Want to reduce poverty in your state? Then reduce state spending—and taxes.
That’s the conclusion of “How to Win the War on Poverty: An Analysis of State Poverty Trends,” a recent study by Matthew Ladner, Ph.D. of the Arizona-based Goldwater Institute.
Ladner compared state spending with state poverty levels and found something very interesting: Those states with the greatest reduction in poverty between 1990 and 2000 also tended to be those with the lowest level of state spending.
- The 10 lowest-spending states averaged an 11.2 percent reduction in general poverty rates between 1990 and 2000, including a 1.2 percent decline in childhood poverty.
- While the 10 highest-spending states saw an increase of 7.3 percent, and an increase of 4.5 percent for childhood poverty.
Interesting stuff! But there’s more. The comparison also appears to hold for low-tax states. According to Ladner, “Overall, the low-tax states saw a decline in poverty rates more than twice as large as the average state decline (-13.7 percent decline compared with a -6 percent decline). Poverty rates increased in the high-tax states by 3 percent.”
Ladner concludes: “The dramatic declines in poverty in the ‘small government’ states strongly confirm the classical liberal hypothesis: Low spending and low taxes promote economic growth, which in turn reduces poverty. These states seem to have succeeded in reducing poverty by allowing the private economy to flourish.”
As the author implies, the study only confirms what serious economists already know about economic growth and the retarding impact of big government. But it is important that we are able to present policymakers with the evidence to back up our claims.
Most legislators want to do the right thing, but it is often hard to do so in the face of big-spenders who see more government taxes and spending as the solution for all of our ills. Legislators need a rebuttal, and the Goldwater Institute does just that.