« Hizb ut-Tahrir: Terrorism is not the Issue | Main | No More F-22 Raptors »
July 19, 2009
"States Hit Hardest by Recession Get Least Stimulus Money"
If a state wants a bridge, normally they would raise the necessary funds from tax revenue. If a county wants to build another homeless shelter, they would do likewise. If either is too poor, it may be a good for another state to give them the money. We are, after all, one country and all in it together.
The mechanism by which states give each other money is the federal government. Instead of the tax money being routed through the county or state, it goes through the federal government. If the federal government does not have the money, but the need is great, it can engage in deficit spending, the theory being that we'll pay ourselves back when times get better.
Of course, it's all nonsense. The reality is that federal revenues do not go to the states or localities that need them the most, but are divided up according to how powerful your senator or representative is.
Fox News did a study and the fact is there is an inverse relationship between stimulus spending and need.
The stimulus bill "includes help for those hardest hit by our economic crisis," President Obama promised when he signed the bill into law on Feb. 17. "As a whole, this plan will help poor and working Americans."But FOXNews.com has analyzed data tracking how the stimulus money is being given out across the 50 states and the District of Columbia, and it has found a perverse pattern: the states hardest hit by the recession received the least money. States with higher bankruptcy, foreclosure and unemployment rates got less money. And higher income states received more....
The spending data come from two reliable sources: the Wall Street Journal and the Federal government's Recovery.gov....
Charts and Graphs Below the Fold
The first graph shows stimulus spending per capita as related to the per capita income by state. If stimulus money was going to those with low incomes, we would expect to see the line go steeply from lower left to upper right. As it is, it's clear that states with the lower per capita incomes are not receiving more money:
Next we see stimulus spending as related to bankruptcy rates. Again, the trend line goes in exactly the opposite direction it should if money was allocated by need:
Next is stimulus spending as related to foreclosure rates. Ditto to what we saw above.
Finally, stimulus spending as related to unemployment. Big surprise, states with higher unemployment rates do not get more money than those who don't:
Two more paragraphs from the story
Breaking down the data by type of spending shows that money for infrastructure was much more likely than social spending to go to high-income states with low bankruptcy and foreclosure rates. Federal spending on construction and repairs to federal buildings as well as repairs to highways and public transit projects drives much of this perverse relationship between economic distress and infrastructure stimulus spending....Lee Ohanian, an economics professor at UCLA who has extensively studied New Deal policies and depressions, told FOXNews.com that the spending patterns our study found "certainly don't fit what you would think that they would be from the standpoint of government spending as a social safety net.... The pattern does seem quite odd. It is certainly not the way the program was advertised."
Yup. The stimulus money was not allocated based on need, but on political power.
But the stimulus was never about stimulating the economy. It was about two things:
- Moving us in the direction of a European-style statist economy. Obama knows that once these programs are in place they're almost impossible to eliminate. The objective of the Democrats was to set up programs that would require future spending, knowing full well that again once in place these programs take on a life of their own
- Creating a class of permanent Democrat voters by creating dependency. Once hooked on a program it becomes hard to break the habit. People dependent on the government will tend to vote Democrat.
The Fox story therefore is unfortunately no surprise.
Posted by Tom at July 19, 2009 8:30 PM
Trackback Pings
TrackBack URL for this entry:
http://www.theredhunter.com/mt/refer.cgi/1402
Comments
Tom, if you read the small print in the Fox article, you'll see the following admission.
"Two comments should be raised about the figures. Alaska has by far the highest stimulus spending per capita of any state, more than twice the second highest state, Arizona ($808). But its higher amount may at least partially reflect the state's much higher cost of living. In any case, given that it is such an outlier, the charts were redone excluding Alaska. Doing that, the results for bankruptcies, foreclosures, and unemployment indicate that the states with the worst problems got even less money than shown in the charts provided here. While states with higher incomes also still got more money, the relationship was no longer statistically significant."
In other words, the only reason income correlates to stimulus funds is because Alaska swallows such a huge amount of pork. And it's a bit unrealistic to claim that the Obama administration has been showering political patronage on the Sarah Palin crowd. And Fox itself admits that if Alaska is excluded, there is no "statistically significant" relationship.
Also, it's hardly as if the past eight years have been free of pork barrel spending. And if you look at the states that have historically received the greatest amounts of Federal funds, they're mainly Red states. Make of that what you will...
Posted by: Mylne Karimov at July 20, 2009 4:54 PM
Thank you for stopping by, Mylne.
Your first point last; I've taken Bush43 and the Republicans in congress to task many times on this blog for their proliferate spending.
As for Red states getting more money, that's wrong too. I don't know how many ways to say it but, I'll say it again: I don't want red states (yes that includes Alaska) to get more money than blue states. Got it? It's wrong when Democrats do it and it's wrong when Republicans do it. Two wrongs don't make a right.
So you misunderstand my motives. I am NOT in this just to get more federal money for my home state of Virginia. That's not why I am complaining. I'm against the entire concept of the federal government sending so much money to the states. If people in a state want funding for X they can raise their own taxes to pay for it. If a state is truly in need then and only then would I accept the federal government sending it money (really money taken from people in other states).
But again, what's going on here is pure political patronage. The difference between Obama and the Democrats and what the GOP did under Bush43 is the scale of it.
I read the bit about Alaska, and it doesn't change the basic point, which once again is that contrary to what Obama and the Democrats say stimulus money is not going to the states that need it most.
Posted by: Tom the Redhunter at July 20, 2009 8:35 PM
Well I wonder whether the scale of it is really so different. The Bush 43 tax cuts were a major cause of the current deficit, and what were they if not patronage showered directly on a Republican-supporting constituency? The deficit accrued during the Bush years dwarfs the Obama stimulus bill.
But fundamentally I agree with you. It is a problem with this kind of Keynesian stimulus spending that it tends to get diverted along lines of political patronage.
But I'm interested in your talk about how if a state is "really in need", then that makes it okay to take federal handouts. It seems to be a fairly massive caveat in your general philosophy. It almost sounds like the kind of thing a liberal might say.
I mean, who decides if a state (or a person, for that matter) is "really" in need? Alaska gets so much pork because it's basically a really remote, inhospitable place to live, with an economy not nearly big enough to sustain its population. Why should the lower 49 be subsidising people who decide to live in such a silly place? Do they "need" to live there?
Posted by: Mylne Karimov at July 21, 2009 11:57 AM
What is going on also is states in big financial trouble like California and my state of Illinois seem to be waiting for a federal bailout. I have zero problem paying more taxes to my state to get it out of debt. I do have a problem paying more to get my state and California, and however many other states, out of debt. I have no problem with stimulus funds going to efforts that create and retain good jobs. To use it as a way to get the rest of America to pay the bills and programs that are the states responsibility is despicable and politically cowardly of our state legislators. It is criminal irresponsibility of our federal legislators to allow this to happen.
Posted by: Truth 101 at July 21, 2009 10:08 PM
