1. A comment on a recent post led me to an article by Mark Muro and others.
Biden’s winning base in 477 counties encompasses fully 70% of America’s economic activity, while Trump’s losing base of 2,497 counties represents just 29% of the economy.
Suppose that each candidate had 50 votes. But the 50 voters for Biden produced $70 of output and the 50 voters for Trump produced $30 of output. The per capita output of Biden voters is much higher.
I am not sure how the Commerce Department computes GDP at a county level. Does Seattle produce a lot of output based on the sales revenue of Microsoft and Amazon? If Amazon moved its headquarters out of Seattle, would Seattle’s GDP suddenly plummet? If Jeff Bezos moved to a rural Texas county, would that county’s GDP soar?
The Commerce data show that a lot of GDP is created in the District of Columbia and Fairfax County, Virginia. Do we believe that a lot of “production” is coming from the government workers in this area?
I find it credible that, on average, Biden voters have significantly higher incomes than Trump voters. And if you assume that people’s incomes are highly correlated with the value of what they produce, then it becomes likely that, on average, Biden voters produce output that is more highly valued in today’s economy.
But I think that it is unfortunate that we report a statistic like GDP as if it has a precision of several significant figures, and that we try to decompose trends in its second difference (to get the alleged change in trend productivity growth) or to decompose the location of production down to the county level. The concept of GDP is too crude to support such fine-grained breakdowns.
2. A reader sent me a link to a paper by Gavin Wright that argues that the de-industrialization of the South broke up a biracial political coalition that was dedicated to trade protection of the Southern textile industry. I am not sure about the political analysis, but there is a somewhat valid economic point that taking away trade protection from that industry caused widespread damage to people who had worked in that industry.
But consider the counterfactual: what if we had continued with restrictions on textile imports? Would jobs have been saved, or would automation have been accelerated? Would households have maintained a high level of demand for Southern textiles, or would they have substituted away to other types of clothing or other forms of consumption? How much would income growth been retarded in textile-exporting countries, and what would have been the consequences?
Baltimore, MD has a very high GDP/capita figure, and nobody would think of it as an economic powerhouse.
I think we need to separate where people work and where they live. There are indeed lots of offices and hospitals that people work in the city limits of Baltimore. But those same professionals choose to live elsewhere. So is the GDP/production of that individual attributable to the city of Baltimore or to the surrounding counties where those workers choose to live (and vote).
I think that the Biden coalition is going to be mostly the very wealthy, UMC educated professionals, and the very poor. What their median income is I can’t say, but it might not be higher. The Trump coalition is the middle class and yeomen business owners and professionals. They seem to have above average incomes overall, but probably can’t hold a candle to Fairfax GS workers (they may have a higher standard of living though).
However, if we were to eliminate the underclass from the calculus, I wouldn’t be surprised if the Biden voter had higher income. I think a key feature of the Trump coalition is people trying to make it on their own, but not being rich enough to afford “luxury beliefs”.
people trying to make it on their own, but not being rich enough to afford “luxury beliefs”.
If I were running for office, I’d hire you to craft my campaign message around that theme.
Another issue is that one of the biggest contributions to long run GDP that a person makes, how many children they raise, isn’t attributable to their GDP at all. There is a huge production gap in children between Trump voters and Biden voters, especially when you eliminate the underclass.
That is a very interesting observation considering that Democrats are more supportive of tax policies that discriminate against successful people. A bit like turkeys voting for Christmas.
It was either on here or Marginal Revolution that someone posted an article that said that when the USSR fell and the countries introduced a flat tax, there was a certain level of gross domestic product. When after a few years they decided to discriminate against successful people when setting tax levels, GDP fell.
I mean there is pretty strong DEM support to bring back the SALT deduction and to base lots of tax and benefit policies around $400k in income being rich rather than the $150k standard of the Obama era. So the UMC Democratic voter is indeed not super keen on actually seeing their tax bills increase.
There are probably are a lot of Dem voters who would be okay with an extra 1% or 2% higher tax rate on the top bracket or two of their income, worth maybe 0.3%-0.6% of their total income, as long as people above them had to pay more.
Sure, they will pay a token amount more in taxes to have Obamacare subsidies extend to 400k, childcare subsidies to 400k, and forgiveness of their loans. I don’t think they will come out behind.
Good points. There are quite few items in the Democratic wishlist that could be done for about $80 billion a year — i.e. family leave, expanding the ACA, more rent subsidies, helping state budgets, etc.
A 1% increase in payroll or income taxes brings in that kind of amount per year. A 1% payroll tax will cost about $125 a month to an urban Democrat making $150,000 a year.
However the really big items proposed by Bernie and Elizabeth and AOC would cost a lot more in new taxes, and for that reason will never pass.
