Does the Northeast still matter?

Does the Northeast still matter?

Does the Northeast still matter?

Moneybox
Commentary about business and finance.
Oct. 17 2003 3:22 PM

Northeast of Eden

A preposterous Republican argument that the Northeast doesn't matter anymore.

Parachuting into Yankee stadium for a playoff game between the Boston Red Sox and the New York Yankees, newly minted New York Times columnist David Brooks discovered some important truths about the region from which the two teams hail. In his column Tuesday, he ascribed the anger he sensed in the crowd to a pervasive feeling of decline. "The Northeast is no longer a particularly important region of the country," Brooks wrote. Surveying demographic trends, which show comparative population gains in the Sunbelt and comparative population loss (and hence lost political clout) in the Northeast, he continued: "We know that our region is not the future."

One might expect an intelligent Republican to draw such a conclusion about a region in which Republican presidential candidates are largely uncompetitive. And it is true that the percentage of Americans living in the Northeast is declining—a trend that's been going on for, say, the last century.

Indeed, the Republicans who control the White House and both houses of Congress—and their Northeastern-bred neo-con cheerleaders—might be able to do without the Northeast politically. But economically, they'd be lost without it. For when it comes to that most American of statistics—wealth production, and its corollary, federal tax production—the Northeast dominates the rest of the country the way the Yankees dominate the American League.

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Essentially, the Northeast—for my definition here, I use New England plus New Jersey and New York—subsidizes the federal government to a massive degree. Incomes are far higher in the Northeast—and the equally Democratic West Coast—than they are in other regions. Meanwhile, many other regions—say, the South and the Great Plains—subsist on federal largesse. On a per capita basis, those in the Northeast pay far more taxes and receive far fewer benefits than people in other regions.

Let's look at the scoreboard. The late Sen. Daniel Moynihan used to document this state of affairs in an annual report issued by Harvard's Kennedy School of Government's inauspiciously named A. Alfred Taubman Center for State and Local Government. Its most recent report measures data from Fiscal Year 1999.

This summer, the Tax Foundation released a detailed study that compares the federal tax burden in each state to the flow of federal funds back into the state via spending and benefits in fiscal 2002. "The result is a startling pattern of income redistribution among the states."

As the study's Table 5 shows, the Northeast is home to the top five federal-revenue-producing states on a per capita basis: Connecticut produces $10,426 per resident; Massachusetts $9,282. New Jersey $8,821; New Hampshire $7, 778; and New York $7,568. The national per capita figure is $6,326. (The lowest is Mississippi with $3,873, which means a typical Mississippian contributes about half to the U.S. Treasury what your typical New Yorker contributes.)

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Next, look at federal expenditures received per capita—Table 7. Of the eight Northeast states, none ranks higher than 14th (Maine). And several of the Northeasterners are way down—New Hampshire ranks 49th, New Jersey is 41st. The top recipients are Alaska, North Dakota, and Virginia.

On a percentage basis, those with the largest disconnect between the amount they ship to Washington and they amount they receive back are in the Northeast. New Jersey receives only 62 cents back on every dollar shipped to Washington, while Connecticut and New Hampshire receive 65 cents and 66 cents, respectively.

The data flies in the face of received notions about wealth, partisan affiliation, and dependence on the federal government. The five largest recipients of federal largesse in 2002 were all non-Northeast states: New Mexico, North Dakota, Alaska, Mississippi, and West Virginia (four of which went Republican in 2000). The states shortchanged the most were New Jersey, Connecticut, New Hampshire, Nevada, and Massachusetts—four of five of which are in the Northeast, and three of which voted Democratic in 2000. * In fact, when you look at the voting behavior of states—based on 2000 per capita income—11 of the 13 wealthiest states voted for Gore while 15 of the poorest 17 states voted for Bush.

There's a danger to using baseball as a metaphor for other, more complicated trends. But here it actually works, only not in the way Brooks thinks. In the same way the high-earning Yankees support economically feeble franchises like the Kansas City Royals by paying the luxury tax, New Yorkers and other high-earning Northeasterners support their more impecunious fellow citizens by paying more taxes.

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And it's something to which Brooks and Co. should pay more attention. The system of federal military and crop subsidies that keeps many regions afloat, the massive military upon which our quest for national greatness rests, social benefits like Social Security and Medicare—none of these would be possible if the Northeast didn't contribute far more to the national fisc than it receives in return.

Republicans like to say that taxing income is taxing success—the more successful you are, the more taxes you pay. By that standard, the Northeast is rocking while other parts of the country are failing.

Maybe the crowds at Boston Red Sox and New York Yankees games are surly because they're working so hard and paying so much to support their less-enterprising and less-productive fellow citizens who inhabit the more balmy and baseball-starved parts of the country.

Correction, Oct. 20, 2003: The original version of this piece stated that four of the five most shortchanged states voted Democratic in the 2000 presidential election. In fact, only three did: New Hampshire and Nevada went Republican. (Return to corrected sentence here.)