Monday, September 24, 2012


Of all the misunderstood and ill considered political positions in American politics today is how many Americans view the redistribution of wealth. They oppose it. But the reality is America redistributes wealth by the boatload. And its been happening on a regular basis for some time now.

Consider this. If California were to get back all the money that it pays in taxes to the federal government California would not be staring down the barrel of an $11 billion state budget deficit this year. California would be running budget surpluses if the state got all the money back it has sent to the federal government. In fact, for every dollar the state of California sent to the federal government through 2005 the state of California only got .78 cents in return.

Redistributing the Wealth
What happened to the rest of California's money, you ask? The easiest way to put it is that California's wealth is redistributed to other states in the union. States that send one dollar to the federal government and got more back through 2005 include states like Alaska ($1.84), Louisiana ($1.76), Kentucky ($1.51), Alabama ($1.66) and Mississippi ($2.02), with the vast majority or recipients being politically conservative Red States.

None of this should come as a surprise to anyone. When it comes to the 47% of the population who GOP presidential candidate Mitt Romney derisively said don't pay income taxes (an ill-informed comment, on many levels) the ten states with the highest percentage of non-filers (and with no federal tax responsibility) reside in the same states that are recipients of California's redistributed wealth.

Apart from typically voting Republican, these are the regions of the country that we usually see and hear noise about getting the federal government off of their back and out of their life.

But the redistribution of wealth does not stop at the federal level. Consider what happens in the state of Alaska.

Mama Grizzlies' Children Sucking Off the Tit of Government
After watching Sarah Palin emerge from Alaska's wilderness to become John McCain's vice presidential pick in 2008 many fell in love with her because of how she represented a state of rugged individualists. Shooting caribou and all her talk of "mama grizzlies" was exciting. And it would have presented a powerful story line, except for one thing. It wasn't true. Not even close.

It's not well known outside of the state, but since 1976 oil companies in Alaska have been sending the state a check for every barrel they pull out of the ground. The state then turns around and redistributes the wealth to Alaska's rugged individualists.

In 2008, for example, Sarah Palin and the state government watched over a system that distributed $3,269 to every eligible Alaskan citizen ($1,200 of this came from a resource rebate program). This added up to just under $20,000 for the Palin family in 2008. While the wealth redistribution for each Alaskan dropped to $1,281 in 2010 and $858 for 2012 there's no avoiding that this money falls into each Alaskans lap for no other reason than the state embraces a wealth redistribution policy that many of the states rugged individualists claim to despise.

With that much money from the Feds ($1.84 for every dollar sent to the Feds) and Big Oil (thousands for each family) you would think someone might inform Alaska of their socialistic redistribution of wealth policies. It sure wasn't going to be Sarah Palin.

Instead of calling their spread the oil wealth program something like the “Redistributing the Wealth Because We’re Really Socialists Fund” – as Sarah Palin might have called it if President Obama suggested the same program nationally in 2008 – the state of Alaska calls it the “Permanent Fund Dividend.”

In a few words, Alaska’s hardened sense of “rugged individualism” is really built on a foundation of communal welfarism, direct from the American taxpayers in the lower 48.

Update On Our Fiscal Union
What is clear here is that when it comes to California's "surplus" dollars, many of the go-it-alone rugged individualist living in some of our most conservative states have demonstrated a remarkable tendency to see the work of others as a form of community property. And it continues today.

In 2011 The Economist reported that from 1990 through 2009 state transfers to New Mexico, Mississippi, and West Virginia exceeded 200% of annual GDP. As an example, it reported that during this period "the federal government spent $1.44 trillion in Virginia but collected less than $850 billion in taxes, a gap of over $590 billion." During the same period California transferred more than $336 billion out of the state, with New York leading the pack with over $956 billion transferred out of state.

The Economist has an updated report on the state of America's fiscal union - and wealth redistribution - from 1990 through 2009 here.

There's more on how our nation redistributes wealth (like subsidies to industry and retroactive insurance programs that the state often picks up when things go wrong in the private sector, which you can read about here). In fact, we've been transferring money for so long that Paul Krugman once noted we don't even think about it anymore.

Yet, we have a group of people who think asking the top 1% of this nation - who actually improved their financial position over the past twenty years - to pitch in a little more to help is akin to "socialism." It's not. Just ask the people who live in states like Alaska, Louisiana, Wyoming, Montana, and Kentucky

- Mark

P.S. It appears that getting the figures on our fiscal union from the federal government won't be as easy as it used to be. The Federal Financial Statistics program has been terminated due to funding cuts, which The Economist reports on here.

UPDATE, II: Here's a 2014 update from Wall Street Cheat Sheet on the redistribution figures. The methods change (different source) but the outcome is the same: Republican-led Red States are a financial drain on the Democratic-led Blue States. 

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