By Nicholas Dolinger
A recent ranking of states according to “business friendliness” has deemed Republican-leaning “red states” as the highest in terms of favorability to free enterprise.
On July 13, CNBC released its 2022 ranking of “America’s Top States to Do Business,” with an overall ranking based on 88 metrics in 10 broad categories. Among these 10, the deeply Republican states of the Mountain West and elsewhere dominated in one metric: “business friendliness,” which was weighted at 8 percent of the total factors contributing to the overall ranking.
“Companies follow the path of least resistance,” explains CNBC regarding the metric of business friendliness. “That includes a legal and regulatory framework that does not overburden business. We measure each state’s lawsuit and liability climates, regulatory regimes covering areas such as trade and labor, as well as overall bureaucracy.”
The ranking for “business friendliness” was dominated by states from the Great Plains and Rocky Mountain regions: the first, second, and third spots in the category were occupied by North Dakota, Wyoming, and Idaho, respectively. The only state in the top five to fall outside these regions was Arizona, with Montana in fifth place, according to CNBC.
While the upper echelons of “business friendliness” were dominated by the Mountain West and other deep red regions, several swing and blue states were included in the top 10. The highest ranking among these was Virginia, which was sixth in that metric. Democrat-leaning New Hampshire and Nevada also appeared in the top 10.
The pattern did not necessarily hold among the lower rankings: The least “business-friendly” state, according to CNBC, was deep-crimson Mississippi, with Republican strongholds Louisiana and West Virginia also appearing in the bottom 10, alongside the Democratic bastions of California, New Jersey, and New York.
“California not only has the most restrictive business climate in the United States, it’s also the most expensive state to run a business. Sadly, when businesses go, so do jobs. The state is 34th in employment and ranks 48th in ‘best states to live’ so voters, is it worth it?” asks political strategist Vanessa Castro.
In terms of overall ranking, the picture was somewhat less partisan: Though North Carolina reigned as the overall “top American state to do business,” the upper echelons also included blue strongholds such as Washington, Virginia, and Colorado, which overall compensated for lesser rankings in “business friendliness” with strengths in categories such as “economy” and “technology and innovation.” However, even within the overall ranking, red states were formidable contenders: Texas was the largest state to crack the upper echelons of the overall ranking, pulling a respectable fifth place, according to CNBC’s experts, with Tennessee, Nebraska, and Utah also appearing in the top 10.
The overall business friendliness of these red states is attributable to a few factors. Among these are low taxes, relatively lax pandemic restrictions, and a lack of onerous regulations. Notably, Texas dropped several places in the business friendliness ranking this year, owing to what the study’s authors describe as “an increasingly bloated regulatory regime” (Texas had previously held the top spot in the overall ranking since 2018). However, the Lone Star State remains highly ranked both overall and in business friendliness.
The results of CNBC’s ranking largely echo those of the American Legislative Research Council’s most recent “Rich States, Poor States” report, which attempts to forecast each state’s economic future prosperity based on 15 policy variables. The trend of Republican prosperity and growth predictions was even more severe in the Laffer-ALEC report’s ranking, with the top 10 spots all being held by either red or swing states.
The findings of these two reports are reflected by the waves of businesses leaving the progressive West Coast and Northeast in favor of greener pastures. In recent months, Caterpillar, Citadel, Hewlett-Packard, Oracle, and Tesla are just a few of the companies which have migrated away from blue states such as Illinois, New Jersey, and California and toward Florida, Texas, and Arizona, bringing both human and financial capital with them as they relocate operations.
“There is a great migration going on, and I expect it to accelerate,” Glen Hamer, president of the Texas Association of Business, told The Epoch Times in a previous interview. “When the Caterpillars and the Elon Musks relocate, it’s an advertisement to the entire country and the entire world that something positive is going on in that state. And there is a multiplier effect.”
Another driver of the economic success of the red states has been the combination of astronomical real estate and rent prices in states like California and New York and new work-from-home opportunities, incentivizing workers to move away from the most expensive cities and seek more affordable housing elsewhere, where they can continue to work at jobs based in those cities.
Demographers have predicted an exodus from the coasts to the American interior for years, but the trend has greatly accelerated as a result of the CCP virus pandemic and its downstream consequences. Many of the states that have reported the greatest job growth since February 2020 are alike in having maintained relatively relaxed restrictions throughout the pandemic, blunting the impact of the virus on these states’ economies. Texas and Florida ranked first and second, respectively, in net population growth during the period from July 2021 to July 2022, with both receiving an influx of over 200,000 new residents.
Kevin Stocklin contributed to this report.