The Triumph of Red States
Joel Kotkin, American Mind
A look at the Great Migration of the twenty-first century.
Forget the presidential election. The real contest about the future direction of the country has already taken place, and it’s the red states that are clearly winning.
What we are witnessing is not so much a national ideological triumph, in the manner of the Reagan era, but a grassroots shift in economic, social, and, ultimately, political power from one set of regions to another. This continues a pattern congruent with American history since the first settlements pushed out from the Atlantic coast, expanding all the way to the Pacific. Even today the wealthiest states, not adjusted for costs, remain perched on the Northeastern or Pacific coastlines.
Today’s shift is not a repeat of “manifest destiny” associated with the old adage “go west, young man,” but more like a call back to the South, and even some places in the country’s vast center. These areas are still catching up with those areas that flourished in the last half of the twentieth century. But over the past four decades, income and job growth in places like Texas and Florida were 50 percent or more above New York and California.
In recent years, the gap between regions has narrowed. Texas, Nevada, Florida, and Arkansas experienced the nation’s highest personal income growth; in contrast, ultra-blue California ranked last, followed closely by Maryland, Massachusetts, and New York. Sunbelt states dominate the list of fastest job creators while California, Massachusetts, Illinois, and Oregon rank toward the bottom. Overall, in the past decade, the six fastest growing Southern states—Florida, Texas, Georgia, the Carolinas, and Tennessee—added more to the national GDP than the Northeast, the traditional economic powerhouse.
Follow the Carbon
In an era where the media and investors obsess over the latest craze, be it bitcoin or artificial intelligence, the states that have done best also tend to retain energy-dependent industries, such as agriculture, resource extraction, and increasingly manufacturing. The movement of some lower-tech manufacturing like textiles was largely based on low wages and employer-friendly labor law, but the current shift has as much to do with regulatory policies common in blue states.
Until the recent wave of climate-related regulations, much heavy industry and high-tech manufacturing remained in states like California and New York. But the ascendancy of draconian climate regulation has had a strong impact on blue collar jobs, a traditional source of upward mobility. The best areas for industry, notes Site Selection Magazine, are in the Southeast and Utah, while California has lost almost 800,000 manufacturing jobs since 1990 according to the Census of Employment and Wages. Oil and gas, once a major industry in the state, is now slated for extinction, while construction and logistics growth have been slower than in competitor states.
A half century ago, California and New York were industrial dynamos, along with the Upper Midwest. Over the past decade, Orlando, Austin, and Las Vegas have led the charge while manufacturing has declined steeply in Los Angeles, Chicago, and New York. New industrial growth is taking place primarily in the South and Southeast, and in red states like Indiana and Ohio, including the preponderance of new EV and battery plants. For example, the supply chain shortage has made producing silicon chips—a California invention—a priority; yet virtually all the new planned semiconductor facilities, employing thousands of workers, are being built in Texas, Arizona, and Oregon.
Erosion in Elite Sectors
Until recently, liberal pundits, and some on the Right as well, dismissed the loss of such industries as irrelevant. The new economy, people like New York Times’s Neil Irwin insisted, would be in the biggest, bluest cities. “We’re living in a world where a small number of superstar companies choose to locate in a handful of superstar cities where they have the best chance of recruiting superstar employees,” he wrote in 2019.
To be sure, for decades jobs in technology, finance, and business services gravitated to places like San Francisco, Seattle, Boston, New York, and Chicago. Yet a recent analysis by Zen Business reports that Texas and Florida are now the country’s high-growth hotspots and are also attracting the most tech workers. The erosion of California’s lead in tech and other advanced industry jobs has been going on since at least 2005, as more jobs in advanced industries gravitate to lower tax states, largely in the South and Intermountain West, according to recent research from Chapman University and UC Irvine.
For the first time since the last century, when Massachusetts seemed a serious threat, Silicon Valley has a serious and capable challenger in Texas. The Lone Star State has been less hit by recent layoffs. Some tech linchpins have already moved their headquarters to Texas, including HP Enterprises, Oracle, and perhaps most crucially, Tesla. Many other firms like Apple, Airbnb, Amgen, Uber, and Space X are expanding largely outside of the Golden State. These trends are accelerating, notes a recent Hoover Institution study.
