July 10, 2020

The Red State/Blue State Fiscal Mythology

Guest Opinion
By Amy Kerr Hardin | May 30, 2020

The last few years, and especially the past two months, is proof-positive that Republicans are the party of fiscal recklessness. There has been a persistent myth that they are the party of balanced budgets. Cutting the pork barrel is their self-generated myth. Republican voters, under the constant drumbeat of Fox News, have dug deep into this obvious falsehood. The GOP and their corporate handlers are counting on that continued ignorance.

As it turns out, those “tax and spend” liberals are the true fiscal wizards, often finding themselves in the position of cleaning up Republican economic boondoggles. (Thanks, Obama.) The GOP is like the kid brother who’s constantly picking fights and needing the mature sibling to get them out of the mess they created.

The saying “GOP stands for Greed Over People” sure does seem to fit at times. Republicans, please stop pretending you are fiscally responsible. Your elected officials are an economic train wreck every time.

Yet Republicans have mastered the art of projection by promoting the myth that Republican red states subsidize Democratic blue states — a claim that’s been thoroughly debunked. The Associated Press Fact Check, a shared effort of AP journalists around the globe to highlight falsehoods and ensure accountability in journalism, found the truth to be the exact opposite. The AP determined that blue states send more money to the federal government than they receive in return. Red states, it turns out, are the subsidy sponges.

Treasury Secretary Steven Mnuchin has done his part in propagating this myth, saying “We [Republicans] are getting the federal government out of the business of subsidizing states. That’s going to impact high-tax states.” That’s hogwash; AP Fact Check found that blue state taxpayers typically provide two to three times more in federal tax dollars compared to red states. Additionally, red states nearly double their tax haul in terms of less tax paid and a higher federal subsidy rate. 

Another piece of the mythology built up by Republicans is that wealthy people, the supposed “job creators,” will leave high-tax states in favor of low-tax red states. Again, a bunch of  malarkey invented to justify tax cuts for the rich. Sociologist Cristobal Young posits in his book “The Myth of Millionaire Tax Flight” that wealthy taxpayers do not seek residency in lower tax states; they prefer to not live in impoverished states. 

Tax policy considerations that lawmakers on both sides of the aisle should embrace should support strong education and improved employment opportunities to stave off the brain drain of young people seeking a better life elsewhere. Corporations weigh quality of life issues when deciding where to set up camp. They want to attract those bright young minds. 

Another bit of red-state Republican propaganda is that they are all about “small government.” Agreed, but only because they have slashed their budgets to hand out tax breaks for the wealthy. Red states have a greater portion of their populations living in poverty with little or no social safety nets, leaving their state houses begging the federal government for assistance. In other words, blue states are subsidizing red states.

In an effort to showboat their supposed disdain for big government, many red states turned down federal Medicaid expansion dollars, a decision that has turned out to be disastrous in the time of the pandemic. Why did they reject federal dollars? The money was meant to aid those struggling to pay for healthcare; it wasn’t a benefit to the rich. So why not take it?

Now, those states have not only lost health insurance for those most in need but also saw many of their hospitals shuttered due to the lack of affordable healthcare. In all, 14 Republican-led states have left their citizens in the lurch. 

Prior to the pandemic, rejecting Medicaid expansion dollars primarily affected poor people. But now, middle-class workers who are losing their jobs and the ability to afford insurance is changing the demographics of the pool of uninsured and under-insured. The Urban Institute estimates that up to 43 million Americans will lose their healthcare. States that lack Medicaid expansion will experience a 40 percent decrease in insured citizens. 

The most infamous example of red-state fiscal irresponsibility occurred in Kansas. It should serve as a lesson to Republicans who are overzealous in passing tax cuts for the rich. Republican Gov. Sam Brownback led Kansas over the fiscal cliff with what was termed the “red-state experiment.” 

In 2012 and 2013, Kansas enacted tax cuts that primarily benefitted the wealthy. This caused a sharp decline in state revenues and led to a series of draconian spending cuts. Republicans gutted the budget in favor of appeasing millionaires. Things rapidly went from bad to unbearable. The situation became so dire that, in 2017, the Republican legislature overturned the tax cuts it had previously made and overrode the governor’s attempt to veto that repeal. 

Brownback used the same GOP talking points that Trump rolled out to support his massive tax cut. The governor sold his plan as “our new pro-growth tax policy,” claiming it “will be like a shot of adrenaline into the heart of the Kansas economy.”

It wasn’t. 

The Sunflower State became the poster child for the failure of regressive tax policies. Rather than implementing tried and true fiscal policies (like increased minimum wage and paid-leave benefits), which research indicates does stimulate economies, Brownback went with the deeply flawed Reagan-era mantra of trickle-down economics.

You’d think, by now, the average Republican voter would figure out they’re getting the fuzzy end of the lollipop.

Nope.

Amy Kerr Hardin is a retired banker, regionally known artist, and public-policy wonk. You can hear and learn more about the state of Michigan politics on her podcast, www.MichiganPolicast.com.

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