Today New Jersey Governor Chris Christie delivered a historic tirade blasting fellow Republican John Boehner for refusing to hold a vote on aid for Hurricane Sandy.
The raw anger and emotion was like something from out of a movie, but beyond the obvious points, Chris Christie brought up one fact about the US economy that really should get a lot more attention than it does.
Rich states like New Jersey, New York, and California (which frequently get blasted by conservatives for having high taxes and big government) pay a lot more in federal taxes than they get back from the federal government. While Republican states, with their low taxes and small governments, get more back than they pay in.
This map demonstrates that phenomenon. The ones shaded blue pay in more than they get back. Texas is the only “blue” state here that doesn’t vote Democratic.
Photo: Ezra Klein
Anyway, it’s the system of intra-state transfers that makes the United States a functioning union, and it’s the reason that we’re not like the Eurozone.
The US states and the various Eurozone countries are actually similar in that they can’t print their own money, and have to strive to balance their books, and if they don’t, markets may lose confidence in them. But the difference is that the rich states are permanently bailing out the poor states, a mechanism which doesn’t exist formally in Europe (it exists on an ad hoc basis).
Not only that, but there are mechanisms to balance things out, when there’s a slump.
Although Florida currently pays in more than it receives, during the collapse, it got a big benefit.
1. From IRS data, we find that Florida’s tax payments to Washington fell approximately $25 billion between 2007 and 2010, the bottom of the slump.
2. From labour Department data, we find that in 2010 special unemployment insurance programs — extended benefits paid for from DC — were about $3 billion in 2010.
3. From SNAP (food stamp) data, we see that food benefits to Florida rose about $3 billion over the same period.
Both Florida and Spain had huge housing busts, but the difference was that Spain didn’t benefit from all these special programs, and lower taxes paid to a central European authority. It just had to fend for itself.
So anyway, the fact that some states help other states is great, but here’s where it gets weird.
In Europe, you have rich, high-productivity states like Germany demanding that the poor, low-productivity states cut their government budgets if they want bailout money. And although the economics don’t work, the sentiment is logical, especially if you’re a German politician that has to explain to voters why their tax dollars are going to a different country.
But in the US it’s totally different. It’s the moocher states (the Greece-like states that are poor and rely on handouts) imposing austerity on everyone. Imagine if Greece were to try to dictate what kind of economic policy Germany could use to stimulate its economy. That’s what’s happening in the US.
And that’s why Chris Christie is rightly outraged that the GOP is so reluctant to aid New Jersey, when over the years (and every year) New Jersey gives more than it gets back.
And although Christie specifically blasted Boehner (while trying to elevate Eric Cantor) in his speech today, this is not just a Cantor thing. Last year Cantor himself was demanding “offsets” for Irene aid spending in the immediate wake of the debt ceiling fight. So this is a GOP thing through and through.
The US doesn’t have an acute debt problem, but it does have a growth problem. And the continued fights with the pro-austerity camp that emanates from moocher states is not helping the US break out of that trap.
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