Commentary / Coronavirus / Economic Developments

In Charts, How Big Blue States Outspend Red States

statesSpeaker Nancy Pelosi and her fellow House Democrats are seeking a more than $1 trillion federal bailout for state and local governments. This is in addition to the unprecedented aid Congress already has sent.

Instead of waiting on a handout from Washington, states should clear the way for a more robust economic recovery by addressing their unsustainable finances.

States and local government spending has increased over the recent past, demonstrating room for targeted spending cuts.

After adjusting for inflation and increases in population, state and local spending (in constant 2019 dollars) has grown from $5,596 per person in 2000 to $7,268 per person in 2019.

That amounts to a 30% increase in the real cost of state and local government over just two decades, even without the thousands of dollars per person the federal government sends to states and localities through a wide variety of programs.

But not all states spend equally. As of 2017, Florida, Georgia, and Arizona spent about $5,800 per person on state and local governments, but New York spent more than $11,700 per person.

Financing state and local governments’ lost revenues would mean spending twice as much on New Yorkers as on residents in more frugal states.

The gap between big-spending states and fiscally responsible states has increased markedly over the last two decades, as this graph of state-level spending changes from 2000 to 2019 demonstrates.

California increased state-level spending by 52% and New York by 49% over the past two decades. Spending on health and education more than doubled in both states, yet health and education outcomes remain unremarkable compared to the rest of the nation.

Meanwhile, Texas has kept spending about flat, and Florida has reduced spending levels by 16%. Former Florida Gov. Rick Scott explained recently in The Wall Street Journal how fiscal discipline has set up his state for fiscal success amid this crisis.

States and localities could save more than $500 billion a year by trimming their per-person spending to where it was in 2000. This would more than cover any temporary reductions in revenue and help set the path for a stronger economic recovery.

During past recessions, countries that addressed their debt crises through spending cuts were able to return to economic growth more quickly. Those that relied on tax increases but did not reduce spending or address underlying fiscal problems, such as underfunded and overpromised pensions, experienced “deep and prolonged recessions.”

A federal bailout could prop up failing states temporarily but would not fix their underlying fiscal challenges. Instead, historical evidence suggests that every federal bailout dollar will increase state taxes by between 33 and 42 cents—the last thing residents in debt-ridden economically deprived states need.

Prolonged recessions and continued budget problems are the most likely outcome of a federal bailout for state budgets.

In addition to hundreds of billions in direct aid for the pandemic response and Federal Reserve loans for lost revenue, Congress has authorized more than $1.3 trillion in federal payments to businesses and individuals. These programs will help buoy tax revenues in every state, although much of the gains won’t be realized until states reopen.

States that still have shortfalls need to do what ordinary Americans and businesses do in such situations—make tough budgeting choices and reduce spending.

Rather than asking for a federal handout, California, Illinois, and New York should try to make their budgets look more like those of Texas and Florida.

Reducing spending in times of crisis will set up states for a successful recovery by keeping taxes low and ensuring confidence in the state’s financial future.

Reprinted with Permission from - Daily Signal by - Adam Michel

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Rik
4 months ago

That’s an example of Socialist Utopia… which really amounts to voting bribery! You know, elect me and I “promise” to give you more “free” stuff than the other candidate. As I mentioned many times before, I live in California where we have the highest sales taxes, highest gasoline taxes and prices, housing and apartment rentals are skyrocketing and now the San Francisco Homeless people living on sidewalks has grown 300%. Hey, but we are a safe haven for illegals! … and we still need more $$$ even after all the highest taxes. Why? Because as Margaret Thatcher once said: “Socialism… Read more »

DEAN OWEN
4 months ago

I also noted this morning FL saw a 14% decline in number of cases over last month. Open economy, less spending, lower virus count.

Fred J Noel
4 months ago

Let the inept governors of the blue states issue bonds to pay for their failed financial policies. Make the people that elected them pay the costs of political mishandling of tax dollars. My grandchildren should not be made to pay back federal deficit loans to bail them out!

joe p
4 months ago

Why do these crooks think I will willingly give them my federal tax money to support a state population of illegal aliens which they find available to vote by Democrat fraudulent means (same day voting, motor voter, vote by mail, no ID required voting)? Why else are the Democrats so eager to tear down the wall? There is a reason that California and New York inflated the “popular” vote: one party government fueled by huge populations of foreigners with no intent to become Americans and supported by government checks. I am losing my country. Stop this insanity.

