NCPA - National Center for Policy Analysis

The Withering Northeast

December 1, 1997

With the exception of New Hampshire, the entire Northeast -- from Maryland and the District of Columbia north to Maine -- resembles a group of European welfare states more than the rest of the U.S., says analyst Stephen Moore.

  • The governments in the Northeast are already nearly one-third more expensive than the rest of the country -- costing $3,226 versus $2,483 per resident.
  • Every northeastern state has a corporate tax rate above the norm, and only Connecticut and Pennsylvania have top personal income tax rates below the national average of 5.5 percent.
  • Labor costs are 30 percent higher than the national average -- in part because none of the nation's 22 right-to-work states is in the Northeast.
  • Welfare benefits are lavish -- for example, as much as $30,700 in New York City.

It is not surprising, says Moore, that Financial World's state-by-state Cost of Doing Business Index ranked all the northeastern states in the bottom rungs (with the exception of Delaware): from Massachusetts (37th) to New York (46th) and Rhode Island (49th).

Such policies are having predictable effects, says Moore.

  • Incomes in the Northeast have grown 20 percent slower than the rest of the country in the 1990s.
  • Real estate values have plummeted 25 percent relative to the rest of the nation.
  • Where 40 years ago the Northeast dominated manufacturing, today the two states with the highest percentage of employment in manufacturing are North Carolina and Mississippi.
  • Connecticut and Rhode Island are the only two states that lost population in the 1990s -- and except for immigration, the population of Maine, Massachusetts, New Jersey, New York and Vermont would be shrinking as well.

Finally, from 1990 to 1995 the Northeast lost nearly half a million jobs, while the rest of the states gained 8.5 million. For the past quarter century, the non-northeastern states have gained new jobs at three times the pace of the northeastern states.

Source: Stephen Moore (Cato Institute), "Is the Northeast Necessary?" American Spectator, December 1997.


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