PSN Blog

Exactly one year ago, conservatives swept the states on Election Day, thanks to promises to focus on jobs and the economy. But in states where conservatives were able to advance their agenda in 2011 sessions, voters only saw attacks on workers, the middle class, women, immigrants, and historically disenfranchised communities.

This week, voters from every corner of the nation - form Ohio to Maine to Arizona to Mississippi - sent a striking and direct message in response, rejecting the overreach of right-wing legislatures and governors in 2011 on a range of issues.

In Ohio, Senate Bill 5 - a law that was forced through the state legislature this spring to strip law enforcement officers, firefighters, and other public employees of fundamental collective bargaining rights - went down in flames at the polls. After consistent polling that saw Senate Bill 5 broadly unpopular with voters, a grassroots effort to gather 1.3 million signatures to put it on the ballot, and a campaign that saw corporate interests flood the state with money in attempt to save it, the measure was decisively rejected at the polls by a landslide margin of 61%-39%.  As The Nation's John Nichols describes it, the massive margin of victory in Ohio was not just a victory for unions and public workers, but "a rejection of the crude politics of austerity that would balance budgets in the backs of working families in order to reward CEOs and banksters."

In Maine, another controversial, unpopular right-wing legislative attack from 2011 was on the ballot: the ban enacted this session on the state's widely popular, four-decade-old election practice that allows new voters to register on Election Day. After collecting signatures to put the law up for a "people's veto," voters in Maine ended up restoring same-day registration by a huge margin similar to the one seen in Ohio: 61%-39%. A majority of voters in every county in Maine voted to restore same day registration. Shenna Bellows, director of the American Civil Liberties Union of Maine, told the Bangor Daily News that "Maine voters sent a clear message: No one will be denied a right to vote... Voters in small towns and big cities voted to protect our constitutional right." 

Social issues were not nearly as prevalent on state ballots as they have been in previous years, but the most prominent and extreme of them ended up being decisively rejected. In Mississippi, an extremist anti-abortion constitutional amendment that would have defined a fertilized egg as a "person" under state law was dismissed by more than 55% of voters statewide.

Meanwhile, special elections in a handful states also signaled a backlash against extremist right-wing social policies, attacks on immigrants, and other measures that they have seen pass in their states and others under conservative control. In a bold rejection of Arizona's economically destructive anti-immigrant legislative policies, the author of SB1070, State Senate President Russell Pearce, was defeated in a recall election, becoming the first Arizona legislator ever to lose a recall election, and the first senate president in any state to ever be recalled. In Michigan, a state legislator was defeated in a recall election for the first time in 28 years in what was seen as a referendum on his support of education cuts and attacks on the bargaining rights of teachers. And in Iowa, voters in a legislative special election decided not to give conservatives full control of the state senate, fearing that they would push through extremist legislation possibly including a repeal of same-sex marriage. 

Election Day results weren't entirely positive for progressive policies across the nation - a symbolic attack on health care reform passed in Ohio and a voter suppression measure passed in Mississippi. And while the message of rejection of right-wing overreach was loud and clear, proactive progressive measures were by and large missing from the ballot this November. With the public clearly on their side on economic issues in poll after poll, and with the 99% movement opening political space for policies that truly grow jobs and state economies, support the middle class, and reduce economic inequality, it will be up to progressives in 2012 to seize the initative and capitalize on the growing rejection of failed conservative policies in the states.

Preventing exceedingly rare voter fraud is not worth the very real consequences to electoral participation among the elderly, youth, and communities of color. That's the message being sent by state legislative leaders across the nation, three of whom - State Del. Jon Cardin (MD), State Rep. Joe Miklosi (CO), and State Rep. Ben Cannon (OR) - co-wrote an op-ed published in the Baltimore Sun this week:

A healthy civic society requires protecting citizens' fundamental right to vote while ensuring the integrity of our electoral system. Sadly, this goal is being jeopardized by a coordinated, nationwide effort to enact voter ID laws that will not solve the challenges facing our electoral systems and will instead disenfranchise voters and infringe upon the fundamental American right to free and fair elections.

