Posted on 02/26/2023 3:57:05 PM PST by SeekAndFind
When Congresswoman Marjorie Taylor Greene called (again) for "national divorce" this week, a common retort among her detractors on Twitter was to claim that so-called red states are heavily dependent on so-called blue states to pay for pretty much everything.
Reporter Molly Knight claimed, for example, that "Red states get their money for roads and cops and schools from blue states. You cut off that gravy train and you e [sic] got a third world country."
Others claimed that red states would be "entirely broke" without blue states. America's social democrats have apparently fully gone over to pushing the narrative that the "red states" are poor and backward while the "blue states" are productive and economically sophisticated.
The implication here is that red states would never survive any sort of separation from the blue states because the red states would then miss out on the presumably large amounts of free money.
Unfortunately for these critics, the data doesn't really back them up. While it is certainly true that a handful of red states receive much more in federal spending than their residents pay in federal taxes, this is not at all the situation across most red states. This is especially not the case in states with states with larger metropolitan areas such as Florida and Texas.
The real story is more complicated, and to see the details, we can look at state-by-state comparisons in terms of "return on taxes paid." This is a measure of how much each state receives in federal spending for every dollar extracted in federal taxes. States with a "return" above one dollar are getting back more than their residents paid in federal taxes. Residents in a state with a "return" below a dollar pay more than they receive.
To do this analysis, we start with the tax collections from each state, as reported by the Internal Revenue service. Then, we look at federal spending in each state. There are some smaller categories of spending that are difficult to track, but we can capture the overwhelming majority of federal spending in each state by looking at several key categories:
Once we add it all up we can see the "return on taxes paid" in graph form below:
By this analysis, the federal spending in Minnesota only amounted to 48 cents for every tax dollar extracted from the state. On the other hand, Mississippi received more than three dollars for every tax dollar paid by residents. Contrary to the idea that most red states are like Mississippi, however, we find that most states—both red and blue—are much closer to the middle on this. The states that are within a few cents of receiving a dollar for a dollar—i.e., "breaking even"—include the Dakotas, North Carolina, Nevada, Wisconsin, Missouri, Utah, Maryland, Kansas, and Florida. Meanwhile, California and Texas are approximately equal with each other, receiving about 80 cents in federal spending for every dollar paid by residents in taxes.
My findings here are similar to the study that was repeatedly sent to Rep. Greene by many of her scoffing critics. Specifically, Green was instructed to read this Moneygeek article which purportedly "proves" that the red states depend heavily on blue-state largesse to survive. Yet, with both our analysis here, and with the Moneygeek article, we will find that the characterization of red states as an economic drain on the country requires quite a bit of hyperbole.2
Just how badly would red states fare if they were to break off from the blue states? Well, only a minority of these states would be "in the red" and get back significantly more than they pay in. 15 out of 27 red states are either net-tax-paying states or within a few cents of "breaking even." In other words, with the exception of states like Mississippi and West Virginia and Alabama, most of these states could realistically expect to be self-funding in case of a national break-up. Moreover, viewed as a single bloc, the red states' overall "return" on taxes paid is only $1.02. Were these states to become an independent region of their own, it would hardly be impossible to manage with current tax resources. In fact, if a "Red States of America" wanted to ensure available revenues exceeded current tax liabilities, the bloc could simply exclude the less productive states. If Mississippi and West Virginia don't bring much to the table, there's no immutable law of nature requiring the "Red States of America" to include them.
Some of the current net tax receiver states could also easily change their fortunes by simply splitting off the less productive areas such as southwest Alabama, western Mississippi, and eastern Kentucky. The blue states would surely be happy enough to have those areas as dependencies
One other tactic used to portray the red states as a bunch of impoverished welfare queens is to claim that the overwhelming majority of the US's GDP is produced in the blue states. Again, this is a sizable exaggeration. Breaking out the blue and red states as we did above, we find that the blue states naturally produce more GDP because they have more people. Specifically, the blue states contain about 54 percent of the US population and they produce about 59 percent of GDP. In contrast, the red states contain about 46 percent of the US population and produce 40 percent of GDP. In this scenario, a red state bloc would still have a GDP over $8 trillion and would have the world's third largest economy behind China and the "Blue States of America." It would have an economy larger than Germany, Japan, and India.
Looking at GDP per capita, we find the red state bloc would remain on a par with western Europe and Canada. If divided up, the blue states today would come in around $69,000 per capita. The red states would come in at about $55,000. Taken as two groups, this would place the blue states on a par with Denmark (at approximately $68,000), and the red states a little above Finland (at approximately $54,000).
Why do we have these large disparities among states? Federal tax revenues are driven heavily by the number of high-earning and full-time workers in each state. States with large numbers of retirees and elderly will thus produce less tax revenue while receiving more in federal spending. States with large low-income populations (relative to overall size) will receive a proportionally higher amount of federal spending. Thus, it's not surprising that Mississippi, with its large low-income population in the Delta region, is a net recipient of federal spending. Similarly, the population in West Virginia is relatively low-income and elderly. Neither of these states have notably large metropolitan areas to balance out these lower-income households. On the other hand, Florida, Texas, Utah, and Ohio have the productive metropolitan areas necessary to balance out populations of pensioners and the unemployed.
