Rent control would only worsen New Hampshire’s housing crisis

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“In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

— Swedish economist Assar Lindbeck

New Hampshire renters have endured steadily rising prices for many years. Their frustration has reached the point that some lawmakers and activists are advocating a policy once unthinkable in the Granite State: rent control. 

The sense of helplessness is real. From 2013-2022, the median rent for a two-bedroom apartment in New Hampshire rose from $1,076 to $1,558, an increase of 45% according to the New Hampshire Housing Finance Authority’s 2022 Rental Rental Cost Survey. This is well above the inflation rate. Had the median New Hampshire rent tracked the national Consumer Price Index over the last decade, it would be about $200 lower.

Rent control is being offered as a remedy for this desperate situation. But more than 75 years’ worth of research into the effects of rent control reveals a disastrous record. 

Establishing a government-mandated cap on rents or rent increases does not suddenly abolish the real world and the economic laws that apply to it. Investors will continue to seek strong returns, and if government artificially constrains their return on one form of investment, they will seek it elsewhere.

No one has to be a landlord. People choose to build and own apartments in anticipation of earning a significant return on their investment. Studies on the effects of rent control laws show that they tend to make communities worse off by reducing investment in rental properties, shrinking the supply of apartments, raising market rents, lowering overall property values, and locking renters into sub-par units while discouraging them from building their own wealth through homeownership. 

Here are a few of the demonstrated harms caused by government rent control policies:

  • St. Paul, Minn., passed a rent control ordinance in 2021. A University of Southern California study the next year found that “rent control caused property values to fall by 6-7%, for an aggregate loss of $1.6 billion.” It further found that “the tenants who gained the most from rent control had higher incomes and were more likely to be white, while the owners who lost the most had lower incomes and were more likely to be minorities. For properties with high-income owners and low-income tenants, the transfer of wealth was close to zero. Thus, to the extent that rent control is intended to transfer wealth from high-income to low-income households, the realized impact of the law was the opposite of its intention.”
  • A 2018 study of rent control in San Francisco found that the imposition of rent controls reduced the supply of rental housing by 15%, raised rents by 5%, and fueled the conversion of lower-end rental units to higher-end condominiums. The authors found that “landlords of properties impacted by the law change respond over the long term by substituting to other types of real estate, in particular by converting to condos and redeveloping buildings so as to exempt them from rent control. This substitution toward owner occupied and high-end new construction rental housing likely fueled the gentrification of San Francisco, as these types of properties cater to higher income individuals. Indeed, the combination of more gentrification and helping rent controlled tenants remain in San Francisco has led to a higher level of income inequality in the city overall.”
  • From 1970-1994, Cambridge, Mass., imposed strict rent controls and made it hard for the owners of rent-controlled properties to convert them to other uses. Those ordinances were abolished with the passage of a 1994 referendum banning rent control in Massachusetts. This led to increased apartment construction. “Over the next several years, direct dollar investments in housing units, as measured by building-permit filings, more than doubled on an annual basis,” a 2012 study found.
  • A separate 2007 study of the effects in Massachusetts found that rent control did lower rents in covered buildings, but also “led to deterioration in the quality of rental units” and encouraged apartment building owners to “shift units away from rental status.” 
  • A 2000 study of the effects of rent control on tenants found that rent control raised market rents and “the average benefit to tenants in regulated units is negative. This implies that, on average, tenants in rent regulated units would be better off if these controls had never been established.”
  • A 2019 study of rent control in Berlin, Germany found that rent control “reduces rents in the controlled sector, but also leads to rent increases for uncontrolled units. And it “reduced the propensity to move house within rent controlled areas, but only among high-income households.”
  • A 1989 University of Pennsylvania study of rent control in New York City found that capping rents discouraged homeownership, helped whites more than minorities, and reduced investment in and upkeep of rent-controlled units. In short, rent control lowered the quality of apartments while simultaneously discouraging renters from becoming homeowners. “The expected rent control benefits had a significantly negative influence on the propensity to own. That is, consumers with large expected rent control benefits had lower demands for homeownership.”
  • A 2009 review of the economic literature on rent control found that “economic research quite consistently and predominantly frowns on rent control.” It also found that the effect on homelessness was inconclusive. “Several empirical studies find no clear relationship between rent control and homelessness,” according to the review. Some studies found that rent control increased homelessness, others that it had no clear effect or reduced homelessness. Given the mixed results, rent control should not be considered a solution to the problem of homelessness.

The negative effects of rent control are so thoroughly documented that there’s almost no disagreement among economists, left or right, on the issue. “The analysis of rent control is among the best-understood issues in all of economics. Its known adverse effects illustrate the principles of supply and demand,” as Paul Krugman, the left-wing economist and New York Times columnist, put it.

Supply and demand also explains New Hampshire’s high rents. The chart below shows building permits for multifamily housing going back to 1999. 

Though building permits have slowly increased, they haven’t kept up with demand. As a result, New Hampshire’s rental vacancy rate fell from 3.4% in 2013 to 0.5% in 2022. Our high rents are not caused by greed or avarice or the wickedness of capitalism. They’re the direct result of a decades-long slow-down in apartment construction. 

The remedy is not for government to attempt to cap apartment prices. It is for government to permit the construction of new rental units. 

Download this policy brief as a pdf: Rent Control Policy Brief 2-2023

Editor’s note: The percentage increase in the median two-bedroom apartment rent in New Hampshire from 2013-2022 is 45%. The initial post inadvertently had the figure for the five-year increase (26%) pasted in the spot for the 10-year figure. 

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Education Entrepreneur Spotlight: Prax Village Homeschool Community

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Editor’s note: Since the COVID-19 pandemic, educational entrepreneurship has boomed nationwide. New Hampshire has experienced significant growth in the number of entrepreneurs and innovators willing to take on the daunting challenge of building a new educational ecosystem. This year, we’ll be highlighting some of the people and organizations that have begun expanding the education marketplace in the Granite State, as well as the obstacles they face in creating non-traditional learning environments. We start with Becky Anderson and Prax Village, a Seacoast community for home-schooling families. We hope you enjoy these profiles and stories of market innovation.

