Most states have seen their economies stagnate over the past year, likely a result of a major slowdown in the coal and oil industries, a new report by the U.S. Department of Commerce reveals.
According to the Wall Street Journal, the gross domestic product (GDP) of 28 states stalled or shrank last year. A complete list of the Commerce Department can be found here, but a number of states were particularly hard hit. Those states include: Iowa, Kansas, Nebraska, Oklahoma, Wyoming and New Mexico.
The findings were not all bad news. Nine states actually saw their economies grow, including the country’s most populous state: California. Thanks to the state’s information industry that includes the successful Silicon Valley, California saw a one percentage point increase in its GDP from the previous year. This is significant because California accounts for around 13.8 percent of all U.S. economic output.
Another of our country’s biggest and most populous states also saw modest economic growth. The Texas economy grew at an impressive 3.8 percent, despite relying heavily on a waning energy industry.
These findings suggest that liberal economist Paul Krugman and other progressives have been wrong to say that oil prices are the main reason to explain Texas’s growing economy.
In an essay titled, “The Texas Miracle Isn’t All About Oil,” Vance Ginn, an economist at the Texas Public Policy Foundation, a free market think tank in Texas, responds to Krugman arguing:
“Krugman’s argument is that the Texas miracle was only about oil prices and not the Texas model of low taxes overall, no personal income tax, relatively restrained government spending, and predictable regulations. Again, given that oil prices remain less than half of what they were at their peak, Krugman and all those arguing that the Texas model will fail are just wrong.”
Oregon is another winner cited in the Commerce Department report, which saw a healthy 3.2 percentage growth. Like the Lone Star State, the Beaver State has been working hard to create a business friendly environment. According to the liberal-leaning Oregon Center for Public Policy, the state has one of the nation’s lowest business taxes.
Besides supporting the free-enterprise system, another takeaway from the report is the need to diversify, so a state’s economy is not entirely reliant on one industry. For example, North Dakota saw its economy shrink by nearly 8 percentage points, largely because of steep drop in mining and oil extraction.
Politically, the findings are likely to have little impact. With the exception of New Mexico, few of the major winners or losers of the report’s findings are swing states. Still, expect both of the leading presidential candidates to frame much of their pitch to voters on the bread and butter issues of jobs and the economy. This report provides needed context.
Israel Ortega is a Senior Writer for Opportunity Lives. You can follow him on Twitter:@IzzyOrtega.