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Wednesday, March 31, 2010

"Red States, Blue States and the Distribution of Federal Spending"

Jeff Frankel does some research on behalf of members of the Tea Party. They might not like his results:

Red States, Blue States and the Distribution of Federal Spending, by Jeffrey Frankel: April 1 is Census Day. Evidently Glenn Beck and Michele Bachmann are encouraging Americans to boycott the census — to refuse to fill out the whole form. This protest follows from their small government ideology. ... They say they want a government that intervenes less in the economic sphere. Perhaps they don’t like the idea that the census numbers are used, among other things, to determine the allocation of federal spending across states, because they don’t think it is the business of the government to redistribute income. That is “socialism.” Even “Stalinism.”

A virtue of the Tea Party movement is that many of its members are engaging in national politics for the first time. It occurred to me that they might be able to use some help figuring out the lay of the land, and so I thought I would pursue a little research on their behalf. The question is geographical redistribution: which states receive subsidies from the federal government, and which other states are taxed to provide those subsidies. One might be able to sympathize with the feeling of those living in the heartland of the country that they should not have to subsidize the northeastern states or California... Given the big budget deficit problem that we will have to solve in the near future, knowing which states are receiving more than their fair share of handouts should help us know where to cut spending.

The accompanying chart contains 50 data points, one for each state. The data are from 2005, the most recent year available. One axis ranks states by the ratio of income received by that state from the federal government, per dollar of tax revenue paid to the federal government. Personally, I think the “red state / blue state” distinction is overdone. But to capture the widely felt tension between the heartland and the coastal urban centers, I have put on the other axis the ratio of votes for the Republican candidate versus the Democratic candidate in the most recent presidential election.

It will come as a surprise to some, but not to others, that there is a fairly strong statistical relationship, but that the direction is the opposite from what you would think if you were listening to rhetoric from Republican conservatives: The red states ... generally receive more subsidies from the federal government than they pay in taxes; in other words they are further to the right in the graph. It is the other way around with the blue states...

One reason is that the red states on average have lower population; thus their two Senators give them higher per capita representation in Washington than the blue states get, which translates into more federal handouts. The top ten feeders at the federal trough in 2005 were: New Mexico, Mississippi, Alaska, Louisiana, West Virginia, North Dakota, Alabama, South Dakota, Kentucky and Virginia. (Sarah Palin’s home state of Alaska ranks number one if measured in terms of federal spending per capita. Alabama Senator Shelby evidently gets goodies for his state, ranked 7, by indiscriminately holding up votes on administration appointments.) The top ten milk cows were: New Jersey, Nevada, Connecticut, Minnesota, Illinois, Delaware, California, New York, and Colorado.

Perhaps in determining how the federal government redistributes income across states one should view its role more expansively than is captured in the budget numbers. ... The four congressional districts that receive the most in farm subsidies are all represented by “conservative” Republicans, located in Nebraska, Kansas, Iowa, and Texas. (Michele Bachmann’s family farm apparently received $250,000 in such farm payments between 1995 and 2006.)

The most commonly ignored area of geographical redistribution is the federal government’s permanent policy of “universal service” in postal delivery, phone service and other utilities (electricity; perhaps now broadband…). Universal service means subsidizing those who choose to live in remote places like Alaska, where the cost of supplying these services is much higher than in the coastal cities. Perhaps they should move…

If I were cynical, I might suspect that the reason that Glenn Beck, Michele Bachmann, and some Republicans are not enthusiastic about getting the most accurate numbers possible, from the census and otherwise, is that they don’t want people to know who is getting federal handouts and who is paying. Probably they don’t want to know themselves.

    Posted by on Wednesday, March 31, 2010 at 03:33 PM in Economics, Fiscal Policy, Politics | Permalink  Comments (52)


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