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Guy
The Battle of the Big States
Four states dominate the US economy, culture, and politics. They are California and New York on the Left, and Florida and Texas on the Right. They each have formidable economies. If they were independent countries, their respective state GDP would rank as follows among countries:
4th California (behind Japan, and ahead of India)
8th Texas (behind France, and ahead of Italy)
9th New York (behind Italy, and ahead of Brazil)
14th Florida (behind Australia, and ahead of Spain)
Except for Florida, the three other states have a larger economy than Brazil (9th), Canada (10th), Russia (11th), Mexico (12th), South Korea (13th), and Australia (14th). And, Florida’s GDP is much larger than Spain (15th), Saudi Arabia (19th), and Argentina (24th). Also, the mentioned states have far higher GDP per capita than the mentioned countries.
I will benchmark these four states along seven socioeconomic dimensions, including:
Health
Society
Education
Demographics
Employment
Economics
Housing
The table below specifies the subjects I will address regarding each dimension. The subjects have at times a sequential order. For instance regarding Health, I first start with Smoking and Obesity which are precursors to various diseases. And, I end up with Life Expectancy which is the end outcome.
I will convey the information mainly through graphs with a very intuitive color coding. California is colored green as it is the leading environmentalist. New York is blue as it is the archetype Blue state. Florida is purple because until recently it was very much a swing state. And, Texas is red as the archetype Red state. If you remember, this intuitive color coding, the graphs are very easy to interpret.
Health
Smoking
Source: CDC, linear extrapolation for missing years (2004, 2005, 2008, 2009, 2012, 2013)
As shown above, regarding smoking, the Blue states have consistently lower rates. Notice, the abrupt uptick in 2017 and 2018. However, when going back to 2000, overall smoking rates are declining for all four states.
Obesity
Source: CDC
As shown above, overall obesity rates (left graph) are steadily higher for the Red states. Texas stands out with obesity rates that are around 4 percentage points higher or more than any of the other states.
When focusing on the young (18–24 years old) on the right, this data set is very volatile due to small samples. However, Texas still stands out.
Overall, obesity rates for all four states are rising over time.
Diabetes
Source: CDC
Diabetes rates are rising for all four states. Again, Texas stands out as the unhealthiest state on this count. The other three states have fairly close diabetes rates. However, notice the strange convergence in 2021, when all three states have an uptick in diabetes rate, meanwhile, Texas has a decline in such rate.
Cancer
Source: CDC. Linear extrapolation for 2006 - 2013
Regarding cancer mortality rate, the Blue states do much better. California is steadily 10 points below the Red states throughout the entire time series. And, since 2016 New York has experienced a rapid drop in mortality rate. Back in 2016, it was pretty much tied with the Red states. By 2021, it had the lowest cancer mortality rates among the four states.
Heart disease
Source: CDC. Linear extrapolation for 2006 - 2013
Heart mortality is more apolitical than other health topics. Indeed, the majority of the time New York has the highest rate. Meanwhile, Florida and California are very close with the lowest rates.
Life expectancy
Source: American Medical Association, National Vital Statistics
The Blue states have steadily a longer life expectancy. This makes sense as life expectancy is very much the end outcome of all the other mentioned health metrics.
Focusing on the recent years since 2016 (right graph), at the onset there are very large differences in life expectancy between the Blue and Red states. California’s life expectancy is about 2.4 years longer than in Texas. That’s a huge difference.
Focusing on 2020, at the onset of COVID, see how New York suffered so much more than the other states. With a heavily concentrated urban population, it got hammered by COVID early on way before we had vaccines and treatments for COVID. In 2020, New York’s life expectancy dropped by more than two years. In 2020, New York’s life expectancy was still longer than for the Red states, but only marginally.
New York's experience early into COVID
Society
Poverty
Source: US Census, Statista
Notice how poverty rates were very different in 2010 with the Blue states having much lower poverty rates than the Red states. Poverty rates rapidly converged by 2014. And, they remained reasonably convergent till 2019. Over the next three years, they diverged again.
At the beginning of this time series, poverty has a strong correlation with politics (Blue state = low poverty rate; Red state = high poverty rate). But, by 2022, poverty rates have become very much apolitical. The Blue and Red states do not align anymore in a predictable fashion as at the onset of the time series in 2010.
Crime
Source: FBI
Regarding the crime rate, a lot is going on here. So, let’s quickly review each state separately.
- California
California has experienced the least improvement in crime statistics. It started at a comparatively low base back in 2000. But, its violent crime rate bottomed out in 2014, and it has steadily increased ever since. It now has the highest violent crime rate among the four states. Its property crime rate stats have shown the least improvement among the four states. And, they are now also the highest among these four states.
