I’m with McAnally
This tweet shows a pretty obvious blind spot among people on the left:
So McAnally welcomes a major investment in his town, perhaps assuming that this represents the free market at work. Then he changes his mind when he finds out that it is an inefficient subsidized investment that results from a highly statist industrial policy regime. And for that he’s basically called a phony.
I’m with McAnally—buy the cheaper solar panels from China and produce goods and services here for which America has a comparative advantage. After all, it’s not like America is unable to create jobs for people that want to work.
PS. I know, “But if there’s war over Taiwan there might be a slight delay in the rate we can add solar panels to our rooftops!!!”
PPS. Over the past 12 years, I must have read 1000 commenters explaining to me their stupid theories about how politics work. Not one of those theories is able to explain this simple graph:
Biden’s secret agenda is to transfer billions of dollars from high taxpaying blue states to government dependent red states. ¯\_(ツ)_/¯
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14. August 2023 at 10:32
“Biden’s secret agenda is to transfer billions of dollars from high taxpaying blue states to government dependent red states.”
They want to create culture of dependency:)
14. August 2023 at 10:49
I might be misunderstanding your question but that graph is no more than a demonstration of the rural/urban divide that has begun ruling politics all over the world.
Industry gets built in rural areas because it’s cheaper. Almost every rural area is republican. I don’t think it’s more complicated than that.
Biden passed a bill to produce the stuff democrats want. It’s cheaper to produce the stuff democrats want in rural Republican areas. So the direct investments from the bill goes to republican areas.
14. August 2023 at 11:05
Rafael, You said:
“Industry gets built in rural areas because it’s cheaper.”
No, it’s much cheaper in China. And why not rural parts of blue states?
14. August 2023 at 11:59
“Not one of those theories is able to explain this simple graph”
The article the graph is from gives this explanation:
“Republican’s success in attracting investment is partly due to their districts often having large swaths of available land and cheap labour”
Rafael, in his comment above, wasn’t totally wrong.
The article goes on to mention that Federal assistance is available regardless of what state a company invests in and that Republican states often give more tax breaks, relative to Democratic states, on top of the federal assistance.
Moreover, the article mentions a number of instances of Biden specifically visiting these new projects and calling out the Republican congressmen/women whose districts they are in for not supporting the IRA and Chips acts that helped these investments to take place.
So, my conclusions are this
– The Democrats have pushed through an industrial policy that gives financial incentives to build clean energy manufacturing in America.
– the firms making these investments have to build in America to get the federal benefits, but since what state they choose within America does not impact the benefits they get, they choose republican states that tend to have cheaper land, cheaper labor, lower taxes, and more business friendly policies.
– (this is speculative) Democrats, at least the national level politicians, know the above and are ok with it because this is their attempt to peel away rural, working class voters from the Republicans.
Finally, the article and your graph show the republican districts getting about 80% of the investment. Well, when I look at a graph of congressional districts, colored by party, just an eyeball check looks 80%, if not more, rural districts are republican. So, even if investments were randomly assigned to each district, that lopsided figure wouldn’t surprise me. Here’s the congressional map I was looking at (its a bit dated it shows districts from 2018):
https://projects.fivethirtyeight.com/redistricting-maps/
14. August 2023 at 12:39
People support whatever they wish to support, regardless of the negative side affects.
McAnally supports policies adopted by Trump and opposes those adopted by Biden, regardless of how it affects him.
Biden supports industrial policy and opposes free trade, regardless of how it affects electoral chances or creates deadweight loss.
14. August 2023 at 12:43
MSS1914, Sure, you can always come up with ad hoc explanations. But when people tell me their theories of politics they are almost always conspiratorial. “They say this is the reason, but it’s actually about who benefits”. That sort of thing.
Ad hoc explanations are always possible:
1. They do this because it helps their voters.
2. They do this because it helps the opposite party’s voters, and they are trying to get them to switch party.
Thanks for clearing that up!
(Not directed at you, just speaking in general.)
14. August 2023 at 12:46
Samuele, If I make that sort of claim, commenters always tell me that I’m naive.
14. August 2023 at 13:00
Scott, it’s slightly different.
18 small state GOP Senators vote YES on Infrastructure bc it largely funded small-state projects… then 2 small state Dems (WV, AZ) gave cover to countless other small state Dems who would have voted NO if forced.
The biggest mistake Dems make is CA, IL, NY seeing DC as how they boss around the country, and not how small states rape big ones.
TX and FL totally get it. They’d happily partner with CA, NY, IL to keep $ and power at home.
14. August 2023 at 15:36
I agree with McAnally also. In theory.
But in truth, it is impossible to determine comparative advantage among nations.
There is no such thing as free, fair or foul international trade, so infused is the field with taxes, regulations and subsidies–and the effective suppression of labor income and consumption (see China, Michael Pettis).
I agree that both US political parties are hopelessly corrupt.
14. August 2023 at 16:07
Thanks for the sanity check. I thought the same thing when I read about that guy. I can’t speak for him, but it’s how I would have felt.
15. August 2023 at 00:35
Oh, no those horrible farmers and industrial workers who seek handouts. What a bunch of a losers. Perhaps we should place them in a reeducation camp so they can be more like the heavily indebted, crime-ridden democrat states. That’s what all peaceful small towns need. A few gangsters, a bit of drugs, bring in the degeneracy, and BOOM you are a blue state.
