A Denver-based think tank argued for the adherence to free-market principles when crafting policy in a new report that gives Colorado’s economy a strong rating but which also warns about a “sour” climate ahead.       

The new report by the Common Sense Institute paints both an optimistic and foreboding future, noting that Colorado’s employment growth ranks among the top 10 states in the country but that perils persist in the form of slowing migration, which could mean insufficient workforce, rising inflation and the possibility of a recession.  

The proper response to these challenges, the group insisted, is pursuit of the “tried-and-true principles of the free enterprise system.”

“The record of history is clear: a decentralized economic system, free of cumbersome regulation, will consistently deliver greater wealth, better services, more advanced industries, and improved overall outcomes for the individuals, families, and communities throughout our state,” the report said. “An embrace of free enterprise principles will guide policymakers and voters in their quest to bring Colorado to its full potential, even in challenging economic times.”

The public-policy debates in Colorado mirror those in other states and often offer glimpses of the contending theories on how best to organize economic activity within the confines of America’s capitalist experiment. The tensions manifest in many forms, notably in taxation and government spending. 

The group’s 2023 Free Enterprise Report surveyed eight policy areas: jobs and the economy; education; energy and environment; health care; housing and community; infrastructure; state budget; and taxes and fees – rated Colorado’s performance, noted recent policies, and then summarized major issues on the horizon for each. 

Three of the areas – jobs and the economy; energy and environment; and health care – received a thumbs-down. The rest got a neutral rating. 

The group added a disclaimer by noting its assessments are neither the final word nor the only valid perspectives. Indeed, others contend that a free enterprise approach must be tempered with regulations to ensure a level playing field and prevent calcification of systems. Many also argue for a more robust role for government, saying only the latter has sufficient resources and the influence to effect lasting and necessary changes.      

The report said Colorado’s economy has so far performed well, ranking No. 7 in growth among the states between the third quarter of 2021 and the third quarter of 2022. Colorado’s employment growth also remained strong, up 2.3% above pre-pandemic levels, putting the state at No. 11 in post-pandemic employment recovery. 

Colorado’s unemployment rate stood at 3.4%, below the national average, the report noted.

But the state’s inflation rate stood at 7.7% over the past 12 months, which translated to the average Colorado household spending $9,207 more since 2020.

Worrisome indicators exist, the report said. Colorado has twice as many job openings as the unemployed, but its net migration has slowed – to a “pace that may be insufficient to meet future workforce needs.”

“Rising inflation and the strong possibility of a recession sour Colorado’s economic outlook,” the report said. “If a recession occurs, the economy will slow, output will fall, and the unemployment rate will increase.”

Common Sense Institute, which adopts a nonpartisan posture but advocates for free-market and economic vitality, also argued that new regulations will affect employers, who will soon have to navigate “regulatory overhauls” and new programs, notably the Paid Family and Medical Leave Insurance (FAMLI). Minimum wages in Denver and Colorado also will start in January, which means more labor costs for some Colorado businesses.

“Colorado policymakers will face tough decisions with high inflation and a potential recession on the horizon,” said the study’s author, Evelyn Lim, a CSI 2022 Mike A. Leprino Fellow. “To ensure a stable and competitive economic position, a reprioritization of essential issues and a return to the principles of free enterprise in addressing those issues will keep the state on the right path through economic uncertainty.”