The real effect of voter ID laws is not to prevent fraud but to disenfranchise millions of deserving voters. Studies have shown that about 21 million Americans, or 11 percent of eligible voters, currently lack a valid photo ID. However, those percentages rise to as high as 25 percent for African-Americans, 15 percent for low-income voters, 18 percent for seniors and 20 percent for voters under 30. You may notice a pattern here: many of these demographic groups are progressive base voters....

The campaign by narrow special interests to strip away the fundamental rights of our citizens through voter ID requirements is disingenuous. There are far better methods to address the challenges in our electoral systems, and we urge our colleagues across the country to join us in modernization efforts that will maximize voter access, reduce costs to taxpayers, improve security and help us stay true to the bedrock principles upon which our country was founded.

The destructive effects of state voter ID laws are becoming more and more painfully clear in other states as well. Tennessee’s new voter ID law is barely five months old and, already, it’s disenfranchising the state’s elderly voters.  Last week’s heartbreaking story about a 96-year-old Chattanooga resident who was denied a voter ID is, unfortunately, likely the first of many that are sure to surface as GOTV efforts ramp up for the 2012 elections. 

Dorothy Cooper,  96-year-old Chattanooga resident, found someone to drive her to a state Driver Service Center so she could obtain the ID she now needs in order to excercise her right to vote, stood in line with her walker, and presented a packet of materials that included her rent receipt, a copy of her lease, her voter registration card, and her birth certificate – and still couldn’t obtain her voter ID because she lacked a marriage certificate to document her married name.  In seven decades of going to the polls, Cooper said she had never had problems – not even during the Jim Crow days prior to passage of the Voting Rights Act in the 60’s – until now. Yet even when seniors have driver’s licenses, they are not out of the woods in Tennessee.  The state does not require seniors over 60 to have a picture on their license; of 230,000 who opted not to get a picture on their license, about 126,000 are registered to vote.   

Around the nation, legislators and the public alike are realizing the nefarious, partisan intent behind voter ID laws, intented to address what the New York Times accurately characterized in an editorial this week as "The Myth of Voter Fraud." The editorial board notes that the assault on voting rights is not limited to voter ID - and it is not rooted in any actual desire to address fraud:

Other states are beginning to require documentary proof of citizenship to vote, or are finding other ways to make it harder to register. Some are cutting back on programs allowing early voting, or imposing new restrictions on absentee ballots, alarmed that early voting was popular among black voters supporting Barack Obama in 2008. In all cases, they are abusing the trust placed in them by twisting democracy’s machinery to partisan ends.

This week’s misguided ruling by a federal judge in Alabama that upheld parts of the harshest anti-immigrant state law in the nation, HB 56, is a devastating setback to our nation’s deeply held values, Alabama’s economic prosperity, and the well-being of all Alabama residents. The Alabama decision does not represent existing and binding Supreme Court precedent, and it stands as an outlier in stark contrast to other recent federal rulings on similarly draconian anti-immigrant laws, including Arizona’s SB 1070, where the courts have ruled similar provisions unconstitutional — including those that require law enforcement officials to ask for immigration papers from anyone they suspect on sight of being undocumented. If allowed to stand, this decision would put countless Alabama families and children in danger, drive taxpayers out of the state, sink Alabama’s economy, and set a chilling example that other states would be foolhardy to follow.

The confusing decision set down by U.S. District Judge Sharon Lovelace Blackburn upheld some of the most extreme parts of HB 56. These provisions include one requiring that schools look into the immigration status of students and their parents — a requirement that stands in direct contradiction to established Supreme Court precedent that ensures all students of families living in the United States access to a public school education. Other provisions of the law that Judge Blackburn rashly and erroneously concluded should be allowed to stay in effect includes language that makes it a crime to fail to carry immigration documents, mandates that undocumented immigrants driving without a license be jailed indefinitely, and restricts contracts between government, private citizens, and immigrants, that may limit access to housing and even such basic utilities as water service for undocumented workers. Many of these provisions were upheld despite being explicitly rejected by other courts, and the judicial process should eventually conclude that the arguments presented by proponents of HB 56 do not hold water.

