How the “Takers” Voted

By Stephanie Kelton

In any fiscal union, some states will benefit disproportionately from the way federal dollars are collected and allocated. In the US, roughly half of all states are net recipients of federal spending (i.e. they receive more in federal spending than they pay in federal taxes). These welfare queens are supported by fiscal transfers from the remaining states, who sacrifice their tax dollars but don’t enjoy the same investments in their infrastructure, industries, schools and communities.

The figure below shows who the “takers” (shades of orange/red) and the “makers” (shades of green) are.

States like New Mexico, Mississippi and West Virginia take a lot. States like Oregon and Iowa take fairly little.  And then there are the takers in the middle, places like the great state of Virginia, where, from 1990-2009, “the federal government spent $1.44 trillion but collected less than $850 billion in taxes” (source).

Disappointed presidential hopeful Mitt Romney (along with Bill O’Reilly and others on the political right) has insisted that President Obama owes his reelection to the welfare moms and food stamp dads who wanted to be sure their sugar daddy stayed in office so he could keep funneling money away from society’s makers to these shiftless takers.

I thought it would be interesting to see how the real takers in our fiscal union voted.  Here’s the breakdown:

President Obama won 26 states plus the District of Columbia. Mitt Romney won 24 states.  Of the 27 regions that were won by President Obama, seven (or 26%) are net recipients of fiscal transfers.  Of the 24 states won by Mitt Romney, twenty (or 83%) are fiscal takers.

It’s sort of funny when you hear people on the political right talk about seceding from the union.  How long could they survive without their makers?

** For a similar (and much more substantial) look at this issue, see this recent Bloomberg piece.

20 Responses to How the “Takers” Voted

  1. Very interesting! Would be neat to see the total $ value of fed transfers by candidate.

  2. Stephanie –

    An interesting breakdown would be the “taker” states who have GOP governors/legislative majorities.

    Aren’t they the ones resisting federal funding for Medicaid and health insurance exchanges, among other things?

    rsp

    jcl

  3. Not to say that the point is valid, but there are several caveats:
    (1) There are, perhaps, several confounding variables (overall population density, compactness/dispersion of localized populations, population growth decline) which account for positive/negative fiscal receipts which make aggregate state-level data misleading. One possible confounding variable upon cursory glance might be that mega-states tend to take in fewer $ than are taken (8 of 10, which is greater than 7 of 10 mega-states carried by Obama). Mega-states tend to have compacted populations which means more bang-for-buck on roads (instead of relatively dispersed populations which tend to elevate per capita infrastructure costs).
    (2) What’s irksome to me, is that this phenomenon is brought up quadrennially, as a retort to welfare liberalism. I think it (a) reinforces the myth of financial scarcity, (b) can be used as a sort of punishment for “close-minded” red-staters by deficit doves to dismantle entitlement programs.

    Sure, “pull-up-by-their-bootstraps” conservatives should be called out, but not with aggregate state populations as hostages in partisan kabuki theater. Deliberate, bi-partisan, NAIRU-inspired disemployment affects red- and blue-staters indiscriminately regardless of fiscal taker/giver status of states in aggregate. What should be shouted from the mountaintops is the welfare to financial elites (regardless of the state[s] in which they claim residency), and the upward transfer of wealth from the poorest 99+% to the wealthiest <0.1%. Case in point, midnight blue NY state has the highest gini coefficient of all states (only surpassed by still darker blue District of Columbia); Utah has the lowest gini coefficient.

    I feel compelled to voice this criticism only because I suspect good-cop Dems will be using a counter-narrative of "lazy" red-staters to justify Pete Peterson austerity. Right now, I would contend, our main (if not, exclusive) fight should be against the upward transfer of wealth (through government disproportionately destroying money from the poorest 99+% and/or curtailing money creation/allocation directed at the poorest 99+% like Social Security) – that is, MMT is our fight, not the partisan kabuki distraction from a bi-partisan agenda of austerity.

