March 21, 2013

ECONOMIST: State Governments vs. Federal Government: The America That Works.

In May the greatest nation will hit its debt ceiling; unless it is raised, Uncle Sam will soon start defaulting on his bills.

This is the America that China’s leaders laugh at, and the rest of the democratic world despairs of. Its debt is rising, its population is ageing in a budget-threatening way, its schools are mediocre by international standards, its infrastructure rickety, its regulations dense, its tax code byzantine, its immigration system hare-brained—and it has fallen from first position in the World Economic Forum’s competitiveness rankings to seventh in just four years. Last year both Mr Obama and his election opponent, Mitt Romney, complained about the American dream slipping away. Today, the country’s main businesses sit on nearly $2 trillion in cash, afraid to invest in part because corporate bosses cannot imagine any of Washington’s feuding partisans fixing anything.

Yet there is also another America, where things work. . . . Pressed for cash, states are adopting sweeping reforms as they vie to attract investments and migrants. Louisiana and Nebraska want to abolish corporate and personal income taxes. Kansas has created a post called “the Repealer” to get rid of red tape and pays a “bounty” to high schools for every vocational qualification their students earn in certain fields; Ohio has privatised its economic-development agency; Virginia has just reformed its petrol-tax system. In this second, can-do America, creative policymaking is being applied to the very problems Congress runs away from.

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