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IMPROVING LIVES in ALABAMA a Vision for Economic Freedom and Prosperity IMPROVING LIVES in ALABAMA a Vision for Economic Freedom and Prosperity

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IMPROVING LIVES in ALABAMA a Vision for Economic Freedom and Prosperity IMPROVING LIVES in ALABAMA a Vision for Economic Freedom and Prosperity IMPROVING LIVES IN ALABAMA A Vision for Economic Freedom and Prosperity IMPROVING LIVES IN ALABAMA A Vision for Economic Freedom and Prosperity Edited by Daniel Sutter About the Johnson Center The Manuel H. Johnson Center for Political Economy at Troy University provides a dynamic and rigorous education program focused on the moral imperatives of free markets and individual liberty, as well as relevant policy research on national and local issues. Founded in 2010, the Johnson Center has rapidly grown from an idea into a vibrant hub of teaching, scholarship, and rigorous public debate. The Johnson Center has established itself as a leading and reliable contributor to public policy in Alabama and across the nation. For media inquiries, please contact: Manuel H. Johnson Center for Political Economy 137 Bibb Graves Hall Troy University Troy, AL 36082 (334) 670-6583 business.troy.edu/JohnsonCenter/ Improving Lives in Alabama A Vision for Economic Freedom and Prosperity Table of Contents Introduction Daniel Sutter 1 Economic Freedom and Prosperity in Alabama G. P. Manish and Malavika Nair 2 The Need for Constitutional Constraints on Government George R. Crowley 3 Taxing Alabama: How the State Generates Revenue and the Impact on Residents Jim F. Couch, J. Douglas Barrett, David Black, and Keith D. Malone 4 Reinventing the Alabama K-12 School System to Engage More Children in Productive Learning Dr. John Merrifield and Jesse A. Ortiz, Jr. 5 School Service Privatization in Alabama Daniel J. Smith and Robin P.K. Aguiar-Hicks 6 Medicaid in Alabama: Innovative Reforms for the Future Scott A. Beaulier 7 Pension Reform in Alabama: A Case for Economic Accounting Eileen Norcross 8 Tax Incentives, Job Creation, and the Unseen: Is Alabama Giving Away the Store to Attract New Industry George R. Crowley 9 Reforming Occupational Licensing in Alabama Daniel J. Smith 10 Legal Reform in Alabama: Recommendations and Implications John A. Dove 11 Cultural Renewal: How to Make America Great Again Adam Lowther 12 Economic Possibilities for our Grandchildren: Unleashing the Invisible Hand in Alabama Arthur Carden 4 Improving Lives in Alabama A Vision for Economic Freedom and Prosperity We all want Alabamians to lead wealthier, healthier and Improving Lives in Alabama: happier lives. But how do we achieve these goals? Properly Introduction balancing the roles of the private and public sectors holds the key. The Manuel H. Johnson Center for Political Economy was Daniel Sutter founded at Troy University in 2010 to support research and teaching about how economic freedom generates prosperity and happiness. We have compiled this volume to offer a variety of ways to improve life in Alabama. Eighteenth Century Scottish professor Adam Smith, widely regarded as the founder of the economics discipline, titled his most famous book An Inquiry into the Nature and Causes of the Wealth of Nations. This indicates that economists have been thinking, studying and writing about wealth and growth since the founding of our discipline. And the accumulated evidence overwhelmingly demonstrates that economic freedom leads to prosperity and happiness. A market economy is the dizzying array of voluntary interactions which emerge when property rights are secure. In a market economy people are free to earn a living as they choose, start a business if they wish, purchase the goods and services they desire, and save and invest for retirement or benefit their children and grandchildren. People also are free to form clubs, foundations, churches, and civic groups to pursue other goals. The prosperity generated by the market is not limited to monetary riches, but includes all aspects of human well-being and flourishing, including life expectation, infant mortality, educational attainment, environmental quality, and happiness. Markets deliver people materially better lives and the satisfaction of having earned their well-being through their own efforts. This book offers a mix of concrete steps for the near term and long run targets. Some of the concrete suggestions, like reducing the number of jobs requiring occupational licensing (Chapter 9) or privatizing school services (Chapter 5), could be implemented immediately. More often the focus is on the direction Alabama must move to reap the full benefits of economic freedom. Too often the energy and focus required to accomplish the day-to-day tasks of government (as well as business or personal life) prevents us from assessing whether we are on path to achieve our long term goals. Dealing with this year’s budget, repairing the roads, or educating students, leaves policymakers with too little time to consider the long term. Improving Lives, as the volume’s subtitle suggests, offers a vision for a freer, wealthier, and happier Alabama. 