omahas: (Default)
[personal profile] omahas
There's been a lot of noise from a small but vocal community of libertarian and tea-party Republicans who believe that, especially after Obama was successfully re-elected, secession is the only resort left. I find this amusing in light of the evidence...but then, maybe that evidence hasn't been put in a simple enough context for them.

So, I decided to do that.

I've created a table that lists out all of the states (sorry, no territories or DC), which candidate that they voted for, and whether they have a surplus or deficit as of 2009 (as a percentage of the 2009 GDP). My sources are here (The Red and the Black, Politico: 2012 Presidential Election). I've simplified some of the surplus/deficit numbers...I didn't to strain anyone's limited math skills.

Reviewing the chart, it is quite clear what will happen. If all states that voted for Mitt Romney were to secede from the union successfully, here is the result:

17 Blue states would be available in the "Obama Union" to help fund the 9 Blue states that have a deficit of >0%

4 Red states would be available in the "Romney Union" to help fund the 20 Red states that have a deficit of >0%

Those 4 Red states...Arkansas, Georgia, Texas, and Nebraska...are probably, as a whole, not all that interested in actually seceding. Talking about it is as far as they will go. I mean, why would you want to help fund that many people, when you believe in pulling yourself up by your own bootstraps?


Date: 2012-11-10 07:39 am (UTC)
From: [identity profile]
Just for clarity, I feel it's important to point out that the surplus/deficit figures quoted here compare 20 years of Federal taxation and spending against just one year of GDP. In other words, for the majority of the red states in the bottom half of the table, net Federal spending represents less than 2.5% of the state's economy.

Also, these figures entirely neglect so-called "unfunded mandates", Federal programs that compel the states to spend their own money on various programs.

Medicaid is one well-known example of this kind of spending. Nationwide, Medicaid amounts to about 2% of GDP.

Presumably, states that secede would discontinue spending related to unfunded mandates. Eliminating Medicaid alone could largely offset the loss of Federal spending in many red states were they to leave the Union. Eliminating all obligations under unfunded mandates could put most of these states back into the black overall.

There are also Federal requirements that amount to unfunded mandates on individuals and businesses, such as the need to spend substantial amounts of money each year on bookkeeping for Federal taxes, OSHA and ADA compliance, and so on.

Finally, we should not simply assume that all Federal spending is beneficial. Much of it goes toward purposes that don't help the states in meaningful ways, such as maintaining large offices full of workers who would be freed up to do more valuable labor in the absence of a Federal presence.

It's my opinion that there are no more than one or two red states that could not easily support themselves if the substantial overhead costs of Federal government were removed. Given a full understanding of the consequences, these states might not choose to secede.

Although I think it's highly unlikely that any states will seek to leave the Union, I believe it's most likely that such a thing would happen first with one or two states. Other states would wait to see how these experiments worked out before following their lead.

. png

Date: 2012-11-10 07:50 am (UTC)
From: [identity profile]
Oh, I forgot to point out that the data shown here are based on 1990-2009 Federal taxation and spending, so the sad, serious effects of the last three years are not visible.

Also, as the Federal government's role in the economy continues to expand, the break-even point will continue to march down the page, with more and more states being forced into the position of paying more in Federal taxes than they receive in Federal spending.

So in a sense, your chart gives us a start on figuring out when the balance will shift to the point that secession becomes a favorable economic strategy for the "Romney Union."

(Not that Romney himself would have anything to do with it; he received those votes only because a Boston liberal was marginally more attractive to conservatives than a Chicago socialist. He wouldn't even make the ballot in a union of red states.)

. png

Date: 2012-11-10 04:34 pm (UTC)
From: [identity profile]
This post is not about how much the input of Federal taxes impact each state's economy individually, but on the whole how much each state is contributing towards other states. In other words, the fact that the Federal government collects more taxes in the majority of states that voted for Obama and redistributes them to the majority of states that voted for Romney says that the majority of states that voted for Romney would be operating at a deficit if they formed their own union just to start off.

The numbers don't have to include the past few years because those numbers would just shift everyone down the chart equally. I mean, do you honestly think the more blue states would be producing less taxes and more red states producing more taxes during this recession?? I don't think so.

As for unfunded mandates, that is absolutely correct. Lets take a look at a few known ones, and unknown ones that this new union would suddenly have to deal with.

Medicare: If you think these red states would suddenly just dump Medicare entirely without any similar program being implemented then you are very foolish. There are plenty of elderly in each state and lots of people who can't get any health insurance. I'm sure those red states will try to ignore the problem for as long as possible, but once Obamacare is gone, the issue will smack them in the face. The citizens will recognize the issue and eventually demand a solution.

Bookkeeping expenses: I'd be interested in seeing the figures you have that show that each state spends a significant amount of money that really impacts their budget.

Military: Right now, the Federal government pays for the defense of the union. But if this new red union is to exist, it will have to create it's own defense. And considering that it believes that paying for defense is the most important expense out there, that will mean a significant impact on the states that secede. Their taxes pay for it now. They will have to continue paying for it, and there will be a rise as they have to pay for new installations, recruitment (many soldiers in current bases live in different states...they will go home to those states after a state secedes and that state will have to recruit, train, and purchase supplies for the new soldiers), weaponry, etc. Obviously the Federal government will not allow the seceding state to keep the Feds weapons and other military items.

