RALEIGH — North Carolina faces many challenges. You and I may disagree with how to rank those challenges, or what to do about them, but we share a belief that our state could be a better place than it is today.

John Hood

This reformist impulse is proper and useful. But we shouldn’t let it make us unduly and unrealistically dour. Few states can match what North Carolina already has to offer — which is why few states match or exceed our growth rate.

The latest population data from the U.S. Census Bureau, for example, show that North Carolina’s population grew by some 133,000 last year, to 10.7 million residents. Only Texas (471,000) and Florida (417,000) increased more in population during the period. In terms of annual growth rate, North Carolina ranked 9th at 1.3%, with Florida (1.9%) topping the list.

America’s fastest-growing states are primarily in the Southeast and Mountain West. That’s been true for some time now. Similarly, the places with the largest drops in population last year were also rather predictable. There were six-figure population declines in New York, California and Illinois. In percentage terms, the fastest-declining states were New York, Illinois and Louisiana.

As for gross domestic product, North Carolina’s economy has since the beginning of 2020 posted a compound annual growth rate of 2.8%, adjusted for inflation. That’s significantly higher than the national (1.6%) and regional (2.1%) averages. Idaho (4.2%) ranked first in this category, followed by Tennessee (3.8%), Florida (3.6%), Utah (3.6%), and New Hampshire (2.9%). Our state ranked 8th.

Which states are slackers in economic growth? Well, Louisiana’s GDP actually shrank by an average annual rate of 3%. Other places with net negative growth since January 2020 included Alaska, Wyoming, North Dakota, Oklahoma, Hawaii, New Mexico, West Virginia and Maryland.

As should come as no surprise to no one, I believe that the past decade of free-market reforms and fiscally conservative policies made North Carolina a more attractive place to live, work, invest and create new jobs. We went from having one of the worst-designed tax systems in the country to one of the best. Under laws already enacted by the General Assembly, our tax rate on personal income will decline to 3.99% by 2027. Our corporate tax will disappear entirely by 2029. I also credit infrastructure improvements and a series of regulatory-reform measures for improving North Carolina’s business climate.

A Canadian think tank, the Fraser Institute, provides a handy way to track these changes over time. In the most recent iteration of its Economic Freedom of North America index, North Carolina ranked 9th. That represents a marked improvement from its 2010 rank of 19th. By the way, what state currently ranks first in economic freedom by Fraser’s measure? Florida.

It is important to keep in mind, however, that government is not the primary driver of economic decisions — whether for good or for ill. All other things being equal, states with smaller, less-intrusive, and more-effective governments tend to grow faster than average. That’s the finding of most (though not all) academic studies published over the past several decades.

Where the rubber meets the road, however, all other things are never equal. States differ significantly in geography, natural resources, population density, and economic structure. Many factors that determine growth over time can only be modestly influenced by public policy, if at all.

Look again at that list of states with shrinking economies. While some of them are “blue” states with relatively high tax and regulatory burdens, others such as Wyoming and North Dakota don’t fit that description. States overly reliant on industries such as oil drilling, mining and tourism have had a rough few years. Even Texas, a popular destination for migrating families and business alike, managed only to match the national average in GDP growth (1.6%).

North Carolina’s economic portfolio is more diverse — and becoming more so over time. Is there room for improvement? Sure. But we already have a lot to be thankful for.

John Hood is a John Locke Foundation board member.