Tuesday, July 28, 2009

When Red Becomes Blue

Joel Kotkin in The American Enterprise notes that the economic rain does not appear to fall equally on the just and unjust alike:

For example, while state and local budget crises have extended to some red states, the most severe fiscal and economic basket cases largely are concentrated in places such as New York, New Jersey, Illinois, Pennsylvania, Michigan, Oregon, and, perhaps most vividly of all, California. The last three have among the highest unemployment rates in the country; all the aforementioned are deeply in debt and have been forced to impose employee cutbacks and higher taxes almost certain to blunt a strong recovery.

The East Coast–dominated media, of course, wants to claim that we have reached “the twilight” of Sunbelt growth. This observation seems a bit premature. Instead, traditional red-state strongholds such as the Dakotas, Idaho, Texas, Utah, and North Carolina, dominated the list of fastest-growing regions recently compiled for Forbes by my colleagues at www.newgeography.com.

Competition among jurisdictions, just as the economist Charles Tiebout once predicted, will either fix their economic policies or they will die politically:

“When the economy comes back,” notes veteran California-based economist and forecaster Bill Watkins, “there will be a pent-up demand. People will compare and move to the places that are affordable and don’t have the fundamental tough tax and regulatory structures.”

These demographic and economic trends will have a long-term political impact. The net in-migration states—almost all of them red—will gain new representatives in Congress after the next census while New York, Pennsylvania, Michigan, and perhaps even California could see their delegations shrink.

In fact, amidst the Blue Man’s current political ascendency, the devolutionary process is likely to continue. Its roots are very deep, and will prove more difficult to reverse than media and policy claques suggest. In historic terms, blue states’ relative decline represents one of the greatest shifts of political and economic power since the Civil War.

But I wonder. It is true that states of Michigan, Ohio, and even mighty California are seeing significant out-migration to states with brighter economic prospects. (Not that there is anything new about this; when I was a child in Houston in the 1970s, the roads were full of bumper stickers that read "Will the last person out of Michigan please turn out the lights?".) Expatriate Californians have been an increasing presence in Colorado, New Mexico, Nevada, and other Western states for some time.

But there is some evidence, particularly on environmental matters, that they take their voting behavior with them. The changes are thus strengthening rather than weakening land-use planning, extreme anti-pollution and species-protection measures, and the other regulations that have proven so detrimental to housing costs and economic growth in California itself. Attitudes about labor cartels, which have long been protected in the Rust Belt states and in California, might also migrate with the migrants.

Having observed firsthand the failure of such policies in the states they are fleeing, why would people then choose to impose them on their new homes, which are succeeding precisely because of their absence? There are two possibilities. The first is cluelessness, an explanation that I am always open to. The second is that the people who are fleeing have personal stakes in imposing the same rules here as they had there. The people who can afford to move are the ones who have the biggest stake in protecting the investments they make in housing once they move to their new jurisdiction, and restricting the supply of housing is the easiest way to achieve that. More generally, people are getting the policies they want, and these policies will be coming to Texas and Wyoming soon enough.

Against this unhappy outcome is only the possibility that political competition is really meaningful, something I argued against in my previous post, and in many prior to that. The fact that incumbents are so easily reelected, that modern political technology allows the measurement of voter preferences to such a fine degree, and that politics is the product as much more of interest-group capture (i.e., competition for bribes/campaign contributions) than competition for votes combine to suggest that the faith in democracy as competition to eliminate what ails Michigan and California is misplaced. And so interest-group struggles over how to divide up ever-more opaquely raised tax revenues become the theory of the modern state with the most predictive power. Mancur Olson, in other words, in other words, is right.

James V. De Long, in another article in The American Enterprise, recognizes this problem, but predicts that the breakdown of the special-interest state leads to its replacement by something more amenable to human achievement. I am aware of no historical precedent for such a timeline, but whether Mr. De Long or Olson is right is the question on which the future of America as a dynamic, innovative society hangs.



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