Good News and Bad for the Land of Enchantment

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Hey, New Mexico, the Rio Grande Foundation notes that you receive "$2 in federal funds for each $1 state taxpayers pay in federal taxes."

That's the good news. The bad news is this:

Rather than benefiting the state's economy, high levels of federal spending seem to actually harm state economic development. Gessing clarified, "It is striking that our neighbors in Colorado and Texas each receive less from the federal government than is taken from their taxpayers ($0.79 and $0.94 respectively), yet Colorado's gross state product is 11th in the nation and Texas ranks 20th." In sum, Coloradoans and Texans enjoy stronger economies than New Mexicans even though the federal government gives less back to them than it takes.

New Mexicans may have little or no control over the location of military bases, Indian reservations, national parks, and other federal institutions, but Gessing argued, "All Americans, most especially residents of New Mexico, should disavow themselves of the notion that federal spending contributes to prosperity. This holds true no matter how much money that state receives relative to what it sends to the Nation's Capitol."

More here.

Full list of how much states get back per dollar sent to Washington here. A whopping 32 states get more back then they send in, with good, goddamn great New Jersey getting the rawest deal by pulling a measly 55 cents back for every buck sent DC's way.

Former Reasoner Matt Welch gives a high five to New Mexico Gov. Bill Richardson here.

NEXT: Meanwhile, in the Moussaoui Trial...

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  1. I’m sorry, but the metric seems to be way off here because one would expect richer states to give more to the feds in income taxes and therefore get disproportionately less back. So what you posit as the effect is really the cause.

  2. When a couple million bucks worth of explosives is fired off in one of the Air Force’s testing sites, does the value of the ordnance get counted as money the feds “give back” to New Mexico?

  3. When a couple million bucks worth of explosives is fired off in one of the Air Force’s testing sites, does the value of the ordnance get counted as money the feds “give back” to New Mexico?

    Ummm…sure…just like all the bombs dropped on Iraq are charity for the Iraqi people.

  4. Isn’t this a little bit of reverse causality going on here? Perhaps New Mexico gets more government money because it is poorer and needs more government money. That is supposed to be the whole point of the federal welfare state is to take money from the well off and give it to the less well off. Given that goal, it makes perfect sense that a state like New Mexico with a small population, small industrial base and a high percentage of dreadfully poor Indians and immigrant Mexicans would get more federal dollars than a state like New Jersey, with a large heterogeneous population, lots of wealthy people, and a large industrial base.

    The implication here is that because New Mexico is poor and receives a lot of federal aid, that federal aid is not helpful. That doesn’t necessarily follow at all. It could be that New Mexico would be a lot poorer if it didn’t get the federal money. If the country didn’t have federal programs there might be a much greater difference in the incomes of poor and rich states than there already is. I am not saying that is necessarily true. I am saying that we cannot tell one way or another from the mere fact that some poor states get more federal money than rich states. This is a classic case of misusing statistics.

  5. isn’t it interesting that the all the top dollar return states are all RED and the lowest return states are BLUE?

  6. John,

    You’re focusing on the other half of the equation from what I looked at. Either way, as we all know, correlation is not causation.

    OTOH, Joe,

    I would think the cost of the ordnance would count as “money given back” to the state where it was manufactured, not where it was blown up.

  7. Dammit…I pulled a Jennifer.

    Oh, and joe, I hope you really weren’t expecting that statement to be taken seriously. “give back” is relevant to the location of purchase, not where the supplies are used.

  8. Native NMexican here.
    This shows a profound lack of understanding of why NM is poor. Fyodor is on the mark. Seems like NM is moving up though…44th, not bad for a state with the highest poverty rate in the country (I think we tie with Miss).

  9. Eh4n,

    That is because wealthy people, especially people who inherit wealth tend to be liberal. The dems are loath to admit it but its true. Take out the black vote and the pattern is even more striking.

  10. Science,

    A lot of the reason why New Mexico is so poor in the aggregate is the feds insane policies regarding Indian reservations. Take out the Indian reservations and I bet New Mexico is a lot higher than 44th on the list.

