Migration, Liberalism, and Growth

May 3, 2009

Anecdotally, we all know that people tend to move from blue states to red states.  It’s one of the reasons I am such a strong proponent of states’ rights; if people don’t like the rules and taxes of one state, they are relatively free to move to another state more in-line with their beliefs and their pocketbook.  It’s much easier to move from state to state than to change nationality.  Since our boy wonder is quickly turning the whole nation into a blue state basket case, I wanted to study the real trend of people migrating within the US and compare the migration data to state political affiliation.  To do this, I used the US census estimates for migration between 2000 and 2008, concentrating on domestic migration rather than total migration.  The rational for this decision is that I want to know how current citizens feel about their state and international migration would swamp some of these trends for major immigrant states such as California and New York.  I then used the data from the last three presidential elections to weight states on how liberal or conservative the state trends.

Migration

To begin, I took the downloadable csv census file and for each state, added the net migration from 2000 to 2008 to give the total migration for each state.  The net migration is then divided by the base population in 2000 to generate a percent migration

Next, I took the percent return from the last three elections and averaged the percent return in each state for the Republican candidate and the Democratic candidate.  For instance, Massachusetts went 33% for Bush and 66% for Gore in 2000, 36.9% for Bush and 62% Kerry in 2004, and 36.2% for McCain and 62% for Obama in 2008.  The average Republican score for Massachusetts is 35.4% while the average Democratic score is 61.3%, yielding a Republican Advantage Score (RAS) of -26%.  The full scatter graph is shown as Figure 1, where the x-axis indicates the RAS and y-axis indicates the percentage migration in or out of the state between 2000 and 2008.  In general, the more left on the chart the more liberal the state and the more right the more conservative.  As you move up on the chart, more people are moving into the state and as you move down, more people are fleeing the state.

Figure 1.  Migration vs political affiliation

Figure 1. Migration vs political affiliation

When I first plotted this scatter graph, I was a bit disappointed.  Naively, I was expecting to see a line that showed people flocking from blue states toward red states.  While you can clearly see that people are leaving the most liberal states, the data is noisy indicating that people migrate for a variety of reasons.

To further refine the study, I classified each state as: Very conservative, conservative, moderate, liberal, or very liberal.  I used the scatter plot to assign percentages such that each group would contain roughly the same number of states.  Any state with a RAS larger than 15% is very conservative, between 5% and 15% is conservative, from -5% to 5% is moderate, from -15% to -5% is liberal, and smaller than -15% is very liberal.  This gives 13 states as very conservative, 10 states as conservative, 10 states as moderate, 8 states as liberal, and 9 states as very liberal.  Now, I took the total population migration within these groupings as a percentage of the total population contained in these states relative to 2000.  What I found was that very liberal states had a net -4.8% migration, liberal states had a -2.2% net migration, moderate states had 2.9% migration, conservative states had 3.6% migration, and very conservative states had a 1.7% migration.  If you subtract Louisiana from the tally, as its migration is heavily negative due to hurricane Katrina, conservative states have a 4.7% total migration.

When total averaging is included, people do flock from liberal states to conservative states, and the trend is very strong.  Not surprisingly, the migration is concentrated from heavily liberal states toward moderate and conservative states, but not as much into heavily conservative states.  This is most likely due to two factors.  First, people are socially not comfortable moving from heavily liberal states into deeply religious and conservative areas.  Second, the heavily conservative areas are not as developed as the moderate and conservatives states, meaning that they cannot economically support a large influx of new people.

top-5-out-migration-states

top-5-in-migration-states

If we look at the five states where the out migration is the highest, we see that three of these five are very liberal, one is liberal, and the only one that is conservative is Louisiana where the out migration was due to Katrina.  Looking at the top five states where the in migration is the highest, we see two conservative states, one very conservative state, and two moderate states.  Again, this data highlights the fact that people flock away from the heavily liberal states and into moderate and conservative states.

When people see the relative economic opportunities afforded by liberal policies compared to moderate and conservative policies, they overwhelmingly choose to move away from the former into the latter.  Given this unmistakable trend, why is it that people then vote to implement the very policies that people are flocking away from given a choice?

Growth

The answer to this question is primarily concentrated in the time response of the system to tax, regulation, and growth.  More taxes spent on social programs generally yield a short-term benefit that can be directly attributed to a given policy.  The negative results are generally seen in the economic growth numbers, which don’t start to show effects for years after a policy has been enacted.  Worse yet, because this time lag is substantial, it is difficult to directly attribute bad growth numbers to a particular policy.  The real trade-off between liberal and conservative economics is the difference between short-term benefits as opposed to long term economic growth.  According to Einstein, the most powerful force in the universe is compound interest!  Economic growth is simply compound interest paid on the entire economy.