It’s called cheap labor. You are not going to setup a factory in downtown Washington D.C. Of course it’s going to be in a rural or suburban area. The rent would be a waste of money. Not even Musk places his factories in the city. It makes zero sense.
And why do the solar panels have to come from your beloved China? Why can’t they come from India? How about Taiwan? How about Philippines? Or are those democracies not to your liking? Perhaps you prefer the uigher slave labor in China, and the CCP model of governance.
If you really want cheap labor, then you wouldn’t China to produce your solar panels. You’d choose PH, Taiwan or VN. India would be slightly more costly because of the shipping logistics, and because the salaries are slightly higher.
15. August 2023 at 03:14
Both the McAnally anecdote and the chart illustrate the left’s “What’s Wrong with Kansas (Oklahoma)?” mentality. They puzzle over why, no matter how many subsidies they direct to rural areas, they can’t seem to buy enough votes.
I vaguely recall left-wing commentators criticizing Republican politicians for opposing Obamacare even though they personally were receiving some sort of subsidy/benefit from it. (Or, maybe it was some other welfare program.) The commentators claimed that the politicians were being hypocritical for opposing a program while personally benefiting from it. No, actually, looking beyond one’s own narrow personal interest is what we hope politicians would do.
15. August 2023 at 10:04
Professor:
If I’m reading the chart correctly it is not grouping by state partisanship, but partisanship at the district level, essentially all rural districts are Republican, even in extreme blue states like California (https://en.wikipedia.org/wiki/2020_United_States_House_of_Representatives_elections_in_California)
15. August 2023 at 11:11
Rafael, Yes, I was wrong—it is at the district level.
18. August 2023 at 16:07
Just out of curiosity, if an energy company from, say, Portland OR, builds a big wind farm in SE Idaho in the middle of BF nowhere, how much of the “investment” accrues to the local legislative district or economy?
The turbines and power equipment is purchased and shipped in; the building materials for outbuildings are shipped in; the truck drivers bringing components work for a national firm; the construction workers are from Portland; the power company is HQd and does all it’s banking and business in Portland; the construction company is HQ elsewhere; probably the even the trucks don’t buy fuel in Red country.
So what’s left for Red? Ten or twenty permanent local jobs? Half of which are skilled technical people hired from outside the area? And maybe 3-6 months of construction workers staying in local hotels and eating out locally.
OTHO, what accrues to Big Blue Portland? All the executive salaries; all the bankers and financial workers attending to the project; all the company’s office leases, office furnishings; most employees; most of the construction money goes through these firms. The turbines and components might be manufactured in Blue country but even then the executives who take home most of gains and their offices and coteries are in (blue) cities.
Your thoughts?
20. August 2023 at 08:10
Kangaroo, Good question, and I don’t know the breakdown. But keep in mind that the future flow of economic activity occurs in the places these new chip plants are located. So it’s not just about the initial investments.
24. August 2023 at 09:38
MSS1914 is correct, in part. Cheap land, then add cheaper labor, no unions, less taxes and regulations. If companies are spending money to move from blue to red states, surely new companies will choose red states more often. (Also, one year time frame is a tight window to draw conclusions from).
14. September 2023 at 16:00
I wanted to chime in on the political aspects of the “more money going to red-districts.”
We just have to accept the fact that in a very literal sense, 99% of us are peasants. When you watch game of Throne about 99% of the show is about nobility and the “knights” and almost none of the characters are peasants.
The point is – we have a horribly skewed way of looking at history as we are living it; a view that is horribly biased to the one aspect of history that is easily forgotten.
The simplest explanation that Republican districts get more money is not that they are “government dependent”; but rather that Republican politicians represent a stronger elite-class. Call them nobility or whatever.
In Rome, think Optimates and Populares.
There’s nothing clownnish or mysterious about US politics. It was built to model a Roman system and it is therefore functioning like a Roman system functioned.
It has two competing camps of nobility, one that uses the crowd to maintain its position, and the other that doesn’t have to.
And like the Roman system, the elite “optimates” win all the tax-farming.
To quote Cerci from Game of Thrones:
“Power is power.”
14. September 2023 at 16:10
I also want to point out that because the graph is total value of the projects that this is more significant than simply “rural”. High value projects in the US requires high value capital and labor.
Example: Intel’s building its Foundries in Licking, Ohio in a Republican district where they could literally have built down the street by a few blocks and been in a Democrat district.
The point to this is that rather than build a few blocks down the street in a Democrat district; they built where the political power told them to build by giving them the best deal while still keeping access to those above-things that are high value.
If it were as simple as “it’s rural therefore…”
Then we should see a valuation skew, because high value must be closer to cities to gain access to high value infrastructure and labor forces and universities to train the workers, etc.
The above graph shows that elites favor the Republican party at least for whatever thing the graph purports to measure.
I think the parties are in a lot more agreement than disagreement. When elites fall out of favor they destroy each other or go to outright civil war.
That grows outside the scope of my comment, but think of how it was an increasingly lethal battle in Rome between Optimates and Populares that led to Marius vs. Sulla, then Caesar vs. Cato and etc.