Very Different Economic Times in Red vs. Blue States

Trend Macroanalytics Chief Investment Officer Don Luskin had the perfect response to the recession obsession in Sunday's Washington Post (reproduced at his blog), when he noted that second-quarter growth was "virtually the same as the 3.4 percent average growth rate since -- yes -- the Great Depression." He also added, based on a working paper by UCLA economist Edward Leamer, that:

Anyone who says we're in a recession, or heading into one -- especially the worst one since the Great Depression -- is making up his own private definition of "recession." And probably for his own political purposes.

But for the moment, let's humor the critics and allow for the possibility that the economy as a whole has somehow slipped into recession during the current quarter. If so, where have the stumbles occurred?

Certainly not in red states Texas, Florida, or Arizona (though the Grand Canyon State has a Democratic governor, it went solidly for Bush in 2004, and has relatively conservative GOP legislative majorities). As Phil Gramm and Mike Solon noted in their weekend Wall Street Journal column (HT to Alo at Brain Shavings for the heads-up), those states created one-third of all U.S. jobs in the past 10 years, and their per-capita income growth far outpaced the national averages.

Most other red states have until very recently done very well. Some are still doing just fine. For example, the seasonally adjusted July unemployment rates in Utah, North Dakota, South Dakota, Idaho, Nebraska, and Oklahoma averaged well below 4%.

If you're looking for troubling times, visit the blue states. You'll find plenty.

Looking for high unemployment?

  • First, go to California (Kerry by 10% in 2004, Democrat-dominated legislature, and might-as-well-be-Democratic governor). Its seasonally adjusted August unemployment rate was 7.3%, up from just 5.4% a year ago.

  • Then go east to Michigan, where things have gone from bad to really bad during Democrat Jennifer Granholm's tenure. Wolverine State July unemployment was 8.5%.

  • Move on to Ohio, which went from pseudo-red under Bob Taft to

    blue in 2006, with the election of a Democratic governor, who has been aided and abetted by a mostly complacent GOP legislature. July unemployment: 7.2%.

  • Finally, skip over red state Indiana, which is still holding its own, and you'll get to Obama's home state of Illinois, whose Democratic governor, legislature, big-city mayor, and U.S. senators have all played a part in creating the Land of Lincoln's 7.3% July unemployment rate.

For decidedly Democrat-driven government bailout situations like Freddie Mac and Fannie Mae -- referred to as "Barney's Rubble" in Wednesday's Wall Street Journal -- visit true-blue Metro DC.

To find brokers, bankers, and insurers taking unjustified risks with depositors' and others' money, go to the blue-state triumvirate of New York, New Jersey, and Connecticut, and its Democrat-heavy investment banking industry.

Within certain states, the red-blue contrast is stark. In Ohio, if you want out-of-control foreclosures and general economic doldrums, visit bluer-than-blue Cleveland, Akron, Canton, Youngstown, Toledo, and Dayton. If you want areas that are largely holding their own, stick with Cincinnati and Columbus, especially the GOP-dominated rings around each city. The same holds for economically distressed southeastern Michigan vs. the rest of that state, and Chicagoland vs. most of the rest of Illinois.

So if there is indeed a recession taking place, blame it on the blue states and blue regions, with their high-tax, high-regulation, high-giveaway environments. The lower-tax, more economically free red states and the red regions within otherwise blue states are certainly not the culprits.