December 23, 2014

A new study by State Budget Solutions examines the relationship between the size of the private sector economy in a state relative to the government. Their theory is straightforward. While the private sector creates wealth, government mainly redistributes it.

Here is a key finding. “When examining the lower 48 states, the analysis finds that, on average, a 1 percentage point decrease in the size of the private sector yields a decrease in per household income of approximately $3,273.”

They apply that observation with the increase in government relative to the private sector if Utah expands Medicaid under ObamaCare. “Expanding Medicaid in Utah by $258 million will shift the composition of Utah’s personal income toward public sector spending and shrink the private sector by up to 0.25 percentage points. That means in the next few years, the average household in Utah would see its income drop by up to $805, or the number of jobs in the state will be reduced by 14,125. The overall loss in personal income will be up to $749 billion ($805 multiplied by 930,700 households).

This analysis estimates a reduction in the long-term growth in the economy and does not necessarily mean the elimination of existing household income or jobs. It does mean that future income increases and job creation will be lower than they would be in the absence of higher taxes and spending. Also, the analysis underestimates the long-term decline in the private sector that will occur because of a slower private sector growth rate.”

North Carolina ought to create a vibrant private sector economy. Growth is the way to generate better incomes for people, not big government redistribution. Check out how ObamaCare’s Medicaid expansion hurts the economy.