From World War II to the 1980s, the US economy grew at an average rate of 1.8% compared to a 1.6% growth rate in the economies of the major European nations (see Ref).  From 1980 onward, the US growth rate increased to roughly 2.0% per year.  While these differences may seem small, they compound over time.  In Figure 2, you can see that after 100 years, an economy growing at 1.8% is a full 21% larger than an economy growing at 1.6%.  More striking, an economy growing at 2.0% is 48% larger than an economy growing at 1.6%.  Trading short term benefits for long term growth is a fool’s errand.  One of the major reasons that the US became the economic engine of the world was that it did not make this trade with the result that over the long haul, it greatly outpaced similarly placed western economies.

growth-vs-time

Figure 2. Growth vs. Time given three different growth rates.

What’s changing now?  In the last few months, we have seen the US flip to an entirely different economic model.  Instead of playing for long term growth, we see the US taking out the credit card to purchase all of the short term benefits that have slowed the major economies of Europe for the last 60 years.  Spent well (another argument for another time), this money very well might yield some short term improvement in the lives of citizens, essentially purchasing votes for the next round of elections.  Unfortunately, the debt incurred during this spending binge is going to greatly hamper the future growth of the economy.  Every dollar of money the US government has to pay back is a dollar that it must tax out of the productive sectors of the economy.  Instead of that dollar going to upgrade a factory or pay an employee, it is going to finance the debt that was incurred to provide short term social benefits.  You cannot look at Figure 3 without being astounded at how much debt the US is willing incurring over the next decade.  As sure as gravity pulls an apple to the ground, this debt will greatly slow the growth of the US economy for decades to come.

Figure 3.  US deficit as the country transitions from Bush to Obama.  Attribute to Gatewaypundit.

Figure 3. US deficit as the country transitions from Bush to Obama. Attribute to Gatewaypundit.

Summary

To summarize, the migration data presented at the beginning of this article unarguably shows that people move away from heavily liberal and liberal states to moderate and conservative states.  Given the ability, people flee high tax and regulation areas to go to places where the taxes are lower and they have more economic opportunity.  However, these liberal policies keep being enacted because the real cost of liberal economic policies are hidden in growth numbers that take years to show effects.  In effect, these policies gain the credit for their short term benefits, but don’t take the rap for the long term decline that they inevitably cause.  The result is that liberal economic policies tend to be political winners, while causing long term economic slowdown.  On a state by state basis, we clearly see these long term trends push their citizens into states with more conservative economic policies.  Ironically, the new transplants tend to support the same liberal policies that caused them to move away from their previous state to begin with, because the cost of these policies is again hidden in the long term growth trends that won’t become apparent for years to come.  This cycle is sure to continue until the liberal agenda completes its work and we all live like royalty, such as the citizens of North Korea or the old East Germany.


Conditions on TARP Repayment

April 20, 2009

According to this article from the Financial Times:

Strong banks will be allowed to repay bail-out funds they received from the US government but only if such a move passes a test to determine whether it is in the national economic interest, a senior administration official has told the Financial Times.

 

Once you’ve given in to the idea that the government has the right to intervene in the private sector, you acquiesce to the idea that private enterprise has no inherent rights.  By not fighting for principle, even those banks with decent balance sheets have been pulled into the government banking system.  Everything now will be a political decision, not an economic one.

The official said former Treasury Secretary Hank Paulson was right to treat all the banks the same way in late 2008 at the peak of the crisis but it was now necessary to differentiate more between institutions. Stronger ones should be encouraged to raise more capital, while the government would target its interventions to support weaker ones.

It isn’t that strong banks made good business decisions and should survive while weaker banks made poor decisions and should go bankrupt, we just need to make sure that they all succeed for the public good.  Capital once again will flow from the producers to the moochers.


Ayn Rand on a Social System Appropriate for Mankind

April 13, 2009

For those wondering where the name of this site comes from- John Galt is a fictional character in Ayn Rand‘s book, Atlas Shrugged.  Ayn Rand is a great defender of capitalism and individualism, and this spirit was fully embraced in her novels.

I’d never heard Ayn Rand speak until now- I found this speech (audio only) on YouTube.  While not the most energetic speaker (English was clearly a second language), she makes an incredibly complete argument for capitalism:

For those without audio or who would like a brief introduction to Ayn Rand’s writings, here is an excerpt from Atlas Shrugged discussing money as the root of all evil.


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