wants to prance around in that winner’s circle.

While Kentucky may resemble Authentic as the mecca of horse racing, we trail the pack when it comes to competing successfully in terms of economic growth against our competitor states.

As Bluegrass Institute Visiting Policy Fellow Andrew McNeill notes in a new report, Kentucky 40 years ago was essentially as wealthy as North Carolina and Tennessee.

By 2019, however, those states were entering the final stretch while Kentucky was struggling to reach the far turn.

Kentuckians’ average disposable income in 1980 was $7,209, on par with Tennesseans’ $7,420.

Average incomes in our state still hadn’t made it to $40,000 by 2019 while those of our neighbors to the south are now nearly $45,000, or a whopping 114 percent of Kentucky’s.

If the Bluegrass State doesn’t make its move now, how wide will the competitive gap become in the next 40 years?

In just the last 20 years, Kentucky’s per capita income grew by only 9 percent, compared to 29 percent nationally.

During that time, Kentuckians’ incomes dropped from 86 percent of the national average to only 73 percent.

The state’s economy grew over the period but not fast enough to keep pace with the rest of the country.

McNeill’s report suggests a different “racing strategy” is needed, one built upon economic freedom rather than progressive redistribution policies, which results over many decades indicate haven’t pushed Kentucky ahead or even put it in a position to win.

Only ideological leftists intent on increasing the size, cost and scope of government will argue it’s coincidental that the benchmark states in McNeill’s report which Kentucky trails in the race for economic competitiveness all spend, tax and borrow significantly less than we do here in the Bluegrass State.

The data in the report refutes any such assertion.

Data collected by Pew Charitable Trusts reveal average government spending in Kentucky between 1993 and 2012 was equal to more than 15 percent of state personal income, which isn’t only higher than our competitor states, but also trumps bastions of progressive redistribution like California, New York, New Jersey and Illinois, and is higher than the nation’s average of 12 percent.

The fact that only New York among those aforementioned states had higher per-capita spending than the commonwealth in 2018 indicates continuing doubt that Kentucky’s “horse” is ready to make a serious run.

“Our state’s historical embrace of redistribution has led to sluggish progress in creating higher living standards for everyday Kentuckians,” McNeill writes.

Like most states, Kentucky’s competitors aren’t likely to slow down post-COVID just so we can catch up.

They’ll be hungry to get their economic engines humming again.

And the Bluegrass State won’t make that needed run without getting spending under control, which can only happen by recognizing that resources are limited – even for government – and prioritizing expenditures will be critical, especially in the current environment of budget uncertainty.

First among the report’s 11 recommendations is the need to enact a Taxpayer Protection Act forcing politicians to identify priorities and tie future spending increases to inflation and population growth.

This seems like a reasonable starting point for getting Kentucky back in the race – if it’s hungry enough.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at www.bipps.org. He can be reached at jwaters@freedomkentucky.com and @bipps on Twitter.

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