For the last several years, the United States has undergone a migration pattern based on political preferences. It began when the pandemic produced significantly different public-policy responses by red and blue states, and accelerated until mortgage rates finally returned to historic norms. The Wall Street Journal became one of the first media outlets to take note of the trend in December 2021, but the shift had begun more than a year earlier. And the reasons were obvious:

The pandemic has changed America in many ways, and one major change is the migration from states that locked down their economies and schools the most to those that kept them largely open.

That’s the underreported news in last week’s Census Bureau state population and domestic migration estimates from July 1, 2020 to July 1, 2021. Data used for this year’s Congressional reapportionment was based on where people claimed to live on April 1, 2020. But what a difference 15 months of lockdowns made. ...

The Covid data tracking outfit Rational Ground calculated that the 25 states with most in-person learning during the 2020-2021 school year gained 822,064 people on net from other states. It’s impossible to quantify precisely the cause-and-effect impact of school closures and lockdowns on population migration. But the correlation is clear from the data.

There’s also the impact of rising taxes.

The editorial board closed with a warning to blue states:

Differences in policies and political values won’t recede with the virus, and it’s clear from the census data which side is winning the contest for talent and taxpayers.

Indeed. This has turned into full-blown capital flight, as middle-class families with investment potential looked for and found greener pastures. Tax bases have shrunk in states like California and New York while growing in lower-tax states with more conservative policies and governance. If these current trends continue, the states that gave Donald Trump the victory in 2024 will have several more Electoral College votes in 2032, not to mention greater influence in the House of Representatives. 

But what has this capital flight meant economically? The Economist took a look at the data, and discovered that two Americas really do exist. And one of them is thriving:

These trends play out across America. Along with Kai Wu of Sparkline Capital, a fund manager, we assembled 30 listed firms that are seen favourably by Republicans or Democrats, based on surveys. The process was inevitably arbitrary: there is no single poll that covers all companies. In the end, the Republican basket included firms such as John Deere, Fox and Harley-Davidson, whereas the Democratic one featured Etsy, Lululemon, Lyft and more. The recent market turmoil hit the Republican basket hard. But in the past decade its shareholder returns, including dividends, have thrashed the blue basket (see chart 3).

Why do MAGA companies seem to outperform? Maybe they eschew virtue-signalling. Point Bridge America First, an exchange-traded fund that uses the stock ticker MAGA, only includes firms that support Republicans. The Democratic Large-Cap Core Fund, with the stock ticker DEMZ, invests in companies that make big donations to the Democrats. Since the end of 2020 MAGA’s price has easily outperformed DEMZ. Goldman Sachs, a bank, has built a stock index containing firms “that could benefit from key Republican policies”, such as those in oil. In the past decade the share prices of these companies have comfortably beaten the market.

Inclusiveness matters. This observation is freighted with irony, since progressives punish brands that don't meet their definition of "diversity." That incentivized numerous brands to go all-in on woke, only to discover that the lecturing didactic turns off most of their potential consumers. It's a lesson that Bud Light and Target learned the hard way, both brands that would otherwise be considered blue-collar and working-class. It's not just the companies favored by red-state consumers that thrive, however. It's also the consumers themselves:

There are more Buddy Garritys today. In 2024, 47% of Americans reporting annual incomes above $1m lived in Trump-voting states, up from 43% in 2014. Incomes among poorer folk are rising, too. Population growth is strong. ... Republican states including Florida and Texas are still enticing internal migrants. And with local consumer confidence strong, expect spending in MAGA-land to hold up better than in Democratic-leaning areas.

In other words, MAGA policies are making America great again -- where those policies are in place. Americans have responded to that by migrating to the areas where America has returned to that path of greatness, and they are bringing their capital and talent with them. With all of that in mind, we should expect no other outcome -- and it's an outcome that has been dictated by blue and red states alike. 

It's still good to see the data confirm it, and that poses the real question. Will blue states learn the lessons from it ... or condemn their economies to permanent second-tier status?