Prax Village: A thriving co-learning community
By Becky Anderson

Prax Village is a community of liberty-minded homeschooling families in the Seacoast region of New Hampshire. After two full years, our current member base includes more than 100 kids of all ages, from about 50 families. But Prax Village looked much different when it was established in the autumn of 2020.

A small group of like-minded families had collectively purchased and, through many volunteer hours and efforts, renovated a private community center that we call the Praxeum. The building and beautiful outdoor space on our property were used for charitable events, meetups, classes, and co-working. The Praxeum’s founders were at different stages in raising our families, yet we found ourselves always returning to a common goal: to form a support network for parents navigating the choice to raise our children outside of the conventional school system, and a strong, trusted social group for our kids as they grew.

In 2020, government-imposed COVID restrictions unceremoniously canceled many of our extracurriculars and homeschool groups, while also closing homeschoolers’ typical gathering places like libraries, museums and indoor playgrounds. Many new and long-time homeschoolers felt displaced and found themselves searching for in-person opportunities. Kids (and parents) really missed interacting with each other in a normal and natural way.

We already had a location, one of the biggest obstacles to overcome, and knew it was the right time to share it with more families, so Prax Village was launched. For an affordable monthly fee, members had just a couple of opportunities per week to meet at the Praxeum, along with seasonal special events. We trusted that this simple start would grow into richer and more robust offerings, and it has.

Through steady and organic growth, Prax Village has become a community that has greatly exceeded our initial expectations and continues to evolve and improve.

Prax Village members include kids from babies to teens, and many types of homeschoolers: brand new and seasoned, religious and secular. A wide array of educational philosophies can be found here. Many members join after moving from other states to New Hampshire for its high quality of life and increased personal freedom. Because we share common principles of liberty and a desire to raise responsible and thoughtful individuals, our members make up a strong and supportive community despite our diversity of educational styles.

Thanks to the enthusiasm and energy of parent volunteers, Prax Village now offers multiple classes and clubs five days a week, with a year-round calendar of 8-week sessions. We owe our success to members’ generosity with their time and knowledge. Over the past year, the schedule has included Spanish, soccer, book club, chess club, LEGO club, multiple art classes, music appreciation and chemistry — and that’s only a partial list!

We aim to cater to a wide variety of interests, from weekly Toddler Time for ages 2-4 with rotating parent leaders to a multi-year academic deep dive into Greek classics for ages 11 and older. Most families come to the Praxeum one, two, or three times a week for the supplemental classes that interest them most, and our 8-week sessions give everyone a chance to try out different things and maintain a flexible schedule.

We have established our own unique set of seasonal traditions — a Valentine Exchange, Freecoast Egg Hunt, Midsummer Potluck, Halloween Trunk or Treat, and Enlightenment: A Winter Solstice Celebration.

Organizers also create fun opportunities around the region exclusively for Prax Village members, like our field trip to the New Hampshire Farm Museum or sailing classes with the Gundalow Company. We have held food drives and toy drives, and seasonal clothing swaps with leftover clothes donated to the Pass Along Project. We are even beginning to see more time carved out for parents to connect and recharge, like Ladies’ Book Club and Anarcraft meetups.

In September, we tried something new and, for one weekend only, we transformed the Praxeum into Prax Museum: A Pop-Up, Hands-On, Kid-Made Science Center. Prax Village members invited friends, family and fellow homeschoolers to explore physics, chemistry, light, electricity and other amazing natural phenomena by interacting with dozens of exhibits and demonstrations. Popular exhibits included the impressive full-room pinhole camera, the Bernoulli blower, colorful shadows, and tricky goggles that turned the world backwards and upside down. Every exhibit was an opportunity to play with science and learn together.

Prax Village differs from the typical homeschooling co-op. We avoid long waitlists and limited enrollment. Because we are able to adjust our programming choices according to size and member demographics, new families can join at any time. We don’t provide core academics, as we understand that the parent is the expert in their children’s unique learning needs.

We aren’t a drop-off program. In part, this decision was made to avoid regulations and licensing, but by including parents in all that we do, we encourage strong friendships to form between whole families rather than only the children. Our large, weekly, unstructured gathering is an important social time for parents and kids alike.

With so many families leaving the public school system in search of other educational options, this is an exciting time for homeschoolers, and New Hampshire is the best place to be! Prax Village is positioned to continue leading the way as a community for liberty-minded homeschoolers in our state. If you would like more information about Prax Village or to become a member, visit https://praxvillage.org.

Becky Anderson is founder of Prax Village Homeschool Community.

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The Interest & Dividends Tax is a New Hampshire disadvantage

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Eight U.S. states have no income tax. 

New Hampshire is not one of them.

The Interest & Dividends tax lingers. A tax on passive income is still a tax on income, and this one has given New Hampshire an asterisk by its name when listed among the nation’s low-tax states.

At midnight on Dec. 31, 2020, Tennessee’s tax in interest and dividends ended, making it the eighth state with no tax on income. Six months later, New Hampshire legislators passed a budget that included a five-year phase out of our Interest & Dividends Tax.

But with policymakers in other states chasing the New Hampshire Advantage ever more aggressively, there is interest in eliminating the I&D Tax by the end of 2023 rather than 2026. 

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming are the only states that don’t tax income. (Washington passed a capital gains tax in 2021 but it’s been blocked by a court pending a challenge to its constitutionality.)

Florida, Tennessee and Texas all want to become known as the freest state in the nation. Florida Gov. Ron DeSantis already refers to the Sunshine State as the “Free State of Florida.” 

New Hampshire is losing its reputation as a refuge from burdensome taxation.

In the Tax Foundation’s State and Local Tax Burdens ranking, Tennessee ranks third, Texas sixth and Florida 11th. New Hampshire is down to 16th place. 

Florida ranks higher than New Hampshire in the Tax Foundation’s Business Tax Climate Index. It places fourth. New Hampshire is sixth. 

Florida last year passed New Hampshire to claim the top spot in the Fraser Institute’s Economic Freedom in North America report. 

The New Hampshire Advantage is real. By creating a low-tax, relatively low-regulation refuge in the Northeastern United States, New Hampshire policymakers have delivered profound benefits for Granite Staters. 

From 1977-2019, New Hampshire’s economy grew by an astounding 335%. Massachusetts had the second highest economic growth in New England at 234%, a full hundred percentage points below New Hampshire.  The U.S. economy grew by 203% in those same years.