More broadly, the judicial process underway in Alabama should send a clear message to other states considering anti-immigrant bills — which failed in many states this year, most recently in New Mexico — that enacting economically destructive anti-immigrant measures opposed in almost all cases by a wide spectrum of local businesses, religious groups, civil rights groups, law enforcement officials, and community groups is a road to economic catastrophe. Undocumented workers in Alabama paid $130.3 million in state and local taxes in 2010, and comprised roughly 4.2% of the state’s workforce (or 95,000 workers) in 2010, according to recent reports. Recent analyses have concluded that the state could lose an astounding $2.6 billion in economic activity if the provisions in the law were allowed to stand and all undocumented immigrants and their families removed from the state. But even if the blatantly unconstitutional parts of the law are eventually rejected by the courts, Alabama and other states that may follow their path by pursuing anti-immigrant laws are already ensuring economic damage to their states. Even Arizona is now coming to the realization that anti-immigrant laws have been disastrous for their states. Earlier this year, dozens of Arizona CEOs, representing corporations such as US Airways, Intel Corp., and The Arizona Republic, wrote a letter expressing opposition to further anti-immigrant measures, realizing the already monumental economic damage that has already resulted even though the most drastic provisions have been prevented from taking effect by the courts.

The evidence is clear: anti-immigrant laws such as those pursued by Alabama kill jobs, hurt state economies, endanger communities, and drive away taxpayers — in addition to systematizing discrimination in a manner that clearly does not represent American values. Laws like these are also a body blow to state budgets around the nation, still struggling from historic revenue shortfalls, and which will now be forced to account for millions defending them in expensive and needless legal battles. Just this week, it was reported that the Department of Justice was looking at challenging anti-immigrant measures in Utah, Georgia, Indiana, and South Carolina, in addition to the current legal challenges underway in Arizona and Alabama.

There is another approach being advanced at the state level. State legislators across the nation working with State Legislators for Progressive Immigration Policy (SLPIP) have been on the front lines in developing, introducing, and advancing immigration measures that would grow state economies, create jobs, and result in safer and healthier communities. For example, instead of driving away talented immigrant students, these lawmakers are proposing tuition equity measures that will help keep a skilled workforce in their respective states. Business leaders representing major companies and forward-thinking elected officials have also been strongly highlighting at both the congressional and state levels the need for immigrant workers to stay here and power the nation’s economy forward, because they know that being pro-immigrant is good for business.

The cost of laws like HB56 to our nation’s values and to our states’ bottom lines could not be clearer. Anti-immigrant laws like these represent fundamentally irresponsible wastes of public resources, and ineffective approaches to immigration. Flawed and indefensible rulings like Judge Blackburn’s should not confuse the matter: anti-immigrant state laws like Alabama’s are not only unconstitutional, they are a path to absolute ruin for state economies.

In his address before a joint session of Congress on Thursday evening, President Obama laid out a $447 billion package of policies intended to spur desperately needed job creation. A breakdown of the American Jobs Act shows a mix of proposals including targeted tax cuts and spending that have been supported on a bipartisan basis in the past, and which altogether are estimated to increase employment by up to 4.3 million jobs over the next two years.

States are set to be key players in many of the efforts outlined in the plan. In addition to providing desperately needed direct aid in the amount of $35 billion to states and local governments still struggling with historic revenue shortfalls (funding that is predicted to add 135,000 public and private sector jobs in 2012) as well as $30 billion in funding to modernize schools and $49 billion to continue extended unemployment benefits, other policies in the American Jobs Act echo innovations that have already been enacted with widespread support in states across the nation.

One such proposal, work-sharing, was enacted in the state of Maine this year with unanimous and bipartisan support in a legislative session that, like many across the nation this year, was brutally contentious. By allowing workers to keep their jobs while working fewer hours and collecting partial unemployment benefits, the policy has already allowed employers the flexibility they need to retain their workforces in many states. Dean Baker of the Center for Economic and Policy Research suggests that if the policy is as successful on a national basis as it has been in other countries, it would result in millions of new jobs.

Another piece of the American Jobs Act that was presaged by success in the states this year is the banning of employer discrimination against the long-term unemployed. New Jersey Gov. Christie signed similar legislation into law this year, and other bills protecting the record numbers of Americans who have found themselves out of work for extended time periods since the recession began were introduced in states including New York and Michigan. In many states, these policies have been enacted with bipartisan support — and there is no reason policies like these should not win broad support in Congress as well. Regardless of their ultimate fate in D.C., both will continue to be priorities for state legislators in 2012 looking to ensure the job security of their constituents.

