No, you'll find more grinding intergenerational po

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Red and blue states are very different — economically speaking.

https://blogs.cfainstitute.org/investor/2018/...ne-nation/

This is where a recent study by David C. Parsley and Helen Popper comes in. The duo investigated the differences between red and blue states much more thoroughly than my friend and I did over a couple of beers.

So what did they find?

Red and blue states vary so much in their economic trajectories that they may as well be two distinct countries within the United States.

First, blue states have enjoyed higher economic growth rates on average than red states since the Great Recession. Since the mid-2000s, the business cycle of blue states has increasingly diverged from that of their red counterparts.

The average disparity in GDP growth between red states and blue states has hovered around 3.5% since the recession ended. For comparison, a previous study of 20 developed nations found an average GDP convergence among them of only 1.75%.

Differences in GDP growth also lead to differences in household income and household consumption — i.e., in living standards. Luckily, there are several transfer mechanisms that mitigate these gaps in GDP growth so that consumption shortfalls in red states amount to only about one-fifth of the growth deficits.

But Parsley and Popper found that red states and blue states smooth these consumption variations in very different ways.

Capital markets are the great leveler.

Capital markets are the most important tool to mitigate consumption gaps from one year to the next and from one state to another. Capital markets ease about 43% of idiosyncratic state risks. In a sense, capital markets render an important service often overlooked in the public debate: They reduce income inequality among the states.

But once capital markets are accounted for, further crucial differences emerge. The second most critical tool to smooth consumption in red states is fiscal transfers. Blue states, on the whole, contribute more tax revenue to federal coffers than they receive in return. So in aggregate, the federal government transfers wealth from the blue states to the red states.

Commonly referred to as......wait for it...….yep, socialism. LOL!

Blue staters, on the other hand, ease the consumption gap by saving more and purchasing durable goods. Of course, poorer households often cannot save and thus must rely on fiscal transfers, so this red state-blue state gap might just be the result of wealth disparities between the two cohorts.

Whatever the cause, the study demonstrates that the current polarization in US politics is misguided and counterproductive. Economically speaking, the red states benefit from the blue states through government redistribution and transfers of capital from blue state savers to red state investments via capital markets.

Blue states benefit from red states, on the other hand, which fuel their higher growth and higher income with attractive investment opportunities as well as cheaper labor and lower prices.

In other words Red Staters are our Mexicans and Vietnamese.

The current political polarization is undermining not only the sense of unity among the American people, but also the future economic growth of the country as a whole.

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