Tuesday, January 19, 2021

Blue states vs red states - the economic difference is striking

 

Brandon Smith, whom we've met in these pages several times, points out the real impact of politics on the people in an economic comparison of blue versus red states.


Blue state economies are dying because they are oppressive and this stifles trade and business.

. . .

According to the U.S. Postal Service, New York City alone saw over 300,000 residents pick up everything and leave from March to October. This is an unprecedented spike, an exodus the likes of which New York has not seen in a long time.

On the other side of the country, California is witnessing its own exodus, and it started well before the pandemic struck. In 2019, California saw over 653,000 residents escape the state’s suffocating bureaucracy and high taxes. In 2020, the state has hit its lowest population growth rate in history, even after accounting for babies born. More than 200,000 people left the state than moved in in the past year, and before anyone claims that these people are “liberals” invading red states, even the California media admits they are mostly conservatives seeking to escape the socialist sinkhole.

. . .

But what does this mean for leftist states in economic terms?  First, a huge loss of tax revenue, and this is dangerous for blue states in particular. California was projecting a $5.6 billion surplus in January of last year, only to face a $54 billion deficit by August. The state’s net tax revenue fell by 42% from March to May year-over-year, far outpacing losses in the rest of the country. Democratic Gov. Gavin Newsom begged Congress for $14 billion in federal aid, claiming that the government has a “moral and ethical obligation to help the states”.

And this seems to be exactly how states like California are surviving, by stealing tax dollars from people in other states that have been more responsible in caring for their economies.

. . .

What leftist cheerleaders often refuse to mention is the deep and insidious debt problems and deficits blue states suffer from. Looking at a list of the most indebted states in the U.S. in terms of total assets and liabilities, you will find that the vast majority of them are Democrat controlled.

Furthermore, blue states tend to have the highest levels of unfunded pension liabilities. In other words, their public pension obligations are only partially funded and are suffering a net loss ... Red states top the list in terms of the best funded pensions and the lowest debt per capita.

These debts are caused by irresponsible spending policies and endless socialist welfare measures, and as with most socialist systems, they always end up spending more money than they can bring in. They also end up wasting money more than they effectively spend money. This translates to much higher taxes, as blue states refuse to admit policy errors and fix their mistakes. Instead, they punish the citizenry with increased taxation. A list of the highest personal income taxes across the country is dominated by blue states.

Blue states like Illinois also stack the list of highest property taxes.

. . .

This dynamic has led to red states outperforming blue states across the board in terms of economic recovery. Job recovery in red states far outpaces blue states, along with recovery in GDP. As a result, a call has been rising for a “Blue State Bailout”, and with Biden ostensibly entering the White House they may very well get what they are asking for.

The problem is, the amount of bailout money that would satiate the hunger of blue states would have to be in the multi-trillions. As more and more people and businesses leave these places for more free states, it’s inevitable that tax revenues will dry up. And, as leftists raise taxes to cover the deficit even more people will relocate. It is a vicious cycle that will lead to complete dependency on federal dollars for blue states to survive.

. . .

It is also important to consider at a fundamental level the types of people that make up the populations of red states versus blue states. Blue states have built a culture of dependency and the majority of leftists have no useful skill sets that would allow them to adapt to an economic crisis. Meanwhile, red state culture encourages independence, self-reliance and productivity.

The most likely reaction among blue states or the federal government under Biden will be to try to “redistribute” the wealth and stability from red states to blue states.

. . .

There could also be an attempt to stop people from moving away from blue states entirely. We have already seen a beta test for this in California, where legislators are attempting to pass a bill which would legally require former residents to continue paying taxes to the state for years after they leave.

Of course, this would lead to severe resistance from conservatives, but that is a discussion for another time. The bottom line is this: the economic and pandemic policies of blue states have failed miserably. Their only option is to see the error of their ways, become fiscally responsible and remove totalitarian lockdown measures, or, attempt to leech success from the red states like parasites. Which one do you think they will choose?


There's more at the link.