Other recently enacted state policies that were highlighted in the President’s jobs plan require more caution and scrutiny. A program in Georgia that allows workers to train on a voluntary basis with a potential employer while still receiving unemployment benefits received praise in the President’s speech, but the National Employment Law Project has underscored the potential danger of it and similar programs that mix voluntary work with unemployment insurance. Oversight and accountability of programs like this are clearly needed.

And while economists are broadly predicting that the package proposed by the President would significantly boost the economy and directly grow jobs, questions remain about how the fully paid-for package will indeed be paid for. In his speech this week, the President outlined the need to make “modest adjustments” to Medicare and Medicaid — proposals which he is expected to elaborate on as he releases a deficit reduction plan later this month, and which would also affect state economies directly and possibly painfully.

The Senate Democratic Steering and Outreach Committee released the following document outlining the impact of the American Jobs Act for all 50 states — scroll down to see all of the numbers on how the jobs plan is expected to affect your state:

The American Jobs Act - State by State

It has been more than 90 years since women fought their way to suffrage. In that period of time, we’ve experienced the Year of the Woman – when a record number of women ran and/or won congressional races in 1992 – and voter turnout rates for women that have consistently exceeded voter turnout rates for men since 1980. The gender gap that often gives Democrats the edge among female voters (except in 2010) and proved to be Ronald Reagan’s “woman problem” has forced all candidates to acknowledge the power of the female vote. Despite this growing clout, 2011 saw a barrage of state legislation that effectively moves women’s suffrage back in time and impedes access to the polls for millions of us.

The passage of voter ID legislation made headlines this year for its anticipated horrific effects on the electoral participation of minority, low-income, and young voters. However, its specific detrimental impact on women was less publicized. According to a survey sponsored by the Brennan Center, only 66% of voting-age women with access to any proof of citizenship have documentation with their current legal name. Using numbers from 2000, this may leave as many as 32 million voting-age women vulnerable to the whims of conservatives trying to suppress the vote of traditionally progressive voting blocs through voter ID. Of the whopping 33 states that introduced bills this year to require photo identification at the polls, so far, eleven state legislatures have passed the measures. Voter ID has been signed into law in seven states to date.

Similarly, attempts to shorten the early voting period – in which voters can cast a ballot before Election Day at satellite locations – and eliminate weekend voting were successful in five states this year. These measures make it that much harder for busy women to have their voices heard by taking away the flexibility needed to accommodate work and familial obligations.  Women in these states will once again be forced to choose between participating in democracy and, say, picking up a child from day care – a discomfiting situation of which Elizabeth Cady Stanton and Lucretia Mott would surely disapprove.

It is time for women to not only take advantage of the right to vote for which so many fought, but to invoke the passionate dissent that marked the long march to suffrage. We can vote out those who seek to quiet our voices, but we can also send a clear warning that we will not stand by and watch as our rights are picked apart. As conservatives gear up for a second round of assaults on voting rights in 2012, it is crucial that women – with all of the power and potential that has been realized in the years since those pioneering heroes – act now by defending that which we fought for and won decades ago.

Cross-posted at MomsRising.org

Follow Cristina Francisco-McGuire on Twitter: @CristinaPSN

(Follow Tim Judson on Twitter: @TimPSN)

In a year that has seen a wave of state legislative attacks coming from corporations and the right wing, a conference of state legislators from all over the nation taking place this week in San Antonio is proving to be a bright spot for those standing up for the middle class and working families.

The National Conference of State Legislatures (NCSL)  may be little-known outside of state legislative circles, but NCSL plays a significant role in shaping state policy by acting as a lobbyist on behalf of state legislatures in Washington, DC. NCSL’s 2011 legislative summit – taking place this week in San Antonio, Texas – is an annual forum for determining the policy agenda on which NCSL will lobby the federal government for the following year. Issues that have been addressed in previous years range from federal spending allocations to rules governing how states have to implement federal laws (like the Affordable Care Act), and the impact of international trade policy on state and local economies. About 700 state legislators attended this week’s conference, as well as over 300 advocacy groups and trade associations.

