Blue States Subsidize Red Ones

A blog about business and economics.
Oct. 18 2012 12:16 PM

How The US Currency Union Works—Endless Subsidies To Low-Productivity Areas

Jon Cohn notes the central irony of American politics. Because rich people are Republicans but rich states vote Democratic, Democratic policies transfer wealth from Democratic places to Republican ones:

If Rick Perry wants to strip the Texas welfare state bare, why should voters in Maine or Oregon care? If anything, the blue states would probably benefit from such a move. Since red states have more poor people, and since their state governments spend less money on the safety net, they receive a larger share of federal funds. Among states that voted Republican in the last three elections, all but one gets more money back from the federal government than it pays in taxes. For most Democratic states, it’s the opposite. Looked at this way, the red states are the moochers and the blue states are the makers. 

If you glance over at the European Union, it's clear that this is a key strength of the United States as an integrated economic zone. Everyone cares about their communities and since all our elected officials represent specific geographical constituencies there's a fair amount of parochialism in our politics, but political activists are overwhelmingly committed to a nationwide ideological vision. People who favor transfer payments and social programs for the poor don't care that this disproportionately entails sending money our of San Francisco and to Kentucky. This gives the country a resilience in the face of external shocks that Europe likes. The agenda of the Dutch Labor Party is that there should be a strong welfare state for Dutch people not that the relatively affluent Dutch should be taxed for the benfit of relatively poor Portugal.

What's interesting to ask about the United States is why things play out this way. My best guess is that large cities are engines of both prosperity and liberalism (you can perhaps see this most clearly in the DC suburbs' encroachment into Virginia upending the state's politics) rather than either liberalism causing prosperity or vice versa.

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



Don’t Worry, Obama Isn’t Sending U.S. Troops to Fight ISIS

But the next president might. 

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.

How Much Should You Loathe NFL Commissioner Roger Goodell?

Here are the facts.

Altered State

The Plight of the Pre-Legalization Marijuana Offender

What should happen to weed users and dealers busted before the stuff was legal?

Surprise! The Women Hired to Fix the NFL Think the NFL Is Just Great.

You Shouldn’t Spank Anyone but Your Consensual Sex Partner

Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
Sept. 17 2014 7:03 PM Once Again, a Climate Policy Hearing Descends Into Absurdity
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
Sept. 17 2014 6:53 PM LGBTQ Luminaries Honored With MacArthur “Genius” Fellowships
  Double X
The XX Factor
Sept. 17 2014 6:14 PM Today in Gender Gaps: Biking
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
Brow Beat
Sept. 17 2014 8:25 PM A New Song and Music Video From Angel Olsen, Indie’s Next Big Thing
Future Tense
Sept. 17 2014 7:23 PM MIT Researchers Are Using Smartphones to Interact With Other Screens
  Health & Science
Bad Astronomy
Sept. 17 2014 11:18 AM A Bridge Across the Sky
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.