You’ll Be Very Surprised Who’s Benefiting Most From Bidenomics

A paradox of Bidenomics is that it’s been more beneficial to red (predominantly Republican) states than to blue (predominantly Democratic) ones. This might perhaps help explain why Biden’s approval rating among Democrats has fallen to 78 percent, but it flatly contradicts Biden’s downward approval rating among Republicans to 5 percent.

We take for our text a June 30 news release from the Commerce Department’s Bureau of Economic Analysis tracking growth in personal income from January through March 2023. The correlation is uncanny between states where incomes are rising fastest and states that absolutely revile Joe Biden. 

In North Dakota, which Biden lost to Trump by 34 points, and where Biden’s net approval rating was negative 46 percent in March, according to a Morning Consult compilation, personal income during the first quarter of 2023 rose 11 percent over the previous year. 

In Nebraska, which Biden lost by 20 points, and where Biden’s net approval rating in March was negative 36 percent, personal income rose 11.1 percent. 

In Montana, which Biden lost by 16 points, and where Biden’s net approval was negative 21 percent, personal income rose 8.3 percent. 

In South Carolina, which Biden lost by 12 points, and where Biden’s net approval was negative 23 percent, personal income rose 6.8 percent.

All these increases in personal income exceeded the national average, which was 5.1 percent. In North Dakota and Nebraska, personal income growth was more than twice the national average. Hey red states, Biden might justifiably think. You’re welcome!

The blue states were not so fortunate.

California? Biden won the Golden State by 30 points, and his net approval rating there was 11 percent, his highest in the country. As Biden would say, God love ’em. But personal income was up only 0.7 percent.

New York? Biden won the Empire State by 23 points, his net approval there was 3 points, and personal income grew 3.2 percent. 

Maryland? Biden won it by 34 points, his net approval there was 8 percent, and personal income grew 5 percent, a whisker below the national average.

Not every state conformed to this pattern. Maine, Michigan, and Oregon all went for Biden in 2020, and in all three, personal income grew well in excess of the national average. But these states are not outliers in every respect. In all three, Biden’s approval numbers were under water.

What explains this bizarre circumstance? The Wall Street Journal’s editorial page, which lacks my refined palate for paradox, resolves the contradiction by pretending there is none. The blue states, it says,

boast high taxes and a high cost of living, which along with Covid lockdowns spurred increased out-migration during the pandemic…. States with higher earnings growth … tend to have lower tax rates as well as fast-growing populations…. More Americans are moving to states where wages are growing faster and their earnings go further. 

This doesn’t stand up to scrutiny. People don’t migrate that much at all anymore compared to previous eras; as I’ve written elsewhere, the “Go West, Young Man” spirit of following where opportunity leads has greatly diminished, to the severe detriment of the national economy. This has occurred even as disparities between levels of state taxation have increased. Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities, observed in January that in 1990 the combined state and local tax burden in the 10 highest-tax states (nearly all blue) was 69 percent higher than in states without income taxes (nearly all red). By 2020 it was 85 percent higher. Yet interstate migration went down, not up; since 2010 it’s been 1.5 percent, or half of what it was in earlier decades.

Why do people migrate less? Opinions differ. Some say it’s because families with two working parents are more reliant on grandparents for child care than they used to be. Some (I’m in this camp) say it’s because economic opportunity is now stratified by educational attainment, rendering a move to, say, San Francisco more plausible for a computer programmer with a graduate degree than for a data-entry clerk with an associate’s degree. The data clerk might boost his wage, but not sufficiently to cover the higher cost of living. Indeed, to the extent that economic migration persists, it’s often not toward economic opportunity but away from it, because places with less economic opportunity have cheaper housing. Some studies argue that state tax policies influence migration significantly, especially since the state and local tax deduction for federal income tax was eliminated in 2017. But the authors of these studies seldom consider that for the average worker, housing weighs much more heavily than a state income tax in any cost-of-living calculation.

