Report: Economic freedom best path to make Kentucky competitive again

(FRANKFORT, Ky.) – A report released today by the Bluegrass Institute for Public Policy Solutions looks back over the past 40 years to demonstrate how Kentucky has fallen short in creating the robust economic growth generated by competitor states and provides several recommendations to place the commonwealth on a path towards a whole new level of opportunity for Kentuckians.

"The Lost Decades: Kentucky's Economic Underperformance 1980 - 2020" by Visiting Policy Fellow Andrew McNeill contrasts the Bluegrass State’s sluggish progress in creating higher standards of living with four benchmark states - Alabama, Indiana, Tennessee and North Carolina – and provides overwhelming evidence that Frankfort's practice of favoring progressive redistribution over economic freedom has held the state back for generations and continues to do so.

"The question of why Kentucky couldn’t keep pace with its competitors is complex," McNeill said. "However, a critical distinction can be drawn between Kentucky and these other states. Their embrace of limited government and fiscal responsibility has created greater wealth and opportunity for their residents. Kentucky remains a laggard, as this report shows."

While Frankfort has sold the notion that “Kentucky continues to move forward,” the fact is Kentucky's per capita income has fallen from 86.2% of the U.S. average in 1999 to 72.9% in 2019. The state’s economy grew over the period but not nearly fast enough to keep pace with the rest of the United States.

The analysis also uncovers a fact likely to surprise many: Forty years ago, Kentucky was essentially as wealthy as North Carolina and Tennessee – states which receive high marks in various economic-freedom rankings – while the Bluegrass State shares the space reserved for larger "blue states" like Illinois, New Jersey and Connecticut.

The report’s central premise regarding Kentucky's sluggish growth is less about partisan labels than it is about whether policy favors economic freedom or progressive redistribution.

Evaluating Kentucky's historic and current fiscal policies reveals a clear preference for higher government spending, irresponsible debt and a tax burden borne by Kentuckians more closely aligned with New York than a competitor like Tennessee. Kentucky redistributes a higher percentage of its residents’ income through state government spending than any of the four benchmark states. Especially troubling is the fact that constituencies favoring higher taxes and redistribution continue to prevail in Frankfort.

“Four decades of stagnation offer sufficient evidence that policies centered on government growth and the redistribution of hardworking taxpayers’ dollars hinder the ability of Kentuckians to flourish and enjoy the economic blessings of liberty,” Bluegrass Institute President and CEO Jim Waters said. “This report offers a framework of realistic recommendations to assist conscientious policymakers and their constituents in making the case for policies favoring less government and more economic freedom which will help Kentucky catch up and compete once again.”

The report offers 11 recommendations to rein in state spending and debt, support pro-growth tax policy and require a new level of transparency and program review for state-funded programs. Recommended structural reforms include placing a Taxpayers Protection Act constitutional amendment in front of voters for ratification, strengthening Kentucky's Rainy Day Fund and requiring all revenue and spending measures be posted for 72 hours before a vote by the General Assembly.

Report author Andrew McNeill is available for comment at amcneill@freedomkentucky.com or 502.403.7548.

For more information, please contact Jim Waters at jwaters@freedomkentucky.com, 859.444.5630 ext. 102 (office) or 270.320.4376 (cell).

The Bluegrass Institute for Public Policy Solutions, Kentucky’s first and only free market think tank, has been offering commonsense ideas to solve the commonwealth’s greatest challenges since 2003. Find these solutions at www.bipps.org.