As noted earlier, Stephen Moore has a dearth of peer-reviewed publications; however, he has coauthored work purporting to be analytical. One of these is these is the Economic Outlook ranking published by the American Legislative Exchange Council (ALEC). In Rich States, Poor States, 2015:
The Economic Outlook Ranking is a forecast based on a state’s current standing in 15 state policy variables. Each of these factors is influenced directly by state lawmakers through the legislative process. Generally speaking, states that spend less—especially on income transfer programs, and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that tax and spend more.
Hence I think it is reasonable to ask whether the ALEC-Arthur Laffer-Stephen Moore-John Williams “economic outlook” ranking (hereafter “ALEC ranking”) actually has any predictive power, above and beyond other demographic and geographic indicators. This analysis follows up on a more ad hoc analysis in this post, and confirms conclusions arrived at in Fisher w/LeRoy and Mattera (2012). In addition, this analysis serves as a rejoinder to ALEC’s rebuttal asserting that critiques did not incorporate sufficient controls and allow for differing time horizons, to wit:
Moreover, rigorous statistical methods show that a higher economic outlook ranking in Rich States, Poor States does indeed correlate with a stronger state economy.
Figure 1 depicts the one year growth in real Gross State Product and the ALEC ranking, lagged one year, for growth over the 2008-2014 period. Should the ALEC thesis be correct, one should see a negative sloped relationship.
Figure 1: Real Gross State Product growth (log first difference) and lagged ALEC ranking for Economic Outlook. Nearest neighbor fit line (red), window = 0.3. Source: BEA and ALEC, Rich States, Poor States, 2015, and author’s calculations.
There is no obvious correlation between annual growth rates and the ALEC rankings. Note that lagging the ranking so that, for instance, the growth rate between 2013 and 2014 is related to the ALEC ranking in 2012 (instead of 2013) does not change the results much. (The ALEC 2013 ranking pertains to data reported in 2012, as far as I can tell). This outcome is unsurprising because the ALEC rankings are highly persistent. If one estimates a panel autoregressive model for the ALEC rankings, the AR coefficient is 0.95, and the adjusted R2 is 0.90.
Defenders of the ALEC rankings have argued that the rankings are aimed at predicting growth at a longer time horizon than annual. Given that the perspective of the RSPS methodology is supply-side, this argument is prima facie sensible. In order to accommodate that argument, I display in Figure 2 the data for three year (nonoverlapping) horizons (for 2014, and 2011).
Figure 2: Nonoverlapping average three year real Gross State Product growth (log difference) and three year lagged ALEC ranking for Economic Outlook. Nearest neighbor fit line (red), window = 0.3. Source: BEA and ALEC, Rich States, Poor States, 2015, and author’s calculations.
Figure 3 provides analogous information, at the six year horizon (the maximum possible given the span of ALEC rankings).
Figure 3: Average six year real Gross State Product growth (log difference) and six year lagged ALEC ranking for Economic Outlook. Nearest neighbor fit line (red), window = 0.3. Source: BEA and ALEC, Rich States, Poor States, 2015, and author’s calculations.
The nonparametric fitted lines indicate a slightly negative slope overall, suggesting some content to the argument that lower ranked states grow slower. In both Figures 2 and 3, North Dakota and Texas constitute outliers along the y-dimension. In order to discern how much these two observations drive the results, I omit them and replot in Figure 4.
Figure 4: Average six year real Gross State Product growth (log difference) and six year lagged ALEC ranking for Economic Outlook, excluding North Dakota and Texas. Nearest neighbor fit line (red), window = 0.3. Source: BEA and ALEC, Rich States, Poor States, 2015, and author’s calculations.
No obvious pattern emerges from this last plot. In order to move beyond simple graphics, I now implement a series of regressions. First to a simple examination of the a bivariate relationship, encompassing the lower 48 states, one obtains at the annual frequency:
Δyi,t = -0.00003ALECi,t-1
Adj-R2 = -0.00, SER = 0.027, N=288. bold indicates significance at 10% msl, using heteroscedasticity and serial correlation corrected standard errors.
(I use the lower 48 as I do not have demographic and geographic data for the Alaska and Hawaii.)
Essentially, there is no explanatory power for the ALEC-Laffer indices in terms of year on year GSP real growth. Allowing for individual state-fixed effects, one obtains:
Δyi,t = 0.0004ALECi,t-1
Adj-R2 = -0.00, SER = 0.027, N=288. bold indicates significance at 11% msl, using heteroscedasticity and serial correlation corrected standard errors.
