State and Local

State and Local

Research

Daniel Sutter | Jun 21, 2016
Medicaid was established in 1965 as a joint state and federal program to provide medical insurance to Americans who are poor and have disabilities, and it has grown from 1 percent to 3 percent of GDP. The source of Medicaid’s growth over the past 50 years must inform efforts to reform the program and slow spending. The literature on the political economy of Medicaid provides strong evidence of interest group and political ideological influence, enabled by the open-ended federal match for state spending.
Eileen Norcross, Olivia Gonzalez | Jun 01, 2016
A new study for the Mercatus Center at George Mason University ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, such as unfunded pen­sions and healthcare benefits.
George R. Crowley | May 17, 2016
A new study for the Mercatus Center at George Mason University examines recent trends in state fiscal policy and details how well these efforts conform to widely accepted “best practices” in tax reform. It examines the tax and the expenditure patterns of five states and finds that, while there is no one correct way to enact economically beneficial tax reform, it is possible to discern some clear trends.
Robert Krol | May 05, 2016
Economist Robert Krol examines the problem of highway congestion, looking at how congestion pricing has been successful in the past and why it could be an attractive option in the future. There is mixed evidence about whether congestion pricing is regressive, but governments implementing congestion pricing could use several policy solutions to help reduce inequity. These include reducing other regressive taxes such as the gasoline tax and giving commuters the option to choose between toll lanes and toll-free lanes.
Marc Joffe, Jesse Martinez | Apr 12, 2016
Puerto Rico is facing a severe fiscal crisis, and new crises will be almost inevitable in the absence of major institutional changes in the commonwealth. History has bequeathed the island inefficient state-run enterprises and a government unable to balance its budget, but Puerto Rico could have a bright future if it undertakes the right reforms.
John A. Dove, Daniel J. Smith | Mar 22, 2016
Alabama currently lags behind its regional neighbors and the nation in economic growth and performance. This study undertakes a comprehensive analysis of Alabama's current fiscal situation as well as the reforms necessary to put Alabama on the road to economic prosperity.

Testimony & Comments

Christopher Koopman, Thomas Stratmann, Mohamad Elbarasse | Jun 12, 2015
There is little evidence to support the claim that certificates of need are an effective cost-control measure; and Stratmann and Russ have found that these programs have no effect on the level of charity care provided to the poor. While controlling health care costs and increasing care for the poor may be laudable public policy goals, the evidence strongly suggests that CON regulations are not an effective mechanism for achieving them. Instead, these programs simply decrease the supply and availability of health care services by limiting entry and competition.
Eileen Norcross | Jun 11, 2015
In this brief comment, I will focus on the correct framework to use in selecting the appropriate interest rate when valuing public pension sector liabilities. A framework based on economic principles will accurately measure the market value of these liabilities and is superior to the actuarial approach.
James Broughel | Sep 02, 2014
This year’s report makes several important improvements over reports from previous years. However, there are still a number of ways in which this report can be made more useful if it is to be a meaningful representation to Congress and the American public of the effects of the regulatory system in the United States.
Matthew Mitchell | Oct 04, 2011
Matthew Mitchell testified before the House Committee on the Judiciary about state governments' experiences with Balanced Budget Amendments.
Russell Roberts | Feb 16, 2011
Russell Roberts testified before the House Committee on Government Oversight and Reform on the second anniversary of the stimulus.
Eileen Norcross | Feb 09, 2011
Eileen Norcross testified before the U.S. House Committee on Oversight and Government Reform on the looming municipal debt crisis.