Participation in this year’s summit saw a rightward shift in attendance, by both legislators and advocacy groups, reflecting the tectonic political shifts in state legislatures that resulted from the 2010 elections. In addition, many progressive legislators from states with new conservative majorities were not permitted to represent their states at NCSL by their new leadership. In initial committee meetings to decide NCSL policy positions this year, conservative legislators attempted to further capitalize on their electoral victories of 2010 by introducing several destructive policy proposals and issue forums. Earlier this week, over Twitter, we reported on a resolution introduced in NCSL’s Budget Committee to make support for a federal balanced budget amendment a “core principle” of NCSL’s mission. Members of NCSL’s Financial Services Committee debated a resolution calling for a repeal of the Dodd–Frank Wall Street Reform and Consumer Protection Act, passed in 2010 to prevent the types of abuses that led to the 2008 economic collapse.

The good news is that advocates for teachers, workers, healthcare and the environment were prepared and organized – and progressives won nearly all of the battles over these and other important issues. The balanced budget and Dodd-Frank resolutions were defeated handily in their committees. A call for stronger enforcement of mine safety laws was first stripped of an anti-regulatory provision, and then passed in the Labor Committee. Much to the chagrin of those who wish to slash Social Security, the Labor and Budget committees passed a joint resolution demanding strong stewardship of the Social Security program and opposing any attempt to dip into Social Security funds or cut back on benefits resulting from last week’s deal over raising the federal debt ceiling. And the Health Committee passed language calling for strengthened state-based Medicaid programs and ensuring strong state-based health care exchanges, following a year in which PSN worked closely with state legislators to advance strong, common-sense policies under the Affordable Care Act to ensure the health security of  families.

Despite these victories, some destructive, corporate-backed resolutions did succeed, such as an AT&T-backed effort opposing community broadband networks. As readers of PSN’s Stateside Dispatch well know, large telecommunication companies have been lobbying for state laws banning municipal broadband providers in order to reduce competition and fatten their bottom lines. PSN and our allies worked to support legislators in opposition to this short-sighted resolution, which came as supporters of affordable, accessible broadband service have introduced federal legislation to protect local communities’ right to pursue this critical infrastructure.

Still, the primary story that emerged from this year’s NCSL summit was one of common sense prevailing over the economically disastrous and socially divisive proposals that have received so much of the spotlight in the states this year. As lawmakers look towards 2012 sessions, it is clear there is significant desire among many legislators to turn the tide against these destructive ideological attacks and begin renewing the critical work of rebuilding prosperity in our states.

At a time when personal income tax rates on the wealthiest Americans are at their lowest levels in decades and states around the country find themselves starved for revenue and facing formidable shortfalls, a chorus of conservative voices has been attempting to justify even further tax reductions. They are claiming that high state tax rates are causing wealthy residents to abandon their homes and move to states with lower taxes. But despite acceptance by many on both sides of the aisle, studies have conclusively shown this “millionaire migration” theory to be a myth.

The millionaire migration myth – the central claim of which is that asking the wealthy to pay their fair share would actually result in decreased state tax revenues due to interstate migration - was advanced in states including New York, New Jersey, Connecticut, Rhode Island, Maryland, and Oregon. However, a closer inspection has shown that there is no correlation between state tax rates and migration. Furthermore, a litany of recent polls shows that voters overwhelmingly support higher taxes on the rich as a means of addressing large budget deficits – especially when compared with the damaging cuts to state budgets that are actually responsible for the slowing pace of our national economic recovery.

The millionaire migration myth attracted a lot of attention in 2009, a year after the Maryland legislature raised the state tax rate on residents earning over $1 million to 6.25 percent. That year, the number of Maryland residents filing returns over $1 million dropped by 30 percent, leading the right wing to instantly leap to the irrational conclusion that one-third of the state’s top earners simply packed up and left the state. After a similar 2009 tax increase in Oregon failed to yield the expected increased revenue, the myth spread like wildfire. Suddenly, it became indisputable logic to many that progressive income taxes in New Jersey and Connecticut, a temporary millionaire’s tax in New York, and the estate tax in Rhode Island were all causing the wealthiest residents of those states to flee for the sunnier (read: low tax) pastures of Florida.

