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- [00:00]
Jack Salmon
This is an iHeart podcast.
- [00:02]
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- [00:56]
Newt Gingrich
Welcome to Newts World podcast on the iHeart podcast network. I want to talk about a number this week that didn't get nearly the attention it deserved, because it tells you more about the state of the country than almost anything happening in the headlines. The June jobs report came in at 57,000 new payroll jobs. 57,000. That's well below the 129,000 added in May. And it's well below what economists were forecasting. Treasury yields dropped on the news because Wall street immediately read it as a sign the labor market is cooling fast. Now, I've watched a lot of economic cycles from a lot of vantage points as speaker, as historian, and frankly, as somebody who remembers what real stagflation looked like in the late 1970s. And I want to give you a framework for thinking about this number. Because a single jobs report can be noise, but the trend line behind it is not noise. Earlier this year, private payroll growth was running at two and a half times the pace we saw all through last year. Strong numbers, real momentum. And now, just a few months later, it's cooled off enough to spook the bond market. That kind of whiplash usually means the underlying economy is more fragile than the headline numbers we're letting on layer inflation. On top of that, the Fed's preferred measure, the price index, was running at 3.5% as of the spring, more than a full point above where it was a year earlier. And Fed Chairman Kevin Warsh has been blunt about in a way I actually respect, prices are too high. Full stop. No hedging, no political spin. When the person running the central bank says the plain truth out loud, that should tell you something about how serious this is. Here's what that means in the real world, away from the charts and the Wall street commentary. It means a family's grocery bill and their electric bill are eating a bigger share of the paycheck than they were a year ago at exactly the moment job growth is slowing down. That combination rising cost and a cooling labor market is the single most dangerous economic mix for regular working Americans because it removes both of their escape routes at once. You can't easily spend your way out of high prices because your income growth is stalling. And you can't easily find a better job because hiring is slowing down. Consumer spending, which has carried this entire economy since the pandemic, is showing real signs of fatigue. That's not me being alarmist. That's what the data say. I'll tell you what frustrates me most about weeks like this one in Washington. A weak jobs report and a hot inflation number should be the only story in every hearing room, every committee markup, every press conference until it's fixed. Instead, it competes for oxygen with a dozen other headlines and gets a day, maybe two. But the family deciding whether they can afford air conditioning repairs this month in the middle of a heat wave with a grocery bill that's up and a job market that's cooling, that family doesn't get to move on to the next news cycle. They're living this every single day. So here's what I want policymakers thinking about this week. And I say this as someone who has never believed government spends its way to prosperity. Energy costs are a major driver of this inflation number, and energy policy is one of the few levers Washington can pool relatively fast. Permitting reform, domestic production, grid investment, the things I've been arguing for since long before this administration or the last one. You don't fix stagflationless slogans. You fix it by making the actual cost of producing and moving goods in this country go down deliberately on purpose, starting now. That's my read on where the economy actually stands this week, underneath the noise. Coming up, Jack Salmon of the Mercatus center at George Mason University joins me to break down his new research on where Americans are actually moving and why. The answer isn't what most people assume. That's next. I'm really pleased to welcome my guest, Jack Salmon. Jack Simmond is a Gibbs Scholar and Research Fellow at the Mercatus center at George Mason University, where he focuses on economic and fiscal policy with an emphasis on federal budgets, taxation, economic growth and institutional analysis. His research and commentary have been featured in outlets including the Hill, Business Insider, Real Clear Policy, National Review, the American Institute for Economic Research, and Reason magazine. He's also testified before Congress on the risk of debt Accumulation, deficit spending and inflation. And he's joining me to discuss his new policy brief, Interstate Migration Trends in The United States 2018-2023 Where Are Americans Moving and why? Which examines five years of IRS migration data covering 33.9 million interstate moves to figure out what's really driving Americans to pack up and move to another state. Jack, welcome and thank you for joining me on Newt's World.
- [06:30]
Jack Salmon
Thank you for having me on Speed Gingrich.
- [06:32]
Newt Gingrich
So before we get into the why, I want to start with just the scale. We're talking about how many Americans pack up and move annually.
- [06:42]
Jack Salmon
Based on the IRS state migration data that I used over these five years, there were a total of almost 34 million interstate movements during this five year period. In 2023 alone, which is the last year that I looked at, there were 6.7 million moves alone in that one year. So it's quite a large scale movement that happens every single year in the
- [07:04]
Newt Gingrich
US does any other country have the scale of internal migration that we do?