The coefficient is positive, indicating that lower ranked states, and hence states that have a less business friendly environment according the ALEC criterion, exhibit higher economic growth. The coefficient is borderline statistically significant. I would say that the use of state-level fixed effects is a fairly blunt way to account for state-specific factors. A better approach controls for state factors that economic theory suggests might be important for growth, such as geographic and demographic factors. Here we include log population density (LDENSITY, to account for urbanization), dryness (measured as inverse, WET), mildness of weather (MILD) and proximity to navigable waterways (DISTANCE); these four variables are defined such that positive coefficients are expected. These variables are time-invariant; hence one cannot estimate a fixed effects regression incorporating these variables. I also include log real price of oil (LRPOIL) to control for oil producing states, allowing the coefficient to vary across states.
Δyi,t = 0.0002ALECi,t-1-0.01LDENSITYi + 0.019WETi + 0.001MILDi + 0.0001DISTANCEi + LRPOILi,t
Adj-R2 = 0.36, SER = 0.021, N= 288. bold indicates significance at 10% msl, using heteroscedasticity and serial correlation corrected standard errors.
The ALEC ranking has no statistical significance, while a drier and more mild climate is associated with faster growth, with statistical significance. Proximity to navigable water is also a positive factor.
What if we estimate a comparable regression, looking at 6 year growth rates (but omitting oil prices which are the same for all states)? Then one obtains:
Δyi,t = -0.018 -0.0001ALECi,t-6 +0.001LDENSITYi – 0.0007WETi – 0.0003MILDi -0.00001DISTANCEi
Adj-R2 = -0.02, SER = 0.007, N= 48. bold indicates significance at 10% msl, using heteroscedasticity and serial correlation corrected standard errors.
Notice that the ALEC coefficient is not statistically significant. Thus far, the one case it has shown up as borderline significant, it goes the opposite of the ALEC-Laffer-Moore-Williams thesis.
Finally,Professor Ed (“no recession”) Lazear recently asserted that states with fast growing employment have low tax rates and right-to-work laws. He also argues that one needs to incorporate the depth of the drop in employment in 2008-09, in order to explain the growth in employment (so, a sort of version of the bounceback thesis he forwarded in the Economic Report of the President, 2009). I can’t find the working paper that provides the basis for his assertion, but I can estimate a comparable regression. In order to make the proposition testable, I examine 5 year growth rates in output, and refer to the ALEC rankings in 2009. I add the change in output from 2008 to 2009 (so TROUGHDEPTH takes on a value of -0.05 for observation i if output dropped 5% going into 2009).
Δyi,t = 0.065 -0.0010ALECi,t-5 +0.0046LDENSITYi + 0.0042WETi – 0.0014MILDi +0.00005DISTANCEi – 0.3413TROUGHDEPTHi
Adj-R2 = -0.04, SER = 0.037, N= 48. bold indicates significance at 10% msl, using heteroscedasticity corrected standard errors.
The ALEC variable does not exhibit statistical significance. Omitting ND and TX would not change this basic results. Moreover, the trough variable coefficient, while exhibiting the right sign, is not statistically significant.
Bottom line: The ALEC ranking, which purports to measure business-friendly policies, is not correlated with real GSP growth, either short term or medium term. This is true if one controls for additional variables.
I don’t think this necessarily means that policies such as right to work, or tax rates, and so forth do not have an impact on growth. For instance, Kolko, Neumark, and Cuellar Mejia, J.Reg.Stud. (2013) conclude that what’s important is “less spending on welfare and transfer payments; and more uniform and simpler corporate tax structures.” Hence, the ALEC economic outlook ranking is, in my assessment, a manifestation of faith based economics.
[This is a revision of a post from 2015]
Note: Thanks to Professor Neumark, who kindly provided the data set used in his J.Reg.Stud. paper for use by my students in my PA819 statistics course (all students had to use his data set to analyze whether business conditions as measured by various indices (but not the ALEC ranking) influenced state level growth). The demographic and regional variables are drawn from that data set.
“In both Figures 2 and 3, North Dakota and Texas constitute outliers along the y-dimension.”
Both benefiting from the oil price boom. In the case of ND – this is fracking. I hear Stephen Moore is teaming up with CoRev on a paper that will empirically show that more CO will lead to global cooling!
In case anyone doubts Moses o Moore evading taxes – Bloomberg has the story:
“Stephen Moore, whom President Donald Trump said he’ll nominate for a seat on the Federal Reserve, owes more than $75,000 in taxes and other penalties, according to t A federal tax lien filed in the circuit court for Montgomery County, Maryland, where Moore owns a house, says that the government won a judgment against Moore for $75,328.80. The January 2018 filing said it was for unpaid taxes from the 2014 tax year and could accrue additional penalties and other costs.”
