An abandoned Toledo factory

Investment magazine Forbes listed Ohio as one of eleven U.S. states in a “death spiral” based on a recent analysis of states’ economic and demographic data. The Forbes report, “Do You Live In A Death Spiral State,” advised readers not to buy property “in a state where private sector workers are outnumbered by folks dependent on government.”

“Eleven states make our list of danger spots for investors. They can look forward to a rising tax burden, deteriorating state finances and an exodus of employers,” William Baldwin wrote. “The list includes California, New York, Illinois and Ohio, along with some smaller states like New Mexico and Hawaii.”

Ohio was the eleventh state on the list, with a “takers” to “makers” ratio of 1.00. Forbes calculated that New Mexico, the top state on the list, has 1.53 residents dependent on government for every 1 private industry worker.

A photo slideshow accompanying Baldwin’s story described Ohio’s economic situation as a “fiscal standoff between takers (people collecting welfare, a government salary or a government pension) and makers (private sector employees).”

The report combined several studies, including U.S. Bureau of Labor Statistics data, research conducted by the non-profit Kaiser Commission on Medicaid and the Uninsured, and state pension fund analyses conducted by University of Chicago professor Robert Novy-Marx and Northwestern University professor Joshua Rauh. The meta-study also includes investment and economic data from Conning & Company, an investment firm specializing in insurance portfolio risk management.

According to Baldwin’s formula – which adds together the number of government employees, citizens dependent on the state for their healthcare, and calculates each $100,000 in unfunded state employee pension liabilities as equivalent to a single individual totally dependent on the State – each Ohioan employed in the private sector pays for the entitlements promised to one “taker.”

In comparison, 100 California private industry workers must cover the cost of 139 public-sector employees and recipients of government-funded entitlements such as food stamps and welfare checks. An earlier study found that public-sector employees in almost all job fields were better paid than their counterparts in the private sector, creating what amounts to a privileged class of workers, placed above the taxpayers funding their salaries.

The Conning Municipal Credit Research report, published in October, found that Ohio’s available treasury accounted for only two-thirds of the money required to fund the fringe benefits promised to public-sector employees. Prior research conducted by the Pew Research Center suggests that Ohio’s public-sector pension system has promised $87 billion more than it is actually able to pay.

Conning, and by extension, Forbes magazine, gave Ohio’s economic outlook poor marks for the relative size of public-sector fringe benefits and welfare expenditures, low population growth, and the large share of state government debt that each Ohioan owes. Ohio ranks in the bottom half in all but two indicators of state fiscal and economic health and stability used by the study, and ranks among the worst-performing states in nearly half of the indicators.

The Forbes meta-study, which ultimately concluded that investing in Ohio was a very risky proposition, echoes conclusions reached by prominent economist Arthur Laffer in April 2012. Laffer described Ohio as a “fiscal basket case,” with the second-lowest economic performance and 38th economic outlook of all 50 states.

Despite the economic warning signs and historically negative impact of higher state taxes, progressive groups including Policy Matters Ohio continue to advocate for bigger government paid for by “the rich.”