North Carolina historians might lay claim to the state being first in freedom for its Colonial-era declarations of independence. But the most comprehensive instrument available to measure modern-day economic and personal freedom in the 50 states says it ranks only No. 19.
Will Ruger and Jason Sorens, authors of Freedom in the 50 States: An Index of Personal and Economic Freedom, published by the libertarian Cato Institute, told members of the General Assembly on Wednesday that North Carolina is improving its ranking. But they had no shortage of recommendations on how to stay on that path.
“Where North Carolina, we think, could most stand to improve are on some of these what we consider cronyist regulations,” said Sorens, who lectures at Dartmouth College. “It’s one of the worst states for insurance freedom, lots of price controls, and rating classification limits for automobile and homeowner’s insurance,” which limit competition in the marketplace.
“We do find a relationship … between the number of lobbyists in a state and its cronyism,” Sorens said. “As the number of lobbyists per legislator goes up, freedom from cronyism declines, in other words [the state] becomes more cronyist.”
Ruger, vice president of policy and research at the Charles Koch Institute and Charles Koch Foundation, said the index captures 230 “top-line variables,” so the heavily data-driven research was not skewed by cherry-picking a few categories.
According to their research, North Carolina ranked 17th for fiscal policy, including state and local taxation, government employment, government subsidies, and government debt. The state did not fare as well in its regulatory policy score, finishing at No. 26.
The economic freedom index is derived by combining those two scores. North Carolina finished No. 24.
“That’s not a mark of shame,” Ruger said. “There’s room for a lot of improvement here,” and North Carolina should move up in the next edition of the rankings, published in 2018. That is because this edition of the freedom index used data from 2014, the most recent available, and North Carolina has made improvements in some of those areas since then.
North Carolina’s overall freedom ranking was 19th, which was determined by combining the economic freedom and personal freedom scores. The state ranked No. 13 on personal freedoms.
Ruger said personal freedom, sometimes called paternalism, draws from such items as criminal justice reform, gun rights, educational freedom, gambling, travel freedom, and campaign finance.
“North Carolina performs quite well particularly [compared] to other Southern states, and that’s a real advantage for North Carolina, particularly in terms of attracting a lot of high-value added businesses and citizens,” Ruger said.
Sorens said based on the data in this latest index, if North Carolina wishes to improve its standing it should:
1) Eliminate the state monopoly on distilled spirits and privatize liquor stores.
2) Trim hospital spending, “which we find is higher than the national average.”
3) Trim individual income taxes, “which are also relatively high.”
4) Eliminate rate regulations of property and casualty insurance, or move to a freer regime that allows a company to start using a new rate, and then file with commissioner. “That reform alone would have raised North Carolina five places on our regulatory freedom index.”
5) Abolish punitive damages in court cases, or limit them.
6) Abolish certificate of need laws for new hospital construction. “There’s a lot of research on this. [A certificate of need law] doesn’t seem to have any health benefits. If anything it results in fewer hospital beds available to people, and at actually higher costs.”
7) Grant nurse practitioners independent practice and prescription authority. “Nurse practitioners can certainly do general medicine. Allow them to open practices without having to be supervised by physicians.”
8) Limit equitable sharing with the Department of Justice so that state public policy on civil asset forfeiture is followed.
Interestingly, North Carolina law prohibits civil asset forfeiture — the practice of a law enforcement agency seizing someone’s property before they are charged or convicted of a crime.
“Even though the state does not have civil asset forfeiture, law enforcement, we find in North Carolina, heavily participates in federal civil asset forfeiture, so it’s kind of an end-run around state law, and maybe defeats the point of the public policy that North Carolina has enacted,” Sorens said.
“The Department of Justice can simply say, ‘Let us take over your cases, and we’ll split the revenue with you,’ so you don’t have to follow state rules anymore,” Sorens said.
Ruger said another area in which North Carolina should relax regulations is in occupational licensing because they “are so pernicious” in thwarting the opening of a new business, or competing with an existing one. They particularly harm less fortunate people who “are trying to move up the ladder of the American Dream.”
For example, Ruger said, long hours of educational requirements often are tied to getting an occupational license, yet they “aren’t really as connected to the job as they’re claimed.”
He said the freedom index can be useful to elected officials and policymakers, the media, or others who wish to compare states, or hold them accountable. Properly used, it could foster freedom-based competition among the states, and provide the potential for them to reimagine their policies from innovative programs being put in place elsewhere.
“Individuals are free when they are allowed to dispose of their lives, liberty, and property as they see fit consistent with the equal right of others to enjoy those things,” Ruger said.
“Freedom is valuable for its own sake,” Ruger said. “But it’s also valuable because it impacts … a lot of things we care about like economic growth,” and whether businesses and taxpayers are moving into a state or out of a state because of its policies.