This morning on CNBC, Carl Quintanilla asked Meredith Whitney what we should make of the fact that the states in the most fiscal trouble are all blue and the states in the healthiest shape are all red.
You know the story: Illinois, New York, and California are in horrible shape.
Texas is in great shape.
Except, well, that’s one problem right there. Texas isn’t in that great of shape. That trope just got blasted out of the water this week when the Comptroller said that the revenue shortfall would be worse than the worst estimates.
But there’s more: Florida and Nevada are also struggling. Florida has a 12% budget deficit in 2012. Nevada is also in trouble. Now sure, both of those states are ostensibly “blue” but we’re pretty sure that the point of this exercise is to look at who’s managing the state, and in both Nevada and Florida it’s basically GOP rule.
Conversely, Minnesota is a “blue” state, but it’s run by a GOP governor, and we’re pretty sure Tim Pawlenty wants credit for its general health. Heck, Indiana went blue too, and it’s held up as a state that’s doing great.
There’s one more HUGE problem with the argument, which is that it doesn’t take into account receipts form the Federal Government.
Last year Ezra Klein posted this map. The red states are the states that receive more from the Federal Government than they pay back in taxes. The Blue States get back less. As you can see, basically with the exception of Texas, it’s Blue States that pay in more than they receive, and Red States that take more.
This is part of what makes the US work and Europe not work… the rich are always transferring cash to the poor states here. In Europe, they’re just trying to get that off the ground.
And so between the fact that the rich are already bailing out the poor here, and the fact that the blue/red solvency divide isn’t so sharp, it seems clear that breaking down states by political leadership as a useful way of measuring state fiscal health is just stupid.
A pox on both their houses.