Stephen Russell
4 months ago

CA funding via Feds & no other source to date & then tried to toss Tesla out.
NO funds for Blue states, NO SALT either or increase SALT.
Pure waste & Gov Newsom does Nothing
& then to have LA County extend shutdown to Aug from March.
Open up for business or lose tax $$$

Lizzy
4 months ago

JUST “MORE” of the RE DISTRIBUTION of WEALTH–DEAL They JUST MUST support ILLEGALS AND BUY VOTES SOMEHOW!!!!

Lawrence Greenberg
4 months ago

“Instead of waiting on a handout from Washington, states should clear the way for a more robust economic recovery by addressing their unsustainable finances.” They cannot do that. The Leftists running the blue states, for decades, have been using taxpayer funds to buy votes for themselves in the form of outrageous giveaways and freebies for the leeches and the dregs who won’t work, as well as ridiculous pay raises and benefits to their allies in the public unions. And now Pelosi and the rest of the Communists – er, I mean Democrats – want to take advantage of our current… Read more »

Mike B.
4 months ago

We are at a crossroads in our country. If Socialist democrats gain power in government we are headed to national ruin. We must elect fiscally responsible Senators, congressmen and governors or we will all be in the situation that California and New York are in.

Chuck
4 months ago

A very clear example of Democrats philosophy in these states: Tax, tax, tax; spend, spend, spend. It’s at the local, state and national levels. Don’t believe it? Observe Nancy Pelosi and Charlie Schumer in action.

Diana
4 months ago

Redistributing of wealth well I want all politicians pay cut in half, they are even less then a part time worker so cut pay in half no retirement, healthcare, no benefits of any kind, and retroactive 25years that means all that are retired loose don’t give me we can’t do that Oh Yes We Can these corrupt politicians have done or allowed done to those that have worked 40 hours a week for 20-40 years, so We need this done and term limits, and that these politicians that try to Change, Distort, Twist, Ignore Our Constitution as Written, Fired and… Read more »

HelenC
4 months ago

Now Illinois wants the entire country to bail them out for over 40 years of mismanagment. Raise taxes has been mantra of legislators in Springfield for over 40 years. Madigan robbed Illinois while his supporters got rich. Pelosi is in DC using the crisis of COVID-19 as a ruse to send funds to DEM states. Enough of taking from honest states to pay for sins of failing states!

Gary
4 months ago

Yes the FAILED and CORRUPT liberal democrat governor’s, are exposed!
So keep allowing sanctuary cities, unabated illegals and poor fiscal policies…..you taxpayers who vote them in deserve the hole their digging you!

Richard
4 months ago

The reason why some states are blue is that everyone in those states is saddened by the amount of their money wasted on corrupt Democratic officials.

David Spade
4 months ago

These blue state leaders don’t get it….they do not even attempt to curtail spending. It is a sad commentary on both their ability to use common sense, and their ability to retain citizens. The outflow of taxpayers to other states will become more pronounced. They should file bankruptcy and not depend on taxpayers from other states to pay for their continuing sins.

George
4 months ago

The country is being destroyed by these people. Sooner or later we will all be bankrupt. Do they not see or understand that or do they just not care. Mistakes, sure, there were many. But this country brought ideas and hope to many. It is being eroded away and very few seem to care.

Greg Grysko
4 months ago

There’s only 1 cure for this… Vote Republican!!

Veteran
4 months ago

Time to bring those big spenders of taxpayer money up on charges of treason for attempting to bankrupt the country, and our next generation. The Democrats must be made to learn that the National Treasury is not their personal piggy bank, or slush fund of petty cash and that there will be legal consequences for their party, and its members if they keep transgressing against our nation and compromising our national security.

Phillip Nagle
4 months ago

The best thing for the federal government to do is to provide a method for these wild spending blue states to file for bankruptcy. My home state of Illinois was bankrupt long before the COVID-19 pandemic with excessive pension commitments far in excess of anything the state could pay. Much of the excess state spending in these blue states has come from promises made to labor unions, donors and various power brokers in order to stay in power. Let them go belly up!

Joann M Evjen
4 months ago

Oh my gosh. Stop the spending and let us get back to work!!!!

dom Catrambone
4 months ago

Illinois is a crooked monopoly run by career politicians like Madigan who control the other politicians. They give away the farm to big unions in order to stay in power. The public continues to re-elect the same shameful leaders for years and years. we need term limits . We may still get crooks, but may get more choice.

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