This growth has given Granite Staters the highest median household income in northern New England, 25% higher than Vermont’s and 35% higher than Maine’s. 

Over those years, however, officials in other states have watched and learned. They’re chasing — and often passing — New Hampshire.

After the eight states with no income tax are the nine states with a flat income tax. New Hampshire is in this group, which used to be very small but is growing rapidly. 

Five other states have passed legislation to move to a flat income tax. Others, including North Carolina, are phasing out their income taxes on the way to joining the elite group of states with no tax on income. 

Policymakers in these states are intentionally trying to keep their people, employers and entrepreneurs — and attract those in other states — by narrowing the gap between their tax burden and the burdens in states like New Hampshire. 

In other words, they are trying to put an end to the New Hampshire Advantage by creating a tax and regulatory environment more favorable than ours. 

Having the Interest & Dividends Tax on the books is hurting New Hampshire in this increasingly competitive landscape. Investors, retirees and many entrepreneurs know that they gain nothing financially by moving to New Hampshire because we tax their investment income. 

Even AARP has pointed out to its members that New Hampshire is a less desirable place to retire than Florida, Tennessee, Texas or any of the other truly income-tax-free states because we tax investment income. 

“Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — have no income taxes. New Hampshire, however, taxes interest and dividends, according to the Tax Foundation,” AARP’s website warned its members in a post last year. 

Turbotax warned its users in December that New Hampshire taxes passive income. After listing the states with no income tax, it noted that “New Hampshire limits its tax to interest and dividend income, not income from wages.”

Maintaining the Interest & Dividends tax creates a small but real drag on both economic and population growth. 

“Over the past decade, states which forgo income taxes have seen their populations grow at twice the national rate, and gross state product grew 56 percent faster in states without an income tax than it did in those with one over that period,” the Tax Foundation noted in 2021. 

As long as this tax remains on the books, it discourages relocation to New Hampshire by individuals who could use their assets to invest in local start-ups, commercial and residential real estate development, and local non-profits. 

It also chases away wealthier Granite Staters and retirees. When financially successful Granite Staters move to Florida and Tennessee to avoid the Interest & Dividends Tax, New Hampshire loses. 

The most commonly made objection to ending the Interest & Dividends Tax is that it would reduce state revenues. But i’s unclear how much revenue the state would lose.

Revenue from the I&D Tax has varied over the last decade. The tax brought in $93 million in fiscal year 2013, and fluctuated between a low of $79.8 million and a high of $96.9 million through fiscal year 2017. Since fiscal year 2018, the tax has generated more than $100 million in revenue annually, spiking to a record $157.5 million in fiscal year 2022. 

The 2022 revenue was driven by unusually large stock market gains that year.

Assuming annual revenues in the $100 million to $125 million range, the question is whether the state could weather the loss of those funds without making severe budget cuts. The answer is obviously yes.

For the last decade, state General Fund and Education Trust Fund revenues have exceeded budgeted amounts in every year save one. Revenues were $435.5 million above plan in FY 2022, $323.7 million above plan in FY 2021, $173 million above plan in FY 2019, $133 million above plan in FY 2018, $96 million above plan in FY 2017, $166 million above plan in FY 2016, $47 million above plan in FY 2015, $3.8 million above plan in FY 2014, and $45.7 million above plan in FY 2013.

In the last decade, revenues were below plan only during the pandemic year of 2020, when the sharp decline in business activity caused business tax and rooms and meals tax revenue to plunge. 

New Hampshire’s growing economy has already generated enough surplus state revenue to replace the I&D Tax receipts. 

And eliminating the I&D Tax would end a strong disincentive for higher-wealth individuals to live in New Hampshire. Making the state more attractive to investors and entrepreneurs would have positive economic effects, which would be felt in state revenues over time.

Accelerating the repeal of the I&D Tax would make New Hampshire more attractive to retirees, investors and entrepreneurs by the end of this year. If the state can afford to eliminate the tax now, why wait three years to enjoy the benefits of making New Hampshire more economically competitive?

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How licensing makes you wait longer for a haircut

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Unless you’re still growing your pandemic beard, you might’ve noticed that getting an appointment with your barber or stylist seems to take longer than it did before the pandemic. 

It’s not all the extra alcohol you got accustomed to consuming on a weekly basis since 2020. The supply of barbers, hairdressers, hair stylists and cosmetologists in New Hampshire really has shrunk in the last several years. As with so many other occupations, the demand for these services exceeds the supply of providers.

And as with so many other areas of the economy, the shortage is made worse by government regulations. 

Fortunately, there’s a simple tweak to state licensing laws that would encourage more licensed personal grooming professionals to move to New Hampshire. 

Barbers, cosmetologists and estheticians are licensed by the state, and the law regulating these professions does not automatically recognize as valid licenses earned in other states. 

RSA 313-A:14 authorizes the Board of Barbering, Cosmetology and Esthetics to recognize an out-of-state license “provided the other state’s licensing requirements are substantially equivalent to or higher than those of this state.”

Sounds harmless. But it’s not. 

It’s not clear how the board is to determine whether a license is “substantially equivalent to” the qualifications for a New Hampshire license. States require varying hours of education and training, but also varying numbers of tests and varying levels of experience. One state’s program might be more effective than another’s even though it requires months’ less training. 

Economists who’ve studied license portability generally prefer blanket license reciprocity. Stephen Slivinski at Arizona State University has studied occupational license portability among the states and found that the general “lack of license portability has real-world impacts. It keeps workers from moving to a state when they might otherwise. Lack of portability is also especially onerous for ‘trailing spouses’ of military members who are often kept out of the workforce when their family is transferred to a new state.”

“Getting a new license requires costly, time-consuming, and duplicative hours of training just to do the job that the worker was already doing before they moved across the state border. As a result, the lack of occupational licensing portability suppresses the labor market opportunities for new residents of a state. Additionally, it has the effect of discouraging people from moving to a new state at all.”

This is a serious issue for New Hampshire, which is suffering a years-long labor shortage. That shortage includes these licensed occupations. 

New Hampshire Employment Security has a single occupational classification that covers hairdressers, hairstylists, and cosmetologists. In 2021, the last year for which the state has published data, the total number of hairdressers, hairstylists and cosmetologists in New Hampshire was 1,860. 

