Where Did Rhode Island Go Wrong?

Aaron Renn contends that over-regulation and generous government benefits have hampered the state’s economy:

Depending on the month, Rhode Island has either the worst or second-worst unemployment rate in the nation: 9.3 percent, according to the latest Bureau of Labor Statistics figures. Since 2000, the state has lost 2.5 percent of its jobs, and what jobs it has created are mostly low-paying. The job situation is so dire that entire local economies have become dominated by the benefits-payment cycle. In Woonsocket, for example, one-third of residents are on food stamps.

Rhode Island boosters cite its per-capita income of $45,877—4.9 percent above the national average and 14th-best in the country—as evidence of the state’s economic strength. But this number is misleading. It’s driven in part by high levels of government-transfer payments: everything from retirement and disability insurance to workers’ compensation and unemployment, veterans’ benefits, and the whole panoply of federal grants (Medicaid, food stamps, SSDI). Rhode Island ranks third in the country in such transfers per capita. Incomes have also been stagnant for decades. As late as the 1930s, Rhode Island’s per-capita income was nearly 50 percent greater than the national average. By the mid-1940s, though, it had declined to just a tick above the U.S. average, where it remains.