Blue States vs Red States; Covid & Economic Recovery

There are two completely different economic recoveries occurring among the states: a “Blue State” and a “Red State” recovery.

In the so-called “Blue States,” state and local governments have been very slow to reopen their economies, and very quick to re-close. As a result, unemployment has been consistently higher, and still totals in double digits at 10.6%.

The recovery in the “Red States”, meanwhile, has been much stronger, with unemployment at just 6.6%.

And the people who live in the “Purple States” (the swing states) have seen a mixed recovery, with unemployment at 7.8%, fittingly in between the level of the red and blue states.

The result of this will be not just differences in unemployment rates, but also differences in the multitude of other factors that unemployment affects, including state and local finances. Blue state politicians are essentially creating the circumstances that will require a bailout:

Stricter business closures -> Higher unemployment -> Decreased household incomes -> Lower tax revenues -> Worse state & local finances -> Greater need for federal bailouts

Indeed as negotiations over yet another round of federal coronavirus spending continues, one of the biggest hang ups is that blue states and municipalities essentially want bailouts to pay off debts from their prolonged shutdowns (among other things). So far, President Trump has said he doesn’t want poorly-run states to be subsidized by better-run states (though, if Democrats sweep in the upcoming elections, that’s likely to be exactly what happens).

Oh, and the notion that the Red States have been irresponsible by not being as strict and by opening up quicker has thus far not been seen in the fatality data: the Blue States have suffered 40% more deaths per million residents than Red States.

And the notion that population density is the reason for this disparity may also be turning out not to be the case, as recent studies have found that population density (e.g. people per square mile) is not the driver of higher death rates.