There have been a number of suggestions on the federal level that stimulus packages potentially benefit certain states at the expense to others. OK, Mitch McConnell and Rick Scott has both said that there should be no bailouts for “poorly operated blue states” by “red” states. The assumption here is that “red” states are better more responsible in their operations that “blue” states, and that there is a net transfer of funds by “red” states to “blue” states. So aside from the fact that we are all in this together, and we are all better off when everyone benefits in the long run, the question is – it this red-blue argument really true? And if not, what is really true? Let’s take a look at some basic statistics tracked by the federal government and others.
Let’s start with the basic one. What is the net federal flow of funds per capita? Negative numbers mean more money leaves the state than comes in. What this graph shows is that Kentucky and Virginia receive the most federal funding per capital than any other state (over $9,000/person). The states with a large net funding going out are Connecticut, Massachusetts, North Dakota, New York, New Jersey, while Illinois and Washington, while negative, are closer to net zero. The states near net even are California and Colorado. Texas and Utah are slightly positive. The rest of the states average a net influx of $4,000 per capita. States asking for help in the Covid 19 crisis? New Jersey, New York, California and Illinois. Not what you expected.
The GDP is highest in many of these same states, plus Minnesota, Virginia, and Delaware). So, are these net payers because they have high income? The answer is to a degree, yes, although Alaska, Delaware and Wyoming are high income subsidized states, Alaska particularly so. Alaska, Delaware and Wyoming are states with falling incomes over the past 5 years, and challenging budgets – Alaska is considering ending payments for oil since their Treasury is now broke. Not Connecticut also has a falling income.
So the reality is that these states that are net payers tend to have better economies. They also have better education and spend more money, but that is for the paper that I am writing about this. Stay tuned (but don’t be Kentucky).