- [07:11]
Jack Salmon
Not that I know of. It's certainly not the case in Europe, where mobility tends to be much lower, but not based on my research. Do I know of any other country with something close to this. Perhaps in a developing nation somewhere like in East Asia, where people tend to move from rural to urban, there are large migrations of those sorts, but nothing like this, where we have the sort of constant mobility of people moving.
- [07:31]
Newt Gingrich
When you just look at numbers, which states are the big winners and which states have been the big losers?
- [07:39]
Jack Salmon
If we look at the raw numbers, when we're looking at the interstate migration data, it tends to be the ones that we often see in the news. So the biggest loser tends to be California, which I believe over the five year period lost more than 1.2 million people leaving the state on net. And the biggest gainer was Florida with over 900,000 in migration movements. So these are the ones we often read about. These are the sort of the nominal numbers of people moving. They tend to be the largest states.
- [08:07]
Newt Gingrich
Those are exist gross numbers. When you look at it measured against the state population, you get very different numbers, don't you?
- [08:16]
Jack Salmon
Yeah, that's right. So I wanted to measure the migration rate, but I wanted to measure it on a scale that's relative to the size of the population of the state people are moving from or moving to. So I call that the net migration rate. And when you do this, the numbers are a little bit different. The top five states in ranking order are Idaho, South Carolina, Delaware, Montana and Florida. So Florida is no longer number one, it's number five. And then the five biggest losers, when you measure it this way are New York, Alaska, Illinois, California and Hawaii. So it's somewhat of a more blurred picture from what we normally hear in the narratives about state migrations. But it's definitely an interesting story to be seen here.
- [08:57]
Newt Gingrich
If I understand the material correctly, you Show Idaho up 63%.
- [09:04]
Jack Salmon
It's not 63%. It's 63 people moving into the state on net out of every thousand residents in the state, which is the largest rate among all of the states in terms of in migration, relatively.
- [09:17]
Newt Gingrich
Considering it's not a very big state, they must have constant pressure on housing just from the sheer number of people who are moving in.
- [09:28]
Jack Salmon
That could be a possible factor assuming the state doesn't keep up with its sort of demand for housing by increasing supply. That's something that I think we'll touch on a little bit further into the discussion when we talk about the factors behind the movements. It's states that have an abundance of housing supply. They have more of a light touch regulation. They tend to keep up with the population growth so they can sustain more in migration. So it's sort of a pulling factor for people wanting to move to states. When people move to states, one of the things they're looking for is affordable housing. I mean, it's the thing we spend. The average household spends most of their income on that one thing. So it's a very important factor. So it's possible that states with large in migration end up with higher house prices if we assume they don't keep up the supply to match the demand for that housing.
- [10:14]
Newt Gingrich
I was surprised that Alaska and Hawaii both are ranked so high in terms of losing people in particular. I guess Alaska has always struck me that Alaska was gaining people, but that's not the case.
- [10:29]
Jack Salmon
That isn't the case, especially when we look at it using the metric that I use, which is the net migration rate. It's actually in the bottom five of the rankings, which also sort of blurs the narrative. We often hear about red versus blue because Louisiana and Alaska are both in the bottom five states in terms of net migrations. While there are a handful of what we might consider blue states in the top rankings. So Delaware is in the top five gaming states. So it's a little bit of an interesting different story to what we normally hear. But yeah, you're certainly right that you might not consider Alaska to be a state that's losing a lot of population. But there's probably other Factors behind that,
- [11:04]
Newt Gingrich
you chose to look at five years instead of just one year. What do you think is the advantage of looking at a five year pattern?
- [11:13]
Jack Salmon
Most of the analyses I've seen on state migrations often just hone in on one single year. So every year we get a data release, whether it's IRS tax filer data, which is what I used, or whether it's U haul moving truck data. And so we get these stories about here's how many people moved from, for example, 2023 through 2024. But one year of data doesn't tell us about trends. I wanted to know more about the flows of people over time. Where are they moving over time? What are the trends that we're seeing? So I figured five years was enough to see trends. But it was also important because five years of tax filer data gives us 2018 through 2023, which means we don't just look at the sort of the pandemic spike that we're all familiar with, but we also get some pre pandemic migration movement data and we get some post pandemic because we go all the way out to 2023. So we get both pre pandemic pandemic spike and post pandemic moves, which gives us an idea of the sort of broader trend of movement both during and outside of those sort of spikes that we would expect to see in your data.
- [12:20]
Newt Gingrich
If I understand it correctly, New York really has the worst comparative migration rate. Is that suggesting that there may be something structurally going on that's more than just say Covid?