It's a very serious concern that tax-and-spend progressive liberals now control the US government.  I guarantee you that they're going to try to do as Brandon Smith predicts.  (Nancy Pelosi tried, but failed, to do exactly that with her so-called "stimulus" packages last year.)  Since the Democratic Party now controls Congress, the Senate and the Presidency, there's a very good chance they'll succeed.  That might be the final nail in the coffin of the already debt-laden US economy, overloading it with a burden so great that it collapses under the strain.

I'm preparing a series of articles about inflation and the threat ahead.  It's growing worse by the day, and I believe we may be facing a very serious economic headwind as a result.  If we are, decades of tax-and-spend politics (which occurred, let's be honest, on both sides of the political aisle) will be at the root of it.

Peter


6 comments:

SiGraybeard said...

There could also be an attempt to stop people from moving away from blue states entirely. We have already seen a beta test for this in California, where legislators are attempting to pass a bill which would legally require former residents to continue paying taxes to the state for years after they leave.

As far back as 2012, I remember reporting that the California Franchise Tax Board was billing people for back taxes when they no longer lived in the state any longer. The pattern seemed to be that they'd attack lower income people for amounts they could get away with. That is, they'd never go after corporations with building floors full of lawyers, but people for whom fighting back would be costly.

They'd seize money out bank accounts or send bills. If you had some sort of specialty occupational license then you must have unreported income. The idea was to get out of state people to weigh the costs of losing say, $500 or $1000 vs. the cost of hiring a lawyer in California to fight it, travel to California, stay in a hotel or some place.

In another example, they were going through the garbage of an engineer who lived in Las Vegas to find evidence they could claim tax on an invention that was making him a lot of money. Could they prove he thought of the concept while in California? Even just driving through or changing planes?

The stories about that slowed or stopped but I don't know that the practice did.

One of the original reporters was Charles Hugh Smith.
https://www.oftwominds.com/blogmar12/predatory-California3-12.html

As for your larger point about the coming troubles, the Ho Jo administration seems to be going full tilt Modern Monetary Theory and full tilt redistribution. You can be sure bad times are coming.

Unknown said...

Our economy is debt-based. Debt is wealth according to this structure. Debt will never decrease or wealth decreases. I realize this is hard to accept. You must accept this fact.

Going off the gold standard was the shift from "money being money" to "money being debt". Gold in 1933 was 20 dollars per ounce. Gold now flirts with 1900 dollars per ounce. This increase is due to the increase in debt.

A person can pay off his debt...but the assets he "owns" are still debt-based.

We are fish licking our scales while swimming in a sewer.

Beans said...

Even worse is the outright theft of property due to fees and taxes that even red states are starting to use. Oh, you're family has owned that property for 200 years? No, your family is renting it from the state or the feds and you owe your rent. Parents just died and now the land is transferring to the children? No, the leasees just died and the children are assuming the rent, with a fee, of course.

Own a pet? Fee...

Own a car? No, you rent it from the government, fees and taxes. Taxes and fees.

You've got money in the bank? No, the government says you have a balance of, which they or the banking institution can seize any time they want, and then charge you for trying to access or get back any part of your balance.

We have slipped so far away from what our founders wished us to be.

And, yes, getting off of hard currency and personal ownership of gold back in the 30's was a big part of it. Wait, wasn't that caused by Dems back then?

greg said...

People fleeing blue states are leaving with a windfall profit from their house and creating resentment. Resentment by cashing out. Then taking the cash and gentrifying neighborhoods in cheaper to live cities. So now I have to sell my over inflated gentrified property and move into a more affordable location to offset the calif exodus. They could stop this by calif state making rules where it's not going to benefit you to flee and mess up my town. I wish I would have bought a rental property 10yo, but not smart enough. I dunno anything.



























Old NFO said...

It is about to get ugly, and I can't help but wonder if hyperinflation is on the way.

Will said...

greg:

" They could stop this by calif state making rules where it's not going to benefit you to flee and mess up my town."

That tax started this month. Although it is expected to be taken to the USSC, those idiots might be okay with it. Time will tell.