All right, then. We’ve established that the red states’ larger growth in personal income isn’t likely explained by state governance. And while Bidenomics helps account for the general prosperity enlivening the national economy, I see no evidence that the president is deliberately targeting economic stimulus to people who despise him. So what’s happening?

I think it relates to something I wrote about earlier this week: the rapid increase in wages that occurred during the labor shortage that followed Covid’s peak, a period known as the Great Resignation. (It’s over now.) This wage increase was heavily tilted toward low-wage workers. It was so large that economists David Autor of MIT and Arindrajit Dube of the University of Massachusetts, along with Annie McGrew, a graduate student in economics at UMass, reported in March that it reversed one-quarter of a four-decade runup in wage inequality between the bottom 10 percent in the income distribution and the top 10 percent.

As I noted in my earlier piece, this wage compression did not reverse the income-inequality trend that dates to 1979, which is between the middle class and the rich, and is what people generally mean when they talk about income inequality growing ever-larger. That continues unabated. I also noted that like all economic phenomena caused by Covid, the Great Resignation’s rapid wage compression does not lend itself to extrapolation, because the pandemic was a freak occurrence. 

Do wages always rise faster in red states than in blue states? They do not. In May, Andrew Van Dam of The Washington Post showed (scroll down to the next-to-last chart) that since 2009, wage growth has been higher sometimes in red states and sometimes in blue states. If anything, it’s been higher slightly more often in blue states.

Then why are red-state wages rising faster now? Because red states have poorer workers. If we’re just coming off a period of rapid wage growth for low-income workers, then it’s logical to expect the poorer states to show the biggest statewide increases in personal income.

Red states are indisputably poorer than blue states. Of the 10 states with the highest poverty rates, eight are red: Mississippi, Louisiana, Arkansas, West Virginia, Alabama, Kentucky, South Carolina, and Oklahoma. The other two are the District of Columbia—not technically a state, but with a higher proportion of African Americans than any state; and New Mexico—with a higher proportion of Latinos than any other state and the third-highest proportion of Native Americans. Not to slight these minority groups, of course, but it’s a demographic fact that, collectively, they’re less prosperous than the white majority.

Now let’s look at the statutory minimum hourly wages in the states with the highest growth in personal income. North Dakota? $7.25 (i.e., same as the federal minimum). Nebraska? $10.50. Montana?  $9.95. South Carolina? South Carolina has no wage minimum, so it follows the federal minimum of $7.25. 

That leaves one hell of a lot more room for improvement than in California ($15.50), New York ($14.20), and Maryland ($13.25). If there’s a rapid increase nationwide in wages for low-income workers, it’s going to be more dramatic in North Dakota, Nebraska, Montana, South Carolina, and the other red states than in California, New York, and Maryland, and the other blue states simply because the increase will start from a lower base. It’s just math.

So why isn’t Biden reaping any benefit? Mostly because our polarized divisions are too entrenched. But also, I think, because the blurring of the distinction between low-income work and middle-income work, which occurred rapidly during Covid but has been happening more gradually throughout the past decade, creates middle-class resentment. Inarguably, higher wages for low-wage workers is cause for celebration. But if wages are stagnating in the middle at the same time, that’s politically treacherous, because morally decent middle-class workers will wonder why their wages aren’t rising, too, and morally indecent middle-class workers will spew race hatred and other toxic MAGA agitprop.

It’s worth noting that during most of Ronald Reagan’s presidency, income growth for the poor lagged far behind income growth for the middle class. Neither was much to write home about, but growth was positive for the middle class, after inflation, whereas growth for the poor (defined as the bottom 25 percent) was, after inflation, varying degrees of negative. The poor’s real wages went down while the middle’s real wages went up. Might that have had something to do with Reagan’s popularity among middle-class voters?

Today we see the opposite trend—a convergence between low and middle incomes. The problem of lagging middle-class wage gains persists even as wages rise rapidly at the bottom. That’s just as true in red states as it is in blue ones, and it’s pissing middle-class voters off.