Issue LXXXV: Blue State Bailouts, Red State Refunds

2 May

Governor Chris Christie (R-NJ) angrily denounced Republicans in Congress in 2013.  It was “disgusting” that Republicans in Congress continued to delay and block $60 billion in disaster relief for the region after Superstorm Sandy.  “In our hour of desperate need, we’ve been left waiting for help six times longer than the victims of Katrina with no end in sight…. [s]ixty-six days and counting, shame on you.  Shame on Congress,” he said.  And this was with a Republican speaker of the House, John Boehner (R-OH).  Other Republicans in New York and New Jersey were similarly pissed.

Cable news has been yakking about the political divide for twenty years now.  There are Democratic blue states and Republican red states.  But these well-paid misinformers fail to note some startling economic trends in political representation.            

Income polarization meets political polarization

The short story is that there has been a 20 year cull of Republicans in rich states and an affluent occupation of the blue states.  Many states had mixed political representations, but now poor states and districts are Republican and rich states and districts are Democratic.  Until recently, there used to be Democratic senators representing Iowa, Nebraska, Louisiana, and South Dakota while there used to be Republican senators in New York, Illinois, Vermont, and Oregon.   Go back to January 1998 and see the differences over 20 years by income.

  Table 1 – Number of Republican Senators in richer states (1998-2018)

State Household Income Rank January 1998 December 2018
New York 14th 1 0
Minnesota 12th 1 0
Oregon 20th 1 0
Washington 10th 1 0
Arizona 28th 2 1
Colorado 11th 2 1
Delaware 17th 1 0
Vermont 27th 1 0
Rhode Island 15th 1 0
Maryland 1st 0 0

 

Table 2 – Number of Republican Senators in poorer and rural states (1998-2018)

State Household Income Rank January 1998 December 2018
North Dakota 18th 0 2
South Dakota 29th 0 2
Florida 39th 1 2
Louisiana 47th 0 2
Georgia 32nd 1 2
Arkansas 48th 1 2
New Mexico 46th 1 0
West Virginia 50th 0 1
Kentucky 44th 1 2
South Carolina 42nd 1 2

The senators that remain in the wrong table risk losing their seat in the next election or on retirement.  Cory Gardner (R-CO) and Susan Collins (R-ME) likely will lose the 2020 election while Joe Manchin (D-WV) likely will be replaced by a Republican upon retirement.  Only New Mexico seems stubbornly Democratic despite its poverty.

Similar things are also happening in the U.S. House.  The GOP lost every single congressional seat in New England while Democrats lost all of West Virginia’s seats and the state government.  Five years after Superstorm Sandy wiped out the Atlantic City boardwalk, New Jersey Republicans drowned five congressmen in 2018 to become a 11-1 Democratic delegation to Washington from a 6-6 tie.  The ten richest congressional districts are all Democratic now.  If income now predicts party loyalty, strange political changes are now afoot.

The Coming Canadianization of American Politics

Any Canadian would laugh at my contention that American politics may begin to Canadianize.  With its civility and parliamentary system, Canada cannot be America’s political future.  However, when talking to Canadians about politics, they all seem strangely aware of how the federal government spends their taxes at the regional level.  Canadian government is much more decentralized than the United States.  For example, unlike the United States, provinces run Medicare not the federal government.

To help all Canadians get the same level of public services, richer provinces subsidize poorer provinces through transfer payments.  Oil-rich Alberta famously receives no federal transfer payments while poorer Atlantic provinces and Quebec get topped up by the federal government.  This allows those poorer provinces to provide similar levels of benefits and public spending as the richer provinces.  English-speakers in Canada routinely moan that the French Quebecers squeeze them for money by threatening secession.  In any case, Canadians seem familiar with who gets more money from the feds than Americans are.  Until now……

Blue State Bailouts, Red State Refunds

Senate Majority Leader Mitch McConnell (R-KY) does not want to send federal financial aid to state and local governments.  Sen. McConnell says they should just go bankrupt.  He derides this as a blue state bailout since much of the disease (so far) are in blue states or blue cities run by Democrats.  New York, if a nation, would be the hardest-hit country in the world.

