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Willisms

« Trivia Tidbit Of The Day: Part 338 -- America's Manufacturing Base. | WILLisms.com | Bilbray Beats Busby In The Prequel »

Trivia Tidbit Of The Day: Part 339 -- Gross State Product, Not Arbitrary.

These Trends Are Not Accidental-

Ideas matter. Good ideas succeed. Bad ones fail.

Indeed, while the overall U.S. economy is running full steam ahead, with every state (other than Louisiana) showing economic growth over the past year, some state economies are created more equal than others:

grossstateproduct.gif

Notice any trends?

Sure, there's the red/blue thing that holds up-- with only an occasional exception. Moreover, though, there's policy. As we've seen before, states-- red or blue-- with relatively lower tax burdens tend to perform better, economically; meanwhile, states-- red or blue-- with relatively high tax burdens tend to perform poorly.

That explains why New Hampshire, a state that went for George W. Bush in 2000, stands out in the New England region. New Hampshire has one of the better tax structures (possibly even the best) in the country. Meanwhile, Ohio has one of the worst.

Generally, though, Republican-dominated states are posting stronger economic growth than Democrat-dominated states.

Again, that's just a trend. There are definite exceptions to the trend. But, clearly, ideas matter. Policies matter.

When Republicans act like Republicans (and most do, despite some of the grumbling we hear these days), good policy becomes good politics. At the same time, how many elected Democrats do we know that truly act like Republicans?

That was rhetorical, but the answer is pretty close to zero. Just like Michigan's Gross State Product growth.


-------------------------------------

Previous Trivia Tidbit: Manufacturing Sector Is On A "Record" Pace, Although The Media Won't Ever Admit Such.

Posted by Will Franklin · 6 June 2006 09:55 AM

Comments

Well, except that the trend you're pointing to doesn't show up on the map, actually. California and New Hampshire have the same growth rate, so perhaps California has the ideal tax system?

You're also assuming the a high growth rate is the only measure of economic health, but it does depend on what you're growing from - for example, a third-world country whose growth is higher than that of a developed country can still have an incredibly low standard of living and per-capita GDP.

The chart doesn't really tell us much of anything of use.

Posted by: John at June 6, 2006 10:43 AM

Wrong, wrong, and more wrong.

The trend does show up on the map. And no state is comparable to a third world country.

Also, I didn't show this, but if you go in to the BEA press release, you'll see that the economies of left-leaning states are shrinking as a proportion of the American economy.

Posted by: Will Franklin at June 6, 2006 10:50 AM

Speaking of "wrong, wrong, and wrong," Will, you said "New Hampshire has one of the better tax structures (possibly even the best) in the country."

New Hampshire, the only state with neither a state income tax or state sales tax, indisputably has the best tax structure in the country. There is no "possibly" about it.

And New Hampshire really isn't a "blue" state. Kerry won, but our Congresscritters are Republican, 4 for 4, as is our legislature. The gov's a Democrat, but a sensible one.

And seeing how dismal the rest of New England is gives me a frisson of schadenfreude... (sorry, Will, being around here makes me want to class up my language. You're a corrupting influence on me.)

As far as California having the same rate as NH; there has to be a certain element of scaling taken into account. I know that it's based on percentages, not raw numbers, but the sheer magnitude of the California economy (larger than most nations) and the fact that it's home to high-tech and entertainment colossi has to be a factor...

J.

Posted by: Jay Tea at June 6, 2006 01:38 PM

Speaking of "wrong, wrong, and wrong," Will, you said "New Hampshire has one of the better tax structures (possibly even the best) in the country."

New Hampshire, the only state with neither a state income tax or state sales tax, indisputably has the best tax structure in the country. There is no "possibly" about it.

And New Hampshire really isn't a "blue" state. Kerry won, but our Congresscritters are Republican, 4 for 4, as is our legislature. The gov's a Democrat, but a sensible one.

And seeing how dismal the rest of New England is gives me a frisson of schadenfreude... (sorry, Will, being around here makes me want to class up my language. You're a corrupting influence on me.)

As far as California having the same rate as NH; there has to be a certain element of scaling taken into account. I know that it's based on percentages, not raw numbers, but the sheer magnitude of the California economy (larger than most nations) and the fact that it's home to high-tech and entertainment colossi has to be a factor...

J.

Posted by: Jay Tea at June 6, 2006 01:43 PM

No, part of what Will is pointing to is explained simply by net migration of people into these areas. Part of a state's growth is due to the existing population doing better and adding new jobs, industries, businesses, etc. But the other part is driven by population growth.

Hence why Florida, Arizona, Nevada and Texas post the largest gains in the country. So it would be easy to dismiss Will's claims by simply saying, hah, states are growing because their populations are growing and that explains the entire reason for the growth of these states. But you would be wrong again.

The fact is that national GDP is growing at approximately 4%. But some states are growing and some are not. Growth allows new infrastructure and new prosperity. Shrinking or stagnant states cannot pay the bills over time. And when they are already running deficits, it gets worse.

So what we see is a dual effect. First, net migration is happening for a reason. People are leaving the red states and moving to the blue states in record numbers. Will has posted numerous times on this, so I won't rehash. Again it comes down to tax rates. But California is also growing in population by leaps and bounds, it is just not AMERICAN population. It is not to say that blue states never grow or that red states always grow faster, but rather to say that as businesses and people become more mobile, just as jobs become more mobile, they tend to go to the places where the policies are most favorable for them.

