Disscussing why States Prosper on Fox News Strategy Room

I always enjoy the opportunity to join the panel on FoxNews.com Strategy Room. This being the week of its first year anniversary of that program made it all the more special. On the show we covered many things, including why certain states prosper and why others do not. I knew exactly where the conversation was going when the Host, Eric Bolling started discussing the decline of Detroit and other historically industrialized cities and out of no where he started naming states (mainly in the South) that seem to be enjoying economic growth. He asked, "what do these have in common?' The answer was simple; they are Right to Work states.

Right to Work states allow employees to choose whether they join a union, while closed union shop states make union membership compulsory. How significant of an impact does such have an economy? A report by Steve Moore of the Wall Street Journal and best selling author Arthur Laffer, published by the American Legislative Council, indicates that it is huge. The authors do a thorough investigation of why the ten richest states have prospered and why the ten poorest have struggled. The report covers ten years, 1997 to 2007.

The states that have enjoyed the most prosperity over the last decade, according to the study, are Utah, Colorado, Arizona, Virginia, South Dakota, Wyoming, Nevada, Georgia, Tennessee, and Texas. On average, these ten states witnessed an 85.1% increase in the states' gross state product growth, an 87.9% increase in personal income growth, a 55.9% increase in personal income per capita growth, and a 20.4 percent increase in population growth.

On the opposite end of the economic spectrum you have Hawaii, Pennsylvania, California, Illinois, Ohio, New Jersey, Maine, Rhode Island, Vermont, and New York. These unfortunate states have only seen a 59.3% increase in the states' gross state product growth, a 60.7% increase in personal income growth, a 52.3% increase in personal income per capita growth, and a mere 4.4 percent increase in population growth.

There are several similar characteristics between the rich and poor states in one area in particular, which is in the policies they pursue. For example, all but one of the winners are Right to Work states (Colorado). Meanwhile, all of the losers are under force unionism. When unions (and their higher benefits, wages, and other labor expenditures) are a fixed cost of doing business, those states are simply less attractive, which leads businesses to businesses moving to more business friendly states.

It doesn't stop with unions. The ten losers are noted for having excessively high taxes on businesses and high income earners. When these income earners feel such pressure, they know they cannot always "fight" the policies effectively, so they take "flight" to states that are friendlier to business and wealth creation. Furthermore, the losers are known for more excessive regulations than the winners, another cost in time and money in building a business. Finally, these losers often have crippling licensure laws that undermine entrepreneurship and economic activity. Laffer and Moore's study goes much further by examining several "principles" of effective taxation and shows huge disparity between the winners and losers. The bottom line is that some states create an environment that is more business friendly. As a result, those states enjoy lower unemployment and higher economic growth.

The results of the states that ignore the ability of businesses and the affluent to flee such policies have led to a huge decline in both prosperity and even population growth in the "loser" states. The study should be read by policy makers, business owners, and individuals who want to live in states of prosperity and not poverty.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

The Demise of the US Auto Industry on FoxNews.com Strategy Room

FoxNews.com Strategy Room is an eclectic marketplace of ideas, especially when Eric Bolling is at the helm. Bolling’s academic background of economics and business, accompanied by a career that has included being a professional baseball player, one of the world's largest commodity traders, and years as a business news journalists (first with CNBC and now with Fox News and Fox Business) makes him something of an adrenaline addict and one of the most enjoyable TV hosts to watch.


Bolling is intelligent, eloquent, and passionate about his convictions, although they are not easy to label. He describes himself as one who is "center/right and believes in free markets." As a man who has made a significant part of his living as a commodities broker, his passions are both pragmatic and well founded.

When I was on the Strategy Room this week (Bolling hosts 3 PM EST hour) the show covered a plethora of issues early on, but slowly began to focus on the fact that the United States automobile industry is dying and seems to be doing so quickly. This is one of the most dominant topics in business news today.

Invariably these discussions lead to "what should the government do to solve this?" My answer to that is that government has been the primary reason the industry is in such a dire situation. You can go back decades to when Michigan became a close union shop state, making labor the primary customer rather the people who buy cars. This has led to Detroit paying over $70 an hour per employee compared to Japan's $40 an hour for employees in Southern states. Addressing the auto industry situation should include:

• Ending the controversial UAW "Job Bank" program . This program has paid tens of thousands to be idle at 90 percent of salary.


• Bring auto worker wages back to the real world. According to the Heritage Foundation, when it comes to salary and benefits, the average wage of all private sector employees is $25.36 and for American based Japanese auto plants (Honda, Nissan, Toyota) is $42.95 to $47.60 on average. The big three pays $70.51 (Ford), $73.26(GM), and $75.86 (Chrysler) per hour, per employee. These six digit wages for blue collar work demand a reality check.


• End the "30 and out" practice. The Detroit auto companies allow employees to retire with very lucrative packages at the young age after 30 years. If you start working at a plant at 20, you can retire at fifty. You can see where that can be costly. 60 or 65 should have to be the standard retirement age, which is what the market clearly demands.


• Seven week vacations need to be history. Detroit auto workers receive almost two months off a year. This is another pounding cost, on a very weak industry, that needs to change.


• Finally, they should require the companies to relocate to a right to work state. This would empower these companies to lower wages and make it easier to implement the other reforms listed above. Twentytwo states are Right to Work, 28 are not. It is more than a coincidence that all but one of the ten richest states are Right to Work, while the ten poorest are closed union shops according to the American Legislative Exchange Council. The threat alone could make the Michigan government come to its senses.

So how do I think the problems of the auto industry should be solved? This can only be done through markets, less government, more freedom, and plain old business sense. These are the kind of ideas that once made the automobile industry the envy of the world.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.