In 2017, the number was 2,020. We lost 160 positions in these occupations in four years, even as New Hampshire’s population was growing.

House Bill 409, sponsored by Rep. Diane Pauer, would help to fill that shortage by making it easier for licensed professionals in these fields to move to New Hampshire and begin work immediately, without having to spend hundreds of hours and thousands of dollars to be retrained in the field in which they’ve already been trained.

HB 409 would remove from state law the clause that grants barber, cosmetology and esthetics license reciprocity only when the practitioner’s home state license requirements are “substantially equivalent to or higher than” New Hampshire’s.

What would this change do? 

Well, for barbering, New Hampshire has among the lowest hours-of-education requirements in the nation. We require 800 hours of training to become a barber. Only four states require fewer hours, according to licensing data compiled by the Institute for Justice (IJ). 

One of them is New York, which requires just 291 clock hours of training to become a barber. One could easily argue that this requirement is not substantially similar to New Hampshire’s. But does anyone actually believe that Manhattan barbers pose a danger to New Yorkers, or that a licensed barber who moves from New York to New Hampshire is a danger to Granite Staters?

Vermont, Florida and Oregon also mandate fewer hours of barber training than New Hampshire does.

For cosmetology, New Hampshire requires 1,500 hours of training. Eight states require fewer hours, including Massachusetts and Vermont (both 1,000 hours). California, New York, New Jersey and Florida also require fewer hours of training than New Hampshire, according to IJ’s data. 

Again, it would be absurd to argue that cosmetologists in New York, New Jersey, California, Massachusetts and Vermont are so dangerously undertrained that they should be forbidden from working in New Hampshire. If you’re qualified to cut Sarah Jessica Parker’s hair, you’re surely qualified to cut Jeanne Shaheen’s or Maggie Hassan’s.

Though only a handful of states require fewer hours of training for these occupations, they include some of our neighbors and other states not far away. HB 409 would remove the entirely unnecessary equivalency language and allow licensed professionals in Massachusetts, Vermont, New York and a few other states to relocate here and start working right away. 

This change is unlikely to eliminate the shortage of barbers and hairstylists right away. But it would remove one obstacle that needlessly prevents some professionals from moving here. 

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An island of liberty — under attack

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New Hampshire’s view of national politics is distorted by the presidential primary. The distortion is so strong that sometimes we fail to see broader national trends until they become part of a narrower story about presidential ambitions.

Gov. Chris Sununu’s 2023 inaugural address is a perfect example. The speech stands on its own as a statement of what we might call New Hampshire exceptionalism.

“Over the last six years, New Hampshire has become an island of freedom surrounded by highly taxed, highly regulated states.

“We are a harbor for citizens fleeing the states they once called home in pursuit of our Live Free or Die way of life.

“We continue to open up doors of opportunity, giving families the freedom to choose the path that best suits their needs.

“We have provided leadership that puts ‘The Individual’ ahead of ‘The System.’ Ensuring that everyone — regardless of income, gender, race, or religion – has the same opportunities to succeed.”

The speech drew immediate comparisons with Florida Gov. Ron DeSantis’ 2023 inaugural address, delivered two days before.

Both governors cited studies that rated their states high in measures of economic and personal freedom, and quality of life. Both portrayed their states as refuges for free people fleeing the grip of heavy-handed government in neighboring provinces.

DeSantis and Sununu are being discussed as potential rivals for the 2024 Republican presidential nomination. So the similarities in their speeches were taken by many as evidence of their ambitions.

There’s obvious merit to such observations. And yet presidential ambition can’t entirely explain these speeches. Something larger — and more important — is at work here.

Governors listing their state’s accolades is nothing new. Maggie Hassan touted New Hampshire’s national rankings in her 2013 inaugural address. What’s most noteworthy this year is how similar Florida’s and New Hampshire’s ratings are.

As we’ve written before, Florida and New Hampshire have become rivals for the top spot in the Fraser Institute’s Economic Freedom in North America report. (In 2021, New Hampshire ranked No. 1, Florida No. 2. They switched places in 2022.)

That’s not an accident. Florida’s elected officials have spent many years striving to improve their state’s economic position relative to rivals such as New Hampshire, Texas, Tennessee and North Carolina.

This is how Rick Scott began his inaugural address in 2011:

“We gather today to talk about Florida’s future.

“To assess where we are . . .

“To define where we want to go . . .

“And to plan how to get there.

“Clear goals and hard work can achieve amazing things.

“The giant oak trees that surround us here

“ARE what they ARE

“Because acorns had a plan.

“Once we take the right steps, I am absolutely convinced that Florida will become the most exciting place in the world to live and work.

“Let’s begin by facing squarely the challenge of our time-a stalled economy.”

Scott said moments later, “job creation is a MISSION.”

He proposed to cut taxes and regulations, reform the bureaucracy, and expand educational opportunities.

Four years later, in his 2015 inaugural address, he touted the 700,000 jobs Floridians had created.

National rankings of the kind Sununu and DeSantis cited are metrics by which governors increasingly finding themselves measured — by themselves, their rivals and voters.

It’s difficult to say how much these rankings guide governors and legislators. As college rankings have been shown to influence university administrations, it’s likely that these now constant state rankings do help to shape policy.

And they appear to be focusing state leaders on policies that stimulate economic growth, and for good reason. Policies that lead to growth lead to better economic and social outcomes, which then lead to higher rankings.

Economic growth creates jobs, raises incomes and improves health and well-being. As Veronique de Rugy wrote last week:

The economy grew at an average of 3.5% between 1950 and 2000. Since 2000, that rate has slowed to 1.7%. The cost of lower growth is real. John Cochrane does the math for us: “If the U.S. economy had grown at 2% rather than 3.5% since 1950, income per person by 2000 would have been $23,000 not $50,000.”

What policy other than economic growth has the power to double the average American’s living standard in a generation? None. And here’s the cherry on top: All the stuff an advocate anywhere on the political spectrum claims to value—good health, clean environment, safety, families and quality of life—depends on higher growth.