It should also be noted that when I say "metropolitan area" I don't mean "urban core." Activists on the Left often like to promote the idea that the most entrepreneurial, productive, and dynamic sectors of society are necessarily concentrated in urban cores. But the data does not show this. Rather "suburbanization" of both employment and labor is a longstanding trend, meaning that many sectors of the economy in recent decades have been decentralized out of the urban core, and each state's most productive centers are often found in the suburban counties—where political leanings are not at all necessarily "blue." Moreover, many of a state's most productive workers—engineers, medical personnel, entrepreneurs, financial workers, for example—choose to live in suburbs. Thus, the most productive states are often states with large sprawling suburban areas, and not necessarily "big cities" in the twentieth-century sense.
Rep. Greene's Twitter critics are clearly very enthusiastic about portraying Americans in red states as impoverished unsophisticated welfare queens unable to get by without wealth transfers from the blue states. It's a convenient narrative, although an inaccurate one. It is likely in most scenarios, however, that secession would come with short-term economic dislocations and disruptions. Yet, short-term economic troubles have never been an insurmountable obstacle to secession and revolution. The American revolutionaries, after all, voluntarily cut themselves off from trade and took on huge debts to achieve political independence. Short term economic realities also do not dictate long-term prospects. If a Red States of America embraced global trade and a reduced regulatory burden, it could expect to see its economy accelerate in the medium and longer term. Moreover, cultural issues often trump economic ones, and residents may be willing to sacrifice some amount of wealth (measurable in dollars) for the perceived advantages of political self-determination. Were red-state Americans given the option to secede in exchange for per capita GDP levels similar to those of Germany, I suspect that many would take that bargain.
bkmk
Once the dollars spent on national defense for EVERYBODY are weeded out, the picture changes again, dramatically.
Ah, reddit will never believe this. They’re all convinced that all blue states are carrying all red states.
A much quicker solution is to stop supplying cities with food and other necessities. By the way, if there was a CWII it wouldn’t be between red and blue states, north and south, or east and west. Most of the nation is red. The small blue parts don’t make a damn thing worth any value, at least to me. Just cut them off.
Additional point not mentioned - most national corporations are headquartered in blue states, so their federal taxes are recorded as coming from there, in spite of the fact that their profits come from national operations.
Ditto for the “owner class” of these corporations, as the wealthy also disproportionately reside in blue states. Their incomes also derive from the national scope of their assets, such as their holdings in equity and debt, directly or via mutual funds, hedge funds, etc. But their income taxes are registered in their residential addresses.
A national split would require split tax filings for all these corporations, requiring reporting of income derived in each new country. And ditto for holders of these assets, directly or indirectly.
bkmk
The Tax Foundation used to compile these reports. Many high-income earners live in blue states, yet blue staters keep voting to send more money to Washington, so then Washington can redistribute it around the country. I never understood these voters.
So... how would a national divorce work?
I did not see it specifically in the article, but does the federal spending in each state include military bases, shipyards, etc. or is it just federal funding to states and entitlements?
Then they retire to Red States and take their Social Security dollars with them. They pay less taxes too.
Let me count the savings.
By breaking with socialist politics, red states will save with a massive reduction in DEI, BLM, Public college and k-12 reorganization to stop the BS.
Cutting red tape.
Pumping oil and increased used of NG, clean coal and nuclear power will destroy the Blue states as they strangletheir middleclass with GREEN....
Just the tip of the waste.
I think it does. There are a lot of military bases in southern states.
Two words fossil fuels and foods.
Blue states, and more accurately blue CITIES in all states, are net users of energy, food, water, waste disposal, and virtually all other resources.
Contrary to what Citifried economists like Ed Glaeser say, cities are net importers of virtually everything they rely upon for survival. In exchange, they export sewage, nuclear waste, air and water pollution, etc. to the countryside. This Keynesian calculus treats all economic activity as equally valuable, whether it is saving lives or rebuilding a hopelessly floodprone New Orleans after Katrina (courtesy of Bush the Idiot).
The “monetary” flows merely disguise the true story by considering goods and bads as fungible substitutes.
How long would any city survive if it had to grow all of its own food, provide all of its own water and electricity and absorb all of its own waste?
The “country” could last indefinitely without the contributions of the “city,” but not vice-versa. Our much-vaunted urbanization is a one-way arrow to a very unpleasant destination.
It's true that the divide isn't by state - it's urban vs. rural.
But in terms of economic production urban wins.
I'm from Mississippi originally, the top of the often cited red state list that receives more federal dollars than it sends in. Correlation doesn't equal causation however. Mississippi may be red but 40% of the population is african american and vote almost exclusively democrat. They're also mostly on some form of welfare. That's where all that federal money is going when it pours into Mississippi. So yes, Mississippi is a red state because the other 60% votes mostly republican, but the vast majority of the federal money goes to people who vote democrat. It's not correct to say a red state gets the money because ultimately the money goes to people, not the state, and the people who are sucking up the money don't vote republican.
“Rep. Greene’s Twitter critics are clearly very enthusiastic about portraying Americans in red states as impoverished unsophisticated welfare queens unable to get by without wealth transfers from the blue states.”
Then these critics should be fully on board with Rep Green’s proposal. Right?
EC
That is the wrong way to look at it. A red state nation devoid of all connections to the USA would flourish ecomically. The red countrty economy would mushroom, lifting all boats. The key to prosperity is freedom and a little protectionism.
Funny how all the establismet Democrats and Republicans hate the thought of secession. It is the one thing they all agrree on.
Of course the data doesn’t back it up.. and a lot of those blue states get bonus income due to things related to red states.
IE NY financial gets boon from economic activities of all states.
West Coast gets boon from all the imports for ALL states through their ports.
The idea that blue states are wholesale subsidizing red states is nonsense.
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