Despite the many attempts to advance the millionaire migration myth, a host of rational voices are thankfully helping to debunk it. Three main reasons emerge from their analyses that show why the clamoring from the right should not be taken seriously.

First of all, in bad economic times, salaries drop for people at all levels of the income scale, meaning that fewer people are filing tax returns in the millions. Next, even in instances where it can be proven that millionaires are moving out of a state, they often move to another state that has an equal or even higher rate of taxation, indicating that such decisions are likely determined by factors that individuals find to be more important than tax rates - like good schools, safe neighborhoods, and close proximity to their jobs. And lastly, critical analyses of the reports of millionaire migration have shown that the statistics used to “demonstrate” this phenomenon are inaccurate.

For instance, a 2009 report from the Institution on Taxation and Economic Policy showed that, in Maryland, the reduction in the number of taxpayers filing returns of over $1 million corresponded with an increase in the number of people filing in the tax bracket directly beneath it. The millionaires were not moving; they were making less money. Furthermore, the tax increases in Maryland affected more than just millionaires – the data revealed that the number of Maryland residents affected by the new taxes actually increased following passage into law. A similar scenario played out in Oregon in 2010, as the decrease in the number of million-dollar earners explained why the state brought in less-than-expected tax revenue. However, the number of taxpayers filing returns of over $100,000 was actually 60,000 more than initially expected. Again, high income earners were clearly not moving away from the state.

Claims that Rhode Island’s estate tax was causing the state’s wealthy residents to leave were also thoroughly off the mark. The Rhode Island Poverty Institute released a report in 2010 showing that estimates of tax revenue lost to migration were greatly exaggerated and used highly flawed statistics. Most convincing, the study showed that when Rhode Island residents did move, the most popular destination was Massachusetts, which also has an estate tax. In New York, the study which claimed to support the millionaire migration myth was practically a work of fiction. Among a litany of statistical fallacies, the study claimed that there were over 380,000 people with million-dollar tax returns in the state in 2007 when the real data shows there were only 375,000 people filing returns of $200,000 and above. It also reported data from 2009 tax returns when that data did not even exist yet, making it quite difficult to trust any of the conclusions drawn from this study.

At least two accurate, methodological studies have been conducted on the alleged migration phenomenon. Earlier this year, researchers at Princeton University released a highly detailed report analyzing the effects of the 8.97 percent tax rate on New Jersey’s top earners. The conclusion of the study was that “New Jersey’s new tax raises nearly $1 billion per year, and tangibly reduces income inequality, with little cost in terms of tax flight.” A similarly in-depth study of New England tax rates conducted by the Political Economy Research Institute at the University of Massachusetts, Amherst concluded that “taxes do not play any notable role in causing people to leave a state.” In fact, “higher state income taxes are shown to decrease the numbers of people leaving a state.”

The facts on this issue are clear: millionaire migration is not a reality for states with high taxes. What is real, however, is the degree of fiscal crisis in which so many states presently find themselves, caused largely by a systemic lack of revenue. Responsible policymakers know that asking the highest income earners to pay their fair share needs to be a part of addressing large budget deficits, and the American people agree. Poll after poll has shown that a large majority of Americans believe that a balanced approach to addressing budget deficits, including higher taxes on the wealthy, is the right way to go. And not only is this is approach good policy, it's good politics as well.

Resources

The Wall Street Journal - “Millionaires Go Missing” 
The Wall Street Journal - “Ducking Higher Taxes” 
Bloomberg - “New Jersey Population Growth Slows as Taxes Push Some to Flee” 
The Connecticut Policy Institute - “Don’t Kill the Golden Goose!: Raising the Income Tax May Be Good Politics, but It Is Bad Policy” 
Partnership For New York City - “Can New York Rely on a ‘Millionaire’s Tax’ to Solve the Budget Crisis?”
Ocean State Policy Research Institute - “‘Leaving Rhode Island’ Policy Lessons from Rhode Island’s Exodus of People and Money”
Reuters - “Analysis: Americans try to outrun state, local tax hikes”
Institution on Taxation and Economic Policy - “Where Have All of Maryland’s Millionaires Gone? Nowhere – They’re Probably Just Not Millionaires Anymore”
Institution on Taxation and Economic Policy - “Dear Wall Street Journal: No Need to File a Missing Persons Report – Oregon’s High-Income Taxpayers Have Not ‘Vanished’”
The Poverty Institute - “Report claiming Rhode Islanders moving out to avoid estate tax is unmoving”
Citizens for Tax Justice - "Authors of New York Study Claiming Millionaires Fleeing Reach New Low and Just Make Up Numbers" 
National Tax Journal - “Millionaire Migration and State Taxation of Top Incomes: Evidence from a Natural Experiment”
Political Economy Research Institute - “The Impact of Taxes on Migration in New England”
The Wall Street Journal, The Wealth Report - “The Downwardly Mobile Millionaires”
Capital Gains and Games - “Americans Support Higher Taxes. Really.”