  11. You’re neglecting the fact that New Mexico is in the path between Texas and California. The freeways and other infrastructure simply have to be maintained whether or not New Mexico can afford it. This is the logic of federal funding in the first place. New Mexico and, for that matter, the Dakotas, are poor, lightly populated states where federal funding of infrastructure is a much more noticeable part of the economy even though, on a land area basis, it isn’t much greater than Texas.

    Add to that the bombing ranges and military test grounds that are placed, quite logically, in the most thinly populated areas they could find, and the fact that New Mexico is a border state, and you have a recipe for heavy government subsidy. Sure, Texas is a border state, too, but it’s got a hell of a lot more people. It pays more in taxes. The effects of federal funding are spread out over a larger population. It is, as John pointed out, a misleading statistic.

    I would argue that Mississippi has far less of an excuse for its position on the list. Virginia is in its place because of its proximity to DC. West Virginia is there because of the valiant efforts of Robert Byrd. The others? Mostly low-density states or places with a heavy military presence.

  12. John,

    Take out the reservations, and you don’t really have much left.

  13. Lots of red states get more than they give.

    And people wonder where the Republican message of small government went?

  14. As one of the few who actually lives here in the Land of Enchantment let me add one salient point:

    It is difficult for us to grow when most of the state is federally owned or separate sovereign indian nations. If you take out all the airbases, nuclear (defence) industry, the national forrests, the national monuments (e.g. archaeologic treasures) and the nations there really aint a lot of land left.

    So sure we get lots of federal dollars, but that’s largely because the Federal Government owns most of the state. And a large part of what it does not own it subsidizes (the reservations)

    Me, I still pay way too much in taxes and get nothing in return, thanks

  15. I hate to once again be the Bearer of Inconvenient Facts, but New Mexico went for Bush in ’04, albeit by a small margin. So based on the results of the last election, it’s technically a “red” state, just like Colorado and Texas.

    And I’m very skeptical of the assertion that Colorado’s gross state product is higher than Texas’. They must be putting it in per captia terms, because there’s no way a state of some 4 million people would have a larger overall economic value than a state with 30 million people.

  16. John,

    Would love to see any demographic info you have to back that claim up. All the studies I’ve ever seen indicate that wealth correlates with being Republican (though those studies may be outdated, i.e. predate GWB). Anecdotally, I live in New York and work at a large investment bank you’d know the name of, and most of the people I work with (the more senior, the more true) tend to be Republicans. OTOH, most of the people I hang with outside work, who are generally employed in marketing or advertising or the arts, are Democrats. Weakness of anecdotal evidence acknowledged, but thought I’d add it.

  17. Okay, strike that last comment, I figured out the context.

  18. Brian24/John,

    Regarding relative wealth of Dems vs Repubs, a study would be needed to determine this, but my guess is that Democrats are more highly represented in richer demographic areas, such as urban versus rural, but that Republicans are richer than Democrats within the same demographic.

  19. As a professional economist and statistician, this type of article infuriates me… people will point to nonsense like this as proof that “statistics can be made to prove anything”. But, the numbers aren’t wrong here – what’s wrong is the obviously abysmal IQ of the moron who wrote this piece.

    These “give back to the Feds” articles are all complete idiocy.

    New Mexico recieves a lot of federal money per capita because it is a poor state, with lots of retirees, with military bases, a large federal research facility, lots of federal lands, lots of Indians, and a low population density. None of this is caused by federal money – these are the causes of federal money…

  20. Brian24,

    Statisticians and political scientists at Columbia U. recently published a paper (pdf) on the subject. They were trying to explain the paradox of why high-income voters tend to vote Republican (people with incomes over $200,000 went 60% for Bush) while states with a relatively high per-capita income tend to vote Democrat. Their main conclusion: “In poor states, rich people are much more likely than poor people to vote for the Republican presidential
    candidate, but in rich states (such as Connecticut), income has a very low correlation with vote preference.”

  21. Garth,

    I wonder if that’s why Virginia and Hawaii are so high on the list as well–both states with a strong military and federal government presence.