Faster economic growth is likely to engender even greater benefits for the bottom 50% of the income distribution, which contains young people just starting their careers, retirees trying to stretch their fixed incomes with part-time work, and those populations that are caught in intergenerational cycles of poverty. And this is true everywhere in the world. As Harvard University’s Dani Rodrik rightly sums up, “Historically nothing has worked better than economic growth in enabling societies to improve the life chances of their members, including those at the very bottom.”

Governors have caught on. Because they want to end their terms with wealthier, happier people, they’ve become more aggressive in their pursuit of growth-focused economic policies.

In his 2015 inaugural address, Arkansas Gov. Asa Hutchinson proposed cutting taxes and improving public education to “compete and win in this global marketplace.”

In his 2021 State of the State address, Texas Gov. Greg Abbott boasted of his state’s top national rankings and said the government had a duty to “keep Texas the freedom capital of America.”

Even governors of states that are losing population and businesses are finding ways to claim the title of most free state. California Gov. Gavin Newsom last week claimed his was the “true freedom state.”

In some states, legislators are leading the way. Last year, North Carolina celebrated its CNBC ranking as “America’s top state for business” after a decade-long push to reform the tax code helped create “the nation’s strongest economy.”

The big story here is not the 2024 presidential primary. It’s that state-level elected officials, particularly governors, are thinking an acting as if they’re engaged in a national competition to achieve the greatest economic, educational and social welfare gains for their populations.

They’re pursuing not just results, but results that can be measured.

In that pursuit, they’ve learned that creating a climate conducive to economic growth produces the best results.

New Hampshire learned this decades ago. Our growth-based policies created the New Hampshire Advantage, which made us the economic marvel of New England.

Now that so many others have caught on, New Hampshire can’t afford to slack off. Being an island of liberty in the Northeast has dramatically improved our quality of life here. But the field of competition has expanded well beyond New England.

States all over the country are working every day to lure our young people and poach our businesses. If we stop pushing for competitive advantages by keeping taxes low, improving educational opportunities, budgeting more efficiently, and removing barriers to entrepreneurship and economic opportunity, we risk undoing the massive gains we’ve made since the middle of the last century.

It’s a mistake to view the Sununu and DeSantis inaugural addresses purely through the lens of the presidential primary.

These governors have become part of the presidential conversation because of their policy successes. And those successes are rooted in an older, ongoing competition among many states (often led by governors) to improve measurable outcomes for their residents.

That ongoing, and progressively more intense, competition is the bigger story.

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The foundation of all Christmas giving is prosperity

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The legend of Santa Claus is based on the actual St. Nicholas, and all tales of jolly old St. Nick share the same beginning. 

Nicholas, born in 280 AD, was orphaned when his parents died in an epidemic. He went to live with his uncle, a Christian bishop. Strong in his faith, the young Nicholas chose to devote his life to serving others. In pursuit of this mission he began giving away his family fortune.

Wait, his what?

Nicholas’ parents were, depending on the version of the story, either wealthy or at least very prosperous. When they died, the boy is said to have inherited quite a lot of money. 

Somehow, this detail often gets left out of the Santa story. Think of all the Christmas stories you’ve heard. How many times have they mentioned that Santa was rich?

Our tradition of hanging stockings at Christmas is rooted in the legend of St. Nicholas tossing three bags (or balls) of gold through the window of a poor man’s house to provide a dowry for each of the man’s three daughters. The gold is supposed to have landed in the girls’ shoes or their stockings that were hanging by the fireplace to dry. Nicholas perpetrated this good deed at night in obedience to Matthew 6:1, which warns against performing works of charity in front of others. 

Nicholas’ charity became the stuff of legend, and tales spread of a saint who gave money to the poor and helped children (even bringing some back to life through prayer). 

All of this was miraculous in the third century. Today, bringing people back to life through prayer is still miraculous. But people giving away enormous sums of money happens every day and we don’t consider it remarkable at all.

In the centuries since St. Nicholas tossed his inherited gold through the poor man’s window, economic growth has created millions of Santas. And we can create more. 

An obvious but overlooked lesson in the Santa Claus story is that the one necessary precondition for the existence of Santa Claus is wealth. 

Had Nicholas been poor, he’d have had no gold to give away. 

(Yes, Santa’s got a brand new bag, and it’s full of money.) 

When you think about it, having more than you need for survival is the foundation of all charity. And so the key to stimulating more charitable giving is to create more wealth. 

Research on charitable giving bears this out. When the economy grows, charitable giving increases. When it shrinks, charitable giving also shrinks.  

In 2021, Americans gave away $484.5 billion. And that’s just in official donations that can be tabulated. It’s doubtful that St. Nicholas could’ve comprehended a sum so large. 

But there’s another, even greater, benefit of economic growth. It reduces the need for charity in the first place. 

This chart of global hunger vs. GDP per capita shows how economic growth feeds the poor.

This chart of child mortality by level of prosperity shows how economic growth saves children’s lives. 

This chart of world GDP during the last two millennia shows the power of growth to lift people out of poverty.

Simply put, economic growth has created millions of Santas who give away billions of dollars a year. And the economy itself has become a sort of super Santa, enriching humanity and keeping children alive on a scale that St. Nicholas would envy. 

In “A Christmas Carol,” why isn’t Scrooge poor? Because a poor Scrooge could do nothing for Bob Cratchit and Tiny Tim. The spirits save Scrooge’s soul, but Scrooge’s wealth saves Tiny Tim’s life.

The stories of St. Nicholas and Scrooge both focus on their hearts. Their desire to help others is central to their transformation into folk heroes. But their charitable acts are made possible by their wealth.

The best way to spread Christmas cheer might well be singing loud for all to hear. But the best way to spread Christmas giving is to make everyone prosperous.

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Humbug! Scrooge would want fewer apartments

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In the opening of “The Muppets Christmas Carol,” Gonzo and Rizzo the Rat are selling apples in a dingy London market. Gonzo scolds Rizzo for eating the inventory. 

“Hey, I’m creatin’ scarcity,” Rizzo replies. “Drives the prices up.”

Rizzo is a clever rat.

Later in the movie, the ghosts of the Marleys tell Scrooge how they enjoyed overcharging the poor for rent. (In the Muppets version, there are two Marleys.)

Rizzo didn’t comment on those lines, but he might’ve dead-panned, “maybe someone ate the apartments and drove up prices?”

