Amid Recession Fears, Economically Free States Continue to Outperform

Florida Gov. Ron DeSantis recently responded to questions about California Gov. Gavin Newsom’s ads airing in Florida, "It’s almost hard to drive people out of a place like California given all their natural advantages, and yet they are finding a way to do it.” He noted that California is hemorrhaging its population because of bad progressive economic policies so that they could be more free

Florida ranks third in the nation for economic freedom, according to the Fraser Institute. And California ranks second to last.

Our own study supports the position of DeSantis.

Freer states that were more reluctant to shut down their economies due to COVID-19 are doing much better economically than states with severe shutdowns. Even a state like California is suffering — which was considered an American paradise for nearly a century, with its perfect weather and natural beauty.

This month’s U.S. jobs report showed an increase of 372,000 net nonfarm jobs in June, yet it’s still under the pre-shutdown number by 524,000. The Biden administration trumpeted the good news of job growth, yet the real story is in the details. Labor participation is lagging and inflation-adjusted average hourly earnings are declining, and the bulk of the new jobs added are decisively in lower-tax, pro-growth-oriented states.

Residents are fleeing California, New York, Illinois, and Pennsylvania for places like Georgia, Florida, Tennessee, and Texas. DeSantis noted that it was once unusual to see California license plates in Florida, but it’s now a growing trend.

Of the 14 states that have recovered all their jobs lost due to the shutdowns, 12 are in states with legislatures and governors, championing a better fiscal and regulatory climate. This supports lower costs of living that offer new residents greater purchasing power and better opportunities to weather a looming recession.

Perhaps the most important statistic is how Americans are voting with their feet.

Forty-six million Americans changed zip codes in a 12-month period ending in February 2022. That’s the most moves since 2010. According to the U.S. Census Bureau, in 2021, California, New York, and Illinois had the highest domestic migration losses, and Florida, Texas, and Arizona gained the most.

Pods, a moving and storage company, offers up their own data on where Americans are increasingly headed. Virtually every destination benefitting now is in the Southeast, Texas, or Arizona. Pods continually cites that people say the lower cost of living as a primary reason for relocation.

U-Haul released a report showing essentially the same results. And there are private research organizations as well with more corroborating evidence, such as How Money Walks that uses IRS data.

And it’s not just people that are moving but businesses, too.

In June, Caterpillar Inc., a Fortune 500 company, announced they are moving their headquarters from Deerfield, Illinois, where they have been since the early 1900s, to Irving, Texas. This makes Texas now the headquarters of 54 of the Fortune 500 companies in the world. Remington Firearms, America’s oldest firearms manufacturer, recently announced its relocation from New York to LaGrange, Georgia.

The list goes on and on.

Competition amongst states for residents and businesses is a booming trend that doesn’t look like it will abate soon. Undoubtedly, ad campaigns and recycled political rhetoric will ratchet up the fight on both political sides for new residents and commercial enterprises. Yet the policies of lower spending and taxes, deregulation, and stronger property rights resulting in more freedom are winning.

Prolonged COVID-19-related shutdowns and excessive government mandates proved to be a formula for economic destruction. The evidence in favor of economic opportunity and robust markets is overwhelming.

Fortunately, Americans are now seeing and acting on not only mounting evidence but also their own real-life experiences — which is the true test of which approach is more viable.

Vance Ginn is Chief Economist at the Texas Public Policy Foundation, and former Associate Director for Economic Policy of the White House’s Office of Management and Budget, 2019-2020. Erik Randolph is the Director of Research at the Georgia Center for Opportunity.