The Exodus Continues — To Texas and Florida, Away from California
December 7, 2020
NEWS THIS MORNING THAT GOLDMAN SACHS may move its asset management division from New York City to Florida got us thinking about the major political shift that will come after this year’s census. The winners in the 2024 election — and in upcoming congressional redistricting — will be Texas and Florida; a high-profile loser will be California.
THE COVID IMPACT: The raging pandemic has shown that many people can work from home, a signal to cost-cutting companies that they don’t need to maintain expensive locations in places like midtown Manhattan. Many big Northern cities, besieged by crime and high taxes, are experiencing an outflow.
THE TREND BEGAN EVEN BEFORE THIS YEAR’S PANDEMIC AND SOCIAL UNREST: AllianceBernstein announced in 2018 that it was moving to Nashville, and an exodus out of Silicon Valley to Texas already was underway before the virus hit. Several hedge funds and money managers are looking for property north of Miami.
WHILE FLORIDA IS EXPECTED TO GAIN TWO ELECTORAL VOTES, the jackpot will go to Texas, which will get three more votes, bringing its total up to 41 seats, second in the nation to California’s 55, soon to drop to 54. There’s no individual state income tax in Florida or Texas, while the top rate in California is a staggering 13.3%.
AFTER DECADES OF POPULATION GROWTH, California will lose an electoral vote and a congressional seat for the first time in the state’s history. It’s still the most populous state in the nation, with just under 40 million people, but deadly fires, high taxes and decay in San Francisco and Los Angeles have taken a toll.
AND THERE’S BEEN AN EXODUS FROM NEW YORK CITY, mostly to the suburbs, since the virus hit. Before then, there was a decade-long migration from the Tri-State area to Charlotte, Austin, Nashville and of course Florida. For the first time ever, Florida soon will have more electoral votes and congressional seats than New York state.
ADDING SEATS AND ELECTORAL VOTES: In addition to Texas (3) and Florida (2), one-seat winners are expected to include Arizona, Montana, North Carolina, Oregon and Colorado. One seat losers other than California are expected to include Alabama, Michigan, Ohio, Pennsylvania, West Virginia, Illinois, Massachusetts, New York and Rhode Island.
THE POLITICAL IMPACT: With Texas and Florida becoming more powerful, that’s a plus for Republicans because they’re doing significantly better with Hispanic voters in those states.
THE ECONOMIC IMPACT IS CLEAR: With interest rates close to zero, as the Fed promises accommodative policies for three more years, real estate will remain red-hot in booming Texas and Florida, not to mention in cities like Charlotte and Nashville. The dramatic American migration continues to move southward.
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STIMULUS UPDATE: Details on a compromise deal may be released today, but this process will take time. There’s a consensus that the package, lasting until April 1, should cost about $900 billion, but progressives like Bernie Sanders want more, while conservatives in the Senate want less.
TO COMPLICATE MATTERS, the vehicle for a stimulus bill will be the massive budget deal, which isn’t finished yet; an extension past the Dec. 12 midnight deadline may be required. Bottom line: a pandemic bill is still likely — especially after Friday’s mediocre jobs bill — but we’re not expecting a final deal until well into next week.
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