There will never be meaningful new taxes on the UMC. It will go to debt. Urban democrats didn’t have children, republican children will pay for it.
Biden projects his own ACA plan will cost $75B a year, and of course it will be a lot more than his own projection for lots of reasons. So that’s just one thing in the bucket and we are already at your $80B.
My little 1% example assumes a tax on every wage earner, like Social Security and Medicare taxes today.
But this is emphatically not the kind of tax that Congress has been passing even under Democrats.
Instead the pattern is to leave the first $250K or so of income untouched, and just tax the overage. That pleases the masses.
But you need a much higher tax rate on the rich to raise the same amount of revenue. The math is simple.
The ACA imposed two taxes only on the wage and capital income over $250,000. Together these taxes raise only about $45 billion a year.
Also these modest taxes have fueled enough anger and resentment to fund ten years of flimsy lawsuits and other sabotage of the ACA.
My experience with these things is that CBO projections are garbage for obvious reasons people know at the time.
One, though biggest or most obvious, is that various taxes and reimbursement changes included to get the score down almost never ever get imposed.
Lets take something like the health insurer fee, which isn’t even that hard of a fee to advocate for.
“The health insurer fee applies to insured medical, dental, and vision plans. The fee is based on a health insurer’s market share of the industry. It took effect in 2014 but was suspended for both 2017 and 2019, although it continued to apply for the 2018 calendar year. It also applies for the 2020 calendar year, as the permanent repeal is not effective until 2021.”
Every year lobbyist descend on Washington to try and get rid of the HIF for that year. Sometimes they win. Sometimes they don’t. It’s always fun having to adjust bids right up to the last minute trying to guess. The original CBO projections of HIF obviously didn’t anticipate it being applied in a Swiss cheese manner.
And that is a tax on health insurers. Imagine how much easier it is to fight fee cuts for doctors and nurses.
“…Biden voters produce output that is more highly valued in today’s economy…”
Really? We don’t “value” in the sense of GDP hospice workers, garbage collectors, primary school teachers, long haul truckers. We do “value” coders trying to get you to click on a button. Who is providing the true value?
“We don’t “value” in the sense of GDP hospice workers, garbage collectors, primary school teachers, long haul truckers. We do “value” coders trying to get you to click on a button. Who is providing the true value?”
One mistake you are making is to limit your thinking to the value to one person of a service being provided versus not being provided. Yes, it is worth a lot to me to have my garbage picked up versus piling up, rotting, attracting rats, etc. But picking up garbage doesn’t require extensive training or talent. Anyone not physically handicapped can do it. If my garbage man quit and the next week the garbage company had a different person doing the job, I would not know or care. Compared to the alternative of someone else doing the job, any one garbage man provides little value added.
A second mistake is to forget that one’s income depends on the total value added, not the value per capita. A brain surgeon makes a good living by providing extremely valuable services to a handful of people, since any given operation can last many hours. A pop singer with a hit song provides very little value per capita, since everyone can choose many other songs or other forms of entertainment. But even if hearing the song is only worth a penny per person, if 50 million people want to listen to that song dozens of times before tiring of it, that can add up in total value. Sports stars are in the same category, bringing small pleasures to the masses, which is why they rake in millions per year.
Coders are in reasonably plentiful supply and don’t get paid all that much if all they can do is make sure that when you click the button you get taken to the right place. The person who understands human psychology enough to know what you will find attractive probably has a talent in shorter supply, and gets paid more for satisfying your desires, even if you disapprove of them.
Primary school teachers add at most a marginal value to relatively few people. There are under 30 kids in a classroom, and at that age they are primed to learn. In the old days of one room schoolhouses, most learned from the older kids in the room rather than the teacher, and that never hampered them. In that respect, primary school teachers are probably overpaid relative to the value they add.
As Chris Matthews noted back in 1991, the Democrats are the Mommy party, and the Republicans are the Daddy party.
Southerners in my experience have more fondness for ‘ma daddy’.
Democrats have no problem with an Elizabeth Warren or Ruth Bader Ginsberg, fiery Grandmas and schoolmarms. Southerners recoil from such figures. (both male and female Southerners, in my experience,)
The Democrats won the Presidency this year because Daddy was just too vain and mean and irresponsible. Biden was a more kindly Daddy who supported his daughters.
In 1828 it was the South that tried to prevent the “tariff of abominations”, the passage of which (105 to 94) created the nullification crisis, one of the events leading to the Civil War. The South exported raw materials mostly to England (cotton, tobacco, indigo, etc.) and imported manufactured goods. The tariff was designed to protect northern manufacturing industries, which would raise prices on what Southerners imported, while lowering the demand for what they exported (since those exports were converted into the finished products that were the imports about to be heavily taxed).
