It’s an increasingly familiar story. The event I was attending was a CNBC-sponsored program titled “Growth in the Heartland,” a contradiction in terms for most of the past half-century, but now a real phenomenon and a possible long-term trend. Studies now detail the resurgence of a host of Midwestern cities such as Kansas City, Mo., and Minneapolis, including some in what has been called the Rust Belt, such as Columbus, Ohio, and Madison, Wis. In recent years, gross domestic product in the Great Lakes states has been outgrowing that of the East Coast.
To an extent, the shift reflects natural economic adjustment. Decades of slippage have meant that wage rates, housing prices and overall costs of living are far lower than those prevailing on the coasts. The median home can be purchased in the Midwest for 60 percent of what it would cost in the Northeast, and barely half what it costs on the West Coast. The computer engineer who commands $108,000 in California can be hired for $79,000 in Michigan.
Another price of past coastal success is paid in the currency of time. Half of the nation’s shortest metro-area commutes are in the Midwest. One needn’t tell Washingtonians where the longest are, clocking in at more than twice the drive time one faces in Wisconsin or Iowa.
Small wonder, then, that even in a society where mobility has slowed, the hemorrhage of people out of the Northeast and California is now unmistakable, and it’s less and less masked by international immigration. Net domestic migration from the Northeast now runs more than 350,000 per year; California is losing population, and likely a congressional district, for the first time in its history.
These changes are more than just a pendulum swinging. Some of the turnaround is the product of conscious, thoughtful public policy. Places such as Wisconsin, Michigan, Ohio and my home state of Indiana have built some of the country’s most business-friendly climates. Many have reformed and strengthened public education and seen positive results. Five of CNBC’s top 10 states for infrastructure are Midwestern, led by Indiana at No. 1.
(Of course, there are exceptions. Illinois, where local wags claim the state slogan is “Come for the corruption, stay for the high taxes,” is ours. But Chicago is losing 200 residents a day, and last year Illinois sent 30,000 people to Indiana, twice those going in the other direction.)
But let’s give credit where it’s due; we would not be getting by without a little help from our friends. If the Midwest impulse is to do whatever we can to lower the burden of investing and hiring, our friends elsewhere seem to think that if they let you build something and employ someone, they are doing you a favor.
One friend totaled the regulatory cost of building a home in California at 18 months and $100,000, and that was before construction could start. The state’s new law penalizing independent contracting will hit screenwriters, freelance journalists, owner-operator truckers and the entire California-born gig economy in an ironic act of economic infanticide.
Overall tax burdens are lower in the middle of the country, but especially so at higher income levels. California is notorious for collecting half of all its revenue from less than 1 percent of its citizens, but the practice is common elsewhere. In Connecticut, which trailed only New Jersey and Illinois in last year’s survey of outbound moving vans, more than half the fleeing refugees came from upper income brackets (greater than $150,000 a year). This is what is known as a death spiral.
And then there are the quality-of-life choices. Public authorities tolerating discarded needles, aggressive vagrants and you-know-what on the sidewalk are hard for us provincials to understand. But when Oracle moves its annual tech conference out of San Francisco because of “poor street conditions” — at a loss of $64 million for the city — we sure get that.
No one is claiming a Midwest miracle or a full reversal of a decline that has gone on for decades. But no one 50 years back saw how far Detroit, Cleveland and other once-strong cities would eventually fall. One has to resist succumbing to that four-syllable German word I always struggle to pronounce. And we can stifle any urge to say “Last one to leave, turn out the lights.” They’ll probably just go out by themselves.