A stopped clock is right twice a day, as the old joke goes, you just have to keep looking at it. Fox News is running with a story about how the states hardest hit by the stimulus bill get the least money. They are right; but they don’t tell you why, really. And they don’t exactly make sense in many of their measurements. This is sort of what you would expect from them. But let’s answer their analysis with the unasked question: "Why?"
Even after accounting for other factors, each $1,000 in a state’s per capita income means that the state got $21 more per capita in stimulus funds. With a spread of almost $38,000 in per-person income between the top and bottom states, this has a sizable impact. High-income states get considerably more stimulus money.
First, this is a bad question. Per capita income isn’t a measure of how hard a state is hit by the recession, it is entirely possible that higher income states are hit worse in a downturn than lower income states. People who have farther to fall, have harder to fall, too. Many high income states are markedly more cyclical, which is not unexpected. The real question is which states have seen the largest falls in per capita income; that’s a better measure. Second, the stimulus bill, like the one passed in 2008 and the three between 2001-2003, was — stop me if you have heard this one before — driven by reductions in income taxes. And as you would expect, lowering income taxes sends more money to states with higher per capita incomes and lower unemployment rates. That’s what the ideology of "giving money back to the taxpayer" means. The entire stance of the right wing was that giving money to people who aren’t working is to give money to undeserving people. Fox is complaining, no, bitching, that the people they wanted to give money to are the people who got the money.
Note to Fox News: income tax cuts don’t help the unemployed, and federal programs that are adjusted by state income go to states with higher income. After pushing for a Republican stimulus bill, Fox News is upset that we got a Republican stimulus bill.
To understand the reality of why unemployment statistics and per capita income are not good measures, let’s take a look at two charts. The upper one, from the Bureau of Economic Analysis (that is the Commerce Department) shows the per capita income by county in the US on the eve of the recession, in 2007. The second one is an average of the unemployment rate over the last year by county. What is obvious from the unemployment graph is that there is a pole running up the center of America, and that pole should be obvious to any student of American Presidential politics; it is the Western wing of the Republican Coalition, the pole of states that Bob Dole carried in 1996 and that McCain fought to hold in 2008. The other bright spots are the defense belt in New England, the oil patch, and the Federal District.
The per capita graph shows that on the verge of the recession those hotspots of income were closely connected with cold spots; that is, the people who have, and the people that work for them but are not close to them. When the bottom fell out of the economy the rain came down on people in real estate, and the people who worked for them. The belt in the middle was not, by and large, connected to this economy.
A low unemployment rate means something different in a state with few metropolitan regions and little job growth. In such areas, if you are long term unemployed, you are moving out. This is happening in the less densely populated areas of California as much as in the less densely populated states. It is a story that is as old as Rome: the people in rural areas heading to the cities looking for work.
What Fox News didn’t tell people was that these two graphs show the split in the Right in America. The Republican coalition has two wings: one which neither participated in the boom, nor is being hammered by the bust. The other is in two pieces. The Southern one, which rode the boom but is being hit very hard by the aftermath; and the Western slope of the Rockies, which is very tied to the coastal Pacific economy and is seeing a land bust to end all land busts. The Republican coalition is, and looks, divided because one of its two centers is in favor of doing nothing except keeping the checks coming from Washington, and it did so with the stimulus. Whereas the South has gone almost completely to the GOP, the Great Plains is more divided in its Senate representation.
Thus, when the time came to cut a deal, the Senators on the fence were not, by and large, from the South; but from the Great Plains, including those states which are, for the purposes of the Senate, annexes of the Plains: Indiana and Maine. The politics is that the senators that are right of center are needed to get to 60 votes, and they extract vast concessions for their vote. They have been given that bargaining power, and they are representing their constituents by using it. One part of the coalition wants radical action, the other, radical inaction.
Obama got caught, or walked into, the trap. First he bent over on the Stimulus bill, now he is forced to defend it, leaving people asking if we need another one; even though this is a political loser, as Mike Lux points out.
If the United States wants to get back on track, the first reality that needs to be addressed is that our present sources of Credit are Japan, which is in a deep funk; China, which does not want the price of resources to rise, and can limit purchases of Treasuries; a pool of the global wealthy; and the oil states. The road to long term recovery lies in manufacturing, which has been in a slow bleed for two generations.
It is also clear that we need to use global warming for industrial policy, and to have a national health system which shifts 5% of GDP from insurance company profits and overhead to universality and expanding health care supply. But Obama is already compromising on both of these fatally, repeating the problem of the stimulus bill: trading away efficacy for political expediency, and then having to defend provisions that the right-wing wrote from the right-wing’s media attacks.
It leaves Obama in the worst of all possible political positions: having to campaign for the support of "centrists," who ought to be his political base.
But then no one could have predicted this.