Demographic Changes in the United States

This blog post was written by William Sowell and published on Townhall.com 3/29/11.

The latest published data from the 2010 census show how people are moving from place to place within the United States. In general, people are voting with their feet against places where the liberal, welfare-state policies favored by the intelligentsia are most deeply entrenched.

When you break it down by race and ethnicity, it is all too painfully clear what is happening. Both whites and blacks are leaving California, the poster state for the liberal, welfare-state and nanny-state philosophy.

Whites are also fleeing the big northeastern liberal, welfare states like Massachusetts, New York, New Jersey and Pennsylvania, as well as the same kinds of states in the midwest, such as Michigan, Ohio and Illinois.

Although California has long been a prime destination of Asian immigrants and the homes of their descendants, the 2010 census shows a striking increase in the Asian American population of Nevada, more so than any other state. Nevada is adjacent to California but has no income tax nor the hostile climate for business that California maintains.

The movement of the black population-- especially educated young blacks-- is the most striking of all. In the past, the massive movements of millions of blacks out of the South in the early 20th century was one of the epic migrations of a people-- comparable in size with the millions of the Irish who fled the famine in Ireland in the 1840s or the millions of Jews who fled persecution in Eastern Europe in the late 19th and early 20th centuries.

In more recent decades, blacks have been moving back to the South, however. While the overall black population of the northeastern and midwestern states has not declined in the past ten years, except in Michigan and Illinois, the net increase of the black population nationwide has increasingly been in the South. About half of the national growth of the black population took place in the South in the 1970s, two-thirds in the 1990s and three-quarters in the past 10 years.

While the mass migrations of blacks out of the South in the early 20th century was to places where there were already established black communities, such as New York, Chicago and Philadelphia, much of the current movement of blacks is away from existing concentrations of black populations.

Blacks are moving to suburbs, and even to cities like Minneapolis. Overall, the racial residential segregation patterns are declining in the great majority of the largest major metropolitan areas.

Among blacks who moved, the proportions who were in their prime -- from 20 to 40 years of age-- were greater than in the black population at large, and college degrees were more common among them than in the black population at large. In short, with blacks, as with other racial or ethnic groups, those with better prospects are leaving the states that are repelling their most productive citizens in general with liberal policies.

Detroit is perhaps the most striking example of a once thriving city ruined by years of liberal social policies. Before the ghetto riot of 1967, Detroit's black population had the highest rate of home-ownership of any black urban population in the country, and their unemployment rate was just 3.4 percent.

It was not despair that fueled the riot. It was the riot which marked the beginning of the decline of Detroit to its current state of despair. Detroit's population today is only half of what it once was, and its most productive people have been the ones who fled.

Treating businesses and affluent people as prey, rather than assets, often pays off politically in the short run-- and elections are held in the short run. Killing the goose that lays the golden egg is a viable political strategy.

As whites were the first to start leaving Detroit, its then mayor Coleman Young saw this only as an exodus of people who were likely to vote against him, enhancing his re-election prospects.

But what was good for Mayor Young was disastrous for Detroit. There is a lesson here somewhere, but it is very doubtful if either the intelligentsia or the politicians will learn it.

The Price of Taxing the Rich

The more I look at the economic situation of the United States, the more sympathy I have for economists and politician/bureaucrats—their task seems almost impossible.

The genius of the American economic experiment has been that our society has ever sought to increase the gross domestic product and to distribute the benefits evenly.

Most states are funded mainly by income taxes. Now, we are facing a situation where the incomes of some few families are going up rapidly, and this should be producing lots of tax money for the states. However, state/federal budgets are in deficit. Why has this happened?

Californians have studied this phenomenon most closely, where the distress over the economy is most acute. In California, before the recession, half of the state’s income came from the top 1% of its earners, i.e., those households with incomes above $490,000/year.

It has been found that the highest income groups experience the greatest income volatility when anything happens to the economy or to the progressive tax structure, which we have in almost all states and in the Federal income tax system, i.e., the higher the income, the higher the tax bracket.

Many people, mostly Democrats, have thought that to save failing state and national economies, it is necessary to tax the wealthy as heavily as possible in order to fund lots more government programs and to distribute wealth more evenly. This sounds very logical; but this approach has its difficulties.

The situation that now exists is one in which the top earners are paying very high taxes; and those taxes are driving the people with the least money in the high tax bracket out of the high bracket because their income has volatilized downward. The others in that high tax bracket, however, have figured out how to make lots of money due to the exit of their lower income competitors. This effect is producing an even greater spread in the income of Americans, with the very rich becoming even richer. Of course, the very rich are paying lots of income tax; and they are keeping the government tax income up. But…the problem is that as the income of the people who are losing net value and income declines, they are not investing in the economy. For that reason, the economy is lagging—despite the fact that the very rich are making a lot of money.

The logical imperative for government and economists, today, is to keep the base of upper income people very broad and the tax rate low. That goal is hard to reach; but raising taxes at a time like this is only exacerbating the problem. It is driving many rich people out of the investment mode and making the very rich even richer, though fewer in number.

This blog post was inspired by articles in the Wall Street Journal, 26 March 2011, pages C1 and C2.