Moore is being silent leaving the task of addressing this to his new wife –Anne Carey. What a man!
“Carey said the dispute originated with a deduction on Moore’s 2014 tax return in which he accidentally claimed the sum of his alimony and child-support payments to his former wife, when only alimony is deductible.”
Accidentally? So Anne Carey admits she married a moron who does not know basic tax law. And Moore pretends to be an expert on tax policy. No – Moore is a moron.
I cannot believe Stephen Moore wrote this:
“This may be a surprising statement from a bleary-eyed, number-crunching economist, but the best anti-poverty program in America may not be tax cuts, debt reduction or regulatory relief, but rather that old-fashioned institution called marriage. It turns out that poverty rates are very low among intact families and prevalent among homes without a father. Children who grow up in single-parent households are much more likely to face economic trouble as adults. Those who cheer divorce as a form of women’s liberation, or who say that stigmatizing out-of-wedlock births is just right-wing sermonizing, just don’t get this intertwined connection between two-parent households and economic success. Sociocultural factors like the decline of marriage are leading causes of the wealth gap and the stubborn poverty trap in many low-income neighborhoods. This isn’t to say that children who grow up in broken homes can’t succeed — millions heroically do. It doesn’t mean that every marriage was meant to be; many times, divorce is the only option.”
I guess he tossed this last line as Moore is also divorced. And now we know he defrauded the IRS by trying to deduct his child support payments from his taxable income! Good thing he married Anne Curry so she can defend husband so Moore personally does not have to answer questions!
In one way I’m surprised that Trump picked Stephen Moore. Sure, Moore is more than intellectually unqualified and dimwitted enough to appeal to Trump. But as far as I know Stephen Moore only has one ex-wife. I thought the minimum threshold was two ex-wives before you could joint the Trump Family Values Coalition. Maybe Rudy could re-assign one of his countless ex-wives to Stephen Moore. That might puff up his resume for “the Donald”.
I’m sure the divorce attorney industry prefers people like Rudy G. and Donald Trump who have serially destroyed 3 marriages as opposed to cheapo Stephen Moore who in his entire lifetime managed to have only one lousy divorce. I guess if Moore gets a FED appointment, he can finally find some other girl so as to cheat on Anne Curry!
CLASSIC!!!! 5-star comment rating from our judges Classic because it’s dead on accurate. What do the kiddies call it?? “Keeping it real”??
“Family values”….. like Republicans EVER knew what that meant. Even Reagan dumped his first wife Wyman for the girl who was well known as a pin-cushion in Hollywood. Nancy never fooled anyone who was paying attention. Wyman was treated as non-existant at the funeral of course, as was the daughter Reagan had with her. Maureen was persona non grata from the first time he ran for President. Maureen was probably the classiest of all 4 of the children, was for women’s right to have an abortion and did charity work related to Alzheimers. Of course as the daughter from a broken marriage the Reagans didn’t cart her around too much. Maybe the Reagans were too busy trying to get Patti to “please be quiet”.
Remember kids “Just say NO”. Unless you’re a psychotic nutjob with hormonal issues, in which case, go ahead and entertain yourself with some pills.
This guy’s parents have been married about 46 years now. Wonder what happened there??
The first story is dated 2009 and the last story is dated 2013. Haven’t seen any “updates”. But similar to his Republican and proud Mormon father, former Congressman Ernest Istook, he is a handsome strapping young lad, is he not??
Well, we can’t discount the value of having a “great” father there for him in Ernest Istook. Strange, eh?? A portion from Ernest Istook’s Wiki page:
Transit funding controversies
Istook is against the current federal funding level for Amtrak. For several years, he chaired the subcommittee on Treasury, Transportation, and Special Agencies, which oversaw transportation funding. In 2004, Istook denied special transportation funding (earmarks) requests for districts of 21 Republican House members because the other Republicans had written a letter supporting of funding of $1.8 billion for Amtrak. Istook took the view that their request for major funding increases for Amtrak took precedence over their requests for their districts, and viewed those requests as trying to “double-dip” into the Treasury. Istook lost the chairmanship in 2005, in large part because others in the Republican party were still upset over his handling of this issue.