  4. Well, what can I say? The tea party lives in an alternate reality, fed untruths by the likes of Bill O’Reilly

  5. In line with Sam’s comment above: I know there are the scare quotes in “takers”, and the article is somewhat satirical, but it is worth repeating that “fiscal transfers” are fiscal, but not transfers. I found the two comments below enlightening:

    Comment by Wray regarding fiscal transfers as a cure for the Eurozone’s problems:

    There is no Uncle Sam in Europe to do it; and “transfer” is the wrong word. Uncle Sam issues the currency and does not have to reduce income in one state to increase it elsewhere. … Yes it is “fiscal”, no it is not “transfer”. If we had a fixed economic pie then in real terms we’d be transfering real stuff to the poor regions. But that ain’t true, either, as outside WWII we’ve never operated continuously at anything approaching capacity.

    On the Supposed Weaknesses of MMT: Response to Palley

    And a comment by Mosler to post by Sergio Cesaratto:

    When some regions are at full employment it can be problematic to simply increase aggregate demand at the macro level to sustain full employment in all regions. Should that be the case the ‘answer’ becomes ‘fiscal transfers’ where the central govt. directs public spending to the areas of high unemployment. While this works well to sustain full employment throughout the region, it’s unfortunately misunderstood as a transfer of wealth to the areas of high unemployment from the taxpayers of the low unemployment regions.

    However, while it’s an addition of nominal wealth to the high unemployment regions, and with exports real costs and imports real benefits, if the high unemployment regions are then producing public goods for the entire union, they are in fact exporting public goods and thereby, in real terms, experiencing a reduction of real terms of trade relative to the low unemployment regions.

    A reply to Wray – Part I

    All I suggest to add is that often there is unemployment in the poor regions and consequent transfers to them because the rich regions are Wall Street city slickers hornswoggling the poor yeoman farmers of the poor regions. So the business-as-usual setup of the economy is as a fiscal transfer mechanism from the poor (regions) to the rich (regions) & the government’s “fiscal transfers” counter this and make it sustainable.

  6. You really couldn’t come up with a more meaningless article. Taxes are paid by individuals, not by states, and not all individuals in a particular state are in an identical or even similar economic situation. Federal expenditures in states relate to agricultural subsidies, military installations, etc. The map isn’t even very interesting.

  7. Mark Robertson

    Good observation Stephanie. I’ve seen it made many times before (Google the terms “red state rip-off). Examples:

    http://voices.washingtonpost.com/ezra-klein/2010/04/the_red_state_ripoff.html

    http://economix.blogs.nytimes.com/2010/08/31/states-that-received-the-most-federal-funds/

    http://www.ritholtz.com/blog/2012/02/is-your-state-a-net-giver-or-taker-of-federal-taxes/

    There may be some distortion involved, since Florida has a large amount of retirees, and Texas has oil companies that get subsidies. Some sates receive more military-related money than others. Nonetheless, your thesis is valid, namely that states whose denizens receive more government money per capita than the denizens pay in taxes per capita tend to be “red states” (statistically pro-Republican).

    One of the most egregious examples was red state Alaska under Republican Senators Ted Stevens, Lisa Murkowski, and Don Young. (Remember the “bridge to nowhere” fiasco?) These three Senators secured massive and lucrative projects, despite Alaska ranking 47th in population. For a while Hawaii pulled in about the same aggregate amount each year as all of New York State, even though Hawaii’s population is smaller than that of the Bronx. Of course, this pattern changes over time. More recently, Hawaii went with Obama.

    On a general note regarding “takers” and “makers,” they way I see it, people who whine about “big government” are those who are resent it when other people (in addition to themselves) benefit from government spending. If I am a cut-the-deficit Tea Party type, and government spending promotes my personal views and values, and benefits me at the expense of others, then (for me) the government is great. But if other people benefit from government spending in addition to me, then government is “bad.” It is “bug government.”

    For right-wingers, massive government spending on war and the military industrial complex is proper and good. Everything else is support for “welfare queens.”

    For Wall Street types, massive government bailouts that benefit rich financiers is “efficient” and “patriotic.” All other government spending is “anti-market.”

    If I am a Tea Party-type who relies on food stamps, then I “deserve” food stamps. The government “owes” them to me. Meanwhile I regard unwed mothers who receive government assistance for medical care to be “parasites.”

    I see this same phenomenon even among Libertarians. If government does what they want it to do, this is “liberty.” If other people have different ideas about what government should do, this is “tyranny.”

