April 21, 2024
Economy

Red state economies are surging under Biden. Here’s why.


Nearly every week, a fresh round of strong economic data elicits a celebratory statement from the Biden administration. Most of the best-performing states, however, voted in favor of former President Donald Trump, a new ABC News analysis found.

An examination of key economic measures — including job and income growth — found an overwhelming majority of red states among 18 top performers.

The disparity between red and blue states has little to do with anything Biden has done, experts interviewed by ABC News said, noting that federal policy typically holds minimal influence over state-by-state economic trends.

Instead, they added, the dynamic owes in large part to the appeal of warm weather states for workers and businesses, as well as the combination of company-friendly state policies and Democrat-leaning cities that attract young, educated workers.

“The climates are better in red states, and Americans like good climates,” Mark Partridge, a professor of economics at Ohio State University, told ABC News.

Some experts caution, though, that the statistical snapshot of economic performance could result partly from temporary, state-specific factors that may shift in the coming months or years.

At the national level, the economy performs well on just about every measure of economic health. Inflation is falling, job growth is surging, and gross domestic product is proving much more resilient than expected in the aftermath of near-historic interest rate hikes.

Attitudes about the economy have improved in recent months, data shows. Consumer sentiment soared in January but remained well below pre-pandemic levels, a University of Michigan survey found.

“Dating back to when the president took office, he has enacted a set of historic legislative accomplishments that have very directly driven the historic labor market recovery and historic economic growth we’ve had,” Daniel Hornung, deputy director at the National Economic Council, a Biden administration group that advises the president, told ABC News.

Moreover, Hornung rebuked the notion that Biden’s policies have little to do with the particularly strong performances among red states, citing legislative achievements that, in some cases, have disproportionately benefited red states.

In the aftermath of the Inflation Reduction Act, which offered tax credits meant to incentivize private investment in clean energy, most of the new clean energy projects were located in districts represented by Republican House members, according to a study in September by advocacy group Climate Power.

“This is not something that is collected and concentrated in blue cities,” Hornung said. “It’s really spread throughout the country.”

Five states are currently enjoying better-than-average performance on four key metrics analyzed by ABC News: job growth, personal income growth, gross domestic product growth and gas prices, according to data from the U.S. Bureau of Economic Analysis, the U.S. Bureau of Labor Statistics and AAA.

Four of those five states delivered their electoral votes for Trump in the 2020 election, including Idaho, Texas, South Carolina and Utah. The fifth, Wisconsin, went to Biden.

Meanwhile, 13 states boast better-than-average performance on three of the four metrics. Nine of those states backed Trump, among them Florida and Nebraska.

One of the top-performing states, Texas, posts the nation’s third-highest GDP growth, in part because the state added more people than any other last year, according to the U.S. Census Bureau. San Antonio, one of the largest cities in the state, carries an unemployment rate of 3.1%, leaving it below the national average of 3.7%, U.S. Bureau of Labor Statistics data shows.

KGBTexas, a marketing firm based in San Antonio, has undergone breakneck growth in recent years that has mirrored a citywide economic boom, Katie Harvey, the company’s founder, told ABC News.

As the company gained new clients, Harvey rapidly added employees, expanding from about 35 to 55 workers in three years, or by nearly 60%, she said. The growth was made possible by an influx of people drawn to the city’s affordable housing, educational offerings and business sector, Harvey added.

“We’ve had the best three years in our company’s history,” said Harvey, who founded KGBTexas in 1994. “What has helped us grow is recognizing the positive things that are happening in this city.”

San Antonio, like most of the nation’s major cities, voted in favor of Biden in 2020. In fact, counties that Biden won account for roughly 70% of economic output nationwide, a Brookings Institution study in 2021 found.

Under President Biden, Texas has received about $120 billion in private sector investment in manufacturing, as well as $30 billion in public infrastructure and clean energy investment, White House data shows. For reference, Texas’ GDP in 2022 amounted to $2.4 trillion, according to the U.S. Bureau of Economic Analysis.

The strong performance of red states may result from the convergence of business-friendly state laws and attractive cities for young, educated liberals, Edward Glaeser, a Harvard economist, told ABC News. The pool of skilled workers offers companies a ready source of employees, while companies benefit from state policies like low taxes and right-to-work laws, he added.

“That’s just a very powerful combination,” Glaeser said.

Simple Modern, a drinkware company in Oklahoma City, Oklahoma, has benefited from that precise set of factors, Mike Beckham, the company’s CEO, told ABC News.

The company nearly doubled its revenue last year, reaching almost $180 million in sales, Beckham said. Two years ago, the company had 60 employees; now it has 100.

A business-minded state government helped drive the growth, Beckham added, pointing to a recently launched manufacturing plant.

“If you’re trying to spin up a factory, it’s easy to get bogged down in red tape,” Beckham said. “That wasn’t our experience.”

At the same time, a comparatively liberal city electorate has fueled policies like a sales tax referendum in 2008 that funded what would become the arena of the NBA’s Oklahoma City Thunder, Beckham said.

“There are two sides to the story,” Beckham added. “And our community reaped the benefits of both.”

To be sure, some economists cautioned that the evidence indicating strong performance among red states points to a tendency but falls short of a sustained trend that would require data over a longer period of time. Meanwhile, some experts noted that low gas prices in red states often stem from low taxes rather than favorable economic outcomes.

Moreover, they added, trends in state economic performance shed little light on the consequences of Biden’s policies.

“Presidents don’t really have a lot to do with state economic performance,” Terry Clower, a professor of public policy at George Mason University, told ABC News.

Instead, experts said that relatively strong red state performance results in part from business-friendly policies and attractive weather.

“The warmer parts of America tend to be doing much better than the colder parts,” Glaeser said.



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