What ‘liberal’ Kansas can teach ‘conservative’ Greece

One of the fascinating aspects of the lingering debt crisis in Europe is that the solutions being pursued by leaders in France and Germany are, by almost every measure, fiercely conservative.

Much of the commentary in the US gets this horribly wrong, suggesting that the Europeans are flagrantly libertine when it comes to fiscal matters.  They are a continent of wine-sippers, dominated by bloated unions.

But especially when contrasted with the approach here in America, the European treatment of countries like Greece and Portugal is downright severe.

It’s not just that the Europeans are demanding harsh austerity measures from their member states.  In that respect, we’re more or less on par.

Many US states are also cutting back sharply, laying off hundreds of thousands of workers and curtailing social programs.

No, the place where the Continent is more conservative comes in their fiscal treatment of poorer, less productive states.

In our country, it has been the tradition for decades for big, urban, highly productive states — California, Florida, New York, Texas — to subsidize smaller, more rural, less developed states, helping to build their infrastructure, developing their industries.

According to the most recent available statistics (for 2005), Kansas was receiving $1.50 in Federal spending for every $1 that Kansas taxpayers paid in Federal income taxes.

Alaska receives more than $1.80 back for every $1 paid to the IRS.

These massive subsidies aren’t viewed as a “bailout” or a “loan” or a “subsidy.”  This didn’t just happen once, as a “stimulus.”  It happens every year, year after year.

And small, less prosperous American states aren’t expected to pay that money back.  Indeed, if forced to “borrow” that money, states like Mississippi (which in some years receives back twice as much money from the treasury as its citizens pay in Federal income taxes) would have collapsed long ago.

Just as Greece is on the verge of collapse now.

Here in the US, this steady transfer of wealth between members states has been internalized as a standard part of American political life.

Indeed, much of the American West and South — interstate highways, hydro dams, vast military bases, the education infrastructure around Silicon Valley, and on and on — was built with wealth generated in the Northeast and the Upper Midwest.

Taken in sum, I think it’s arguable that this “liberal” American approach — wealthy states helping poorer states — has proven itself to be the wiser and more sustainable than the one being pursued in Europe.

While France and Germany demand that their less productive member-states shoulder massive loans, relegating them permanently to the status of debtor-partners, the United States has pursued a policy of building up all fifty states.

Imagine if we had pursued a European model.

If forced to go it alone, in fiscal terms, Alaska and Kansas would be far less stable.  During the recent Great Recession, any number of American states would have toppled into insolvency without huge amounts if aid from Washington.

And economic downturns aren’t the only threat.  Imagine if Louisiana had been forced to recover from Hurricane Katrina solo.

Or if the drought-stricken states of the Southwest lacked a massive Federal reservoir system, built to sustain their cities and their farms.

Obviously, there are weaknesses to the American system. Big urban states grumble mightily as dollars flow away year-after-year, decade after decade. But in the long run, it has proved to be a great investment.

Following this model, America emerged in a single century as the biggest, most productive, and most stable economy on earth.

In Europe, by contrast, fiscal conservatives who feel that they’re being hoodwinked by their lazy, bumbling neighbors insist that member states must sink or swim separately.  As a result, the whole experiment of a European Union is imperiled.

As the technocrats in Bonn and Paris squeeze Greece and pummel Portugal, they would be wise to look at the relative success, prosperity, and stability of America’s member states, places like Alabama and and Arizona and Louisiana.

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31 Comments on “What ‘liberal’ Kansas can teach ‘conservative’ Greece”

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  1. Peter Hahn says:

    Good points Brian. The other side is that the European countries can’t devalue their currencies when they get in trouble.

  2. oa says:

    What Peter said. That’s pretty much the whole of the problem, actually.

  3. oa says:

    Also, Brian, I take issue with the radical austerity proposed in Europe as something tht’s “conservative.” It’s radical. And it shows how the modern right has defined for us what the center is. A great read on this here:
    http://www.rollingstone.com/politics/blogs/national-affairs/why-obama-needs-to-change-to-win-20120222#ixzz1nFwWl55j

  4. Pete Klein says:

    So maybe it is time for the South, the West and Alaska to get off the dole and start helping out the North East and Midwest?

  5. sratchy says:

    keep in mind that the eu nations are each independent nations and not part of one nation, unlike the us states.

  6. myown says:

    Ironic that the Federal welfare states in the US are mostly rural and conservative that support Republican politicians who want to cut taxes and shrink the Federal government which will ultimately hurt those very states. And the same people who are against a more even distribution of income via the tax system have no problem (or aren’t aware) that there is a giant redistribution of wealth from largely well-populated, urban, liberal states to smaller, rural, conservative states.