As Dickens’ classic tale is retold and rewatched this Christmas season, many Granite Staters face a harsh reality that Rizzo — and Scrooge — would understand. Scarcity keeps driving up prices for homes and apartments. 

You don’t need to be visited by the ghosts of housing markets past to see the problem — and why Scrooge would love it. You just have to compare the markets for short-term and long-term rentals.

Demand for short-term rentals has surged nationwide. The number of nights booked in short-term rentals rose 15.8% from October of 2021 to October of 2022, The Wall Street Journal reported last week. 

Investors in short-term rental properties expected prices to rise along with demand. But something happened on the way to sipping daiquiris on the beach as the rent money poured in. A lot of other people responded to the high rates by offering their properties for rent too.

“However, while the absolute number of bookings has risen, there has also been a sharp rise in supply of available short-term rental listings in the U.S., up 23.3% in October 2022 compared with October 2021,” the Journal reported. 

A woman who rents her California home on Airbnb told the Journal, “I’ve felt a massive drop” in rents she can charge. A holiday weekend at her home fell from more than $1,000 per night during the pandemic to around $275 now. Why such a collapse? Demand rose, which drove up prices, and those higher prices prompted investors to increase supply, which brought prices back down. That’s how a market would normally function. 

But it’s not how the market for long-term rentals works. 

In October, median rents were up nationwide by 7.8 percentage points, year over year, according to rent.com. In New Hampshire, the median rent was up 14.12%, by the website’s measure. 

Would-be home-buyers have experienced similar price increases. The median single-family existing-home price was up 8.6% in the third quarter, according to realtor.com. The Union Leader reported Tuesday that the median single-family home price in New Hampshire rose by $34,000 from last November to this November. It’s now $435,000.

For homes, apartments and short-term rentals, demand remains strong. But prices have fallen in only one of those markets: the one where supply faces the fewest constraints.  

“My reaction is that the growth in short-term rentals has come about because people are converting their own homes, or parts of them, into short-term rentals,” said Jason Sorens, director of the Center for Ethics in Society at St. Anselm College and author of the Josiah Bartlett Center’s 2021 housing report. “Rarely do people build units specifically for short-term rental. And that’s where the real housing supply bottleneck is: it’s become harder to build. Without more building, we aren’t going to see a similar supply increase for long-term rentals. But the other point this news shows us is that if we did increase supply, it would reduce rents.”

As we documented last year, overly restrictive local regulations are a significant barrier to new development in New Hampshire. These regulations make it difficult to build new housing, which prevents developers from meeting demand. That creates scarcity, which drives up prices. Rizzo would be proud. 

And Scrooge would be thrilled. Scrooge, don’t forget, was a landlord as well as a money lender. He could get away with charging outrageous rents for decades only if his renters had no cheaper options. So Scrooge would be no fan of loosening land use regulations to allow more apartment and home construction.

If Granite Staters want to avoid turning our existing housing shortage into a Dickensian nightmare, the only solution is to loosen the restrictions and let developers create more supply.   

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The last time the N.H. House was split by one vote, shenanigans ensued

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Newly elected lawmakers meet Wednesday to elect officers for the legislative session that starts in January. The House is divided 201-198, with one seat open, as the race ended in a tie. With such a narrow majority, leadership votes could get contentious quickly, and the opportunity for drama is higher than usual. 

How dramatic could things get? It turns out that we have some precedent to look to for answers. And we looked at it. And, well, the words “uh-oh” come to mind. 

Only once in New Hampshire history has the House of Representatives been more closely divided than it is for the 2023 session. That was in 1871, a time not renowned for its civility.

Just six years after the Civil War ended, New Hampshire elected a legislature evenly divided between Democrats and Republicans. The Senate consisted of six Democrats and six Republicans; the House sat 165 Democrats and 164 Republicans.  

When the House session opened on June 7, the stakes were not just high, they could hardly have been higher. Not only was House leadership up for grabs, but two Senate seats were unfilled, and filling them fell to the House. Oh, and the governor’s race that year also fell to the House. Control of the entire state government was on the line.  

That was the situation when members gathered in the morning to elect officers. Election of a speaker was the top order of business, and it was conducted without a fight. On the first ballot, Rep. William Gove of Weare was elected speaker 164-162. 

Rep. Gove was escorted to the chair by two members, whereupon he addressed the divided body as “gentlemen” and delivered a short and conciliatory speech. 

“It may not, perhaps, be amiss for me to express the hope that we shall approach the duties and responsibilities of this session with that careful deliberation and earnest forethought which are so necessary to wise and impartial legislation,” he said. 

And so the members of the House did proceed with careful deliberation and earnest forethought to deploy the diligently memorized rules, norms and customs of the people’s House in service of the most public-spirited effort to effect the destruction of their political opponents.  

The first order of business after choosing a speaker was to elect the House clerk and assistant clerk. This simple task took the next two days. In the process, names were struck from motions, the speaker was challenged, votes miraculously changed overnight, and members tried to pass resolutions to expel their colleagues.  

The initial motion to elect James Jackson of Littleton as clerk and James Colbath of Barnstead as assistant clerk was hit immediately with an amendment to scratch the names and “proceed by ballot to the choice of a Clerk.” The vote on the amendment was 160-159, so Speaker Gove had to cast his first vote to create a tie. The partisan maneuvering had begun. 

An attempt to replace the clerk slate with two other names was killed 161-162, and it was followed by a motion to adjourn, which also failed, followed by a motion to table, which also failed. Then a member questioned the legality of the original motion, asserting that a special rule was needed.

Speaker Gove ruled that a special rule was not needed. In the ensuing series of votes, a motion to uphold his ruling failed 162-164. This was quickly followed by a vote to adjourn, which passed.

When Day 2 of the session opened at 10 a.m. on Thursday and a prayer was said, a member moved to draw seats, and another member moved to declare the drawing of seats null and void. Things went downhill from there.

A motion to adjourn until the next day was defeated, followed by a motion to lay the drawing of seats on the table, which was also defeated. Unable or unwilling to get anything else done, the House then adjourned until 3 p.m.

