Why are Some States Poorer Than Others?

Financial FAQs

We have austerity in our own country as a result of the Great Recession, but it doesn’t fall equally on all states. In fact, states suffering the most are mainly those in the South, Midwest and manufacturing rust belts.

We also know most of them are red states, and so the most conservative. Yet those states—the poorest, who have lost the most wealth—also receive the most government benefits.

How can that be so when they have spawned the most conservative politicians who decry government benefits of any kind? Dean P. Lacy, a professor of political science at Dartmouth College, is one of several researchers who have identified this anachronism. Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates, says his research.

Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Professor Lacy found that the pattern could not be explained by demographics or social issues.

But it can be explained by other factors. One of my earlier columns, entitled “The Have and Have-Not States”, identified several of the factors that differentiate the poorest from the wealthiest states in the U.S., as measured by those states with the highest percentage of passport holders. It comes from a study reported on Grey’s Blog, which shows New Jersey with the highest percentage of passports-68.36 percent-to Mississippi with 19.86 percent of its population having passports.

Grey’s Blog

That factor is openness to outside experience, which is a psychological trait that comes from either having overseas’ relations, or a better education, or a geographical proximity to other cultures. Those states with the highest percentage of passport holders had also the most diverse population, were most educated, most politically liberal, and the wealthiest. Of course, wealth seems to go in hand with education, which shouldn’t be surprising.

Graph: Grey’s Blog

But those same states also had the best public services, most creative workforce and best health care outcomes, as well. Conversely, those states with the fewest passport holders were the least educated, least wealthy, even though they garnered the most governmental services.

Paul Krugman has listed 3 reasons in his own blog why the poorest states tend to elect conservative politicians, who certainly have not enhanced the economic opportunities of their own constituents.

“And what these severe conservatives hate, above all, is reliance on government programs,” says Krugman. “Rick Santorum declares that President Obama is getting America hooked on “the narcotic of dependency.” Mr. Romney warns that government programs “foster passivity and sloth.” Representative Paul Ryan, the chairman of the House Budget Committee, requires that staffers read Ayn Rand’s “Atlas Shrugged,” in which heroic capitalists struggle against the “moochers” trying to steal their totally deserved wealth, a struggle the heroes win by withdrawing their productive effort and giving interminable speeches.”

But he doesn’t mentioning scape-goating, a common tactic used by the most conservative politicians to explain why their own constituents tend to be worse off than those in the blue, more liberal states.

Though Christ’s teaching, “Let he among you who is without sin cast the first stone” should be foremost in the minds of conservative church-goers, particularly, conservative pundits have blamed government and high taxes for their ills, when in fact it has been their own Social Darwinist views that has held back development in the red states.

In fact history has shown that it is during periods of regulatory breakdown, when so-called ‘free market’ ideologies prevailed as during the Hoover and GW Bush eras—i.e. when government oversight was at its weakest—that the greatest economic downturns happened. So it should be no surprise that “Political scientists who use Congressional votes to measure such things find that the current G.O.P. majority is the most conservative since 1879,” says Krugman, “which is as far back as their estimates go.”

That was the era of social Darwinism—when the struggle for survival of the fittest prevailed and made sense to Americans, as we were still struggling to settle and civilize our wildernesses.

But the American landscape is far different today. Modern technology has conquered the means of production, so that we suffer from too much being produced rather than too little. What we cannot or will not domestically produce is easily imported. That is the reason for the succession of burst asset bubbles—from the dot-com market crash, to too- big-to-fail financial institutions, to housing—that Americans have suffered through.

So there is no reason for a regression to 19^th century thought and philosophy that the Republican Presidential candidates seem to be yearning for. There is also no reason for the wide divergence of wealth between states. Research has shown the most prosperous states are the most pro-government, most forward-looking, most open to other cultures and new ideas. What economy (or state) can grow otherwise?

Harlan Green © 2012