Keen observers of public spending would laugh.  The Bluegrass State routinely receives more in federal spending than it pays in federal taxes and has done so for years.  In fact, U.S. Rep Josh Gottheimer (D-NJ) complains about moocher states that get far more in federal government spending than they pay in federal taxes.  Analyzing which states are net payers and which are net receivers is complex depending on what you exclude or include as taxes or spending, but anyway you slice it Kentucky got more and New York and New Jersey paid more in 2016.  Safe Republican states receive more in federal tax money while safe Democratic states lose money in federal taxes.  This gap has been growing over time and may be worse with the Trump tax cut which capped deductions on state income and local property taxes.  So much for all this “makers and takers” talk Republicans like to babble about.

Now there is nothing intrinsically wrong with richer people or richer states or regions subsidizing poor people or states or regions.  That is the point of a state or national government if they plan to have equitable public services.  There is no other way to provide funding on a uniform basis over a large geographic area (in fact it is the point of the Canadian transfer payments system).  But the United States Senate overall rewards small states with parity in representation with large states.  The imbalance will only worsen in the future as 70% of senators will come from 30% of the population.  This did not matter as much when states were not polarized by party and income.  The death of rural Democratic senators and the end of urban Republican senators means representation will become more and more like the pre-reform British House of Lords with a permanent Conservative majority.

In a normal time, this would make politics deadlocked and irritating.  Now with coronavirus, federal obstructionism becomes deadly for blue states.  If Republican senators representing states that are routinely “bailed out” as a matter of public policy refuse to let richer blue states redirect some federal spending for ventilators, testing, and topping up missing tax money from the economic collapse, millions will suffer and thousands could die.  It will ultimately make the recession worse.  In the long term, it hurts the richer, urban states which will hurt the red states which receive more money due to their poverty, military bases, elderly populations, agricultural subsidies, and so on.

What would it take for the Senate to understand that the current representation and polarization cannot stand?  It will not be appeals to morality or the public good; personal avarice and lobbyists will see to kill any of that sentimentality.  But the rule of thumb in American politics still applies: money talks, bullshit walks.  States will need to claim their tax money BACK from Washington.

Governors for the first time are coordinating policies on a regional basis.  Governors now actually are trying to unify and share notes with their neighbors on a daily basis.  There is a West Coast cooperation effort for coronavirus as well as a Midwest group of states as well as a northeastern group of states including New York.  The virus does not respect geographic boundaries.  If California and their neighbors are routinely being ignored for their pleas to get back their own federal funding, they should consider non-cooperation with the federal government.  Governors could say we will not contribute to taxes anymore, and we will tell our citizens not to pay.  They can say that the federal government is not protecting our citizens so we will ask for a federal tax reduction or a rebate of federal taxes spent to our region.  Or we want the Senate to reflect population like how state senates are in state capitols.  Or we will push for autonomy or separation from the Union in a peaceful fashion.  That might make the small states listen.  Only cutting off the gravy train (which they deny exists) will wake them up.

Canada has 10 provinces and 3 territories and is overall larger geographically than the United States.  When a province or region is upset, the federal government has to listen.   Many of the 50 states are not geographically or economically large enough to punch at their weight, and our federal government does not listen at all to regional issues that cross borders like the Great Lakes.  If the US moved towards either larger states or making these coronavirus regional cooperation groups into actually sovereign bodies with taxing and policymaking ability, people would not feel that the government is “too distant” to them when it is Denver, Chicago, St. Louis, or New Orleans instead of the East Coast.   These new regional capitals also should become media capitals, decentralizing our newsgathering away from New York and Washington D.C.  There is far more television news about provincial politics in Canada than state governments in the United States.  There could be regional PBS networks instead of just national and city programming that could improve the quality of our public debate.  Currently we have airheads in New York talk about the “Midwest” they do not know or live in or have ever covered as a state capital reporter.

Coronavirus challenges health policy, economics, and the political system.  But as the contradiction between funding and representation in the system grows, the divide between states is sure to take a more concerning turn.

 

Link

Rockefeller Institute at SUNY Albany – State Balance of Payments

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