- New York
Its crime rate trends were pretty good from 2000 to 2021, but they abruptly spiked in 2021. They are still lower than Texas and California, but higher than Florida in 2021.
- Florida
It has the most improved crime stats, with the most rapid decline in crime rates. Back in 2000, it had the highest crime rates. By 2022, it has the lowest ones. That’s a noteworthy achievement.
- Texas
Regarding violent crime, from 2000 to 2020 it follows almost the exact same trend as California. And, it does a bit better than California in 2020 and 2021. Nevertheless, its violent crime rate in 2022 is still higher than in 2014.
Regarding property crime, just as Florida it starts from a very high level in 2000, but it drops very rapidly until the end of the time series in 2022. In that last year, its property crime rate is now just a bit lower than California.
Education
High school and college degrees
Source: FRED
High school and college graduation rates have steadily increased for all states. Notice how high school graduation rates do not correlate (or are even negatively correlated) with college graduation rates.
Look at California and Texas high school graduation rates. They are fairly similar. But, when you look at college graduation rates, California’s are steadily 3 to 5 percentage points higher.
Similarly, Florida has steadily the highest high school graduation rate, but it is tied with Texas at the bottom of college graduation rates.
Could the above conundrum be explained by Florida and Texas having a weaker university system? The university rankings shown below suggest this is the case.
Source: US News 2024, National Universities ranking
Regarding university rankings, there is no contest. California is the clear champion with 9 universities among the top 50 US News 2024 ranking of national universities. That is more than all three other states combined. Florida has only one university among the top 50, and it is ranked in the mid-tier at 28th. Does that partly explain Florida’s weak performance in college graduation rates? Maybe.
Demographics
Population
Source: US Census
As shown above, California has by far the largest population. But, population growth trends are far more important than population size when you think of “demography is destiny.”
The graphs below show how California’s population has steadily declined since 2019. COVID and Work From Home have caused an exodus out of California and into Florida and Texas. The latter two have grown very rapidly since 2019 affected positively by WFH.
Source: US Census
Demographic aging
As shown in the graphs below, all four states are experiencing rapid demographic aging.
Source: US Census
As shown in the graphs above and below, Florida earns its reputation as a state that is partly a very large retirement community.
Source: US Census
In both graphs above, Florida distinguishes itself as the “retirement community.” It has by far the highest percentage of 65 years old and above (left graph). And, it has a corresponding far lower multiple of workers per retiree (right graph).
Employment
Employment level (number of jobs) is like population. The trend (or growth) is far more important than the overall level.
Source: Bureau of Labor Statistics (BLS)
Below, we can observe the job growth in all four states. On this count, the Red states are the clear winner. Between 2000 and 2023, Florida and Texas both increased their respective job base by around 40%. Over the same period, California increased its job base by less than 15%, and New York by barely over 5%. When focusing on the COVID period since 2019, both California and New York’s job base in 2023 is much lower than in 2019. Meanwhile, Florida and Texas respective job bases are now nearly 5 percent higher than in 2019.
Source: Bureau of Labor Statistics (BLS)
Unemployment rate
Throughout the entire time series from 2000 to 2023, the unemployment rate is typically much lower within the Red states. One exception is Florida during the housing crisis which experienced a spike in unemployment rate from 2009 to 2012 (yet that spike was modest relative to California’s during the same period). However, since 2016 Florida experienced the lowest unemployment rate. And in 2023, its unemployment rate is far lower at 2.5% vs. all the other states that are around 3.75%.
Source: Bureau of Labor Statistics (BLS)
Labor participation
When focusing on labor participation, it nuances a bit Florida’s achievements regarding its low unemployment rate. Indeed, a low unemployment rate is less meaningful if it is associated with a low labor participation rate.
Source: Bureau of Labor Statistics (BLS)
The graphs above indicate that Florida has steadily the lowest labor participation rate and lower employment-to-population ratio (granted the two are almost overlapping measures).
From the above, one could deduce that Florida’s unemployment rate prowess is meaningless given its low labor participation rate. The reality is probably a bit more complicated as the low labor participation rate may be partly explainable due to the difference in age structure vs. the other states. I’ll leave this issue open for debate.
Economics
Inflation
As shown below, Texas has steadily the lowest CPI vs. the other states. California and Florida CPI trends are nearly identical throughout the entire time series from 2000 to 2022. New York overlaps with California and Florida until 2014. Thereafter, its inflation grows a lot slower than the other states. You can see that the upward slope of the blue line from 2014 to 2022 is a lot flatter than for the other states.
Source: Bureau of Labor Statistics (BLS)
Taxes
Source:www.tax -rates.org
The overall tax burden for the Red states is so much lower as to be nearly incomprehensible. So, I quickly searched how Florida and Texas finance their state government.
