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Balance of payments

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#1 diogenes227



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Posted 02 July 2019 - 11:25 AM

What to call them? Red states? Moocher states? Trump states? 


Okay, how about isn't time to kick the deadbeat states off the federal dole?


This from Paul Krugman:


I’ve been reading a recent Rockefeller Institute report on states’ federal “balance of payments” — the difference for each state between what the federal government spends in that state and what it gets back in revenue.


The pattern is familiar: Richer states subsidize poorer states. And the reasons are clear: Rich states pay much more per person in federal taxes, while actually getting a bit less in federal spending, because Medicaid and other “means-tested” programs go disproportionately to those with low incomes. But the magnitudes are startling.


Take the case of Kentucky. In 2017, the state received $40 billion more from the federal government than it paid in taxes. That’s about one-fifth of the state’s G.D.P.; if Kentucky were a country, we’d say that it was receiving foreign aid on an almost inconceivable scale.


This aid, in turn, supports a lot of jobs. It’s fair to say that far more Kentuckians work in hospitals kept afloat by Medicare and Medicaid, in retail establishments kept going by Social Security and food stamps, than in all traditional occupations like mining and even agriculture combined.


So if you really believe that Americans with higher incomes shouldn’t pay for benefits provided to those with lower incomes, you should be calling on “donor” states like New Jersey and New York to cut off places like Kentucky and let their economies collapse. And if that’s what you mean, you should let Mitch McConnell’s constituents know about it.


The point is that while you can criticize particular Democratic proposals, you can only portray progressives as radical or irresponsible, especially as compared with the modern G.O.P., by ignoring or suppressing a lot of facts. I guess facts really do have a liberal bias.


Yes, let Kentucky collapse as a lesson for all the rest of them.



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#2 colion



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Posted 02 July 2019 - 02:35 PM

This is a simpleminded argument.  If a state wants to improve their BOP with DC it has to address what it sends to DC and what it receives.  


Transfers to DC include, individual & corporate income tax, FICA tax, excise tax (e.g., gas)

Receipts from DC include, SS, Medicare, Federal employees and contractors


So, for example, if a state wants to improve its BOP it could create an unfriendly business environment in order to encourage individuals and corporations to leave the state and at the same time a retiree friendly environment.  The majority of states have a positive BOP, reflecting the transfer-receipts factors for their specific situation.  Other than Krugman's stupid suggestion to "cut off states" in practical terms how should the deficit states (e.g., NY, NJ, MA, CT, IL, WA) improve their BOP?