The increasing shift to working from home could further accelerate this outflow. Roughly 50 percent of all Silicon Valley jobs, notes a recent University of Chicago study, can be done at home. Although the Bay Area and parts of Southern California are wonderful places to live, the housing market is out of reach even for well-off people. Some 40 percent of Bay Area tech workers say they would like to move to a less expensive region, which suggests locations outside of California. In a recent survey, three-quarters of high-tech venture funders and founders predicted the same for their workforces.
A similar dispersion is occurring in business services. For most of American history, the financial sector was based solidly on the East Coast, notably New York, with powerful firms also based in San Francisco, Chicago, and Los Angeles. But business services—a key sector for urban growth particularly—is increasingly headed primarily to red state capitals, led by Austin, Nashville, Salt Lake City, Raleigh, and Charlotte.
Just as the tech industry is dispersing to new centers like Austin, Phoenix, Nashville, and Atlanta, so too is finance. Since the pandemic, Texas and Florida have seen their finance industries grow ten times as fast as their New York counterparts. The biggest push is in Dallas-Fort Worth, which recently dethroned Chicago as the number two U.S. financial center and has started to raise capital to build a new stock exchange backed by key players.
The Great Migration
Losses of industries and companies are devastating enough, but the biggest crisis facing blue states and regions is demographic. In the past decade, five Southern states—Texas, Florida, North Carolina, Georgia, and South Carolina, along with Arizona in the West—exceeded growth in all of the other (44) states and the District of Columbia, notes demographer Wendell Cox. This pattern has accelerated since 2020, with Southern states gaining 1.7 million people, while the other three Census regions (the Northeast, Midwest, and West) all had net domestic migration losses. In 2023, Southern states accounted for 87 percent of all U.S. population growth.
In contrast, New York, New Jersey, and California are all losing net migrants, often to these same states. Since 2020, the Census Bureau estimates, New York has lost 884,000 residents to other states. As a percentage of its 2022 population, New York’s net domestic migration loss of 1.1 percent last year was larger than any state’s, exceeded only by California’s net outflow. Between 2022 and 2023, New Jersey lost 0.5 percent of its population, eighth among the states in net migration loss.
One clear trend has been the migration of wealthy individuals, the very people who fund the expansive blue welfare state. This was a slow pattern but gained momentum after 2019. Last year, affluent migrants took almost $24 billion out of California, $14 billion out of New York, and almost $10 billion out of Illinois. Those funds ended up primarily in Florida and Texas, as well as Tennessee and the Carolinas.
Even before the pandemic, affluent young professionals were heading to less expensive and congested cities in search of homes in places they could afford. Over the past decade, the strongest lures for Millennials were not New York, San Francisco, or Los Angeles, all of which suffered net losses in this group according to Brookings, but instead, Dallas-Fort Worth, Austin, and Houston. Last year, the biggest upsurge in new business formation took place in the Deep South, Texas, and the Desert Southwest, while New York and the West Coast economies lagged.
California, once the ultimate magnet for the young and ambitious, now suffers the worst attraction rate in the country and, according to an analysis of IRS data, is hemorrhaging families. Looking ahead to 2060, the state’s Department of Finance predicts no population growth and a reduction of 1.7 million for L.A. County, the state’s largest county.
Immigrants are following the same pattern, migrating not to traditional gateway cities like New York or Los Angeles, but to places like Dallas, Miami, and even small towns in the Midwest. The foreign-born population of Los Angeles declined over the past decade while, according to Brookings, the most recent stream is settling down primarily in Texas and other Sunbelt locales. Much of the same is happening with minorities in general; migration among Asians, blacks, and Latinos has been fastest to red states, where for the most part, they enjoy higher rates of homeownership and higher real incomes
These trends suggest America’s demographic future will be largely red. According to demographer Lyman Stone, birth rates are also higher in red states such as Texas, Arkansas, Utah, Kansas, and the Dakotas. Over time this constitutes what he labels “the conservative fertility advantage.” In contrast, the lowest fertility rates are found in deep blue states like California, Massachusetts, Oregon, and Washington.
The Governance Crisis
Conservative and libertarian economists explain these shifts largely as a function of tax rates. Though taxes are certainly a factor, blue states like New York, California, and Massachusetts long thrived with higher tax rates than states like Florida and Texas, much less than laggards like Mississippi and Alabama. California and other blue states, such as New York, benefited in the postwar era from investments in physical infrastructure and education. But in recent decades, the other states have caught up while California’s government, in one recent study, was ranked least efficient. States like Washington, Texas, Colorado, Utah, North Carolina, and Florida are duplicating “many of the great things about California,” according to Christopher Lloyd, President of the Site Selection Guild, which tracks investment flows. “The development model has turned on its head,” Lloyd suggests. “These states have learned from California. There seems to be a failure there to recognize things have changed and tech people are much more mobile.”
