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  • Competitive Federalism Forces States to Improve

    Where you live matters—in more than one way. As Time magazine reports, some states are known for being laid back, while others are more intense. The beauty of competitive federalism is that it creates a system where this range of emotions is possible.

    Economically, too, the states are in direct competition. For you. They want your skills and your economic contributions. So, in everything from tax policy to education reform, the states are competing with each other. That competition can create a virtuous race to implement the most successful policies.

    “I’ve got to beat Nikki Haley and Bill Haslam and Bob McDonnell next door to me,” North Carolina Governor Pat McCrory explained recently at The Heritage Foundation. The leaders he named are the governors of South Carolina, Tennessee, and Virginia, respectively. “We’re fighting for jobs against each other,” McCrory added. “We act as though we’re private-sector competitors.”

    The competition is friendly, of course. McCrory says these governors often exchange ideas about how to improve their states. But the competition is real. It forces each state to compete to attract residents, businesses, and investments.

    There’s evidence that this competitive federalism works. The Census Bureau says California lost about 100,000 people in 2011, and more than half of them went to Texas. That’s a perfect snapshot for 21st-entury America: a high-tax, hyper-regulation state losing jobs and opportunities to a lower-tax, sensible-regulation state.

    In North Carolina, McCrory has focused on specific areas, including tax reform. “We initiated the most dynamic tax reform that’s been seen in this nation in the past four or five years,” McCrory explained. He’s also attempting to streamline government services and make them more responsive to citizens by treating them as customers.

    Competitive federalism creates a virtuous competition. It also forces states to experiment to discover which policies work and which don’t. It’s a never-ending competition that can make winners of us all.

    Posted in First Principles [slideshow_deploy]

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