During his 1980 campaign against President Jimmy Carter, Ronald Reagan famously asked, “Are you better off than you were four years ago?” At the polls, voters across the country answered “no.” Since then, that simple question has gone down in political lore for being so devastatingly effective.
We have elections this November — the entire General Assembly is on the line — and I suspect we’ll hear some variation of that same question, just on a Virginia scale. Republicans will surely say things are going well under Gov. Glenn Youngkin, and would go even better if he had a Republican legislature to pass more of his agenda. Democrats will say just the opposite. That’s the nature of politics.
We certainly have emotionally hotter issues to debate: How much will Republicans try to restrict abortion access and early voting? How much of the current $5.1 billion in excess revenues would Democrats try to spend before considering tax cuts? However, into that mix we have at least one somewhat objective measure of whether things are getting better or getting worse: The annual CNBC rankings of the best states for business.
I suspect many states secretly dread these rankings the same way colleges chafe at the various rankings of schools. Is this really a good measure? At some point, it doesn’t really matter. All these rankings get so much attention that reputations are at stake, regardless of what the facts might be.
In Virginia, we saw Democrats take credit for the state being ranked first in 2019 and 2021 as evidence of their good stewardship of the state. Last year, we saw Democrats try to blame Youngkin when the state slipped to third place. One problem: I dug into CNBC’s methodology and pointed out that much of it was based on data that predated his governorship, so he couldn’t possibly be blamed. Now we have another year’s worth of rankings come out and Virginia has moved up from third to second. Should Youngkin get the credit for that? After all, we’re now dealing with data from his time in office.
Let’s take a look.
First, the CNBC methodology remains proprietary. We generally know the inputs but the formulas that crunch them are secret. We know that CNBC started measuring 40 different things and now measures 86.
Those 86 inputs are divided among 10 general categories, which are weighted by what the states themselves are talking up as their attributes. “That way, we measure the states based on the attributes they use to sell themselves,” CNBC says in its official explanation. That seems perfectly logical but it also means this: The weighting of those 10 categories changes year to year. That also seems logical — sales pitches vary over time. However, it also makes it difficult to compare rankings over the years. Imagine this in Electoral College terms: Carrying California nets a lot more electoral votes today — 54 — than it did in 1852 when it had just four, while New York, the largest state then, is comparatively less important now.
When CNBC launched these rankings in 2007, the weightiest category was “cost of doing business,” accounting for 450 out of a possible 2,021 points.
For 2023, “cost of doing business” has fallen all the way to fifth place, accounting for just 290 out of 2,500 points.
In first place now is “workforce,” worth 400 points. Behind it, and ahead of “cost of doing business,” are “infrastructure” (390 points), “economy” (360 points) and “life, health and inclusion” (350 points). That latter category used to be called “quality of life.”
The changing weight of these categories shows just how much the world, and the economy, have changed.
I hate to disappoint all my Republican friends but it sounds as if taxes (part of “cost of doing business”) simply aren’t as important as they once were, at least according to CNBC — or the states themselves, since their pitches are what this is ultimately based on. Youngkin has made a big deal about wanting tax cuts as a way to produce “a rip-roaring economy,” but CNBC seems to be saying they’re less important to the economy than they once were.
Instead, the emphasis on “workforce” matches what I hear almost any time I hear economic development officials talk.
The category that has risen the most over the years is “infrastructure.” Back in 2007, that was simply “transportation” and was good for 107 points. Now it’s expanded to include not just roads and bridges but also broadband access — and is up to 390 points. The “economy” section has always been important, but another big mover over the years has been that “life, health and inclusion” category — up from 250 points in the beginning to 350 now. Once again, that matches the pitch I hear from one locality after another: Move here because it’s a good place to live. Interestingly, “education” is like “cost of doing business” — a category whose importance has dropped. In the first rankings, “education” was worth 250 points, now it’s just 125 points in a system with more points.
Again, this reflects what the states themselves are talking about, not CNBC’s judgment of what’s important.
Now, after all that wind-up, let’s take a look at how Virginia scored. These are listed in descending order of importance in the rankings:
Workforce: 7th, up from 11th last year
Infrastructure: 10th, down from 9th
Economy: 13th, up from 20th
Life, health and inclusion: 15th, up from 17th
Cost of doing business: 25th, up from 26th
Technology: 15th, up from 17th
Business friendliness: 6th, same as last year
Education: 1st, up from 2nd
Access to capital: 4th, up from 6th
Cost of living: 25th, up from 30th
Am I the only one who’s not impressed by these numbers? We only make the top five in the two of the least-important categories, points-wise. Somehow, though, we still managed to rank second overall, behind only North Carolina.
Now consider this: While Virginia moved up in the rankings, it actually received fewer points than it did last year when it finished third. In fact, Virginia netted fewer points in this year’s second-place finish than it has any year since 2016, when it tied for 13th. Does that mean Virginia is doing worse? Or does it merely reflect that CNBC has changed the weight of the different categories over the years? (You can argue about the former but the latter certainly seems true.)
For all these reasons, I would not advise either party to spend much time touting the results for whatever political advantage they see.
I would, though, suggest that there might be some broad lessons we can draw from these rankings:
1. The size and quality of the workforce really is a big deal. This is increasingly what states are pitching. This is why the relatively small number of young workers in rural Virginia is such a hard obstacle to overcome — and why the state’s community college system is so important.
2. Youngkin is right to focus on North Carolina as a competitor. The governor routinely cites the Tar Heel state, and these rankings suggest he’s on target. North Carolina’s economic dominance is also potentially good news for localities along the state’s southern border. I’ve previously written about a report that mapped the nation’s economic geography and made the case that much of the southern part of the state is more closely tied to North Carolina’s economy than to the rest of Virginia’s; they just need to figure out how to take more advantage of that. (Here’s where business interests in Martinsville and Henry County like to talk up the importance of a better road to Greensboro.)
3. The Southeast is where the economic action is. The top four states are North Carolina, Virginia, Tennessee and Georgia.
4. Politics may not matter as much as some partisans might like. The top two states are purple ones. North Carolina has a Democratic governor and a Republican legislature. Virginia has a Republican governor and a divided legislature. The rest of the top 10 includes five Republican states (Tennessee, Georgia, Texas, Florida and Utah) and three Democratic ones (Minnesota, Washington and Michigan). Meanwhile, the bottom 10 includes seven Republican states (Oklahoma, Alabama, Arkansas, West Virginia, Mississippi, Louisiana and Alaska) and three Democratic ones (New Mexico, Rhode Island and Hawaii). Politics can certainly make some differences but geography and other factors play a big role, too.
So are we better off today than we were four years ago? You’ll have to decide that for yourself; CNBC’s rankings can’t really help you with that.