5 Introduction The vision for public policy offered here draws on Alabama spends $1.4 billion on non-teaching related items like specific views about how both the private and public sectors food service, maintenance and transportation. School districts operate. The first three chapters thus detail these views, starting across the state could likely save over $100 million by contracting in Chapter 1 with a discussion by G. P. Manish and Malavika for these services with private companies, which have better Nair on the nature of the market economy as well as indexes incentives to control costs and provide better service. Rapidly developed to measure how closely a nation approaches the ideal escalating expenditures on Medicaid, the state medical care of economic freedom. The chapter also reviews the enormous program for low income (and other) Alabamians, have squeezed evidence on how economic freedom yields prosperity and other components of the state budget. Scott Beaulier describes growth. Drawing a line between the private and public sectors in Chapter 6 the likelihood of even greater Medicaid expenditures also requires a theory of the operation of the public sector. in the future, and how changes in the Federal funding formula George Crowley provides this in Chapter 2, reviewing the theory could break the state budget. Fortunately, options for reform of public choice. Chapter 2 also lays out the role of and need for exist, and have been tested in other states. Perhaps the most constitutional rules to constrain democratic governments. Many important reform would be to alter the underlying Federal cost people subscribe to an essentially romantic or idealized view of sharing structure for Alabama Medicaid. Chapter 7 by Eileen democracy in which perfectly informed citizens can precisely Norcross considers the pension system for Alabama teachers and control politicians. Public choice views politicians as pursuing state employees, the Employees Retirement System and Teachers their own interests and only imperfectly controlled by citizens Retirement System (ERS/TRS). Pension benefits are legally through elections. Constraints on democracy, as exemplified by guaranteed for current retirees and employees, and yet ERS/TRS Alabama’s constitutional balanced budget provision, allow citizens is underfunded, meaning that it lacks assets sufficient to pay off to better control politicians. Alabama’s tax system, analyzed by all of the promised benefits. And the underfunding problem may Jim Couch, Douglas Barrett, David Black, and Keith Malone in be far worse than the state reports, due to excessively optimistic Chapter 3, reflects the public choice and constitutional economics assumptions by ERS/TRS concerning the rate of return on its approaches. Our system features several constitutional assets. Should the state retirement systems ever be unable to constraints on the state’s power to tax, including maximum tax meet their obligations, Alabama taxpayers will be called upon to rates for income and property taxes and the earmarking of most step up and make good these promises. tax dollars to specific purposes, like the Education Trust Fund. Alabama’s tax system takes a toll on economic activity, with its Chapter 8 by George Crowley turns to Alabama’s aggressive heaviest burden imposed on lower income families, and costs use of tax breaks and development incentives to lure major the state economy far more than just the dollars raised to fund manufacturing employers to Alabama. Case studies reveal that government. four of five of the most prominent development deals have succeeded as advertised, bringing thousands of manufacturing The next seven chapters of the book turn to specific jobs to the state. But the important question is whether this policy issues, beginning with spending programs and moving success has come at a too high of a cost, both directly to on to legal and regulatory issues. The first two chapters look at taxpayers, and indirectly in economic opportunities not realized. public primary and secondary (K-12) education. In addition to And while Alabama aggressively courts major manufacturers being the largest budget item, education also significantly affects in pursuit of jobs, other state policies cost us jobs. Daniel Alabamians’ opportunity to lead productive and flourishing Smith focuses in Chapter 9 on the license restrictions Alabama lives. Trillions of dollars and numerous rounds of reform imposes on over 140 occupations, or a quarter of the state labor across the nation over the last thirty years have failed to improve market. Occupational licensing too often imposes unnecessary educational outcomes noticeably. John Merrifield and Jesse educational and training requirements on practitioners, making Ortiz explain why in Chapter 4, and argue that real improvement both consumers and Alabamians blocked from pursuing a career requires competition and a diverse range of schooling options to of their choosing worse off. John Dove examines the legal serve the many different learning styles of Alabama’s children. environment for business in Alabama in Chapter 10. Specifically, While Merrifield and Ortiz argue that money alone will not Alabama’s tort law may be deterring as much investment in our solve the problems of our public schools, many of the dollars state as tax breaks manage to attract. The chapter recommends we appropriate to education never reach the classroom.
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