Photographer: Travis Heying/wichita eagle/getty images

With Republicans now in control of the White House and Congress, we’re probably going to see tax cuts, deregulation and weakening of rules protecting labor unions. What should we expect from these policies? One way to answer this question is to look at states where free-market approaches have been tried.

A great thing about the U.S. is that the states can act as policy laboratories. States have many similarities -- they fall under the same federal laws and have similar legal institutions. That makes comparisons between states a lot easier than comparisons between, say, Japan and South Korea. But because of the U.S.’s federal structure, states have a lot of control over their economic policies. They can set their own tax rates, manage public spending and impose lots of regulations, including rules governing organized labor. They can also set urban land-use policy, use industrial policy to promote or lure certain businesses, and much more.

In recent years, a number of states have experimented with the kind of low-tax, anti-union policies that many Republicans and free-marketers like. These include Kansas under Governor Sam Brownback, Wisconsin under Scott Walker in recent years, and Texas going back several decades.

Texas is a difficult case to evaluate. Lots of people talk about the so-called Texas model, but there’s no similar state that can be used as a comparison. California and New York, for instance, have much different industries, climates, ethnic makeups and geographical locations. So comparing Texas to California, as many do, is a bit of an apples-to-oranges exercise -- when Texas does better, it could be because of high energy prices, and when California is winning it could be due to a technology boom.

A better comparison is Kansas and Nebraska. Six years ago, Brownback began a program of big tax cuts in Kansas; Nebraska didn’t follow suit. How did they do? Bloomberg View’s Justin Fox took a look at the states about a year ago, and found that Kansas lagged its northern neighbor in job growth. Kansas continues to lag Nebraska in terms of the percentage of residents with jobs, as it’s done for the past 25 years. And in terms of median income, the Brownback years haven’t done much to reverse the lead that Nebraska opened up in the mid-2000s:

Nor have people been flooding into Kansas to work -- the gap between Nebraska’s employment-to-population ratio and Kansas’ is roughly constant.

So Brownback’s big experiment looks as if it has done very little to boost the state’s economy. Its only real effect has been on the state’s finances -- the tax cuts have created a large and growing state deficit.

How about Wisconsin and Minnesota? Wisconsin’s policies under Republican Scott Walker haven’t been as dramatic as those of Brownback, but the state has been loudly trumpeting its low-tax bona fides relative to its Democratic-controlled neighbor to the west. Wisconsin’s corporate income tax is about 2 percentage points lower than Minnesota’s. Its personal income tax is 1 to 2 percentage points lower, and is less progressive. Its property taxes are about 1 percentage point lower, and its sales taxes about 2 percentage points lower. Wisconsin also has far less generous unemployment benefits -- $14,000 a year, compared with $31,000 in Minnesota. Walker has also launched an assault on unions -- in 2011 Wisconsin stripped most public-sector unions of collective bargaining rights, and in 2015 it adopted a so-called right-to-work law, banning labor contracts requiring workers to pay union dues.

The two states have similar demographics -- both were settled mainly by German immigrants, along with some Scandinavians, and both were about 85 percent white in 2010. Both have very broad-based economies, with manufacturing, health care and agriculture standing out. And both have cold, snowy climates.

So the two make a natural comparison. Lots of progressives like to claim that Minnesota is beating its neighbor, while free-marketers claim the opposite. But a sober comparison shows that the two have done about the same. Noah Williams of the University of Wisconsin-Madison has a set of slides comparing the two along a wide range of economic outcomes -- employment, income, urbanization, dynamism and population changes. On all the measures that Williams looks at, the states have performed very similarly since Walker came to power.

Let’s check the basic metrics of income and employment, as we did for Kansas and Nebraska:

Again, there’s almost no change in the relative differences for more than a decade. And again, there’s no flood of workers into Wisconsin; if anything, Minnesota has gained a little bit on its neighbor in terms of population.

So the big conclusion here is that free-market policy reforms just don’t seem to have a huge impact. Along every dimension of comparison, the two free-market states look similar to their more interventionist neighbors. A reasonable hypothesis is that tax rates, anti-union laws and other state-level economic policies just aren’t nearly as powerful or important as people in the political arena make them out to be. Other factors beyond the control of politicians -- economic geography, for example, or the rise and fall of specific industries -- are probably more important.

So whether you like free markets or government intervention, you should probably temper your expectations for what policy can accomplish.

To contact the author of this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net