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July 22, 2002

NY Bailing Out Other States

So, the United States has generously reached out to New York in its time of need-- bailing it out with federal funds paid for with taxes from the other 49 states.

Well-- not exactly. As I pointed out in an article last fall, America You Owe New York, the state pays far more in taxes each year than it receives in federal benefits. The aid promised was barely enough to offset the subsidies New York pays out each year.

Well, I only had numbers from 1999 and with new numbers from a report by the Tax Foundation, it's clear I underestimated how little real aid New York was offered. Despite Bush's nickel-and-diming NYC over the $20 billion in promised aid, it probably doesn't come close to offsetting the $26 billion more in taxes that New York paid compared to the benefits it received in 2001. New Jersey, a partner in funding the World Trade Center, pays a similar $27 billion more in taxes than benefits-- the highest per capita burden in the country.

Ironically, the "welfare states" enjoying goverment spending (often defense spending in their cases) while not paying their fair share of taxes are overwhelmingly the states that voted for Bush.

Posted by Nathan at July 22, 2002 03:17 PM

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The phenomenon you mention - Red States take mineyfrom the big government they despise, Blue States pay into the big gov't they want more of - was discusses during (and, I suppose, after) the 2000 election (OK, before the election it was projected Red and Blue). You mention defense, and I guess agriculture subsidies go to a lot of Red farm states. But, in the spirit of "any fool can ask a question that ten wise men cannot answer" what do you suppose is going on? And I am hoping for a major upgrade over one theory I heard, which was "sneaky Republicans, dumb Democrats".


Posted by: Tom Maguire at July 23, 2002 12:19 AM

George Will has noted that conservatives don't fight against big government; they like the big government they see benefitting themselves-- defense contracts, prison industry, agribusiness subsidies and so on. In fact, the history of the "Sun Belt" was better described by a writer called Ann Markusen as the RISE OF THE GUNBELT-- the government industrial policy that built much of the south and southwest in the post-war period.

It was on that defense-driven industrial policy that much of the modern conservative movement was built. In their hypocrisy, they decry the money spent on the poor and they suck at the government teet (can we say Harken and Haliburton) but there is no contradiction, just hypocrisy.

I have a quick summary of this dynamic in my dissertation here which talks a bit about the dynamics of inequality of who gets helped and who doesn't by government spending.

Posted by: Nathan at July 23, 2002 12:38 AM

Prof. S. Melman of Columbia University discussed the civilian commercial subsidy of the government/military economy in the 1970s.

Posted by: peasanty at July 27, 2002 01:33 PM

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