State of the States: Republicans Better for Government, Small Business & Inequality

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Numerous articles have been published recently comparing red states to blue states, most involving complicated formulas inaccessible to most people except for social scientists. But a simple matter of score-keeping gives a shockingly clear picture of where the nation stands in terms of the states: Red states are better-run, superior for small businesses, and surprisingly, have less inequality than blue states.

Business Opportunity

As the chart from Entrepreneur magazine illustrates, red states are better for small business, according to a survey of 6,000 small business owners across the country. Republican-controlled states surveyed (21),  average grade: B (9 states had at least an A-: VA, UT, TX, SC, OK, LA, KS, ID, GA; and there were no Fs). Democrat-controlled states surveyed (13), average grade: C- (3 states had an F: VT, HI, RI; 1 A-: OR). Split-party controlled states surveyed (10), average grade: C+ (2 states with an A: NH, AR; no Fs).

If we delve into why that might be, we find that whether a state has a “right to work” law seems to have a lot to do with it. Every Democrat state is a “forced unionism” state. On the other hand, 20/25 Republican-controlled states are “right to work” states. Only three Split-controlled states are “right to work” states. The average grade of the 23 “forced-unionism” states: C (rounded up).

Looking into if there is any possible connection between small business friendliness and unemployment, we can examine BLS numbers from October (warning: the average of state numbers is inexplicably lower at 7.27% than the national average of 7.9% reported, both seasonally adjusted).

Unemployment

The average unemployment of Republican-controlled states is 6.6%, while that of of Democrat-controlled states is 7.74%. Split-controlled states are somewhere in the middle at an average of 7.4%. Of the 14 states with the lowest unemployment rates (6% or lower), 3 are Democrat, 3 are split-controlled, and the other 8 are Republican-controlled.

Interestingly, the 24 states that voted for Romney had an average unemployment rate of 6.83%. The 26 states that voted for Obama had an average unemployment rate of 7.67%. This was mostly because the states with the highest unemployment rates voted for Obama: NV (11.5%), RI (10.4%), CA (10.1%), and NJ (9.7%).

State Budgets

We can also examine an interesting metric from Forbes that has been dubbed “death spiral states.” As reported earlier, these 11 financially risky states where the “takers” outnumber the “makers” are as follows: California, New Mexico, Mississippi, Alabama, South Carolina, Illinois, Kentucky, Ohio, New York, and Maine. Although there is no connection by party control, seven of these eleven states voted to re-elect President Obama.

Twenty-five states have at least a billion-dollar projected state budget deficit (may be annual or biennial): 12 are Republican-controlled, 10 are Democrat-controlled, and 3 are Split-controlled. But 18 of these 25 states voted for Obama. [Continuing this line of investigation, Republican-controlled is (R), Democrat-controlled is (D), and Split-controlled is (S).]

Eight states have zero budget deficits: AK (R), ND (R), WY (R), VA (R), MT (S), AR (S), WV (D), KY (S). Only one of these states voted to re-elect Obama: Virginia.

The 12 states with the largest public employee payrolls (500,000 and above) have budget deficits of $1.85 billion (MI) to $28 billion (CA), except one has no budget deficit: Virginia. Deep red state Texas has the second-highest (projected) budget deficit of $27 billion (includes fiscal years 2012 & 2013, because of biennial budgets). Overall, there is a connection between large public sector payrolls and high budget deficits.

Public Sector Unions

Of the nine states with $5 billion or higher projected budget deficits, all of them have collective bargaining for most public employees, except for Texas. All of them voted for Obama, except for Texas. Public sector unions  kill budgets and polarize the electorate.

One of the most surprising and telling findings regards collective bargaining for public sector employees. Of the 25 states with collective bargaining for most public sector union employees, all but three (88%) voted for Barack Obama in 2012: AK, MT, and NE.

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