US State-Level Economics

So in the election thread an interesting conversation spun off of this◊ chart and this article. Unfortunately it was getting off-topic there, so here is a new thread. Discuss the comparative situations of the states. What factors contribute to a state's economic health? How is your state doing right now? If you could run your state however you liked, what would you do?

edited 16th Jul '12 9:39:54 AM by EdwardsGrizzly

Alright, now, before I go any further-what conclusions do you suggest we draw from the linked articles, precisely? Because I can say a whole lot about what I presume your conclusions are, but that might just be straw manning and that's bad.

Well, just from looking at the chart I notice the following things:

• The two worst states are California and Illinois, both of which are characterized by large cities, massive economies, and democratic politics.
• Most of the best states were more rural ones in the midwest/west, with smaller economies.
• he AAA states with the largest economies (Florida, Virginia, North Carolina, and Georgia) were states with republican majorities but a strong democratic presence.
• The big-economy states with the heaviest political leanings (Texas, New York and Massachusetts) were mediocre at best.
• Among the middle-size, middle-politics states, the western ones tended to be better than the eastern ones.

edited 16th Nov '12 7:29:41 PM by EdwardsGrizzly

Well, I guess the point is, why do you think this chart matters? The ratings agencies have been known to wildly overvalue private debt and undervalue public debt. And when the US had their rating downgraded after the debt ceiling fiasco, the yields on US Treasury Bonds dropped, rather than raised. So I'm not sure what conclusions we should take from all of that.

I am damn skeptical of a chart that gives such a good rating to Wisconsin.

Re: The second article, California has two big problems, both of which have resulted in a political/policy situation that probably is going to require nuclear weapons to fix. Please note that these are counter-intuitive concepts, so please give them a second and think about them.

First, is the supermajority requirement for budgets, and the second is term limits. Both are brought into place with the thinking that they can "tame" corruption, when the reality is that they make it that much worse.

Supermajorities first. There's actually two ways this can go. The ideal, is that in order to get a compromise, everybody gives up something that they want so then it's equal for all parties and they agree. What really happens is that everybody gets something extra (often wasteful) in order to get them on board. The more people you have to "bribe" the more out of control a budget gets. Now, the bribes, as I'm calling them, are not just spending. We're also talking about things such as tax cuts, and even in some situations unrelated policy changes (like changes to social policy)

Term limits, on the other hand, are due to the idea that the longer a politician is in office, the more they are "bought off" by campaign contributions over time. Right? However, this is entirely missing the other factor that many politicians are not just looking for current money for campaigns, but they're also looking for future money...or to be more specific they're angling for jobs. Look at all the GOP candidates, as an example who are basically trolling for Fox News spots. On the Democratic side the best example I could give would be Chuck Dodd or..what's his face...Evan Bayh.

Anyway, that's my opinion. In short, I blame California on the "centrists"

Edit: And it's pretty much a FACT (yes, a fact) that rating agencies themselves suffer from major corruption and in a lot of cases their ratings are by and large arbitrary.

For what it's worth, I should answer your question. What determines the relative strength between one state/provinces (Canada as well) economy versus another, is generally in terms of industry/jobs, and that's pretty much it. All the cheap gas is removed from one state, they go to another state, their economy booms and the first one suffers. That's pretty much it. There's also the race to the bottom, where be it via policy or natural inflationary effects, labor and price levels are cheaper in some parts of the country than others.

edited 16th Jul '12 12:50:38 PM by Karmakin

That's the Cult of Centrism centrists, not people who are just moderates. We're talking about the Goldean Mean Fallacy Club.

I don't know that it does matter, but I thought it was interesting, especially the trends I mentioned.

Golden Mean Fallacy Club.

I like it. Let's nuke it from orbit. It's the only way to be sure.

Edit: On a serious note, check this out:

http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP

Sort by GDP per capita, and there's your answer about US State-level economies, now this doesn't show the whole story, of course, but it's much better than going on agency ratings.

edited 16th Jul '12 1:02:54 PM by Karmakin

That's crazy. Let's compromise and nuke half of them from orbit.