  8. This is brilliant, SK. Expand on it.

  9. This analysis apparently does not take into account the vast agricultural, energy, and defense subsidies. California, in particular, is a beneficiary of enormous government defense contracts. I think the premise is artificial and can’t be accurately substantiated.

  10. I agree with the thrust of other commenters that the data is not granular enough to be very enlightening and that the whole topic calls out for a more nuanced class analysis. Do the people of West Virginia really “benefit” when federal subsidies and lax regulation aid the process mountain-top removal? Would Floridians be entitled to more respect if their retirees were poorer due to Social Security cuts? And these legions of retirees – doesn’t it matter that most of them actually worked somewhere else all their lives?

    Still. As an episode of hypocracy-watch, is the point not valid? Those who tout their own work-ethic, grit and business acumen – and who deride others as lazy shirkers hanging out on the dole – turn out to have actually *built* a set of poor, dysfunctional societies which now require federal subsidies in order to survive. And so certain are they of the truth of their mythological worldview that they strain to be rid of their connection to those other states – whose higher-functioning economies produce real goods and services for the poor to purchase with their subsidies.

    I need to study the “fiscal but not fiscal-transfer” line. It sounds important.

    Cheers

  11. Here is a map that shows Food Stamp use by percentage of population. Looks similar:
    http://chartsbin.com/view/1403

    Also this one, that shows “entitlements” such as welfare:
    http://www.nytimes.com/interactive/2012/02/12/us/entitlement-map.html

  12. Thomas Bergbusch

    Hi Ms. Kelton! I have a question along the lines of Calgacus’s comment. Please explain this statement: “These welfare queens are supported by fiscal transfers from the remaining states, who sacrifice their tax dollars but don’t enjoy the same investments in their infrastructure, industries, schools and communities.” Perhaps my confusion has to do with a misunderstanding about how US fiscal federalism works. What I do not understand is this, and it applies to equalization in Canada and Commonwealth Grants in Australia (I think): we are left with the impression that taxes from people in one part of your country are being used to fund spending in other parts. Is this not directly opposite to what you MMTers normally argue with respect to Federal government spending, i.e. that one’s taxes do not pay for government spending? Fiscal transfers come from the centre (Washington), no? The only proviso that I could think of to this would be that a kind of virtual transfer occurs because, for any given overall level of federal government spending, a disproportionate part is allocated to “have not” regions instead of the “haves”.

  13. One take on this is that those who are a part of the taker states who voted for Mitt, are a bunch of dreamers and misguided whiners who would rather complain about the mythologized negative issues which form the backbone of the Republican viewpoint. Listen to what the Republican core complains about and then think of the validity of any of it, and you will likely understand and appreciate this opinion. It’s like what they say about the 47% of us who don’t pay federal taxes. I am unaware of the percentages of those who fall into the major categories of the non-taxpaying citizenry, but I do know that most of them are made up of the unemployed, senior citizens, and disabled. I have yet to meet any person (I am sure there are a few) who do not want productive work or the capability of earning enough to qualify to pay taxes. Very few Americans are interested in living unproductive non-participatory lives, essentially outside of the main population. But, to hear the Republicans, those who accept unemployment compensation, food stamps, medicaid, or other state or federal assistance enjoy doing so. Most are ashamed by being forced to do so to be able to live.

  14. It would be interesting to see it with DOD spending eliminated. New Mexico for example has several large military installations, and largely military research facilities (Sandia, Los Alamos, White Sands). A state with so few taxpayers and so many USG employees/military could not be anything but red!

    lff

  15. Prof. Kelton,
    How would you explain to someone who is not a professional economist, what the purpose of taxation by the federal government is?
    What is the right level of taxation?
    How do you determine tax rates?
    Thanks
    Marcel Jaff

  16. Pingback: Links 11/25/12 | Mike the Mad Biologist

  17. Here’s an update to the theme of this post in view of the cliff vote.

    http://www.tnr.com/blog/plank/111549/the-civil-war-endures-in-the-fiscal-cliff-fight#

  18. Pingback: Conservatives are the takers, liberals are the makers

  19. While Sarah Palin was running for VP, I mentioned this. it surprised the Hell out of me that Alaska was in essence a welfare state, and yet could hand out oil severance payments to every person living there. Doesn’t that make them welfare cheats?