It appears that folks that have jobs and don't rely on welfare and big government; folks who own businesses and create jobs and economic growth; and the jobs and economic growth that they create--ALL PREFER LOWER TAX Red States. Let's not lie. The people that create economic growth prefer lower taxes and less government. It is only the folks that want to live in a Marxist Utopia or those that are on the welfare rolls that don't mind high taxes. Or perhaps those that don't know any better or cannot imagine living in some craphole like Houston, Dallas, Tampa, Phoenix, or Las Vegas. But our little craphole in Phoenix is now the 5th largest metro area in the country. We just passed Philly.

Posted by: Justin B at June 6, 2006 02:23 PM

In fact, I feel so strongly about it, I said it twice.

SOrry about the double-posting, Will.

J.

Posted by: Jay Tea at June 6, 2006 03:04 PM

The pattern he's claiming to see in the map simply isn't there.

As for some states growing and others not - actually most of them are growing, and the "dismal" New England states you're talking about are doing pretty well.

I'm not saying you're wrong, I'm saying what you've presented here does not demonstrate your point.

Posted by: John at June 6, 2006 03:25 PM

I AM saying you are wrong. There is a clear pattern there. It's ridiculous that you don't see it. I didn't think I needed to organize the states by their relative tax burdens (since I linked back to a prior post on this), nor by red/blue, but I guess I was wrong.

Posted by: Will Franklin at June 6, 2006 03:28 PM

Not to take it even more off-topic, but I thought Bush and the Republican congress were gonna totally tank the economy? As John points out, thinks look pretty good overall...

J.

Posted by: Jay Tea at June 6, 2006 03:49 PM

You know, if you vote with your pocketbook and you vote based on your own financial circumstances, it seems that this projection makes the red states redder and the blue states bluer. The blue states and the two Americas rhetoric of John Edwards keeps getting stronger.

Policies do matter. And we see that the more socialist the policies and taxation strategy, the less likely a state is to grow, both in net domestic migration and in terms of GSP. Growth is the fire that fuels rising incomes and rising prosperity. And as a relative measure of prosperity, it appears that three states, Arizona, Florida, and Nevada are leading the way.

I don't know if any of you have lived in Texas or Arizona (I know Will does), but our states are growing left and right. Same with Nevada. Growth creates business opportunities and our business friendly environment makes it easy to start new businesses without all the pandering to organized labor. People want to live where there is opportunity. People like the weather here too. People like low tax rates. People like affordable housing. And our state economies reflect that.

Look no further than Massachussets for what blue state politics do for a state. Mass is losing people via net domestic migration out of the state. The population growth is stagnant (as opposed to negative) simply because illegals and other non-Americans are coming in. GDP growth lags well behind the national average. So why is Arizona growing and Mass not? You could claim the weather, but the reality is that it is property taxes, income taxes, a pro-business environment in Arizona, and a climate that is friendly to the affluent who are the engine of growth.

Posted by: Justin B at June 6, 2006 04:19 PM

I lived in Cali for three years while on the boat. And the one thing that sticks in my head and is really weird but very relevant to this discussion was this darn commercial I always kept hearing over and over again it has stuck in my brain and says it all.

"come and incorporate in tax free nevada!"

Looking at the chart, I guess it stuck in other peoples heads as well.

Posted by: christian at June 6, 2006 04:57 PM

DANGIT!!!! I was just gonna say that about California. They are losing their best and brightest to near-by Las Vegas and Arizona.

You could add that California's biggest growth is in Nevada and Arizona.

Posted by: MBC at June 6, 2006 08:13 PM

Incidentally, California is so beautiful, rich in natural resources, and so on, that it is practically criminal that its economic growth isn't 10% a year.

Posted by: Will Franklin at June 7, 2006 08:40 AM

I live in Ohio, and it's really unfortunate that even the Republicans here don't see this trend, with the possible exception of Ken Blackwell. Ohio is losing people left and right, and yet no one is considering any real reform. If Blackwell isn't elected governor, I fear I will have to move (maybe New Hampshire).

But Taft has been so incompetent (and tainted with corruption) as governor that I fear the population will elect a Democrat out of anger, which will essentially leave us with someone just like Taft.

Posted by: Jason at June 7, 2006 09:26 AM

And Will is dead on about Cali. The state is so damned near perfect that even Democrats have a hard time screwing it up. And people bear the burdens of high taxes and all of the other crap to remain there. The state will always continue to employ tons of people due to the agricultural industry.

But policies, even in a damned near perfect state with every conceivable natural resource advantage, do matter. You can only punish and tax innovation and entrepreneurs so much before they take their ball and go home. People go there to make money and earn a living and when the benefits of doing it in Cali are outweighed by the government taking their hard earned money and regulating their activities to the extreme, the best and brightest will realize their is more opportunity elsewhere.

Does that spell doom for California, certainly not. But what it does mean is that there will be less and less class mobility and there will remain a permanent underclass of poverty that cannot start businesses or build wealth because the system is stacked against them. The wealthy always remain wealthy, but low taxes and less regulation lower the barriers to entry for innovation and for new businesses.

Posted by: Justin B at June 7, 2006 12:40 PM