Upon returning, representatives drew their seats, then sustained the speaker’s ruling from the previous day. How? The majority claimed to have discovered overnight that the previous day’s 162-164 vote against the speaker’s ruling was in fact a 162-154 vote to sustain the speaker’s ruling. 

The question was then moved to vote by ballot on the clerk and assistant clerk. The speaker ruled the motion out of order and refused to hear an appeal. A member from Somersworth asked to be excused from the voting but the speaker would not excuse him. A vote on whether to put the main question (of electing a clerk) was moved, and the vote was 163-163. The speaker broke the tie. 

Then the gloves came off.

A member rose to offer a resolution to expel another member from the House on the grounds that he hadn’t lived in the state for at least two years, as required by the state constitution. The speaker ruled the resolution out of order. A motion to adjourn was made, but failed to pass. 

Finally, the first half of the original motion, to elect Jackson as clerk, was brought to the floor and passed 164-162. A motion to adjourn was offered, ruled out of order, and the vote for Colbath as assistant speaker followed and was passed 163-162. The House adjourned, having accomplished the election of its three key officers over two days.

The representatives had obviously ignored Speaker Gove’s request in his acceptance speech that members conduct their business “with as little consumption of time as is consistent with due diligence and careful consideration.”

On Friday, June 9, the House reconvened, and members from both sides began bombarding the speaker with resolutions to expel other members for not being qualified to serve. A member from Milford was called to order for violating House rules by stating that Democrats had behaved poorly in former years and he was “going to give them some of their own medicine.”

On Saturday, members elected two senators and Democrat James Weston of Manchester (namesake of Weston Observatory, and pictured above) as governor.

With a one-seat House majority, Democrats managed to get their governor and a Democratic president of the evenly divided Senate. The hard-fought victories lasted only for that session, though.

The next year, voters elected a Republican governor, an 8-4 Republican Senate, and a 210-150 Republican House. Which could be a good reminder that, in politics, victories — and losses — are not always as high-stakes as they often feel.

(Editor’s note: The House records from back then are not as orderly as they are today. If any reader finds a minor error in the narrative of these votes, please let us know and we’d be happy to correct it.)

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How educational entrepreneurship can create new opportunities for N.H. children

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By Kerry McDonald

Parents in the Granite State and across the country are clamoring for more educational choices, and greater access to those choices, so that they can find the learning environment that is the best fit for their child’s distinct needs and interests. As a longtime New Hampshire homeschooling mom, Kathryn Michelotti has seen the statewide growth of both homeschooling and other, more personalized education options over the past decade. Recognizing this mounting demand, Michelotti and fellow homeschooling mom Sharon Osborne opened Latitude Learning, a homeschool learning center, in Manchester in 2019.

Latitude Learning began as a small learning collaborative with a la carte classes and activities for local homeschoolers, but in the wake of widespread pandemic school closures and remote learning in 2020, Latitude rapidly expanded. The program quickly outgrew its small space and moved to a larger facility in Derry, where Latitude now serves 120 students, ages four to 17, by offering daily classes and clubs.

Seeing the success of Latitude Learning and the continued parent desire for more learning options in New Hampshire, Michelotti and Osborne are planning to scale their program statewide. “We hope to have a few more Latitudes around New Hampshire so more learners can thrive the way our students do,” Michelotti said. “I’d love to see a future where each child is involved in a learning center or school that reaches them, instructs in their individual learning style, and encourages them to develop their strengths and talents while supporting their individuality and promoting personal responsibility.”

This vision recently led Latitude Learning to be recognized as a quarter-finalist for the prestigious Yass Prize that rewards education entrepreneurs across the U.S. who are building innovative learning models. As an acknowledgement of their efforts, and to help further their expansion goals, Latitude Learning won a $100,000 grant this fall from the Yass Foundation.

“To be recognized and even awarded for what we are doing shows that others see we are on the right path,” Michelotti said. “Of course, we already knew this because we can see how happy our students are, but an outside organization like the Yass Foundation for Education’s acknowledgement of our mission is incredibly validating.”

New Hampshire is a national leader in both school choice programs and education entrepreneurship, helping to increase learning options for families. The state’s tax-credit scholarship program and new Education Freedom Accounts (EFA) enable income-eligible families to exit an assigned district school for a private education option that may work better for their child.

Meanwhile, entrepreneurial parents and educators, such as Michelotti and Osborne, are building new learning models and launching new educational programs that broaden the supply of available options. Most of these new educational programs are low-cost, but many of them also participate in the scholarship and EFA programs, enabling greater access.

Latitude Learning, for example, charges $600 for a 16-week semester of one-day-per-week classes, which is less than $40 per day. Families can choose how many days per week to attend. Latitude is also an approved provider for both the New Hampshire EFA program and the tax-credit scholarship program, making it more widely accessible to more families.

Encouraging the proliferation of low-cost, innovative education solutions throughout New Hampshire will enable more families to find and access just the right learning environment for their child. Unfortunately, regulatory hurdles and related bureaucratic barriers can make it difficult for education entrepreneurs to start and scale their small businesses.

For Becky Owens in Chester, trying to offer sporadic homeschool programs on her farm property turned into a regulatory headache that likely would have deterred many other aspiring education entrepreneurs from moving forward. Owens had been homeschooling her own five children for several years, after pulling her oldest son from the local public elementary school because it wasn’t a good fit for her shy, sensitive boy. She wanted a more personalized educational environment for him and her other children that would be responsive to their individual learning needs and styles.

A college professor for 15 years with a Ph.D. in education, Owens decided to create that personalized learning environment, and eventually expand her offerings to other children in her community. In 2020, she decided to host occasional nature hikes on her property for small groups of local homeschoolers. She had a handful of students register for one of her hikes, and she placed a chalkboard sign in front of her house with the words “Farm Rich Nature Hike” so families could find her.

This simple gesture set off a cascade of events involving the local building inspector, who issued her a “cease and desist” letter for her farm walks. Over the subsequent weeks, Owens had to prepare numerous documents for local officials, including an aerial view of her property, and appear before the planning board to ask for permission to operate as a home-based business. She also had a property inspection from the local fire chief, even though her program was held entirely outside. All of this was required just so Owens could welcome a few children to her property for a nature walk. Her walks never exceeded 10 kids.

