“A tale of two Americas is emerging: one weighed down by debt and facing de minimis economic growth and another brimming with opportunity and nimble to invest in the future.”

That’s the thesis of Fate of the States: The New Geography of American Prosperity, a new book by Meredith Whitney, CEO of Meredith Whitney Advisory Group and former senior analyst at Oppenheimer.

Specifically, Whitney says “central corridor” states Texas, Oklahoma, Indiana, Colorado, Utah, North Dakota and Montana are best-positioned for fast economic growth and population migration.

What these states have in common are low taxes, pro-business policies, low population density (meaning lower housing costs, shorter commutes and better quality of life) as well as strong and stable balance sheets, especially relative to other states.

“Regardless of whether the fiscal prudence of central corridor states was the result of serendipity of good planning, the reality is these states don’t have the financial burdens now crushing the housing-boom states,” she writes.

As a result, these states are in a position to keep taxes low while also spending on infrastructure and education, all of which will make them more attractive to both U.S. and foreign corporations looking to relocate.

On the other hand, Whitney is very skeptical on prospects for states that overspent during the boom and now face huge budget shortfalls plus falling tax revenues after the housing bust.

'Negative Feedback Loop from Hell'

“Illinois and New Jersey are the worst because they've been doing it the longest,” Whitney says, adding Michigan and California to her list of bad state actors. “They spent as if the good times would never end and made big promises to state and local government employees based on the deliberate bet that they wouldn’t.”

In 2009, for example, state and local government spending was 25.3% of California’s GDP and 25% in New York, which compares unfavorably to just 9.7% in Texas.

And now, these states are being sucked into what Whitney calls “the negative feedback loop from hell.”

Faced with massive deficits and huge pension fund liabilities, these states need to raise taxes even as they’re “running out of money needed to pay for libraries, safe streets, clean drinking water and, yes, schools,” she laments.

Faced with declining services, high taxes and sluggish growth, Whitney predicts the “smart money” – businesses and wealthy individuals alike – will begin relocating from the coasts (and Illinois) to the central corridor.

“One thing really threatening certain states is the power of the 1%...[this group] is being tempted into more tax-favorable, more biz-friendly states…with higher social services and better infrastructure,” she says.