How Blue America Subsidizes Red America

Moneybox
A blog about business and economics.
Feb. 14 2012 12:41 PM

How Blue America Subsidizes Red America

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A very neat Aaron Carroll chart shows that, on average, conservative states feature more "dependency" on federal programs than do liberal ones. You can slice this kind of data in a variety of ways, but you always end up with the same aggregate pattern. It happens to be the case that the richest parts of the United States (think the San Francisco Bay area or Connecticut) favor Democrats and also that conservative areas of the country are overrepresented in the Senate. Transfers, on average, flow away from high-income and underrepresented areas and toward low-income and overrepresented areas. I think the overall pattern is best described as a coincidence and not a pattern of large-scale hypocrisy but there are two important points to make about it.

One is that high-income people living in low-income states are generally very conservative in their political ideology but probably benefit more from federal income support programs more than they realize. If you own fast food franchises in the Nashville area, for example, you're going to form a self-perception as a self-reliant businessman but the existence of Medicaid and the Earned Income Tax Credit are helping to ensure that your customers have adequate income to sometimes eat at your Taco Bell. These chains of dependency snake even longer. If you sell luxury cars in Florida, many of your customers are probably medical professionals who are earning high incomes because other people have Medicare benefits. The aggregate geographic transfer patterns, in other words, do make a real difference to the economic life of the nation. The existence of transfer payments props up the entire local economies of low-income, low-productivity parts of the country.

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The other point is that the fact that we don't think of the issues in this way is important to making the overall country work. Voters, whether they're liberal or conservative, don't think about Boston subsidizing Louisiana. They think about high-income people (a disproportionately large number of whom happen to live in the Boston area) subsidizing low-income people (a disproportionately large number of whom happen to live in Louisiana) and debate the issues on broad ideological grounds. Absent that commitment to broad ideological thinking we'd be in roughly the situation that the European Union is currently in, with Boston-area people happy to participate in a joint economic undertaking with Louisiana to some extent but horrified by the notion that their hard work should subsidize Bayou indolence. You would then have the question of to what extent can people simply leave the low-wage, low-productivity places and move to the more prosperous ones. In the European case you'd find that the logistics of language make it hard for a middle class Greek person to get a good job in Finland, while in the United States severe zoning makes net migration to the highest-income cities impossible.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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