- Florida
According to the Urban Institute, sales taxes account for 80% of Florida’s general revenue. Property taxes account for a material portion of the remaining 20%. But, notice that Florida’s state sales tax at 6.00% is still much lower than California’s at 7.50%. And, California charges the highest income tax rates, meanwhile, Florida charges no individual income tax.
- Texas
Texas has a diversified source of tax receipts without relying on individual income tax. In 2023, Texas major sources of tax revenues included: sales taxes (14.6% of total tax receipts), franchise tax (14.6%) a tax on businesses, an oil production tax (12.7%), insurance taxes (8.7%), motor fuel taxes (8.2%), and a natural gas production tax (7.2%). These six different types of taxes account for two-thirds of total state tax revenues.
Household income
The graph below on the left shows that California has steadily the highest median household income. The graph on the right shows that the median household income increased by close to 90% between 2000 and 2022 (in nominal dollars) for California, New York, and Texas. The three states track each other remarkably closely. Florida comes in a distant fourth as its median household income rose by about 65% over the same period.
Source: US Census
As shown in the graphs below, when you adjust household income for inflation, Florida is still at the bottom. Its household income adjusted for inflation is nearly 10% lower in 2022 than it was in 2000. Over the same period (2022 vs. 2000), California’s median household income has remained flat. New York is 10% higher; and, Texas is 15% higher.
Source: US Census, Bureau of Labor Statistics
When you adjust median household income for home prices a radically different picture emerges. I factored in the home price burden by using Zillow median Zestimate value at the state level, and assuming 100% financing at the average yearly 30-year fixed mortgage rate during a specific year. Next, I deducted the yearly mortgage payments from household income. The two graphs below show you the outcome. Now, Californians do not look well off anymore. When factoring home prices burden as specified, they have the lowest resulting household income. In my mind, this is a far more representative measure rather than looking at household income without considering home prices. Interestingly, Florida is still very near the bottom with California even though it has far cheaper homes (we’ll check that later).
Source: US Census, Federal Reserve, Zillow
Next, I adjusted household income by both inflation and home prices. When you do that, since 2000 the resulting adjusted household income has contracted by nearly — 25% for both California and Florida. It has increased by about 5% for New York and close to 15% for Texas.
Source: US Census, Federal Reserve, Zillow, Bureau of Labor Statistics
The two graphs above disclose the dramatic impact of the abrupt rise in mortgage rates between 2020 and 2022. Within the next couple of years, the Federal Reserve is likely to substantially lower rates and the adjusted median household income should bounce back closer to their 2020 levels. However, notice that even before the Fed’s raising rates, California and Florida have struggled to maintain their 2000 adjusted median household income level going forward.
After inflation and housing costs, there is a third adjustment we should consider: income taxes. As we know, both Florida and Texas do not charge an income tax. Meanwhile, both New York and California charge hefty income taxes. I did not make that adjustment given the complexity of figuring out the effective median tax rate for each state for each year. However, at a high level, we can readily assume that factoring in state income tax would increase Texas-adjusted household income level relative to New York. And, the same is true for Florida relative to California. Given the mentioned tax considerations, California has probably the lowest adjusted household income of all four states.
Housing
Every which way you look at it, California home prices are a lot higher than anywhere else. New York comes in second, Florida third, and Texas a distant fourth (that’s a good thing for Texas).
Source: Zillow
The graph below on the left shows how California and Florida home prices bubbled up and down a lot more than the other states during the Housing Bubble. And, by 2022 they had both risen by close to 250% above their 2000 level! This is far more than about 160% for New York and Texas.
Source: Zillow, US Census
The graph above on the right focusing on the median home price as a multiple of the median household income is steadily much higher for California than for any of the other states. This measure also highlights how much more affordable are homes in Texas vs. the other states. Notice that all the states' respective multiples are revisiting their peak during the Housing Bubble. Homes are currently inordinately expensive given the high mortgage rates.
The graph below shows what is the percentage of median household income that is necessary to cover the yearly mortgage payments (as calculated earlier). As shown, again the contrast between California and Texas is dramatic. The percentages for California are typically two times or more higher than for Texas. Florida and New York fall somewhat in between.
Source: Zillow, Federal Reserve, US Census
Conclusion. Overall ranking of the states
As shown above, the Blue states typically do much better on Health and Education and worse on Employment and Housing. Texas dominates on Demographics, Employment, Economics, and Housing; but, it is in last place on Health, Society, and Education.
The quality of life may be the best in California, but it is also by far the least affordable. Texas may be the symmetric opposite of California (most affordable, but the quality of life is not so great).
The governors of California and Florida make a lot of noise on the national stage promoting their states as the standard for the Nation. Neither of them is really in a solid position on this count. Both states stand in distant 3rd and 4th on fully adjusted household income (adjusted for home price, inflation).