More than two years since the American Recovery and Reinvestment Act was passed, national news coverage of the U.S. economy is still doom and gloom. We have seen job growth stagnate for the past two months, state jobs cut, a federal deficit debate seemingly going nowhere, and unemployment rise to 9.2 percent in June. To make matters worse, employers are even discriminating against the currently unemployed in their hiring practices.

Unfortunately, the federal response to the continuously abysmal job numbers has ranged from the ineffectual to the counterproductive. President Obama is urging Congress to approve not one, but three trade agreements with the misguided belief that these agreements will boost exports and job growth regardless of the fact that states are still dealing with the job flight following NAFTA. Domestic policies seem to be heading in a similar direction as fiscal conservatives are pushing to sharply cut Congressional spending to our detriment.

Even in the off chance that any of these policies were effective, states do not have to wait for the federal government to jump start their local economies. States can be proactive, in spite of their revenue and budget problems, by instituting a proven economic stimulant at a low cost: a minimum wage increase.

As the Wall Street Journal recently reported, the main reason U.S. companies are not creating new jobs is the lack of consumer demand. People are just not spending enough money. How can states get their residents to spend more? By making sure they are earning more.

Studies of previous wage hikes demonstrate that when earnings increase, so does spending. The federal minimum wage increase in 2008, for example, provided a raise to an estimated two million workers, of which 500,000 supported at least one child. These raises translated directly to spending at no cost to the government. The federal minimum wage hikes in 2007 and 2008 resulted in a total of $4.9 billion in consumer spending, with an estimated additional $5.5 billion generated following the 2009 increase to the current rate of $7.25 per hour.

This increase is made possible by the increase in spending power that results from the wage hike. A minimum wage increase of just $1 generates $5 in spending power when making large purchases, such as cars. With car sales for 2011 on pace to be 28% below the sales during the 2001 recession, U.S. car companies should be begging states to raise the minimum wage.

And much to the chagrin of conservative pundits and business lobbyists, raising the minimum wage does not have the apocalyptic effects that they would have us believe. As two recent studies have shown, job losses do not occur following a minimum wage hike, even during times of economic downturns. A study on teen employment showed that the federal wage hikes did not hurt employment rates, but rather the impact was slightly positive even during periods of higher unemployment. Moreover, a study comparing neighboring counties with different minimum wages found that the increased earnings did not correlate to job loss.

Small businesses actually flourish in states with higher minimum wages. A report by the Fiscal Policy Institute shows that small businesses grew faster in states with minimum wages above the federal floor than other states at or below the federal minimum wage. Job growth was also faster in these states, especially in the retail trade sector, which is currently one of the largest industries creating jobs (specifically lower-wage jobs). The National Employment Law Project (NELP) found that, for those lucky enough to land a newly created job since private sector employment hit rock bottom in February 2010, nearly half have done so in lower-wage industries including retail.

Though eighteen states have a minimum wage above the federal floor, only six of those states have minimum wages of at least $1 over the federal rate of $7.25. Even worse, nine states either have minimum wages of $6.25 and under or none at all. Fortunately, ten states have taken action to address the constant devaluation of wages due to inflation, generally by making yearly adjustments to the minimum wage based on the consumer price index. However, even the highest state rate is still $1.71 less than the 1968 minimum wage, which at $1.60 would be equivalent to $10.38 today when adjusted for inflation.

State policymakers can continue to lead in this area and put some drive into this recovery at a low cost. Restoring the minimum wage can ignite the recovery in every state by fueling much needed consumer spending to the benefit of local businesses, workers, and economies.