- [12:36]
Jack Salmon
Yes. So that's why I thought it was important to include this longer term data so we can see both before COVID in 2018, 19, there was already large out migration from states like New York. And as late as 2023, we're still seeing large out migration from states like New York. And the interesting thing about using IRS migration data, which is another one of the reasons why I preferred this metric versus something like census data or U haul data or whatever it might be, is that we can break it down by income groups. So we can not just say that there are thousands of people leaving states like New York every year, but a large share of those are high earning individuals. So they're leaving the state and taking their tax dollars, the tax base with them. Not just tax dollars, but I mean, this is just the economic spending power, it's the entrepreneurial activity. We can look at a state like Florida and we can say, okay, maybe 10 or 20% of people moving into the state were high earners, but that makes up something like 70 or 80% of the income moving into the state. So that's very significant to be able to look at those sort of metrics, those demographic breakdowns. There's different income groups. And we see something similar with New York, as you mentioned, and California. A large share of the income leaving those states, not just the people, but the income going with them, is from high earners.
- [13:55]
Newt Gingrich
When we come back, we'll test the conventional wisdom about why Americans move cost of living climate politics against what the data actually show. Maybe on conservative. I've had this conventional story that these big states, particularly New York, California, Illinois, are just literally pricing themselves out of the market by regulations and taxes, and they're not as much fun anymore. And so people are sort of being driven out. But what does your data tell you?
- [14:33]
Jack Salmon
Yeah, that's definitely a factor. So let's just take one state. So I'll take my home state, where I live. It's somewhere in the middle of the rankings, right? It's not one of the biggest losers. It's not one of the biggest gainers. It tends to be a loser loser on net, based on my data. So one of the factors that is driving this is, I mean, policy is a big factor. And so I just. For this state, I'll focus on tax policy. I look at Virginia's neighbors. I look at West Virginia, which has lowered its income tax rate. I look at Tennessee, which abolished all taxes on income in 2021. I look at North Carolina, which has been cutting its income tax every year. It has a flat tax now. It's going down to, I believe, below 4%. I look at Kentucky, which has also moved towards a flat tax, and it's now cutting down to three and a half percent. And then I look at Virginia in the middle of all these states. It hasn't changed its top income tax rate since 1971. The threshold at which people start paying that top rate is $17,000. That was set in 1987. This is just an outdated tax code that is highly burdensome compared to its neighbors. And so it's no wonder why we're losing residents to our neighbors.
- [15:43]
Newt Gingrich
You think people just literally make that calculation? This is what happens to my family budget.
- [15:50]
Jack Salmon
It's certainly one of the many factors. There are many factors to consider when looking at these sorts of relationships to see which correlate most strongly. Tax policy is one of the strongest predictors of net migration, migration of people across states. It's not the only one, but it's definitely one of the strongest and most significant. It's part of the equation for why people decide to move. It has an impact on the cost of living because how much of your paycheck the government takes from you is something that you take into account. And it's particularly an issue for high earners who, based on the economic literature, tend to be more sensitive. They have more behavioral adjustments to changes in taxation. I mean, the difference between living in a state that has a top rate that's in double digits versus a state that has a 3% flat tax or no income tax at all, it's a very significant difference in income, particularly for a high earner.
- [16:42]
Newt Gingrich
For businesses and particularly small businesses, if they can move across the state line, they save significant money just by that act.
- [16:51]
Jack Salmon
Yes, it's not just the income tax burden that I'm looking at. I'm considering the tax burden broadly in the state, which includes the top marginal tax rates, but it's also things like the tax burden as a share of state income. And so all of these different variables are taking into consideration when I measure the tax burden at the state level. So, yes, it would include the corporate taxation, it would include the sales tax burden, both state and local. I mean, many states, they have this deceiving way of saying we have a fairly low state income tax rate. It may be 3%, but then you find out they also have county and municipal income taxes that can also be 3%. So actually you have a 6% income tax burden. And so it takes into account all of these different measures of tax burden to give us a sort of broad measure that we can look at.
- [17:38]
Newt Gingrich
How much of it's also just, I think of New York City, for example, that it's inherently expensive just by scale. And by putting that many people in that small an area, does that factor also matter? Or historically, were the things you got so good that it was worth accepting that the cost of living will be much higher?
- [18:02]
Jack Salmon
So cost of living is certainly a factor for some people. There's no doubt about that. And I can't speak, based on my research, I can't speak about within state movements. So if somebody was to move from New York City because it was too expensive and they moved to upstate New York, my research doesn't capture that movement because that's within state, but they would be moving for cost of living reasons. But when I actually regressed the data for state migration, interstate migration movements against measures of cost of living. So I use the Bureau of Economic Analysis Regional Price Parity Index, which compares Differences in cost of living between the states. There isn't really much of a relationship, at least it's not statistically significant in the measures that I use, there is a negative association. So there is some possible explanation there as to why people are moving in terms of cost delivering differences, but it's not a significant driver of why people are moving states.
