The Economic Dynamics of Red and Blue States Under Biden’s Administration

The economic impact of Bidenomics has presented a paradoxical situation: red (predominantly Republican) states have seemingly benefitted more than blue (predominantly Democratic) states. This observation sheds light on the decline in Biden’s approval rating among Democrats to 78 percent, while his approval rating among Republicans remains at a mere 5 percent.

Analyzing the data released by the Commerce Department’s Bureau of Economic Analysis, which tracked personal income growth from January to March 2023, a remarkable correlation emerges between states experiencing the fastest income growth and states that exhibit strong dissatisfaction towards President Biden.

For instance, North Dakota, a state where Biden suffered a 34-point loss to Trump and held a negative net approval rating of 46 percent in March, witnessed an 11 percent increase in personal income during the first quarter of 2023 compared to the previous year. Similarly, Nebraska, where Biden lost by 20 points and held a negative net approval rating of 36 percent, saw an 11.1 percent rise in personal income.

Montana, with Biden losing by 16 points and holding a negative net approval rating of 21 percent, experienced an 8.3 percent increase in personal income. South Carolina, where Biden suffered a 12-point loss and had a negative net approval rating of 23 percent, saw personal income rise by 6.8 percent.

It’s worth noting that all these states surpassed the national average income growth rate of 5.1 percent, with North Dakota and Nebraska experiencing growth more than twice the national average. This has led President Biden to perhaps think, “Hey red states, you’re welcome!”

Contrastingly, California, where Biden won by 30 points and enjoyed his highest net approval rating of 11 percent, experienced a meager 0.7 percent increase in personal income. New York, won by Biden with a margin of 23 points and a 3 percent net approval rating, saw personal income grow by 3.2 percent. Maryland, where Biden won by 34 points and held an 8 percent net approval rating, witnessed a 5 percent increase in personal income, slightly below the national average.

While certain states deviate from this pattern, such as Maine, Michigan, and Oregon, where personal income growth exceeded the national average despite supporting Biden in the 2020 election, it’s important to note that Biden’s approval ratings were still negative in these states.

What explains this peculiar circumstance? The Wall Street Journal’s editorial page dismisses the paradox, claiming it lacks substance. However, this argument does not hold up to scrutiny. People nowadays migrate less compared to previous eras, and the significance of following opportunities has greatly diminished, hampering the national economy. This trend persists despite increasing disparities in state tax levels.

Research suggests that factors such as reliance on grandparents for childcare and the impact of educational attainment on economic opportunity play significant roles in the decreased migration. Furthermore, studies on state tax policies fail to consider that housing costs often outweigh state income taxes for the average worker in cost-of-living calculations.

Thus, it is evident that the red states’ higher personal income growth cannot be solely attributed to state governance. While Bidenomics may contribute to the general economic prosperity of the nation, there is no evidence to suggest that the president intentionally targets economic stimulus toward those who hold animosity towards him.

A plausible explanation relates to the significant increase in wages during the labor shortage that followed the peak of the COVID-19 pandemic, known as the Great Resignation. This wage surge predominantly benefited low-wage workers, effectively reversing a four-decade trend of wage inequality between the bottom 10 percent and the top 10 percent. However, this wage compression did not alleviate the ongoing income inequality between the middle class and the wealthy. It is crucial to recognize that the Great Resignation’s wage dynamics cannot be extrapolated since it was an extraordinary event caused by the pandemic.

Contrary to popular belief, wage growth does not consistently outpace red states compared to blue states. Andrew Van Dam of The Washington Post demonstrated that since 2009, wage growth has been higher in both red and blue states at different times, with a slight bias towards blue states.

Therefore, the reason for red states experiencing faster wage growth can be attributed to their higher proportion of low-income workers. Given the recent period of rapid wage growth for low-income workers, it is logical to expect states with higher poverty rates to show greater increases in personal income. Notably, red states tend to have higher poverty rates compared to blue states. For instance, eight out of the ten states with the highest poverty rates are red states. These states have a larger potential for improvement as their minimum wage rates are significantly lower than those in blue states.

It is essential to consider these dynamics when analyzing the economic landscape and the growth disparities between red and blue states. While Bidenomics plays a role in the overall economic landscape, factors such as demographics, poverty rates, and wage differentials contribute significantly to the observed trends.