Customs and border control: They will have to create and fund customs and border control, and gather taxes to pay for it.

And consider whether each state decides to secede separately. They would have to do each of these things THEMSELVES.

You give a lot of opinion in your response, but no facts. You might want to provide some actual numbers to back yourself up (like, for example, just how much these "office full of workers" cost that impact state budgets that would NOT impact them if they set up their own system after secession).

Date: 2012-11-10 08:54 pm (UTC)
From: [identity profile]
Your post relied on an analysis of the effect of Federal taxation and spending on the individual states in order to support your argument about the red states collectively, so it's important that the underlying analysis is correct.

Clearly, during the recession, the Federal government has played a dramatically larger role in the economy than it previously did. Since all Federal participation is inefficient-- the costs of managing this participation are substantial, so the benefits are always smaller than the costs-- inevitably the states have lost more money during this time, which increases the incentive to secede.

I don't think you mean that the recession "would just shift everyone down the chart equally". The chart is just an ordered list. But if you mean that the recession, or the resulting increase in Federal spending, has impoverished everyone equally, then I would generally agree, except that "equally" is not right. Some states have been more sensitive than others to the economic disruptions that caused the recession.

Just for the record, I referred to Medicaid, not Medicare. The difference is significant, because Medicaid is a state-managed medical assistance program for the poor of all ages, not a Federally managed insurance program for the elderly. Also, it doesn't help the discussion to insult me, even conditionally. Let's keep this about the facts, not ourselves.

There was a time before Medicaid, so it is not impossible that some red states might simply abolish it, which would likely force those who rely on Medicaid to move to the blue states, thus improving the fiscal health of the red states. Clearly the opportunity to end this kind of state-funded public assistance creates another incentive to secede.

Unfortunately, it's difficult to obtain data that show what portion of state budgets goes toward complying with Federally mandated bookkeeping. I can point to this spreadsheet for the state of Washington:

It shows that the state agencies that deal with social and health spending are by far the largest, and it's reasonable to suppose that overhead from Federal rules compliance is relatively highest for these agencies, but I admit these data are not exactly conclusive.

There are some good estimates of the costs of Federally mandated bookkeeping on the private sector, however, and it seems likely that the overhead for the states is at least somewhat similar.

According to the Laffer Center:

"U.S. taxpayers pay $431.1 billion annually, or 30 percent of total income taxes collected, just to comply with and administer the U.S. income tax system."

The greatest part of this cost is in lost productivity:

"TheTaxpayer Advocacy Service of the IRS estimates that individuals and businesses also spent 6.1 billion hours complying with the filing requirements of the U.S. income tax code. We estimate the dollar value or cost of these hours to be $377.9 billion as of 2008."

Note that the estimated number of hours comes from the IRS itself; the dollar estimate is from the Laffer Center.

I think it is likely that individuals and businesses are relatively more efficient at complying with Federal bookkeeping requirements than state bureaucracies. All in all, Federal overhead is easily several percent of GDP for the country as a whole and for the individual states.


Date: 2012-11-10 08:55 pm (UTC)
From: [identity profile]
(continued from my previous message)

You are correct that the states would have to begin direct spending to cover various necessary functions that are currently managed by the Federal government. But this is not a useful observation, since the states (and the citizens and businesses within the states) already pay for these functions indirectly-- the functions themselves, and the administration of them.

To be useful, you would need to estimate whether the red states would bear a less than or greater than proportional share of these costs relative to the nation as it exists today and relative to a hypothetical union of red states.

A casual review of the red states identified in your post seems to suggest that they are more likely to be inland states that would be able to get by with much lower military spending. Some, especially Alaska, likely could not afford to become militarily self-sufficient, which could dissuade them from seceding-- or other seceding states could agree to subsidize Alaska's military spending.

You said "Obviously the Federal government will not allow the seceding state to keep the Feds weapons and other military items" but this is not obvious at all; indeed, the statement contradicts historical evidence from the dissolution of the Soviet Union.

Fundamentally, it wouldn't be practical for the US Federal government to insist that peacefully seceding states return the conventional weapons located in those states. The Federal government would have no place to put them, no people to maintain them, and no people to use them. These were the same arguments that led Russia to allow the other former Soviet republics to keep essentially all of their military equipment. This was true of even the smaller republics, which could not have resisted Russian demands to return their equipment.

The same arguments applied to nuclear weapons as well-- some former Soviet republics (Belarus, Kazakhstan, and Ukraine) retained their nuclear weapons when the Soviet Union broke up. They were relinquished to Russia over time, but these were voluntary political decisions.

So I think the facts show, pretty clearly, that the vast majority of red states could be self-sufficient. This shows that a union of red states is not inherently unlikely due to the need for successful states to subsidize poor states.

. png


omahas: (Default)

January 2017


Most Popular Tags

Style Credit

Expand Cut Tags

No cut tags
Page generated Jul. 28th, 2017 06:46 pm
Powered by Dreamwidth Studios