May 31, 2012

Looking at IBD’s Red-Blue State Differences

Filed under: Economy,Ohio Economy,Taxes & Government — Tom @ 11:58 pm

They would be even greater if Ohio was more appropriately classified as a red state.

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On Tuesday, Investor’s Business Daily published an analysis comparing how the “blue states” President Barack Obama carried in 2008 have fared in comparison to the 22 “red states” won by John McCain during Obama’s presidency.

The quick answer: Not well. A more detailed answer, per IBD: “On every indicator but one, blue states have done worse, on average, than red states.” Red prevailed over blue in five metrics: average job growth, unemployment, changes in housing prices, gas prices and just barely in per capita income. Blue won narrowly in GDP growth.

The comparison is interesting but perhaps flawed in its treatment of the Buckeye State, because Ohio went blue for Obama in 2008 but was decidedly red in 2010, as John Kasich led a clean sweep of statewide executive branch officeholders. (A similar claim could also be made about “newly-reds” Michigan, Pennsylvania, and Wisconsin.) If Ohio were considered red in IBD’s analysis, the red-blue differences would have widened even further in most metrics.

Here are the ones we know where I believe the differences are significant enough to merit mention:

  • Job growth — IBD looked at the period from June 2009, the official end of the recession, to March 2012. During that period, red state seasonally adjusted job growth was 1.9%, while the blues grew by 1.2%. Ohio’s employment grew by 1.7% (86,200 on a June 2009 base of 5.05 million). Moving Ohio to the red column would lower its overall job growth slightly, but would lower the blues by more.
  • Unemployment — IBD compared the seasonally adjusted March 2012 rates in all states. The red rates averaged 7.4%, while the blues averaged 8.5%. Moving Ohio’s 7.5% rate into the red group would barely change its rate, while causing the blue rate to go higher.
  • Housing prices — The paper looked at changes during 2011. Red state prices barely budged, while blue state prices dropped 3.5%. Ohio’s price movement last year of -0.1% would leave the reds virtually unchanged if moved there, while causing the decline at the remaining blues to be greater.

Two of IBD’s metrics really aren’t that useful. The red-blue difference in per-capita income it found was negligible, as was Ohio’s outperformance of the rest of the country in 2011. In the final metric, Ohio’s gas prices are in the middle of the U.S. range, and its movement from blue to red wouldn’t have much of an overall effect on either when the overall blue-red differential was about 15-20 cents per gallon.

The final metric, GDP growth, is really an open item, as the government won’t release state-specific numbers for 2011 until June. Ohio’s GDP shrank by 2.6% in 2009 and grew by 2.1% in 2010; both figures trailed the national average. Based on its sharply reduced unemployment rate and decent job growth, the Buckeye State appears to have turned the corner a bit last year, both in comparison to its own past and the rest of the nation’s 2011 performance.

On GDP, we’ll just have to wait and see.

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