Red State Economies Booming and Blue States Underperforming? Check the Data

Red State Economies Booming and Blue States Underperforming? Check the Data

A customer shops at a Walmart Supercenter in Hallandale Beach, Fla., on Feb. 20, 2024. (Joe Raedle/Getty Images)

John Seiler

John Seiler

2/21/2024

Updated: 2/21/2024

Commentary
Here’s an odd story from ABC News: “Red state economies are surging under Biden. Here’s why.” Subheadline: “Red states make up an overwhelming majority of top performers, ABC found.” Unfortunately, the reporter and editors didn’t do some simple statistical analysis with an Excel spreadsheet.
This is relevant to California, because it’s the biggest blue state and should be underperforming, according to the news outlet.
However, one economist who should know better, Mark Partridge, a professor of economics at Ohio State University, told ABC News, “The climates are better in red states, and Americans like good climates.” If that were true, California has the best climate, so shouldn’t it boast the best economy?
Let’s check it out.
Much as conservatives like me would like to believe the red states are doing the best, that’s not exactly the case. True, people are fleeing some blue (Democrat) states, such as California, New York, and Illinois, for red (Republican) states. But a simple scatterplot on Excel shows there’s only the slightest correlation of GDP growth favoring red states.
In the below graph, the X axis (horizontal) for this and the other charts is Real GDP growth from Q3 2022 to Q3 2023, by state. The Y axis (vertical) here is the percentage of state voters that went for President Trump in 2020. These are the red states—the Republican states. All the data are linked at the end of this article.
(One could use different criteria, such as states with Republican or Democrat governors, or state houses. But the 2020 presidential election is well known and was close. So I’m using that.)
At the right side of the blue line, it says: R2=0.0254. According to Scribbr, “The Pearson correlation coefficient (R) is the most common way of measuring a linear correlation. It is a number between –1 and 1 that measures the strength and direction of the relationship between two variables.”
An R2 of 1.0 is total correlation. A “moderate” correlation is 0.3 to 0.5.
In the Trump percentage chart, a 0.0254 correlation is close to zero—that is, basically no correlation. Contrary to ABC News’s reporting, red states are not “surging,” but growing at roughly the same rate as blue states.

Weather Correlation

Now let’s look at the economics professor’s contention that it’s the weather that matters, with economic growth rushing to Florida and Texas.
There’s even less of a correlation there. R2=0.0042. The temperature has no effect on economic growth. One reason is, except for perpetually balmy California, warm-weather states have some unpleasant aspects. Houston and Miami are not only warm, but often hot, muggy, and plagued with swarms of insects the size of an F-16.
The United States is blessed with the best overall weather of any large country. Except for most of Alaska, the highest mountains, and the deserts of the West, the country is one vast, inhabitable place with great farming. Since air conditioning was developed, manufacturing can also occur almost anywhere.

Income Tax Factor

A bigger factor than whether a state is red, or has warm weather, is the top marginal income tax rate. But it’s also not much of a factor. R2=0.0189 in the downward direction. That means it’s a negligible advantage to have a higher income tax rate, instead of a lower. Statistical dust. So don’t raise taxes because of this chart. California is the one in middle at the top, at 14.4 percent.
One reason these numbers are so similar is many blue states have low tax rates. This includes Pennsylvania, whose governor elected in 2022, Josh Shapiro, cut taxes last year. Colorado, where Gov. Jared Polis cut taxes in his first term, now wants to cut taxes again in his second term. And Arizona Gov. Katie Hobbs inherited the tax cuts of her Republican predecessor, Doug Ducey.

Conclusion: American Economy Is Uniform and Self-Sorts

What can we draw from all this? First, America has a largely uniform economy. The main factors are not state taxes or regulations, but federal taxes and regulations—and the Commerce Clause in the U.S. Constitution, Article I, Section 8, Clause 3: “The Congress shall have power ... To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Plus Clause 7, the Postal Clause, “To establish Post Offices and post Roads.”
Since 1789, excepting only the Civil War, all Americans have enjoyed one vast, continent-wide free-trade zone, with a uniform system of communication and roads. There are some state peculiarities, such as California’s smog-control regulations on vehicles. But mainly, it’s a huge market now of 340 million people. The genius of the Founding Fathers again is on display.
If you look at the last graph, for the top income tax rate, it shows GDP growth bunched in the middle, between 4 percent and 6 percent. There’s too much similarity among the states for them to be appreciably different.
Finally, there’s the self-sorting I described in my Jan. 15 Epoch Times article, “Manhattanization of California Advances.” Americans always have been highly mobile. They’re still moving to the places they think best. Genius computer programmers generally are Democrats, and still are moving to Silicon Valley, despite the high state income tax rate. Conservative, middle-class families are leaving California for states with lower taxes and better schools. Others move from and to other states for different reasons.
But I wish reporters and economists would do a little simple statistical analysis.

State Economic Data

Sources:
Notes:
1. For income tax rates, California is corrected to 14.4 percent. 2. New Hampshire and Washington are put at 0 percent, the tax on incomes, but New Hampshire imposes 3 percent tax on interest and dividends and Washington a 7 percent capital gains tax.
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John Seiler

John Seiler

Author

John Seiler is a veteran California opinion writer. Mr. Seiler has written editorials for The Orange County Register for almost 30 years. He is a U.S. Army veteran and former press secretary for California state Sen. John Moorlach. He blogs at JohnSeiler.Substack.com and his email is writejohnseiler@gmail.com

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