- [18:57]
Newt Gingrich
Coming up, we'll dig into the two factors that actually do predict where Americans are moving and what state lawmakers should take away from it. I mean, if you were talking to the legislators across the country, what would you tell them? Your research indicates they should and should not do so.
- [19:23]
Jack Salmon
There are really three big significant drivers of state migration based on my research. One I've mentioned, which is the tax burden, right? Taxation matters when it comes to these decisions. Another one is, which we touched on briefly, is the supply of housing. So housing abundance. If people are moving into a state in large numbers and you want to keep attracting those people to come into your state, you have to keep housing affordable because that's the biggest expenditure. So how many housing permits, estate issues per capita every year is another significant factor that's highly correlated with positive net migration movements. And then the third that I would mention, which shows up, but it's more a broad measure, is what I call the broad economic freedom measure. So this encapsulates both the tax burden, the size of the state, which is another factor. People tend to move towards states with smaller governments as a share of state GDP and away from states with large intrusive governments. But also labor market flexibility is the third of the broad economic freedom. So people move where there are jobs and where there are the most abundant jobs tend to be in states that don't have overly burdensome licensing regulations. States that have right to work tend to have more flexible labor markets. So if I was talking to a state policymaker, I would say these are your priorities. Ensure that your tax code is competitive. People won't move to a state that is raising its tax burden on workers. Second, I would say ensure that your state is supplying abundant housing for those who want to move into your state because they want affordable housing, they want to be able to afford the houses that are near to the jobs. And then third and final, I would say ensure that the jobs are plentiful and the way that you do that is lower the barriers to employment. You know, one of the metrics that I looked at when I'm writing about this is I look at the 102 low earning occupations and how many of them in each of the states require licenses because some states require licenses which require years of experience, years of education, high fees, so many months of training hours. These are barriers to people moving into your state and seeking work. So if you have a low tax burden, abundant housing and an abundance of jobs, then you're going to have more in migration and less out migration. But this is all policy. So this is important for policymakers to consider. And it's a competitive landscape. You know, we talk about the US Being a laboratory of democracy and people will vote with their feet. So if you want to remain competitive, you have to do better on all these three measures.
- [21:59]
Newt Gingrich
There's a very significant percent of the American population that is a pretty sophisticated shopper about the quality of life. And they do respond to the signals being sent by their state and local government to a degree that, as you said earlier, I can't think of any place in Europe where you would have this kind of ability to move, partly because the cultures are so different. Whereas in the US you essentially get Walmart and McDonald's everywhere. You have this huge continental market. But the result is, I'm hearing you, that legislators and bureaucrats should be aware that they're dealing with people who are paying attention and who are translating general policy into the impact on their lives.
- [22:53]
Jack Salmon
Yes, and I think this is something that some policymakers often take for granted or they just overlook the fact. And, you know, I mean, we can see examples of policymakers overlooking this important detail. So one example is the current debate in California about the pending vote on the billionaires tax. Just the announcement of that proposal led to an exodus of some of the state's richest billionaire residents out of the state to a point that it's narrowed the tax base to effectively zero or possibly negative in realistic terms, if we're looking at present value, possible revenues raised. We see these examples all the time. People are savvy and they will behave according to the burdens imposed upon them, and they will move towards better opportunities, and they will move towards states, cities, localities that have less burdensome regulations, less taxation, and more opportunity. And so until policymakers acknowledge these things, we're going to continue seeing these state migration trends that are clearly signaling to us what people want based on where they're going. And it's the loss of policymakers who don't acknowledge this.
- [24:05]
Newt Gingrich
It seems to me that you're also really saying that regulations may be almost as important as taxes, that if you have too much of a red tape burden, shrinking the opportunity to do things or making it expensive to build houses or making it hard to go into small business that that may, in fact, have almost as big an impact as the tax rate.
- [24:31]
Jack Salmon
Exactly right. Tax policy is one of the factors to take into consideration when looking at broad economic freedom. But the regulatory landscape as a whole is also a big part of that puzzle. If you have a heavily regulated state, you're going to have higher prices. If you have a heavily regulated state, you're going to have less job opportunities, so there are going to be less opportunities for people to move there and start careers. You're going to have more expensive childcare, you're going to have more expensive housing, you're going to have more expensive rents. Policymakers much of the time aren't considering this in many of the states. In fact, they're going in the opposite direction. We only had to look at New York City, where we're now seeing the reimposition of rent control on a massive scale, which is another form of regulation that's going to lead to lower quality and higher prices. But it seems that we have to keep learning these lessons of the past that we thought we had already learned, only to relearn them again.
