Pethokoukis, Economics, U.S. Economy

When economists talk about mismanaged US states, one gets special mention

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A new IGM Forum poll of economists finds large, confident majorities who think US states are (a) understating pension liabilities and (b) at risk — at least some of them — of eventually needing a combo of austerity budgets, a federal bailout, and/or default unless they soon increase taxes, cut spending, or change their pension systems.

Now this post really isn’t about pension liabilities. It is about how in the survey of these economists one state repeatedly received special mention for its fiscal woes: Illinois.

But the Prairie State has lots of problems, in addition to government making promises it can’t reasonably keep. The US Chamber of Commerce recently looked at the difficulty of starting a business in different cities. I choose Dallas and Chicago. As you may know, Texas has been a leading state for job creation, Illinois not so much — as this chart shows:

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So how do Dallas and Chicago compare on the regulatory ease of starting a business? Here is Chicago:

US Chamber of Commerce

US Chamber of Commerce

And here is Dallas:

US Chamber of Commerce

US Chamber of Commerce

How to fix Illinois? Spend and regulate less would seem to be a smart start.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

7 thoughts on “When economists talk about mismanaged US states, one gets special mention

  1. Chicago could certainly be more friendly to business, but that says nothing about the entire state’s regulatory climate. The yellow statewide numbers don’t give the population comparison as the white city boxes do. Texas has more than double the population of Illinois. Therefore Illinois as a whole is actually doing better than Texas in small businesses and small business employment per capita.

    I suspect that Illinois’s unemployment rate would improve markedly if you injected a few million barrels of oil and a few billion cubic feet of natural gas underneath it.

    • Yes; the conclusion drawn here are completely wrong based on these statistics:
      As a percentage of overall population Illinois has about 20% more people employed by small businesses (18.6% versus 15.5%).
      Illinois has slightly more business per capita (10.7 versus 11.5).
      Spending and regulating less may be an answer, but what is shown here in no way proves up that hypothesis. Disgracefully poor article.

    • @juandos – The article you linked to seems to be talking about manufacturing jobs. Small businesses are largely service jobs, which have a harder time moving.

      A manufacturer can have customers nationally and even internationally, so moving to a neighboring state with existing manufacturers does not increase competition. If restaurants similarly tried to leave Chicago for St. Louis to cut costs, they’d be competing with existing St. Louis restaurants because of the localized nature of the restaurant market. The demand for eating out in St. Louis would not expand just because there were more eateries; the lower costs would be offset by lower revenues. Ditto plumbers, carpenters, etc.

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