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Friday, March 18, 2011

Let’s All Go to North Dakota

“Reason obeys itself; and ignorance submits to whatever is dictated to it." — Thomas Paine

It is an interesting fact that if you rent a 26 foot U-Haul moving truck in Los Angeles and drive it to Dallas, Texas it will cost you $2,180. If you rent the same truck in Dallas and drive it to Los Angeles it will cost $895.00.

Why, you might ask is this disparity in rental cost to dramatic? You see many more people are leaving Los Angeles for other, more friendly locations than are migrating to L.A. So when a person relocating from Los Angeles to Texas rents a truck the U-Haul company has to pay someone to drive it back and that cost is factored into the rental cost.

On January 12, 2009 the Associated Press reported: “The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y.”

“California's loss is extremely small in a state of 38 million. And, in fact, the state's population continues to increase overall because of births and immigration, legal and illegal. But it is the fourth consecutive year that more residents decamped from California for other states than arrived here from within the U.S.”

In the two years since AP reported on this issue unemployment in the state has risen to 12.4% and the latest estimates for outward migration is now ay around 190,000. As the article points out the overall population is not decreasing, but the offset to the migrations is mainly from high birth rates among the poor and illegal immigration. You can read my last post on the conditions in California by clicking here.

Forbes Magazine has published an interactive map where you can chose a city to see the migration patterns in or out of that city. The red lines represent outward patterns and the black people who are moving in. Try a few cities and see what is happening across the nation when it comes to fleeing some of our largest cities.

Joel Kotkin writes in the Wall Street Journal: “Living on the harsh, wind-swept northern Great Plains, North Dakotans lean towards the practical in economic development. Finding themselves sitting on prodigious pools of oil—estimated by the state's Department of Mineral Resources at least 4.3 billion barrels—they are out drilling like mad. And the state is booming.”

“Unemployment is 3.8%, and according to a Gallup survey last month, North Dakota has the best job market in the country. Its economy "sticks out like a diamond in a bowl of cherry pits," says Ron Wirtz, editor of the Minneapolis Fed's newspaper, fedgazette. The state's population, slightly more than 672,000, is up nearly 5% since 2000.”

“The biggest impetus for the good times lies with energy development. Around 650 wells were drilled last year in North Dakota, and the state Department of Mineral Resources envisions another 5,500 new wells over the next two decades. Between 2005 and 2009, oil industry revenues have tripled to $12.7 billion from $4.2 billion, creating more than 13,000 jobs.”

OB-NA517_kotkin_G_20110314174718“Already fourth in oil production behind Texas, Alaska and California, the state is positioned to advance on its competitors. Drilling in both Alaska and the Gulf, for example, is currently being restrained by Washington-imposed regulations. And progressives in California—which sits on its own prodigious oil supplies—abhor drilling, promising green jobs while suffering double-digit unemployment, higher utility rates and the prospect of mind-numbing new regulations that are designed to combat global warming and are all but certain to depress future growth. In North Dakota, by contrast, even the state's Democrats—such as Sen. Kent Conrad and former Sen. Byron Dorgan—tend to be pro-oil. The industry services the old-fashioned liberal goal of making middle-class constituents wealthier.”

“Oil also is the principal reason North Dakota enjoys arguably the best fiscal situation in all the states. With a severance tax on locally produced oil, there's a growing state surplus. Recent estimates put an extra $1 billion in the state's coffers this year, and that's based on a now-low price of $70 a barrel.”

Kotkin continues: “North Dakota, however, is no one-note Prairie sheikdom. The state enjoys prodigious coal supplies and has—yes—even moved heavily into wind-generated electricity, now ranking ninth in the country. Thanks to global demand, North Dakota's crop sales are strong, but they are no longer the dominant economic driver—agriculture employs only 7.2% of the state's work force.”

“Perhaps more surprising, North Dakota is also attracting high-tech. For years many of the state's talented graduates left home, but that brain drain is beginning to reverse. This has been critical to the success of many companies, such as Great Plains Software, which was founded in the 1980s and sold to Microsoft in 2001 for $1.1 billion. The firm has well over 1,000 employees.”

“The corridor between Grand Forks and Fargo along the Red River (the border between North Dakota and Minnesota) has grown rapidly in the past decade. It now boasts the headquarters of Microsoft Business Systems and firms such as PacketDigital, which makes microelectronics for portable electronic devices and systems. There are also biotech firms such as Aldevron, which manufactures proteins for biomedical research. Between 2002 and 2009, state employment in science, technology, engineering and math-related professions grew over 30%, according to EMSI, an economic modeling firm. This is five times the national average.”

“While the overall numbers are still small compared to those of bigger states, North Dakota now outperforms the nation in everything from the percentage of college graduates under the age of 45 to per-capita numbers of engineering and science graduates. Median household income in 2009 was $49,450, up from $42,235 in 2000. That 17% increase over the last decade was three times the rate of Massachusetts and more than 10 times that of California.”

“Some cities, notably Fargo (population 95,000), have emerged as magnets. "Our parking lot has 20 license plates in it," notes Niles Hushka, co-founder of Kadrmas, Lee and Jackson, an engineering firm active in Great Plains energy development. Broadway Drive in Fargo's downtown boasts art galleries, good restaurants and young urban professionals hanging out in an array of bars. This urban revival is a source of great pride in Fargo.”

“What accounts for the state's success? Dakotans didn't bet the farm, so to speak, on solar cells, high-density housing or high-speed rail. Taxes are moderate—the state ranks near the middle in terms of tax per capita, according to the Tax Foundation—and North Dakota is a right-to-work state, which makes it attractive to new employers, especially in manufacturing. But the state's real key to success is doing the first things first—such as producing energy, food and specialized manufactured goods for which there is a growing, world-wide market. This is what creates the employment and wealth that can support environmental protection and higher education.”

It boils down to having fewer and less onerous regulations, less bureaucracy, lower taxes and a climate attractive to business and investment. California was once like this, but the state drifted too far to the right with its many initiative’s, environmental regulations, high taxes and enormous public service sector pensions. The state has been run by left wing Democratic controlled state legislatures and large cities. More and more states once thought of as being backward farming states are attracting business and investment, especially in technology, pharmaceuticals, banking and energy. I am certain that the folks in North Dakota’s eastern neighbor, Minnesota, are taking notice — you betcha.

Thankfully, this kind of sensible thinking is making a comeback in some other states, such as Ohio and Pennsylvania. This is what Governor Scott Walker is attempting to do in Wisconsin.

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