  22. I can tell you why Virginia is on the list — Northern Virginia has a huge number of federal facilities (DC overrun), the Hampton Roads/Norfolk area sports the world’s largest naval base, there are a couple of army bases, Quantico, training facilities for federal law enforcement and intelligence agencies, etc. It’s not like we’re shaking down New Jersey at gunpoint to pay for a huge amount of poor people (like NM or Miss.).

  23. tijjer,

    I am fairly certain you are correct.

  24. High-income states are also high-cost of living states. It’s useless to pretend someone earning 55% of median in Massachusetts is rich, like someone earning the equivalent dollar value in Alabama.

    Also, state-level data is useless for this stuff. Ever been to Western Massachusetts? You can buy a house for $100k, but you have to bring your own job.

  25. isn’t it interesting that the all the top dollar return states are all RED and the lowest return states are BLUE?

    Well, if we’re counting military base expenditures as “money going to states”, there are an awful lot of military bases in red states. (And they pitch a royal fit whenever you try to close one down…)

  26. I’ve known a few rich people who could be classified as “poor” since most of their income comes from their parents or off their investments. Not a very good measure of wealth. It’s also one reason why a consumption tax would be superior to the income tax.

    Also, the money received per money taxed means very little. What people are really concerned about is who gets the pork. Maybe somebody should do a study that controls for military spending, federal lands, retirees, etc.

  27. When a couple million bucks worth of explosives is fired off in one of the Air Force’s testing sites, does the value of the ordnance get counted as money the feds “give back” to New Mexico?

    Joe, as a Native New Mexican, and long time resident (I am no more), as much as I hate to say it… the answer is ‘yes’. In southern New Mexico, the primary employer is, well, the Federal Government- or subcontractors thereof. By and large, most middle class incomes of the entire region are based upon jobs at military bases, facilities, or industries in support of said industries. Yours truly had his first snot-nosed slightly post teenage job at the infamous HELSTF site in the late eighties. HELSTF was the High Energy Laser Test Facility. I’d tell you what I did there, but then I’d have to kill you.

    Federal jobs are EVERYWHERE. Working in New Mexico is a bit like doing jury duty in Seattle.

    Q. What’s the most common question asked of me while sitting in the jury pool?

    A. What do you do for King County?

    Everyone or at minimum, everyone knows someone, or is connected to someone, somewhere, working for, or benefitting from federal largesse. It’s like a way of life there. All because they’re shooting missiles, firing lasers, blowing stuff up, catching stuff on fire, creating UFO scares etc.

    It’s no accident that NM is the UFO scare center of the universe, BTW.

  28. fyodor:
    I would think the cost of the ordnance would count as “money given back” to the state where it was manufactured, not where it was blown up.

    Not necessarily. It takes HUGE support and logistical staff to actually blow something up. In fact, the building of the device is the easy part, when it comes to the fed. The housing, maintaining and operating part of the device is a huge endeavor, requiring engineers, safety teams, military police, secure facilities, a large tract of land where no one would ever want to live (Tularosa basin), motor pools, supply coordinators, warehouses, security guards, construction personnel. For every dollar building a device, ten times that (I have no proof of this, of course) is spent putting it to use.

  29. As Garth pointed out, NM is mostly federally owned. Alaska (number 2 on the list) is the same way. Only 1% of the state is privately owned. The vast majority is Federal, State or Native Corporation owned. Heck, we only have 600,000 residents and a good 1/4 of those are below the poverty level (don’t pay federal taxes). I am suprised we don’t get more federal funds. Perhaps we Alaskans should talk to our congressman about getting a bridge built or something.

  30. Paul,

    Why is it that all NM end up in Seattle eventually.
    I think it is to get away from the sun… but damned if I don’t miss the Chile…

  31. My sinister plan for southern New Jersey’s secession into an independent country becomes stronger…

    – Josh

  32. That is because wealthy people, especially people who inherit wealth tend to be liberal.

    Bwah-ha-ha! Maybe in Hollywood, but nowhere else. And even in Hollywood, they were very likely liberal long before they became rich. Most actors have a theater background, remember.

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