The culture war between states

July 10, 2022

Montana Economy

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For decades, states have competed to attract business by touting local economic advantages in areas such as taxation, development incentives, labor quality and regulatory policy. Sometimes states also presented themselves to companies on more general principles such as quality of life and public investment in schools and infrastructure. Today, the battle for jobs and for the wealthiest residents has taken a new turn, reflecting the increasingly intense culture wars playing out in America. Faced with an increasingly difficult economic battleground, governors of Democratic-led states are launching companies based on social issues: abortion access, transgender rights and election laws. Blue state officials hope to attract companies that oppose red state legislation restricting abortion, overhauling voting practices or banning biological men from participating in women’s athletics. The stakes are high because business and residential migration patterns, and the economic gains that come with them, have shifted overwhelmingly to Republican-led states in post-pandemic America.

California Governor Gavin Newsom, who has said in the past that his state is forging a new blueprint for “what America is going to look like,” summed up the new Democratic approach. In a provocative and controversial video ad that aired on social media and TV stations over the July 4 weekend, Newsom offensive Florida policies on everything from abortion laws to school curriculum legislation that limit what young students can learn about gender. “Freedom is under attack from Republican leaders in states like Florida. Ban books. Limitation of speech. Make it harder to vote. Criminalize women and doctors,” the ad read. “I urge you all to join us in California, where we still believe in freedom. Freedom of speech. Freedom to choose.” The announcement amplified a message Newsom sent to businesses that left California in recent years. to head to Republican states.”Some businesses may be gone, come back. It’s a point of pride that we welcome you back, we want to celebrate that we have you back,” Newsom said.

That of the Supreme Court Dobbs decision annulling deer v. Wade seems to have played a catalytic role among Democratic governors. New Jersey Governor Phil Murphy, who recently signed legislation extending legal protections to women who come to his state for abortions, has contacted dozens of companies in states where abortion is banned, inviting them to move to Jersey. In a letter to businesses, Murphy said the Dobbs decision would have a “chilling effect.” . . on your ability to attract and retain top female talent while located in a state that has refused to recognize women’s reproductive freedom. The governor’s office later said of the letter, “Governor Murphy encourages businesses looking to support their employees to look to New Jersey, a state where they can be confident that the rights of women, the LGBTQIA+ community and voters will always be protected. .”

Connecticut Governor Ned Lamont issued a similar letter over the July 4 holiday weekend. “There are far-reaching implications for businesses and workers located in states that may significantly limit access to reproductive rights in the weeks ahead,” wrote Lamont, a former business executive. “Customers and employees will be drawn to states that protect reproductive rights for all.” In the letter, Lamont listed other reasons to move to Connecticut, including paid family medical leave, which business groups in the state actually opposed when it was enacted in 2019.

Republicans have hit back at this sensitization. A spokesperson for DeSantis called Newsom’s announcement “pathetic libel” and, pointing to migration figures from California, said people were fleeing “hell”. [Newsome] created in his state to come to Florida. The Republican National Committee, meanwhile, released a statement saying Newsom’s ads “remind Floridians how badly they don’t want to move to California.” Meanwhile, a spokesman for Georgia Governor Brian Kemp said of Murphy’s letter: ‘A sitting governor wouldn’t be spending his time doing this kind of desperate outreach if business was also in full swing. growth in his state. He would celebrate the announcement of multi-billion dollar projects and thousands of new jobs with quality businesses – as Governor Kemp has had the privilege of doing several times this year.

Whether this new twist on corporate outreach pays off remains to be seen, but blue states need to do something to stem their losses. IRS data shows that in 2020, as the pandemic raged and states imposed activity restrictions, residents, businesses and wealth left Democratic-ruled states in droves. New York and California alone collectively lost nearly $40 billion in net wealth leaving the state, while Texas and Florida captured some $30 billion net from residents moving in. The chart should show even bigger gains for 2021. Economic performance, meanwhile, has shifted sharply toward Republican-led states. Moody’s compared states on 13 recent economic metrics and found the best performing places dominated by Republican-led states, while eight of the ten worst economies were in blue states. Republican-run places clawed back all the jobs they lost during the pandemic and added 341,000 more; blue states are still about 1.3 million short.

The offshoring news hasn’t been good for Democratic states either. Hedge fund giant Citadel recently announced it was moving from Chicago to Miami, while Caterpillar is moving its headquarters to Texas from Illinois. Hewlett-Packard, a company synonymous with Silicon Valley, is moving from San Jose to Houston, while hedge funds like Elliot Management and Point72 are moving their headquarters from Manhattan and Connecticut, respectively, to Florida. As these moves suggest, the post-pandemic advantage that red states have on traditional economic and trade issues appears to have widened. The ten states ranked by business executives this year as the best places to locate their businesses were Republican-leaning, led by Texas and Florida, while the ten least favored states by executives are solidly Democratic.

The reaction of certain blue states to the Dobbs decision intensified a growing culture war between the states. So far, this battle has been fought under limited economic conditions — for example, by states banning their employees from going to places with laws that local politicians oppose. Recently, for example, California announced that it would no longer pay for travel for its state employees in four states – Arizona, Indiana, Louisiana and Utah – because they passed laws prohibiting biological males who became female to compete in girls. school sports. California has now enacted travel bans in 22 states that Sacramento officials say have laws that discriminate against gay, lesbian, bisexual and transgender people, though Newsom has sparked controversy by passing vacation in one of those states, Montana. A handful of other Democratic states — Washington, Minnesota, New York, Vermont and Connecticut — have similar travel bans in place for multistate employees.

Democratic governors have been encouraged, it seems, to take the next step. They try to recruit companies based on cultural issues, in part because of the spread of “woke” attitudes in corporate America. Last year, Coca-Cola publicly criticized Georgia’s new election law, sparking a showdown with Republicans in the state, while Disney opposed Florida’s parental rights in education bill. , which limits discussion of gender in the early primary grades.

Even so, one of the hard and fast rules of economic development in the United States, articulated by the late Citicorp Chairman Walter Wriston, has been that “capital goes where it is welcome and stays where it is treated well”. . There is no indication that, in a highly competitive global economy, companies have suddenly decided to revoke this rule.

Photo by FREDERIC J. BROWN/AFP via Getty Images