Sunny Nevada is easily the fastest-growing state in the Union and chilly, gray New York is by far the slowest, according to new data from the U.S. Commerce Department.
But before you sell your delicatessento invest in a casino, you should know that the same new data also show sthat "lackluster" New York is expected to grow by $55 million during the next 20 years compared to only $8 billion for "booming" Nevada.
This apparent contradiction illustrates a serious defect in the Tarot cards economists traditionally use to forcast future growth: The deck is stacked against industrial giants like New Yorl and in favor of small developing states like Nevda.
Our traditional method of predicting economic growth distorts reality and fosters myths about the future. One of the biggest myths going around the country today is that the industrial frost giants of the North are bleeding to death, losing capital to the growing South.
Recent projections by the U.S. Department of Commerce Bureau of Economic Analysis(BEA) show that six of the 10 states growing the most in total personal income during the next decades will be northern industrial states: New York, Illinois, Ohio, Michigan, Pennsylvania and New Jersey. Ironically, BEA also places these six states among the 10-slowest growing in the nation.
Here is how the myth of the industrial decline of the frostbelt began. When economists measure growth, they normally look at the rate of growth. The problem is than an economically tiny state may grow at a rapid rate with little actual gain in income. In other words, because the state starts out small it only needs to grow a little to increase its rate of growth of rate sharply. On the other hand, a large developed state may grow a great deal in absolute terms, but still show a sluggish growth rate on paper.
A more realistic way to represent growth is to look at absolute increase in income instead of the rate of increase. We should not ask how fast a state will grow, but how much. This information draws a more accurate picture of how the states on the map are actually growing relative to each other.
For example, Wyoming is widely reported to be one of the fastest growing states in the country, mostly due to energy development. What these reports fail to mention is that Wyoming's rapid growth obscures the fact that it is expected to grow by less than $4 billion by the year 2000. That's less than all but four states: Delaware, North Dakota, South Dakota and Vermont.
Eight out of 10 of the slowest-growing states are Northern industrial states. However the Frostbelt's dismal outlook brightens considerably when the 10 slowest states are judged by their expected future growth. BEA predicts the slowest 10 states will grow about $69 billion more in constant 1972 dollars than the 10 fastest growers. The 10 slow growers will account for 28 percent of the nation's projected growth.
The slow group will grow more than the fast group because the slow states are bigger. Compare the total personal incomes of each group. In 1978 the slow 10 earned $432 billion compared to $173 billion for the fast 10. By the year 2000 the difference is supposed to jump to $772 billion for the plodding tortoises versus $439 billion for the hares.
If BEA data is correct, most other northern industrial states will parallel the growth of the tortoises. The Frostbelt is not expected to grow as fast as the Sunbelt, but that is precisely because most northern states are larger, and they are growing larger still. Apparently reports of the Frostbelt's imminent demise have been grossly exaggerated.
Similarily, the rise of the New Shouth has been exaggerated. The Sunbelt is growing at a rapid rate that makes it appear to be growing more than it actually is. With two important exceptions, southern states have generally smaller total personal incomes and consequently faster growth rates.
However, two large southern states seem to buck this trend, Texas and Florida. Both demonstrate great gains in absolute growth as well as fast growth rates. Together they will account for 60 percent of the anticipated growth among the 10 fastest-growing states. They also rank second and third, just behind California, among the nation's top 10 growers.
Texas is expected to expand by $96 billion by the 21st Century. Florida is expected to gain $68 billion, just ahead of New York.This impressive activity certainly does not contradict the notion that big states tend to get bigger, but it does prove that large states and high growth rates are not always incompatible.
Nevertheless, the two southern giants are exceptional cases. Texas is still the hub of the nation's thriving energy business. Florida has extremely high numbers of immigrating retirees and tourists.
Apart from the fast and sow states, the rest of the country's expected growth (49 percent) will be in the 30 "medium" states, those growing to the same rates as the country at large (2 percent). The mediums are clearly dominated by California, the biggest groweer of all. Clifornia is forcast to grow $140 billion in 20 years (about 12 percent of all the growth in the United States) although its growth rate barley exceeds the national average.
Even with this huge amount of growth, California is not expected to grab a larger share of the Nation's income.California is simply big, and it will stay big. Even Texas and Florida pale beside its enormity.
Just as California will not gain a larger share of business than it already has, other states are not expected to gain or lose much either. Despite a lot of activity within states, the overall distribution of wealth among states will not change drastically. Rich states will get richer, poor states will get a little less poor.
The Midwest is projected to lose about 3 percent of its present share of earnigs in the next two decades, and the Great Lakes region only about 1 percent. The Southeast expects to gain around 2 percent while the Southeast will pick up a little over 1 percent. The Far West and Rockies will make only modest gains, probably less than 1 percent. New England will lose a fraction of a percent. Overall there is a projected income shift of only 5 percent by the end of the century.
If BEA projections hold up over time, there will be no dramatic changes, only a slight leveling out. There will be no vast migration South no matter how cold it gets. The great markets of the North will continue to grow along with those in California Texas and Florida.
Although the big states are not losing any ground, most of the heady, rapid growth will happen in small states like Nevada, Arizona, Wyoming, Utah, Oregon and Alaska. This is where a lot of quick bucks and broken hearts will be made in coming years.