Why is the GDP per capita for states like Alaska so high? Transfer payments?

I wouldn't actually be surprised if right-leaning states are also sometimes given better credit ratings to try to encourage/"reward" deregulation.

And why do credit ratings use such a nonsensical scale? I mean AAA is bad enough, but BBB is a thing. Just make A+ the best and E-/F- the worst and scale accordingly instead of this silly Rank Inflation. Or just give numerical scores from 0-100.

Balmung: Is that a Touhou avatar? You mentioned rank inflation and now I'm wondering what a state has to do to get the elusive S++ ranking.

<headdesk>

Yes it is, but as much as I would like it to be, my avatar(s) is not the topic, nor is it really related to the topic. Credit ratings are at least related to the topic since they're one of the metrics in use for comparing states.

On topic, folks.

I know that Alaska's natives get payments in return for drilling the oil up there. I can't remember if that's every single citizen of the state or just certain parts of it, but that has to effect the GDP.

I think Texas can usually remain strong, although not the strongest, largely due to its centralized location making it ideal for a whole lot of industries, not necessarily because of any policy put forth by the Republicans. Plus, if Republicans continue to support their latest ridiculous policy, which essentially tries to gut our education system, I think we'll end up going lower because so many of our kids will be too stupid to really do anything that requires a high educational standard.

Well it's generally a really bad idea to try to relate policy at such a local level with how well the economy performs overall, versus relative to itself. There's oil in Alaska, just like there's oil in Alberta which bumps up their economic performance. Alberta has been a right-wing province for all of eternity and they only started to outperform the Canadian average after the oil boom. Any time before then, they were bleeding cash like crazy and needed infusions from the central provinces, especially Ontario, which led to the creation of the equalisation payments (to which provinces which are now rich don't want to pay into now).

California just seems exceptionally corrupt and I really don't see the GOP changing a thing if they were voted in constantly for 20 years straight.

Also, rating agencies are well known for bumping up ratings specifically in light of right-wing policy or free market tactics whether or not they are helpful. It's very much like how the IMF and so on were all super happy with Ireland's retarded corporate tax cuts even as the economy collapsed into oblivion due to deregulation.

edited 16th Jul '12 2:11:14 PM by breadloaf

Yeah when looking at GDP per capita you're going to have to consider a whole mess of additional factors, like what natural resources a state has (Alaska has tons of resources and very few people. Even if they don't all get paid directly, the profits of the oil operations there are included in the GDP), or where the state fits into the overall economy (New York is the hub of the nation's finance and investment business, while West Virginia is mostly mining and heavy industry).

Is there any correlation between state economic activities and the presence of military bases? The DOD spends some major cash.

Florida and Georgia both have a significant military presence, but I don't know whether or not that has anything to do with it.

NASA used to be a huge boost in Florida, although it has slacked off a lot in recent years. Other than that I imagine that most of the military money goes to states that were already big before.

I believe that NASA helps because it has to source a lot of civilian aid to develop the technology and infrastructure. The military might be less so, as it tends to try to internalise costs and not hire/interact with the local economy as much. Though, one should expect some sort of positive economic influence (which may be offset by increased levels of crime, as is usual for areas near military bases).

edited 16th Jul '12 2:39:28 PM by breadloaf

Not only that, but it brings all the people with those skills to the area, so it becomes attractive even to tech companies who are doing non-NASA work.

Wish we'd fund NASA better but alas.

Well I'd to say that military spending is less multiplicative than civilian research spending and it has a lot to do with the openness of civilian projects with respect to promoting industry and producing skilled individuals (also governments are more open to improving human capital out of potential candidates rather than sourcing already experienced individuals).

Ah but that's going off topic I guess.

I think the main thing about state-level economics is more about how well it is handling its random industry and natural capital. This makes accusations of "you're mishandling the state because state y is doing so much better" rather hollow. I also think that the mid-western states might be doing well simply because of the very even population density and job distribution. I can't picture the country giving up on its vast farmlands and then having everyone starve to death. Well, not the current government anyway.