Research Summaries & Toolkits

J. W. Verret, Marc Joffe | Apr 28, 2016
J. W. Verret and Marc Joffe debate whether Puerto Rico should be allowed to restructure its debt. After 10 years of recession and poor fiscal management, Puerto Rico is facing a major fiscal crisis. With $72 billion in debt (the equivalent of the commonwealth’s entire economy), deeply distressed pensions, high unemployment, and outmigration, Puerto Rico is insolvent. Congress is deliberating on legislation to provide a framework for Puerto Rico to restructure its finances under the guidance of a federal control board. The most contested point in the current proposal is whether to allow the board broad authority to restructure debt.
Matthew Mitchell, Olivia Gonzalez | Apr 19, 2016
Over the past six decades, state and local government spending has increased at more than twice the rate of private sector growth. Left unchecked, this growth puts state and local governments on a costly path that is unsustainable. Either spending growth must slow, taxes must rise, or both. Spending growth can contribute to significant fiscal stress, requiring difficult adjustments when large budget gaps arise. Unfortunately, short-term thinking often dominates the adjustment process so that legislators frequently make choices—such as underfunding pension obligations—that improve the short-term fiscal outlook at the expense of worsening the long-term outlook.
Adam Millsap, Olivia Gonzalez | Jan 12, 2016
As state tax systems grow increasingly complex, it helps to have a framework for evaluating their structure. States usually implement taxes that fall into one of three categories—income, property, and consumption—but there is substantial variation in how each of these taxes can be structured. When trying to balance the many competing goals for setting tax policy, state policymakers can use five main criteria to compare the benefits and drawbacks of potential tax instruments: economic efficiency, equity, transparency, collectability, and revenue production.
Eileen Norcross, Emily Hamilton | Jan 13, 2015
Guaranteed pension benefits are a key feature of government employment for many state and local workers. However, flawed accounting methods have resulted in persistent underfunding of these promised benefits.
| Sep 24, 2013
The Mercatus State Policy Guide is intended to summarize and condense the best research available on the most relevant topics. It’s a starting point for discussion, not a comprehensive overview of economic policy. Each statement is supported by academic research, with links provided in the endnotes. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your economic policy research.
Emily Hamilton | Dec 20, 2011
Several public policy organizations have published studies that rank state economic competitiveness. This piece looks at the overlap between three indices and draws lessons for state policymakers.

Speeches & Presentations

Expert Commentary

Jul 28, 2016

The labor market is just that—a market—where we as individuals trade our skills and time for remuneration. As a market, it is a sensitive self-balancing mechanism of incredible complexity responding to millions of actions taken around the world by millions of participants. Artificially interfering in the sensitive balance of this mechanism will create undesirable outcomes.
Jul 19, 2016

The economic variation across the U.S. is considerable. Such variation calls into question the usefulness of top-down, federal fiscal policy designed to smooth out recessions.
Jul 05, 2016

The $15 ‘living wage’ populism that pervades the minimum wage debate is not based on economic evidence, and, as shown here, it’s likely to harm many local economies if implemented indiscriminately across the U.S. While workers in higher-wage cities like D.C. may be able to escape the worst of its effects, those in lower-wage places like Minneapolis are unlikely to be so lucky.
Jun 29, 2016

Spend but don’t tax politicians want to spend and keep taxes low to score points with fiscal conservatives ... Politicians take credit for providing health insurance for the poor; we constantly hear that Alabama Medicaid serves one million Alabamians. Most voters are too busy with their lives to take the time to learn how Medicaid fails to deliver its promise.
Jun 27, 2016

On its face, it may look like the Legislature is trying to chase business out of the Empire State. But this isn’t an anti-business crusade. Airbnb, Uber and Lyft are just part of the wrong industry.
Jun 24, 2016

Disregarding the role of state and local governments will leave much of the problem unchanged. Only when Washington takes fundamental reform at a state-level seriously will everyone have a genuine chance to go out and succeed in the manner that Ryan has suggested.

Charts

According to recent research, expanding state Medicaid spending is “crowding out” spending on other major state programs, most notably education and transportation infrastructure. This growth in state Medicaid spending, however, does not seem to be increasing state debt burdens.

Experts

Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University, where he is the director of the Project for the Study of American Capitalism. He is also an adjunct professor of economics at Mason. In his writing and research, he specializes in economic freedom and economic growth, public-choice economics, and the economics of government favoritism toward particular businesses.
Eileen Norcross is a senior research fellow and director for the State and Local Policy Project at the Mercatus Center at George Mason University.

Podcasts

Eileen Norcross | June 24, 2016
Eileen Norcross discusses Vermont's fiscal health with host Bill Sayre.

Recent Events

Join us for a lunchtime discussion as Eileen Norcross explains what policy changes would help Arizona improve its fiscal health.

Books

Michael S. Greve | May 22, 2015
This essay examines the sources and the scope of federalism’s failures. It provides a trenchant, constitutionally grounded analysis with profound implications for a range of current policy debates. Federalism’s restoration requires not merely rebalancing the federal-state relationship through decentralization. Rather, we must restore the structure of federalism to competitive federalism—which encourages states to compete to enhance freedom and economic growth—in response to the rise of cartel federalism, which squashes competition between the states and makes states dependent on the federal government.

Media Clippings

Adam Millsap | Jun 15, 2016
Adam Millsap discussed local economies with Wallethub's Richie Bernardo for their piece "2016’s Metro Areas That Most and Least Resemble the U.S."
Eileen Norcross | Feb 02, 2014
Eileen Norcross cited at The New York Times.
Sarah Arnett | Jan 17, 2014
The Mercatus Center cited at Philly.com.
Sarah Arnett | Jan 16, 2014
The Mercatus Center cited at Investor's Business Daily.
| Jan 16, 2014
Mercatus cited at Union Leader.
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