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Relegate the State – A Modest Proposal – 2

Back on track.

Back on track.

Yesterday, I introduced the idea of relegating failed states out of the United States. So, how would the system work?

First, we’d have to develop a definition of what “success” really means. Such a definition might include a number of metrics such as educational attainment, employment, crime rates, justice system, health care, life expectancy and, perhaps, a citizen satisfaction index. It might also include some fairness metrics, aiming to understand how minorities fare within the state. It should also include a freedom index that measures how much citizens can do as they please.

There are probably many other metrics to include in the mix. Ultimately, we roll them all into a complex formula and calculate a number. Frankly, it’s not all that different from calculating a quarterback efficiency rating: a lot of stuff goes in, one number comes out.

We then rank the states and allow them to work on improvements. At the end of a decade, we relegate the bottom five – the least successful states. They are granted their independence and are no longer states within the United States.

The relegated states are, in a sense, liberated as well. They no longer need to worry about regulations emanating from Washington. They’re free to behave as they choose. Of course, they no longer receive subsidies from Washington, either.

The system allows for promotion as well as relegation. At the end of each decade, states that had been relegated could choose to apply for re-admission. We would need to develop rules and procedures to determine if they would be re-admitted and how they would be re-integrated. Fortunately, we have at least 20 years to work on the problem.

Ideally, the system would allow non-traditional states to apply for “promotion” as well. With Alaska and Hawaii, we’ve shown that states do not need to be contiguous. Let’s imagine that Wales wants to become a state within the United States. The city of Aberystwyth, Wales is actually much closer to Washington, D.C. than Honolulu is – so distance shouldn’t be a problem. If they can pass the success metrics, I’d be happy to have Wales join our union.

Like any other system, the devil is in the details. Working out the definition of success will take time. (On the other hand, identifying moocher states is quite easy). Plus, we would have to work out all the mechanisms of entry and exit. We could learn a lot from the experience of the European Union.

Despite the obstacles, I think this is a system that would appeal to many Americans precisely because it promotes American virtues, including:

Competition – states will actually have to compete with each other rather than lolling around on government welfare.

Responsibility and accountability – if you don’t do the work, you don’t get the benefits.

Incentives – states, for the first time, have the incentive to improve themselves.

Lower taxes — if giver states no longer have to support moocher states, we can significantly lower taxes.

Freedom – states are free to choose whether they stay or go. To leave the union, all they have to do is continue to fail.

It’s an all-American scheme that will reduce taxes while promoting the well being of our citizens. Let’s get started.

Relegate the State – A Modest Proposal – 1

You've been relegated.

You’ve been relegated.

I’ve always admired the European system of relegating athletic teams to lower divisions when they don’t perform well. The system creates much better competition while rewarding teams that do well and penalizing teams that fail.

Let’s say you own a soccer team in the “A” league, the highest level of competition. In addition to the “A” league, your country also has a “B” league, a “C” league, etc. Being in the “A” league provides a lot of privileges – greater attendance, television revenue, prestige, and so on. You have a lot of incentive to keep your club in the “A” league.

At the end of each season, however, the bottom three teams in the “A” league are relegated to the “B” league. At the same time, the top three teams in the “B” league are promoted to the “A” league. (The number of teams moving up or down varies from league to league). You have a very strong incentive not to let your team fall to the bottom of the standings.

In the American system, on the other hand, an “A” league team will always stay in the “A” league, no matter how poorly it performs. There’s no chance that my Colorado Rockies will be relegated to the minor leagues even though they stunk up the major leagues last year.

The American system creates a number of perverse incentives. There’s a clear incentive to lose games one year to improve your draft position the next year. Even if you have a crummy team, you still get to share in league-related income, like TV revenues. You don’t get the glory of winning a championship, but the financial penalties of failing are not very stiff. If you’re just in it for the money, there’s no real incentive to win.

The European system seems clearly superior. It creates greater competition, removes perverse incentives, and creates a system of accountability. You win, you’re in. You lose, you’re out. That seems much more American than European.

I’ve been wondering lately if we couldn’t apply a relegation system to the states of the United States. We have 50 states and some are clearly more successful than others. Even the failing states, however, reap huge rewards from remaining in the union.

In our current system, there’s no real incentive for a state to succeed. Even if a state fails, it still gets huge subsidies from other states. In fact, the greater the failure, the greater the subsidy. It’s a perverse incentive: the worse you do, the more you get.

In fact, some states – let’s call them moocher states – get a net benefit of billions of dollars from the federal government. These states pay a relatively small amount in federal taxes but get huge federal subsidies in return. There’s no incentive for such a state to invest locally. It would only reduce the federal subsidy.

The giver states, on the other hand, are penalized for their success. They see their moneys drained away to subsidize the moocher states. This reduces their incentive to continue to succeed.

So, what to do with the moocher states? Let’s set up a league table and rank states on their success. Every ten years, let’s drop the bottom five from the union. That will improve competitiveness, enhance local autonomy, emphasize responsibility and accountability, and erase perverse incentives. What could be more American than that?

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