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Credit, Growth, and Politics
R. Alex Whitlock
MSN has a list of 20 cities and their average credit rating. Here's
the list:
Minneapolis 705
Boston 704
Washington, D.C. 691
Cleveland 689
Seattle 688
New York 686
Philadelphia 686
San Francisco 685
Chicago 679
Sacramento 676
Detroit 675
Denver 674
Tampa 672
Miami 671
Orlando 671
Los Angeles 668
Atlanta 667
Phoenix 657
Houston 652
Dallas 650
Anyone notice anything peculiar about this list?
I suppose it's because I'm a political junkie, but I couldn't help but notice that 9 of the 10 upper cities are in blue states (Cleveland being the exception) and 8 of the ten lower cities are in red states (Los Angeles and Detroit being the exceptions).
Relevent? I thought it might be at first. A
state-by-state map is less distinct by bears it out somewhat.
Bush won 31 states in 2004 while Kerry won 19. Using basic numbers and in parentheses adjusting for the fact that Bush won more states by making each of Bush's states count as 2/3 (it's inexact, but close enough), here's the breakdown:
- In the top third, Kerry has 11 states while Bush has 6 (4).
- In the middle third, 8 went to Kerry and 120 (6.7) to Bush.
- In the bottom third, 15 (10) went to Bush and only one (California) went to Kerry.
What's interesting is that looking at the map, some of the most booming states in the south (North Carolina) midwest (Missouri) and west (Arizona) are doing the worst while some of the more stagnant blue states (Pennsylvania) are doing better or at least average (Ohio). The only real predictable ones. The stagnant red states (Dakotas) are also doing well, while the faster growing blue states (Pacific states) are poor-to-midling.
So that got me thinking: maybe the cities and states that are growing are harboring the most debt.
Of the ten fastest growing states (9 red, 1 blue), seven are in the bottom third, credit-wise (two midling, one in the top third). Of the ten slowest-growing states (6 blue, 4 red), seven are in the top third, credit-wise (the remaining three midling).
Looking back at the city list that prompted the study, of the ten fastest growing cities on the list, seven were on the bottom ten of the credit list. All but two are found in the twelve fastest growing of the twenty. Three of the four cities that grew faster than 15% between 1990 and 2000 are #18, #19, and #20 (the other, Denver, is #12).
So why are the fastest growing cities having the most trouble paying their bills? Shouldn't they be the most likely to have jobs and whatnot? Shouldn't the people in cities that are actually losing population be having the most difficulty paying their bills (particularly Detroit, which is midling, and Washington DC, which scored well, credit-wise)?
Food for thought, anyway.
Update: On the drive home I came up with a couple of explanations. They fit a little too closely with some pre-existing political beliefs, which is a little too convenient. So I'm interested in hearing what you all can come up with, if anything.
Observations
Ther's one thing you missed about credit scores.
It's not just whether or not you've missed payments, but the amount of debt you have (compared to income), what *type* it is, and whether it's fixed or variable payments.
For instance, if you have a total of $20,000 available Credit Card limit, and you have $15,000 in credit card debt, your credit score is going to be worse than someone who's got the same limit but only $5000 debt.
Expanding cities, my guess at least, have more people who are "closer to the edge" and that nudges the collective scores down.
There's definitely a lot of growth down south, but what I find more interesting is the fact that the economy still hasn't rebounded. Right now, I think everyone else is wondering what the hell is going on too.
I know I've been telling you for a long time that the economy in Houston is going to be boomin soon, and it's still true. We have so much work lined up, it's ridiculous. Some projects have started moving and the office is jumping a bit more now, but we are expecting a flood of work that is suppose to have us turning down jobs due to lack of pure workforce. It just hasn't happened. Apparently people are running around town begging people to invest. The money is there, but people are extremely reluctant to do so. No one really knows why.
I suspect that the credit has to do with people starting work expecting the money to come in, and when it didn't... ut-oh
Tefkam,
I'm taking the interviewees of the article at their word that it's primarily late payments that's killing credit scores. The fact that late payments (rather than inability to make them or continuing debt) is doubtlessly hurting my credit rating also leads me to give them the benefit of the doubt.
Kavey,
I've seen some improvement in the Houston job market compared to when I left. It's certainly not what it was, but it's a lot better than it was three years ago!
I wonder how this data correlates with the oft-cited statistic that red states get more federal funding per dollar they pay in taxes than blue states do...
Oooooh... government assistence puts people in debt. I love it! :)
I've got my spreadsheet saved, so I could easily plug it in there if I had more exact figures on the input/output of funds. It could contribute somewhat if, for instance, a subsection of the American population that lives off the government and is disproportionately located in blue states. Farmers come to mind, though the farmer states actually do pretty well. Another possibility is military, which also accounts for a large part of the red/blue state discrepency. Would need to know more about what states house how many people.
Better, yes, but not where it really should be at this moment. I've seen many many projects start and stop multiple times, always due to funding. I don't know if they find investors and start up and then investors pull out, or what. It's quite frustrating to see.
I've been talking to a LOT of sales people lately (we have some contracts that are up for renewel so I'm shopping around for better price/service). All of them are as baffled by our current state as we are. The money is just not moving like it normally would be. Deals are being made and broken constantly because of it.
More than "boom" or "bust" states, I think it's their culture: "survival" or "keeping up with the Joneses" that matters with credit. Farm states and most northern states would be more survival-oriented, and metropolitan areas especially would be more dominated by the "keeping up with the Joneses" effect.
I'm sure this isn't fair for everyone, but for many, I consider credit rating a "financial IQ".
And finally, I see this credit rating map as a link between the supposed financial growth or decline of areas and the distribution of wealth. "Keeping up the Joneses" benefits large corporations (lenders especially) more than middle-class averages Joes. But maybe that's just my inner anti-corporation ultra-liberal speaking. :-)
Linus,
I emphasize the boom/bust angle cause it actually seems to work over both cities and states. The cities where things are rough right now (Philly and DC in particular) are doing fine, credit-wise, while cities that are growing fast (Phoenix, Dallas, Houston) are not, regardless of the actual size of those cities (Philly is smaller than Houston, but larger than the other two. Detroit is smaller than Phoenix, larger than Dallas).
But "culture" is a good point because in a city like Detroit, you know your prospects aren't good and you're not as likely to overspend. As Kavey points out with Houston that there may be a lot of people buying more than they can afford because they know their ship is just about to come in.
No one has touched on my (convenient) suspect, yet, which I'm a bit surprised about.
I can't really see your convenient suspect. Something like the James Watt Slander, maybe? Come on, out with it!
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