  7. If Clapton is God, Warren Haynes is Jesus says:

    Myown,

    Indeed. It’s more evidence that those who clamor the most for “less gov’t” haven’t a clue as to what that actually would mean to them personally. Sort or along the lines of the Medicare or SS recipient calling for the end of gov’t supported health care or retirement funding. Many, many Americans are ignorant and very unaware of the irony of such things.

  8. Peter Hahn says:

    A further irony is that if the US states operated as the European Union does, the red states would be forced to cut way back on social services and to force all workers to accept lower wages, which it seems is what they actually want for themselves.

  9. Paul says:

    The austerity measures probably won’t work anyway. Sure these places have these high tax rates that many over here are clamoring for. What you get is just what they have in Greece and Italy, a whole bunch of people that just don’t bother paying what they owe. Higher tax rates always come back and bite the folks that can least afford it.

  10. mervel says:

    Well if we follow the US model the first thing they need to do is locate a giant military base in Greece and then make subsidize Greek agriculture somehow. That is why in the US small rural states have more per captita federal spending. If you put one of the largest military bases in the US in Minot North Dakota, and North Dakota has a population of 500,000 people total, you end up with a BUNCH of federal spending in ND per capita.

    The same goes for Alaska with a lot of federal land and federal installations. The idea that we are just sending these states money in a transfer is not correct.

    But something like that could work in Greece if they were willing to give up their identity as an independent country.

  11. Walker says:

    “The idea that we are just sending these states money in a transfer is not correct.” Right. We’re sending these states money because it’s cheaper to buy off a senator in a small state than it would be in a big one.

  12. Mervel says:

    That is part of it. But the reason that the per-capita federal spending is more than the people are paying in income taxes in those states is not because we are just sending them checks, it is because we are either locating large military installations in those states, they get tons of agricultural subsidies; or there are a bunch of old people living in those states who draw a disproportionate amount of federal spending per person. If you look at these states with high per capita federal spending they often have all three of those going for them.

  13. Mervel says:

    As long as we have a progressive income tax code of course some states will get more federal income than others. If every state simply got back exactly what it paid in federal income tax, why send the money to Washington at all? Simply send it to your state government who will then allocate it back to the residents.

  14. Mervel says:

    Connecticut is ALWAYS going to be wealthier than Mississippi. They SHOULD send Mississippi money.

    They are sending it to the poorest of the poor in the US, they are not sending it to red state Mississippi republicans, they are sending it to extremely poor people in Mississippi who are collecting TANF, food stamps, and medicaid.

  15. Mervel says:

    Is that a bad thing?

  16. Walker says:

    “…they get tons of agricultural subsidies…” And is that a good thing?

    “Connecticut is ALWAYS going to be wealthier than Mississippi. They SHOULD send Mississippi money.” Well, yeah, but a whole lot of Mississippi voters are dead set against income redistribution. Funny, huh?

  17. knuckleheadedliberal says:

    I’m glad to see you coming around to my side Mervel. Socialism ain’t all bad.

  18. Walker says:

    Or is it a case of Income Redistribution from Blue States to Red States is a Good Thing, but Income Redistribution from Rich People to Poor People within a Red State is Communism.

  19. myown says:

    In many cases, like agricultural and energy subsidies, we are sending money to large corporations in rural states that do not need subsidies while the average farmer or small business, what’s left of them, gets a pittance, if anything at all.

    A progressive Federal income tax (assuming we actually had one) does not guarantee expenditure allocations will also be progressive. The spending decisions are made by politicians who are lobbied by big money interests who are rich and powerful partly because of government subsidies. And they get further tax deductions for the expenses of lobbying to protect those subsidies.

    Most Republican politicians today want to severely reduce progressive allocations, like Social Security, Medicare, food stamps, etc. that primarily benefit middle and lower income people and this would probably hit the residents of those poor rural states the hardest. At the same time these Republican politicians want to take the money saved by cutting social programs and give it to the already wealthy through more tax cuts and subsidies to big corporations.

    Progressives and Democrats have failed to point his out while inadequately explaining and defending the very real benefits to the average person that actually come from government programs that way too many people seem to take for granted or don’t even realize is a government program.

  20. Walker says:

    Well said!

  21. Mervel says:

    Much of our federal spending is in fact automatic, it is based on Medicaid, Medicare, and Social Security, the largest components of our federal budget; those things will flow regardless of who is lobbying who. If you have a state with poor people, with old people you will have more federal spending in that state, it is automatic.

