Friday, August 15, 2008

Voting over redistribution? Americans are not greedy

US politics are fascinating in some ways, for example because they pose many challenges to economic logic. Political economy, especially when applied to the United States, relies a lot on the concept of the median voter, self-interest and the fact that voters act rationally, that is, they understand what they are voting on.

Take one important dimension of electoral platforms: federalism and equalization payments across states. There is no explicit system that would redistribute fund across state in the US like there is in Canada or some European countries. However, there is implicit redistribution through various programs and through taxation. For example, if NASA gets more funding, Florida, Texas and California are going to benefit the most. If the food stamp program gets cut, Mississippi will suffer more than Massachusetts. And if the marginal income tax rate is increased for high incomes, Connecticut will suffer more than Arkansas.

The Republican party is typically associated with the right wing, which advocates little redistribution. The Democratic party is pushing for more redistribution, at least compared to the the Republican party. All this would imply that states that would gain the most from redistribution should vote for the Democratic party, right? Right?

Well, look at this data from the Tax Foundation, which describes for each dollar in federal taxes, how many dollars are spent by the federal government in that state. The states that gain the most from this type of redistribution are those that tend to vote Republican. And the bottom is a nice collection of typically Democratic states.

What does this mean? Voters do not understand what they are voting for? Republican congressmen are better at pork spending? Democrats are genuinely generous? Equalization payments are irrelevant and the observed correlation is spurious?


Anonymous said...

Or may be "redistribution" means a different thing to voters.

For instance, highway spending vs transit spending.

Plus the South is a particular case. The data made more sense pre-60's.

T-Bone said...

The Republican viewpoint is that their tax dollars cease to exist once they pay, wasted down the toilet. Or it becomes a cash handout to some bum. Or it goes to some bureaucrat who will just get in the way of something productive. They'll also never recognize how tax dollars benefit them.

There really is the widespread belief that any tax paid is a loss to the economy. There really is a belief that government spending has no economic effect, while cutting taxes creates jobs.

As for the difference in spending per tax dollar paid in each state, I'm not sure... I thought a part of it could be that spending projects are more efficient in densely populated states. But pork barrel projects are such a small portion of the federal budget. I think it's just something as simple as where the highest incomes are. How do those rankings compare to a geographic map of states shaded by average income.

Anonymous said...

Living in Kansas, I tend to agree with t-bone. I am surrounded by people who seem to be living in Lala-land and believe the rest of the US is living off their tax dollars. Yet the linked data shows they are net winners.

Anonymous said...

"Living in Kansas, I tend to agree with t-bone."

Well then you're nopt very observant.

Kansas gets gobs of redistributed tax dollars because of agricultural programs. But most Kansans don't get one red cent in agriculture subsidies.

This redistribution metric is meaningless unless the purpose is agitprop.

DaveMooregan said...

How is it possible that stocks could be dropping this fast all over the world while the current crisis is mostly limited to the US financial sector? Stock prices are supposed to represent the discounted present value of the expectations of future dividends, and possibly the liquidation value of the firms. What in that equation would lead to such price drops?Lower expectations for dividends?Yeah!!! send those greed bastards to us and we'll exploit them!