- [25:24]
Newt Gingrich
I couldn't help but think about in terms of regulatory red tape. I served in Congress with Sonny Bono, who had been very famous with Sonny and Cher. When his career ended, he was in Palm Springs, and he decided that he would open an Italian restaurant, which he would call Sunny's. I mean, pretty straightforward. And so he went down to the City hall to get a license to open this restaurant, and the clerk wouldn't give him a license. And he spent like six or seven months arguing with this guy. And the guy said, look, we have more than enough Italian restaurants, and I'm just not going to give you a license. Sonny used to tell the story. So he said, finally he went down one day and he said, I just want you to know I've given up. I'm not going to apply for a license. And the clerk looked like he'd won a big victory. And he said, what I'm going to do instead is I'm going to run for mayor and fire your ass. And he said that's how he got into politics. He just wanted to open an Italian restaurant. So it wasn't a tax problem. It was one bureaucrat who had that level of power. After riots in Los Angeles in 93, the mayor, who was a Republican and very, very wealthy, told me he had a friend call him and said, look, I really want to help you succeed, so I'm going to put in a factory and employ 1200 people in the poorest part of LA, he said. The guy called him back two years later and said, I can't do it. My lawyers cannot figure out how to get your city bureaucracy to give us permission to open a factory. It just gives you that sense of there's an invisible barrier and an invisible pressure that we don't focus on enough. All of us get the tax side and the tax side sort of clear and it's numbers. But the red tape side may in some places be as big a challenge as a tax site.
- [27:24]
Jack Salmon
It is. And it's not just businesses, it's also workers. So the Institute for Justice publishes a report every few years looking at the 102 lowest earning occupations in every state. And it sees how many of those 102 occupations require a license in every state. So in my home state of Virginia, I believe it's 72 occupations. Of those, 102 require a license. The average amount of time it takes to acquire that license among those 72 occupations is 580 days. Now, if you're considering moving to a state and you're in One of those 72 occupations, I think this is a deal breaker. You would probably turn away very quickly, particularly if the state next door doesn't require a license or requires less training or requires lower fees. The regulatory burden, it really stretches across so many different aspects of people's lives. And it is a huge consideration that people have to take and moving.
- [28:21]
Newt Gingrich
There's both a cost of living and a cost of working component. And you have to look at both of them, not just the one or the other.
- [28:33]
Jack Salmon
Exactly, yes. And they tend to go hand in hand as well, which is what my research tended to find when I was looking at these state migration patterns. But those are definitely sort of complementary factors.
- [28:44]
Newt Gingrich
And so you also then have, if you're really serious about helping, for example, the working poor, these are real barriers to their being able to get better jobs.
- [28:56]
Jack Salmon
Yes, that's a serious factor. I mean, you cannot look at this without considering the impacts of regulations. It may be that for lower and middle income families, the regulatory burden is more of a factor than tax policy, while for the higher earners, the tax policy is a bigger driver. But regulation still matters for those because all of those tend to be business owners. And so the regulatory burden on businesses is another big factor to consider for those people.
- [29:22]
Newt Gingrich
I want to thank you for joining me. I think this has been a fascinating conversation about a reality of America that I think literally does not exist anywhere else. In the world. We have enormous freedom and we exercise it. And it makes us kind of pretty good consumers in looking at both red tape and taxes. So your new policy brief Interstate Migration Trends in the US 2018-2023 where are Americans Moving and why? On the surface it sounds pretty academic, but in fact it's about our lives and about things that directly affect us. So I really appreciate the effort you put in to studying these things and to explaining them to us. And people can get this by going to Mercatus.org and they can have your paper.
- [30:12]
Jack Salmon
Thank you so much for having me on to speak about this. I hope the research is valuable to those who are interested.
- [30:18]
Newt Gingrich
Thank you to my guest, Jack Salmon. New Twirl is produced by Gingrich360 and iHeartMedia. Our executive producer is Garnesy Sloan. Our researcher is Rachel Peterson. Special thanks to Tim at Gingrich Research. If you've been enjoying Newts World, I hope you'll go to Apple Podcast and both rate us with five stars and give us a review so others can learn what it's all about. Join me on substack@gingrich360.net I'm Newt Gingrich. This is Newtsworld.
- [30:55]
Jack Salmon
This is an iHeart podcast. Guaranteed Human.