Istook introduced language into an FY2004 federal spending bill that would cut funding for transit authorities that sponsored advertisements contradicting current government policies and laws regarding marijuana. Judge Paul L. Friedman of the U.S. District Court for the District of Columbia later ruled that the “Istook Amendment”, as it came to be known, was unconstitutional on grounds that it violated the First Amendment, stating “the government articulated no legitimate state interest in the suppression of this particular speech other than the fact that it disapproves of the message, an illegitimate and constitutionally impermissible reason”.
Istook received $29,000 in campaign contributions from Abramoff and some of his clients, and wrote letters urging the Bush administration to reject a casino proposal that Abramoff’s clients opposed. On January 9, 2006, Istook announced he would give $23,000 in Abramoff-related money that was donated to his re-election campaign or his PAC to the Boy Scouts of America. This is in addition to $6,000 in Abramoff-related donations given to the Oklahoma Medical Research Foundation in December 2005. His congressional campaign paid back $5,126 to Abramoff’s Sports Suites LLC, for the use in 2003 of skyboxes by the congressman for an American Idol concert and a Washington Redskins game. Istook has denied any connection between the donations and his activities, saying in 2006, “I barely knew the man.”
Istook is identified in documents filed in June 2008 against his former chief of staff, John Albaugh, as “Representative 4”. According to the documents, Istook called Abramoff in 2003 to thank him in advance for use of one of Abramoff’s FedEx Field skyboxes for a fundraising event. Istook asked Abramoff which projects his clients wanted in the upcoming transportation bill. The government filing refers to an Abramoff e-mail saying Istook “had basically asked what we want in the transportation bill”, and telling his colleagues at Greenberg Traurig to “make sure we load up our entire Christmas list”. Four of Kevin A. Ring’s clients later received at least $1 million each in the transportation bill. On June 2, 2008, Albaugh pleaded guilty to one count of corruption and conspiracy.
I wonder why people tied closely to Abramoff (a man convicted of conspiracy and mail fraud) donated money to Ernest istook as Istook was running for high office?? Probably because they saw Ernest as a man of “stellar ethics” and “unquestionable moral fiber”. Well, It helps having a classy father and parents that don’t get divorced, no doubt. Ernest also has a 92% rating from the “Christian Coalition”, so that’s a big relief.
I’ve thought for awhile now my net searching abilities rank on the high end—but now you have me wondering. Where in the hell is the link that says that EITHER Moore is divorced or “married to Anne Curry”. Because I sure as F— cannot find a respectable and reputable source that says either. Please provide a link or otherwise advise.
His wife’s name is Alison?? But this is dated 2004. 15 years old. Alison does not = “Anne Curry”.
Alison was the first wife and the mother of his 3 sons. He dumped her for Anne Curry.
It would help to lessen the confusion if you spelled her name right, but I saw the Bloomberg article and finally figured out where you got that——
If he punts the taxes to her she must be semi-intelligent. Wonder what her occupation is??
If he was not divorced – why would he be paying child support payments? Then again – Stephen Moore is an incredibly stupid person so who knows?
Josh Marshall has received an estimate of the Word count for the actually Mueller report:
“We’ve just received reports that the Mueller Report runs over 300 pages. (Note that this likely does not include underlying evidence produced in the investigation.) A rule of thumb is that a single spaced page includes roughly 500 words; double spaced about 250. Let’s split the different and say 375 words per page and let’s assume it’s only 300 pages. That comes out to 112,500 words, a decent sized non-fiction book. Just now I scanned through the Barr Letter and from what I can tell it includes 65 words from the report. In other words, we have currently seen .057% of the Mueller Report. Note: There’s a footnote which may include an additional 15 words. This will amount to a game-changing .07% of the report we’ve seen.”
We have seen Barr’s summary which comes to less than 0.1% of the entire report. We can only speculate on how bad the other 99.9% of this report will turn out for Trump. No wonder Team Trump is not ranting about this 24/7. They are truly scared that the entire truth will soon come out!
The estimates people are quoting now is that the redacted “full” report will come out before May. Now you know Barr will come up with every excuse under the sun, including the old stand-by ruse “out of concerns for national security”. What that amounts to is, the earliest we will see that redacted “full” Mueller report will be the last Friday in April.
Now they are saying it will be up to 1000 pages. When it does finally come up – CoRev will be kept busy for a while as he does his best to cherry pick his favorite out of context quotes!
400 pages is the number I am hearing recently. And Barr is claiming mid-April on the Mueller release now. Vague enough to still make it the last Friday in April. Pelosi has been unusually blunt on her thoughts on AG Barr. Honest to God I thought Pelosi was going to send him some cookies and ask him about his health, and if he needed an interest free loan to visit a health clinic. Pelosi still hasn’t made a public admission that she feels as though AG William Barr is her godson either, which shocked me. Maybe after giving “W” Bush and Hank Paulson the largest political gift in world history she finally figured out that tact doesn’t work??
