Tag: Federal Aid to States

Two Data Points That Say Much About Our Economy

The Daily Escape:

Another Alaska pic: Wrongo was in a kayak about 20 yards from this big guy asking himself whether he could out-paddle a charging grizzly. June 21, 2023 photo by Kristina Rau for the cruise line.

Today let’s talk about two interrelated economic issues. First, with more than 200,000 jobs created in the US economy in June, nearly 4 million more people are now employed than just before the pandemic.

Heather Long at the WaPo looked at who’s getting them. Along the way, she busts a few Right Wing myths:

“The mistaken notion that Americans don’t want to work can now be put to rest. Nearly 81% of Americans ages 25 to 54 are working, the highest share since 2001.”

Long reminds us that in March 2022, Fed Chair Powell argued the labor market was “unhealthy”:

“There was a misguided belief that it would take a recession to get supply and demand for goods — and workers — back to more normal levels. But what many experts missed was how many workers of color and immigrants wanted to work and were still looking for opportunities.”

Long provides the demographic breakdown for our recent job gains:

“Fewer White people are employed now than pre-pandemic. In contrast, over 2 million more Hispanics are employed now, over 800,000 more Asian Americans and over 750,000 more African Americans.”

Before the pandemic, companies were complaining that they couldn’t find workers, while the experts were saying the nation was at “full employment.” However, every month, Black and Hispanic people (largely women) kept entering the labor force and getting jobs.

Also, more than 2 million more foreign-born people are employed now than before the pandemic. This means that more than half of the new workers have been immigrants.

This is partly a result of low unemployment. Blacks and Hispanics often do not get hired until late in an economic recovery. In the past year, there’s also been a strong uptick in jobs in government and health care, two sectors in which women of color have historically found employment opportunities.

Employers have also loosened their hiring criteria, offering improved pay and benefits, and removing requirements for college degrees for many positions. Long says:

“This past spring, for the first time, Black Americans were as likely to be employed as White Americans.”

What a change! Hard to see much “socialism” in this new jobs analysis.  This is good news that disputes the old Right wing bromides about how “these folks don’t want work; they want to sit back and get free stuff”.

Second, the WaPo’s Department of Data, a new statistical analysis feature, answered the question:

“Which states contribute the most to the federal budget in taxes, and which get the most back in terms of benefits?”

They start by reminding us where tax revenue comes from:

“The vast bulk of the $4 trillion in revenue the federal government received in 2021 came in the form of income taxes and payroll taxes for Medicare and Social Security. Most of the rest comes from corporate income taxes and excise taxes on goods such as gasoline and alcohol.”

And just 4.5% of that income (customs duties and earnings on Federal Reserve deposits) cannot be traced to individual states.

But let’s get to the good stuff. Just eight blue states, (CA, NY, NJ, MA, CT, WA, NH, and CO) pay more in taxes to the federal government than they receive in federal benefits. They therefore subsidize all other states. Every other state receives more federal money than they pay in taxes.

And unsurprisingly 9 of the 11 top recipients of federal benefits are red states (KY, WVA, MS, AL, AK, LA, OK, AK, SC).

Nine of the 10 states that sent the most to the federal government, per person, voted for Biden in 2020. Nine of the 10 states that sent the least voted for Trump. So who’s got the bigger stake in socialism?

Its important to remember that when Republicans complain about “out of control” federal spending, most of them live in a state that receives more from the federal government than they contribute.

If we ever called their bluff, Republicans would scramble to decide what federal benefits their home states would be willing to give up in order to cut federal spending.

But of course, they would simply bluster on about socialism in the cities.

Maybe we should divide America into the MAKER states and the TAKER states. It’s nice to see that the data again shows Blue states are far more productive. Maybe another question for the Department of Data is:

“Why is higher income so closely aligned with support for Democrats?”

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Tax Revenue Has Never Been More Important

The Daily Escape:

Harris & Ewing “Less taxes, more jobs”, US Chamber of Commerce campaign in 1939. Photo via Shorpy. Maybe the sign should have said “lower taxes”. It was the first of 25,000 such signs put up all over the nation as part of a drive for a reduction in corporate taxes. And it worked. An alliance between the Chamber, Henry Morgenthau, Treasury Secretary, and Sen. Pat Harrison, (D-MS) conservative chair of the Senate Finance Committee, prevailed over the New Dealers. He blocked further tax hikes, and helped to create new corporate tax loopholes. Roosevelt went along, expecting that business would support him. The following year, the Chamber simply demanded more tax breaks, while backing Wendell Willkie. It’s all so familiar. Trickle down is an old idea, and everything old is new again!

 Here’s an interesting chart from End Coronavirus.org showing the progress of states toward beating the current COVID-19 pandemic. The numbers are through May 5. Those in green are winning the fight, those in yellow are nearly there, and the red ones still need more action:

There are four states in the green: Alaska, Hawaii, Montana and Vermont. Ten are nearly there, including Maine, Louisiana, New York and South Dakota. The remaining 37 still need work, some more than others. And many of the “needs more work” states are exiting their lockdowns this week.

So it goes in America. States and cities are going broke, primarily because of the sharp drop in tax revenues since the shutdown. They all face increased costs, from unemployment claims to spending on additional hospital capacity, and overspending on new purchases of PPE because of federal government inaction.

New York City says it will need $7.4 billion in federal aid, while NY state faces a $13 billion shortfall; Alaska’s budget gap might top $1 billion; Colorado’s at $3 billion. California? Its shortfall may be $54 billion. Red ink will be true for nearly every state, county, city, town and village in the country. States can’t deficit spend. They and their local governments must balance their budgets somehow, with some combination of federal aid, budget cuts, or tax increases.

In addition, the WSJ reports that some manufacturers that furloughed employees during lockdowns say their plants definitely won’t reopen.  Manufacturing output last year finally surpassed the 2007 previous peak, but factory employment has not returned to levels reached before the great financial crisis. It appears that in 2020, it will again fall below 2007 levels. And the more that job losses turn from temporary to permanent, the bigger the hit to unemployment insurance, to consumer spending, and to every company that relies on it—including manufacturers.

Wrongo spoke by phone with the mayor of his little town this morning. We are still not sure how we will balance the town’s 2020-2021 budget. In most years, the budget has been approved by the voters in May, but that will not happen this spring. The consequence is that, regardless of how the budget gets balanced, the town’s recovery will likely take several years.

So, states and cities think they have little choice but to reopen. They need the tax revenue, while they face even higher costs if they start an aggressive test and trace program. And they can’t expect the federal government to fund that new testing and tracing.

So most states are moving toward opening, regardless of whether they are red, or blue.

But, states may not all be EQUALLY reckless in what they choose to open, some are planning a phased reopen, followed by a re-evaluation before moving forward to the next step. Some are opening up just about as fast as they closed businesses six – eight weeks ago.

We are living in a federal system with a broken central government. The federal government has handled the pandemic badly, and shows no interest in trying to do better now. Even a robust federalism will fail if there is no federal financial help for the states.

It is a hell of thing to be shown clearly and in no uncertain terms that your federal government doesn’t give a shit if your citizens live or die.

Or if your state suffers a debilitating blow to its finances and future.

Wrongo can’t be sure, but this is probably how black people have felt forever. Now it applies to the rest of us.

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