More serious still, as the competition was upping its game, many blue states have shifted away from growth-oriented strategies to environmental or “social justice” goals. Today, taxpayers in blue states are not rewarded with improved roads and bridges and efficient education systems, but the bill for some of the most outrageous failures—like the Second Avenue Subway, the California Bullet Train, and Boston’s Big Dig. In California, with the highest gas taxes in the country, taxpayers fume about some of the nation’s worst roads.
Education represents an even more dire failure. According to the latest National Assessment of Educational Progress (NAEP)—commonly referred to as the “Nation’s Report Card”—California 4th graders scored lower in mathematics proficiency than those in 29 other states/jurisdictions, with only 30 percent at or above the NAEP standard. In contrast, 41 percent of Florida’s 4th graders and 38 percent of 4th graders in Texas—states that pay far less per student—scored at or above the level of proficiency in math, significantly better than their California counterparts.
Such failures are endemic across Blue America. In Chicago, many schools have not produced a single student who has achieved expected proficiency in standardized tests. New York’s once respected public school systems have also declined precipitously, while the shift toward indoctrination over basic skills in many blue states, notably California, does not bode well for the future workforce. And now the rot is headed even to the elite level, as the scandal about unqualified medical students, selected by race, has undermined the reputation of UCLA’s once highly regarded but now embarrassingly woke medical school.
The Political Future
The blue states are not mandated to embrace headlong decline. Yet, so long as they remain in thrall to a deadly combination of public employee unions and progressive ideology, they will continue to be replaced by conservative-run cities and states. The effects of this shift will not only be felt by New York and Los Angeles, but also well-positioned cities like Seattle, Portland, Minneapolis, San Francisco, and Denver.
Today, many blue states—notably California, Massachusetts, Illinois, and Maryland—suffer deep structural deficits that will likely require a massive bailout from D.C. for their pensions and persistent deficits. But they may lack the political power to engineer a fiscal rescue. In 2020, migration changes helped Texas gain two congressional seats, while Florida and several other red states each gained one. Meanwhile New York, California, and Illinois all lost seats. If current trends continue, the South in 2030 will have 30 more seats than it did in the 1970s.
Do the blue states have an answer to their current political decline? To fix their current woes would require more centrist Democrats—following the lead of Keir Starmer in Britain—who could reverse some of the most destructive progressive policies. The Democratic stronghold of San Francisco, with similar efforts underway in Los Angeles and Oakland, are already trying a new strategy of cleaning up the core and reeling in spending. It is increasingly clear, notes some Democratic analysts, that the party cannot compete nationally if it bows to the activist Left.
Some blue state politicos are reassessing some of the most radical progressives. California’s Gavin Newsom now is ready to oppose progressives on issues like keeping the state’s last nuclear plant alive, cutting welfare funding, and even sending the National Guard to the state’s southern border. He also stands for now against a proposed wealth tax that could further accelerate the already devastating flow of affluent people out of the state.
If reinvigorated, blue states still enjoy physical legacies like the ports of Los Angeles and New York, the residual brainpower in the universities, and existing tech firms, critical for the startup economy, as well as unmatched cultural and media assets. Simply put, things too evolved for Dallas to ever offer the cultural and entertainment values of New York, nor can Florida weather come close to the perfection that Californians, particularly on the coast, enjoy.
There’s always the chance that the red states will undermine their political gains by pushing positions—such as bans on abortion—that will lead to some hesitancy on the part of younger people to move to their states. A return to cultural values of the nineteenth century has little appeal. But none of this will matter much if blue states can’t walk back progressive ideas and follow more traditional liberal approaches again. No matter how much sanity can reassert itself, the shift of power and wealth is already in place, but it’s just a question of the scale of this power shift and how it shapes American reality in the future.
Joel Kotkin is a Washington Fellow at the Claremont Institute Center for the American Way of Life, the Presidential Fellow in Urban Futures at Chapman University, and Executive Director of the Urban Reform Institute. His most recent book, The Coming of Neo-Feudalism, is out from Encounter.
