Cuomo Tries to Make the Case for Blue State Bailouts

President Donald Trump made it clear today that he has no interest in bailing out the states – or as he calls it, “blue state bailouts.”

Speaking to the New York Post, Trump said “It’s not fair to the Republicans because all the states that need help — they’re run by Democrats in every case. Florida is doing phenomenal, Texas is doing phenomenal, the Midwest is, you know, fantastic — very little debt.”

Trump also said, “You look at Illinois, you look at New York, look at California, you know, those three, there’s tremendous debt there, and many others. “I don’t think the Republicans want to be in a position where they bail out states that are, that have been mismanaged over a long period of time,” he said.

And Trump is correct that the worst run states fiscally tend to be Blue, and the best Red. Just take a look at the numbers for the top ten worst states (in terms of their debt per citizen, including unfunded liabilities):

Vermont, -$19,000
New York, -$20,500
California, -$21,800
Kentucky, -$25,700
Delaware, -$27,100
Hawaii, -$31,200
Massachusetts, -$31,200
Connecticut, -$51,800
Illinois, -$52,600
New Jersey, -$65,100

Kentucky is the only state on the list with a Republican controlled legislature (and still had a Republican governor during the time-frame of the study the numbers are sourced from). Every single other state has a Democrat controlled legislature. The only hints of Red is Massachusetts’ and Vermont’s Republican governors (which is surprising, given how liberal both those states are).

Who would want to bail any of those states out?

New York Governor Andrew Cuomo is firing back, arguing that bailing out a state like his would simply be a return of money they paid to the federal government. As he argues, New York pays $29 billion more to the federal government than they get back.

And he is correct (to some extent) – New York is one of just seven state that sends more to the federal government each year than they receive back, however in their case it seems to largely be due to them having less federal employees than other states, and higher than average incomes (leading to them paying a third more taxes per capita than other states). According to a report from the Office of the New York’s State Comptroller, the amount of funds they receive for services is in line with other states:

• New York received $138.1 billion in direct payments including those to individuals who receive Social Security, Medicare, benefits for veterans and retired federal employees, and food assistance, which was close to the average among states on a per capita basis. Major programs for which the state received higher-than-average per capita expenditures include Medicare, food assistance and Supplemental Security Income.
• New York was second in the country in grants to state and local governments, receiving $69.8 billion. Medicaid makes up more than half of all federal spending for such grants and the state’s per capita Medicaid funding from Washington ranked first among all states.

Federal salaries and benefits are also being counted in these statistics.

• In two other major categories – procurement and federal employee compensation – federal spending in New York was less than half of the national average on a per capita basis. The state’s combined total, $19.3 billion, was 2.5 percent of the nationwide total.

If procurement and federal employee compensation were on par with other states, New York would still be a net taxpayer, albeit to a lesser extent (of roughly $10 billion). The rest of the gap is due to the fact that New York is home to a city with more millionaires than any other in the world.

So in other words, New York as a state is a net taxpayer because millionaires don’t get welfare too. I guess Cuomo didn’t think his argument would sound as convincing if he put it that way.

And that all aside, it doesn’t change the fact that New York has racked up over $136 billion in debt, and that doesn’t include $65 billion in off balance sheet liabilities.  In fact, that they racked up this much debt when they have a tax base far wealthier than the rest of the country should be yet another reason to NOT bail them out.

This all relates to a claim that has been popping up lately that Red States have been receiving more from the federal government all along. As I wrote last month: While it is true that red states tend to have a larger percentage of their budgets subsidized by the federal government than blue states – that’s only because their budgets are relatively smaller in the first place. As The Federalist’s Kyle Sammin notes:

Against a national average of 32.62% [of a state’s budget] being federally subsidized, the blue states received 30.80%. Purple states were almost exactly at the national level with 32.92% coming from Washington. Red state budgets averaged 35.75% federal money.

A problem with this metric is that although federal funds make up a larger percentage of red states’ state budgets, the budgets in those states are generally lower overall than those of the free-spending blue states. If, instead of comparing federal funds to state budgets, we look at how much the federal government spends in intergovernmental grants per resident of a state, the results are turned on their heads.

In other words, Sammin points out that because red state budgets tend to be smaller, it would make more sense to look at intergovernmental grants (payments from the federal government to state governments) on a per-capita basis, not as a percentage of state budgets.

Against a national average of $1,935 in intergovernmental spending per American, red states receive just $1,879. Blue states get considerably more, at $2,124 per resident. Purple states see the least of their money returned to them per capita, at just $1,770.

And all this aside – lets suppose for a second that it was true that every single Blue State was a net taxpayer on a federal basis. That still doesn’t change the fact that it’s all Blue States that have racked up the most in debt and unfunded liabilities – and that everyone else would be helping pay that off.