The southern states used the tactic of trying to insert a poison pill into the bill. They amended it to insert provisions which would also strongly raise tariffs on the raw materials that the northern industries tended to import, like wool. Then when the vote was had, the entire South would vote against, and enough of the North too.
But it backfired, and they passed the bill with the high tariffs on manufactured goods and raw materials alike, leading to the crisis.
A similar story was when Judge Howard Smith, Chairman of the Rules Committee from Virginia, inserted “sex” into the Civil Rights Act of 1964 on “Ladies Day”, figuring it would doom the bill in the Senate. That backfired too, in more ways than one.
Did Biden voters have a higher median income than Trump voters? I thought it was the other way around. Trump lost the 100k demographic according to exit polls. https://www.statista.com/statistics/1184428/presidential-election-exit-polls-share-votes-income-us/.
If we add we add up each candidate’s supporters’ gdp directly rather than by an arbitrary geographical unit like county (not sure why it should ‘count’ that one wins the poorest 51% of a rich county) the result is probably the opposite.
But in addition to being probably inaccurate, this boast (it seems like a thickly veiled boast; it was certainly made as a boast regularly in 2016) is an interesting reflection of narrative flexibility of the dominant ideologies: when a party thinks it’s winning the poor vote, it sees this as conferring a moral legitimacy because it’s the party of the marginalized and the have-nots (or the ‘real America’) against the rich and powerful. When it thinks it’s winning the rich voters, it sees it conferring moral legitimacy because it’s the party of the productive, the educated, the winners and the wealth creators, and it’s opponents are the party of the losers. People switch seamlessly between seeing themselves as on the side of the underprivileged and on the side of the winners depending on what fits the moment or the datum they’re currently looking at.
*Lost the 100k demographic)
Lost the less than 100k demographic and won the greater than 100k. I forgot my less than and greater than signs would disappear and take everything in between with them.
+1
Many square that circle by feeling, “Not only are we more productive, we care more about the less-well-off and support policies that help them.”
“And if we hire tax professionals, accountants, financial planners, etc. to minimize our ‘contributions’ to governments, doing otherwise would mean being a chump, and you can’t expect us to allow that.”
What was the GDP of Jeff Bezos for all those years he was taking a minimal salary and plowing everything into Amazon? Rural areas have higher rates of proprietorship than urban areas (https://www.usnews.com/news/national-news/articles/2017-03-20/6-charts-that-illustrate-the-divide-between-rural-and-urban-america ) even among non-farmers. Rural businesses also are more resilient with better survival, probably for the same reason as Bezos, earnings seem to be reinvested in the business rather than paid out. Comparing incomes of small business owners to employees seems like comparing apples and oranges.
I wonder how long this concentration of GDP (if it exists as noted by other commenters) will continue. HP announced it is moving it’s corporate headquarters to Texas. I expect other companies to follow suit. There is no longer such a great need to locate in a small number of locales.
Related – by 2050, 70% of the people in the usa will live in 15 states, represented by 30 senators. And 30% of the people will live in 35 states, represented by 70 senators.
I think the long term trade point is correct but only if we ignore cases where elites destroy their free trade credentials by supporting unreasonable and insolvent enviro regs and green companies that do much to waste our funding, distort our output, and in the end do little to help the economy. Arguable Trump’s tariffs were no worse than these, if not more defensible on foreign policy grounds.
Just like cheering on BLM protests while disallowing churches and right wing gatherings causes the “little people” to notice that “science” always seems to be distorted in ways that favor the cultural/media/governmental elites.
I’m not sure how people find this logic convincing. People who own and operate businesses in heavily democratic counties at much less likely to vote dem than all the people in section 8 housing in the same county who are being supported through that person’s taxes. If you looked at GDP produced per individual, the numbers as to which party’s voters are more “productive” would be much closer, and probably lean republican.
Sorry, Arnold, but both issues are of little relevance. Brookings researchers that point to differences in GDP (per resident? per worker? per idiot?) to explain political differences across counties, should start by comparing counties within large metropolitan areas and with neighboring counties to understand how output and income may differ greatly in some counties (note: the relevant data and methodologies are at the BEA page for regional GDP and income). Indeed, in U.S. counties where government services, education, and health care are relatively important in determining output we should expect to find a higher number of rotten and corrupt democrats (to explain why we should do serious analysis, not the partisan Brookings analysis).
To analyze protected production at the U.S. regional level you should realize that “tradable” goods are subject to the competition of the rest of the world. Sooner or later domestic production of “tradable”, protected goods will be crushed by this competition, and most likely the internal politics of the region will find it too expensive to continue protecting them.