I’d have to assume she’s not senile and that’s pretty much out of the question.
The basic report is reportedly upwards of 400 pages, but this is not counting appendices that almost certainly run into the hundreds of pages and are likely to contain crucial information that may be more likely to get redacted than the main body of the report. This is a serious issue,, and the House Dem leaders, including both Nadler and Pelosi, are demanding the full redacted report, but Barr is making it clear there will be redaction, almost certainly at least of materials involved with ongoing cases, as well as possibly other things.
I should have said Nadler and Pelosi are demanding the full unredacted report, but Barr is apparently doing a bunch of redacting. Heck, they want it on April 2, but he has made it clear he will not deliver it then. Too busy redacting.
I just read in the FT that Stephan Moore has proposed that Fed policy target commodity prices with the objective of rendering the said commodity prices more stable.
No, I did not read that. It came to me while astral travelling over the Drakensberg mountains.
Menzie Chinn: You are not qualified for being on the Federal Reserve board (even if you understand monetary policy better than 99% of Americans) and neither am I or anybody else posting to this forum but by focusing on the nonsense this Stephan Moore fellow spouts, you are doing your country and the rest of the world a big, huge favour.
P.S. I can still not understand why Trump booted Janet Yellin. She is a dove, far more dovish than I would prefer. Was he worried about being shown up a smart, intelligent older woman?
Actually Moore is a gold bug so targeting commodity prices would be his style. With the extreme variability in the relative prices of most commodities, such a FEd policy would lead to yuuuuge business cycles.
This is why we should never let a village idiot like Moore anywhere close to the Federal Reserve.
“Was he worried about being shown up a smart, intelligent older woman?” YES!
BTW – isn’t Jeff Frankel qualified to be on the FED? I think so. And Menzie has co-authored a few papers with Jeff. So if I had to choose between Dr. Chinn v. Mr. Moore – this would be an easy call.
Professor Chinn is MORE than qualified for a position on the FOMC or even the board. HIs resume is better than many who have served in the FOMC, and probably the board as well. I can make a list of less-qualified people but there’s no point in being insulting to people unless my hand is forced. I’ll list those people if someone wants to push the issue. I’ve said before if I was President, Menzie would be a member of my NEC in the blink of an eye, and probably even have an “unofficial” advisory position (as in, if Menzie wanted to talk about something he could walk into the Oval Office ANY time HE wanted). Some people have a personal integrity that is nearly unquestionable. Menzie is one of those guys.
Not only lis Menzie qualified to be on the Fed board, but so is Jim Hamilton.
You don’t understand why Trump booted Yellin? It’s not complicated; here’s the long and the short of it: https://www.cnbc.com/2018/11/28/trump-might-have-renominated-yellen-for-fed-if-she-wasnt-so–short.html
“He feared that at 5 feet and 3 inches she just wasn’t tall enough to get the job done.”
Our President truly is a very stupid person. It turns out that Milton Friedman was only 5 feet 0 inches.
BTW, while her shortness may have been the biggest issue for Trump, he also did not like it that she is a Democrrat. Powell is a Republican, even though he was initially appointed by Obama. Traditionally the Fed board has been very non-partisan, with one of the worst things about Moore’s nomination (still hoping he gets blocked) being that he is so screamingly and stupidly partisan.
As the wife surprised in bed with another man by her husband said, “Who do you believe, your own eyes or me?”
Or from the Soviet era, husband finds wife in bed at home with a sleeping man, so she says “Shhh, he saw Lenin!”
It gets worse. It turns out that Moore stiffed his wife and kids for $300,000 in alimony and child support, prompting a judge to reprimand him and order the sale of their house. Moore finally paid up what he owed, but then turned around tried to deduct the full amount from his taxes. Child support is not a deductible expense.
Apparently when the IRS informed him of his tax underpayment, instead of paying up like sensible people, he refused to pay, resulting in an IRS tax lien. He seems to be a real piece of work.
It’s a shame that his personal life might be the thing that derails his nomination, but the public should expect minimal financial morals of conduct from people nominated to make critical decisions about their financial lives.
He should have been excluded on the basis of competency, but if private morality is what it takes to shame Republicans into do the right thing, then so be it.
Did you not mean to say “maximum financial morals” rather “miimum”? The latter is what Moore seems to have.