Red State, Blue State, Poor State, Rich State

I have been reading an interesting article written by Dean Lacy, a Professor of Government at Dartmouth College in Hanover, New Hampshire entitled “Why do Red States Vote Republican While Blue States Pay the Bills? Federal Spending and Electoral Votes, 1984-2008”. The article explains that “the states that receive more in federal spending than taxes paid have been increasingly Republican in presidential elections” and looks into why this happens.

It is interesting to me because the states that vote Republican are the places where people are against government spending; they want lower taxes and government spending cut for entitlement programs but they are in reality the biggest drain on our government, they are the entitlement states. I agree that there is a spending problem and have a solution that if put forth would probably cause an uproar with Republicans because it would hit the states where they have a stronghold the hardest. My idea ---- balance this difference, if your state puts in a dollar to the Federal government in taxes, you only get a dollar back in government spending in your state.

The things that the Federal government spends money on are the obvious like Medicare and Social Security, but are also things that may not be so noticeable like public work projects, military bases and salaries and wages paid to Federal employees in their state. There are actually 9 categories of Federal subsidies, they include; Direct Loans, Direct payment not for individuals, Other direct payment to individuals, Retirement and disability, Grants, Guaranteed loans, Procurement contacts, Salaries/wages and Insurance.

I know that my home state of Maryland has many Federal jobs, and as a state we receive $1.30 for every dollar we pay in taxes. So we would have to find a way to trim that extra .30 cents. It means either cutting essential services like police, health, and fire, or raising taxes by closing tax loopholes and government giveaways to corporations. As Maryland is a Blue State we would probably look to the latter and I am all for this type of balancing.

There are 32 states that receive more from the Federal government then they pay in in taxes, from small amounts like Georgia, the lowest difference, who receive $1.01 for each dollar to New Mexico, the largest difference, at $2.03 for each dollar. Mississippi is right there at $2.02 and because I have found some data on their Federal spending I want to look at what could be done to balance their spending deficit of Federal Tax money.

The idea of states rights maybe should be embraced, if Mississippi fails will it really cause a problem for me; let's cut spending there down to what they pay in Federal taxes. What would it mean to the people of Mississippi, a loss of jobs, a loss of money for schools and infrastructure projects. Does it matter that this increased money helped “provide a living wage, and improved the quality-of-life in rural and urban areas of Mississippi in 2009.” as reported in “ Federal Spending in Mississippi: A Typological Analysis” by Dr. Albert E. Myles and Dr. Albert J. Allen? I guess it does to the citizens of Mississippi, but they are a Red State that rails against government spending. Maybe by cutting their funding in half (they get $2.02 for each dollar paid in taxes) they will be more prosperous as the mind set of the tea party espouses. The report states that “(a)ny cuts in federal spending will create many challenges for local governments…especially when tax revenues, federal and state support are declining and demand for services are increasing.” Consolidated Federal Funds data (Census Bureau, 2009) reports that Mississippi received more than $53.7 billion in grants, subsidies, direct loans, retirement and disability benefits, other direct payments to individuals, direct payment [not to individuals], guaranteed loans, procurement contracts, and salaries and wages in 2009.

So where can we cut from Mississippi? Where was the money spent? I will use the 2007 budget because it is the most recent I have found. Mississippi received 5.9 Billion in Federal Funds in 2007, of this 3.245 Billion was for Medicare (55%). If we cut off Medicare payments then they would be at an equilibrium for dollars taxed to dollars received. I can guarantee the citizens of Mississippi will not allow this to happen, it is an entitlement near and dear to their hearts, and one that they need. It is too bad we don't have a single payer system that would make the health care system solvent, but they rail against the Affordable Care Act in Mississippi, calling it Obamacare, as if it wouldn't help them. So with out touching Medicare they would have to eliminate all other federal tax money spent and still not reach the equilibrium of taxes in to funds out from the Federal government. This would mean no money for schools, hospitals, roads, and agricultural and economic development. Perhaps we need to take it from the other side seeing as residents of Mississippi pay less in Federal tax then other states. According to The Tax Foundation “Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Mississippi taxpayers work until March 26 to pay their total tax bill, ranking the state 50th nationally. That's 17 days earlier than national Tax Freedom Day (April 12).” So how could they pay for these things, they would either have to raise taxes by, as I suggested Maryland should do, closing loopholes and hitting the biggest entitlement receivers, corporations; If they didn't they would get what they wanted, no tax hikes and spending cuts, but lose what they have, a functioning infrastructure, and essential services that they depend on as a society.

Now lets look at the other side, New Jersey who only receive $0.61 for every Federal dollar paid into the system. Why should they have to spend money to subsidize an entitlement state like Mississippi. According to The Tax Foundation “Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, New Jersey taxpayers work until April 29 to pay their total tax bill, ranking them 2nd highest in the nation. This is 17 days later than national Tax Freedom Day (April 12).” Maybe they should pay less or get more money back. But then the Red States feeding at the Federal buffet would lose out. Tennessee, South Carolina, Oklahoma, Arkansas, Maine, Kentucky, Virginia, Alabama, Louisiana, Alaska, and Mississippi are some of the largest drains, maybe the Federal Government should let them find a way to cut spending without increasing revenue at a state level. I don't think that would fly when they spiral downward, and they'd be the first to cry foul for getting what they asked for by voting Republican.

This is my big problem with the Republicans in general, and the Tea Party in particular, their hypocrisy. If they would look at the numbers they would see how they benefit the most from 'big' government. What they don't see is they are being sold a bill of goods by the likes of the Koch Brothers and other billionaires to do things that will only benefit the top earners. The Republicans in Congress, and some Democrats, have been bought by these billionaires. It will take tearing down the wall of no tax hikes for these people before we will be able to deal with these deficits. In 1951 the effective tax rate on income over 400,000 a year was about 84% and the deficit as a percent of GDP was -2.30 (that is negative, meaning a surplus). In 1960 the same income was at 91% and the deficit as a percent of GDP was 0.65. Today the tax rate, if it was paid in full, on the top income is about 35% and the deficit as a percent of GDP is 8.89. Now if we had higher taxes and low or no deficit in the 50's and 60's, and now we have low taxes on the very rich (whose majority of money isn't even taxable income – can you say capital gains at 15% tax) and a skyrocketing deficit doesn't it seem that we need to reform the tax code and take more from those that have stolen this country by Legislative cronyism at the highest levels of state and federal government.

We have seen a huge increase in unregulated business practices since the Bretton Woods system was dismantled by Richard Nixon. There is over 1 trillion dollars turned over on exchange markets each day. In the early 1970s, 90% of capital in this market was for investment and trade, 10% for speculation. By 1990, those figures had reversed with only 10% of capital related to "real economic transactions". We need a tax on speculative trading, a high tax, to encourage the investment money to be used for long term investments. By taking away the astronomical profits that are made by speculation we will not only lower the prices of things like oil, durable goods and commodities, we will have capital available to do things that will help the economy, like starting new businesses and expanding the manufacturing base. Because financial capital is no longer used for long-term investment and trade, we have in effect undermined our country's economic planning, we are forced to preserve market 'credibility' and by doing so have created a low growth, high unemployment equilibrium with declining real wages, increasing poverty and inequality for the many and profits for the few. This is where the problems lie and the Republicans that are the beneficiaries of this system will never let it change.