    Now where we put military installations, where and how we spend agricultural subsidies these are very political decisions I do agree.

    But it makes no sense; it makes no sense from even a “progressive” stand point to have each state get back the amount of federal taxes it pays. It that is the case we should just fund our military and let every state totally take care of its own business fiscally. Get rid of medicare, medicaid, food stamps, social security and so forth, let the states do it; and not send any money to Washington for those purposes.

  22. Paul says:

    Now Greece is not a pure “socialist” country but they have done the following:

    They have slowly, over decades, increased Minimum Wages, shortened work weeks and hours, decreased Retirement Age, Increase Entitlements, Increased Retirement Pay and Continually Raised taxes and borrowed money to Fund all of this.

    Sounds like one of this countries parties platforms? Better be careful.

  23. Mervel says:

    Republican politicians have not mentioned cutting medicare, medicaid or social security; with the exception of Ron Paul, who essentially wants to do what I outlined above. Republicans just want to cut taxes and raise the debt of our country.

  24. myown says:

    Well those are interesting responses. Paul tries to build a Democrat strawman while Mervel is in denial about Republican policies.

  25. mervel says:

    I think I have captured Republican politics pretty well. They have no plan except to cut taxes, they are NOT nor have the EVER cut any government programs, thus the balloon the deficit.

    Watch what people do not what they say if you want to know what people really believe.

  26. mervel says:

    But federal spending per capita is just math. Where do our federal dollars mainly go? They go to three things, Social Security, Medicare/Medicaid, and Defense.

    So if you have a state with old people, with poor people and with a lot of defense installations you will have high rates of federal government spending per-capita in that state.

    If you have states with young people, with rich people and not alot of interest in large military bases you will have low rates of federal spending per -capita.

  27. myown says:

    Mervel I agree Republican tax cut proposals will just increase the deficit. But conservative Republican politicians (and that’s all there is today) have been out to destroy Social Security and Medicare since they were created. Here are two of many examples. President Bush wanted to use his imagined political capital from his reelection to radically change SS. But he was thwarted by public outcry and Democrats in congress. Paul Ryan’s bill, that was overwhelmingly approved by Republicans, would have similarly altered Medicare beyond recognition. With a Republican President and Congress those proposals would be in effect.

    Conservative Republican politicians and think-tanks hate any government program that is social or provides security for individuals. They don’t believe in a society with communal responsibilities or a safety net – it’s every person for themselves – private selfishness will create a just society. Today’s Republican politicians are disciples of the Ayn Rand cult and it is destroying America.

    The attitude about SS and Medicare payments being automatic or fait accompli is part of the problem. Too many people don’t even think of them as government programs and assume they will always be there regardless of who runs the government. So they support politicians who advocate drastically cutting the Federal budget without being aware it is these social programs that will be significantly reduced.

  28. Paul says:

    oa, I never mentioned anything about democrats but now that you mention it. Not really a “straw man” I have seen them work pretty hard in support of many of those policies, I don’t think you can deny that. Hopefully it will work out better for the US.

    “without being aware it is these social programs that will be significantly reduced”

    They must be. At least that is the verdict of the “bi-partisan commission” set up by the president. But I agree we can’t continue to live in denial.

  29. mervel says:

    myown,

    I know they do keep saying that.

    Then they get in office. Look at George Bush number II, arguably the most conservative President we have had to date; he increased ALL of those programs. I mean he massively expanded medicaid/medicare with his prescription drug programs.

    I don’t know you might get someone; a tea party type who really does think that social security or medicare should go; but in general all politicians want to get in power more than they actually believe anything. Thus these programs grow.

    Defense is the sweet spot for cutting the deficit. It would help the whole country to really shrink our defense establishment.

  30. Walker says:

    “It would help the whole country to really shrink our defense establishment.”

    Well, it wouldn’t help Blackwater/Xe/Academi, nor Halliburton, and god knows how many other defense contractors’ workers, ‘specially the beneficiaries of all those cool “no-bid contracts”.

  31. Mervel says:

    No it would not help them!

    They and their friends in the Military establishment itself would fight tooth and nail for any reductions in GROWTH, let alone true true reductions in the actual budget itself. With fewer divisions you need fewer generals etc on down the line.

    At some point though, urinating on dead bodies, taking pictures of humiliated and tortured prisoners, sport killings of civilians, will take its toll on our own idea of what our military is becoming with these endless occupations. I mean are these random events?? They happened over several years done by different branches of the military in different countries.

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