Eventually, Owens received approval to operate as a home-based business. “As long as I was completely outside, with no more than four cars at a time, and the kids were not being dropped off on the street, then I could continue,” said Owens, who was granted permission to run a home-based residential business but was told any growth would be limited.

“I can’t hire staff because the building inspector said I can’t. If I hire just one person, I am no longer considered a home-based business,” she said.

Owens offers periodic nature hikes, as well as a program called “Pony Pals,” that provides horse-themed interdisciplinary academic work for children once a week for two hours at a time. Additionally, she offers a once a week program for foster kids that focuses on life skills. (Owens and her husband are also foster parents.) Per her home-based business approval, all of these programs are completely outdoors.

In 2021, however, Owens discovered that the fast-growing national microschool network, Prenda, was entering New Hampshire, and that the state was using a portion of its federal COVID relief funds to make Prenda learning pods available tuition-free for New Hampshire families. Owens gravitated to Prenda, appreciating its small, mixed-age model and focus on individualized learning. She signed up as a recognized Prenda guide, able to host these learning pods at her home.

Today, Owens leads two Prenda pods on alternating days and times throughout the week, each with a maximum of 10 children in kindergarten through sixth grade. A few hundred New Hampshire children are enrolled in Prenda pods throughout the state.

As a hired guide for a national microschool network, Owens is able to operate her indoor learning pod program out of her home, but she is barred from running a similar, independent microschool program on her property.

This discrepancy, triggered by local ordinances that often prohibit the creation and expansion of home-based businesses—and especially of education-related businesses—can block home-grown educational solutions in New Hampshire. It can dissuade entrepreneurial educators and parents from offering educational programming that nearby families may want, and it can tilt the scale away from local, entrepreneurial offerings.

“Something needs to be done,” Owens said. “These local roadblocks need to go away.”

Cultivating a low-tax, low-regulation landscape in New Hampshire that encourages small business has long been a priority for Granite State voters. The emergence of a new sector of education entrepreneurship, catalyzed in large part by the state’s growing school choice programs and increasing parent demand for new and different learning options, could be encouraged and accelerated by exempting non-traditional educational offerings from outdated and often irrelevant regulations. Home education is already exempted from state statutes that define education as occurring in “schools.” But today there are many more educational programs in New Hampshire and across the U.S. that don’t fit into the category of “school” or “homeschool,” and often run into regulatory snares as a result.

Providing broad regulatory exemptions for all non-traditional educational organizations in New Hampshire would encourage education innovation and experimentation. Devising this education-focused “regulatory sandbox” could help unleash the supply of more education options for families by prompting entrepreneurial parents and educators to build new and varied learning organizations.

Additionally, modifying local zoning ordinances to allow educational services by default in residential and commercial zones would enable more learning pods, microschools, and similar non-traditional educational models to emerge.

These common regulatory barriers to entry and scale impact education entrepreneurs nationwide, as my new report for State Policy Network describes. They preclude creative education solutions from being invented and extended, and limit the assortment of education options available to families. New Hampshire is well-positioned to lessen the regulatory burden on education entrepreneurs, and encourage the introduction of an array of educational possibilities. Parent demand for more education options continues to grow, and school choice policies such as EFAs and tax-credit scholarships continue to support that demand.

Now, state and local policymakers can encourage the supply of these diverse learning options by removing regulatory hurdles that prevent or limit education entrepreneurship throughout New Hampshire. Who knows what New Hampshire’s next award-winning learning model will be?

Kerry McDonald is an education policy fellow at State Policy Network and a senior education fellow at the Foundation for Economic Education. She is the author of the book, Unschooled: Raising Curious, Well-Educated Children Outside the Conventional Classroom.

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Florida passes New Hampshire as most economically free state

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New Hampshire has lost its title as the most economically free state in the union. The top spot this year goes to Florida, by a hair, according to the 2022 Economic Freedom of North America report released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

Florida scored 7.94 out of 10 in this year’s report (up from 7.78 last year), beating out second-place New Hampshire (7.84).

Economic freedom—the ability of individuals to make their own economic decisions about what to buy, where to work and whether to start a business—is fundamental to prosperity.

“As we’ve pointed out for years, Florida, Tennessee, Texas and other states are serious about gaining a competitive advantage over New Hampshire,” said Andrew Cline, president of the Josiah Bartlett Center for Public Policy. “If we want to have a New Hampshire Advantage 20 years from now, we have to stay focused on expanding economic freedom for all Granite Staters. If we rest on our past accomplishments, we will be left behind.”

Enhancing government control over individuals’ economic choices takes us in the opposite direction. But just as importantly, failing to move quickly enough to enhance economic opportunity for Granite Staters can harm New Hampshire too, as more aggressive states pass us by.

“When governments allow markets to decide what’s produced, how it’s produced and how much is produced, citizens enjoy greater levels of economic freedom,” said Fred McMahon, the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute and co-author of this year’s Economic Freedom of North America report, which measures government spending, taxation and labor market restrictions using data from 2020, the latest year of available comparable data.

Rounding out the top five freest states are South Dakota (3rd), Texas and Tennessee (tied for 4th). At the other end of the index, New York is once again the least-free state (4.25) followed by California (49th), Hawaii (48th) and Vermont (47th). For the first time, the U.S. territory of Puerto Rico was included in the index—its score in this first preliminary effort was 2.04. The least-free state’s score was more than twice as high.

Across North America, the least-free quartile of jurisdictions (including Canada and Mexico) had an average per-capita income of just $2,160 compared to $54,927 for the most-free quartile.

“Hundreds of independent studies have produced overwhelming evidence that higher levels of economic freedom are associated with more opportunity, more prosperity, greater economic growth and more jobs,” said Dean Stansel, report co-author and economist at Southern Methodist University.

The Economic Freedom of North America report (also co-authored by José Torra, the head of research at the Mexico City-based Caminos de la Libertad, and Ángel Carrión-Tavárez, director of research and policy at the Instituto de Libertad Económica (ILE) in Puerto Rico) is an offshoot of the Fraser Institute’s Economic Freedom of the World index, the result of more than a quarter century of work by more than 60 scholars including three Nobel laureates.

The report can be read here: EFNA-2022-US-POST

Detailed tables for each country and subnational jurisdiction can be found at www.fraserinstitute.org.

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