The Red-Blue Economic Divide: Cities Keep Winning

Joe Biden is the clear winner in the presidential popular vote, and even in the Electoral College.  But Biden’s bigger victory is reflected in America’s urban-rural economic divide.  Prosperous cities and metro areas voted for Biden, while economically troubled rural areas supported Trump.  And America’s growing urban economic advantage is driven by structural forces; it isn’t clear that policy can prop up or save declining rural economies. 

Let’s look at the numbers.  As of Thursday, Biden is beating Trump by 3.4% in the popular vote, over 5.2 million total votes.  But now look at the economy.  The Brookings Institution’s Mark Muro finds that “Biden’s winning base in 477 counties encompasses fully 70% of America’s economic activity.”  In contrast, “Trump’s losing base of 2,497 counties represents just 29% of the economy.”  (The gap in numbers of counties just underscores how many American counties have very small populations.)

Economist Jed Kolko finds similar trends.  His analysis shows counties voting for Biden have more people with college degrees, higher median incomes, higher projected future job growth, and fewer routine and lower paying jobs, all factors associated with metropolitan economies.  Their job growth, both before and after the pandemic, is significantly higher than counties where Trump prevailed. 

These numbers continue a longer-term trend, with faster population and economic growth in metropolitan areas, while rural areas decline in both categories.  In the years after the Great Recession, real GDP grew 37.5% faster in metropolitan than in nonmetropolitan counties.  Economists know that cities are the hubs of innovation and growth, and America’s faster metro growth mirrors the same trends in other advanced economies.

Of course, this doesn’t mean metropolitan areas are an economic paradise.  There is high inequality in both urban and rural areas, reflecting America’s persistent and growing overall inequality.  In metropolitan areas, core cities often are surrounded by affluent suburbs that take the lion’s share of regional income while leaving the city with problems of crime, low taxing capacity, aging infrastructure, and substandard education and housing.

Rural areas also have disproportionate political power, both nationally and within states.  Nationally, the electoral college and the Senate both favor rural states.  And within states, partisan gerrymandering and systems designed when states were more rural work against cities in many ways, from voting power to allocation of tax revenues to conservative restrictions on policies in labor, environment, and other dimensions.

But that political power doesn’t produce better economic outcomes for many rural residents.  Although there are massive federal subsidies to rural industries such as agriculture and energy and mining, rural poverty has grown as overall jobs and populations decline.  The conservative Heritage Foundation has found that “virtually all of the (federal) farm subsidies go to large agricultural producers whose household income and wealth are extremely high.”  And U.S. fossil fuel subsidies are estimated to be more costly than the defense budget, and “10 times the federal spending for education.” 

The metropolitan economic advantage isn’t going away.  Innovation, concentration of consumers and resources and skilled labor, and population growth relative to rural areas all will maintain, and likely increase, the urban-rural economic gap in the coming years.  This could fuel further anger and resentment from rural residents against cities, even though cities are the drivers of national prosperity.

A timely new book, Blue Metros, Red States, argues the rural political advantage is eroding, especially in states with large growing metropolitan areas.  The recent election might seem to support that idea, with formerly red states tipped by their metros into victories for Joe Biden—Nevada with Las Vegas, Arizona with Phoenix, Georgia with Atlanta, and Pennsylvania with Pittsburgh and Philadelphia.

But Democratic losses in the House, even with Biden’s victory, suggest this trend isn’t automatic.  And metropolitan suburbs are not moving to greater political and economic integration or burdens sharing with their core cities, as continuing battles over fair housing, education, and regional taxation and transit show.

Can rural economies be revived or redirected?  Scholarly advocates like Stuart Rosenfeld and Amy Glasmeier have tried for years to promote more equitable rural economic development strategies.  If rural areas could decouple from agriculture and extractive industries, their lower costs and quality of life might help anchor new industries with better jobs.  We could finance such efforts by redirecting a small percentage of the multibillion dollar wasteful federal subsidies for agriculture and fossil fuels.

Allowing more immigration would help both urban and rural areas as America’s population ages.  Larger and younger populations are needed to support schools, hospitals, and other essential services.  And rural areas could consolidate duplicative and wasteful governments, although local politics tends to work against that.

But the urban economic advantage—and the prosperity divide with rural areas—will keep growing. Basic economic forces will feed innovation, more specialized and skilled labor markets, and agglomeration effects where size begets both more specialization and more size, in a virtuous circle.  Rural economies already have more government spending as a percent of their GDP than metropolitan areas, due to low incomes, high consumption of public services for an aging population, and less private sector growth.

Whatever the political outcome of the red-blue divide, the economic outcome seems very clear, and not positive for rural areas.  The economic gap in turn could continue exacerbating political divisions and rural hostility to urban areas, with negative consequences for our economy and political life.