A former South Carolina governor accusing Illinois of seeking a federal handout is pretty rich. But that’s what Nikki Haley did after reading that Gov. Pritzker wants to use a quarter of the $41 billion he’s asking for in coronavirus aid to shore up our state’s pension fund.
“A 5th aid package should not bail out states that have recklessly spent and taxed their way into oblivion,” Haley tweeted. “Illinois lawmakers are seeking tens of billions in taxpayer funds to deal with the state’s looming pension debt — that has nothing to do with the COVID-19 pandemic.”
In fact, few states are more dependent on federal largesse than South Carolina — and few are less dependent than Illinois.
When WalletHub looked at how much money each state receives from the federal government compared with how much it pays in federal taxes, South Carolina was the runaway winner, getting back $7.87 for every dollar they put in. Illinois gets back less than a dollar. South Carolina’s net federal spending per resident is plus-$5,008. Illinois’s is minus-$364.
Illinois is one of 14 “donor” states that contribute more money to the federal government than the federal government contributes to us. Overall, South Carolina ranks 10th in dependence on the federal government. Illinois ranks 46th.
Yet President Donald Trump piled on, tweeting “Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help?”
Why are Haley and Trump accusing Illinois of attaching itself to the federal teat — and why are they making it a partisan issue?
They’re attacking the Blue State Model, which political commentator Walter Russell Mead described as constituting high wages, generous benefits, high levels of unionization, and robust public spending. As he wrote in his essay, The Once and Future Liberalism:
One large group, mainly “blue state” self-labeled liberals who think the blue model is the only possible, or at least the best feasible, way to organize a modern society, wants to shore it up and defend it. This group sees the gradual breakup of the blue social model as an avoidable historical tragedy caused by specific and reversible policy errors. Supporters of the model point to the rising inequality and financial instability in contemporary American life as signs that we need to defend the blue system and enlarge it.
Others, generally called conservatives and often hailing from the “red states,” think the model, whatever its past benefits or general desirability, is no longer sustainable and must give way to an earlier, more austere but also more economically efficient pre-“big government” model. Often, backers of this view see the New Deal state as a great wrong turn. Their goal is to repair the errors of the 1930s and return to the more restrictive constitutional limits on Federal power from an earlier time.
Throughout his presidency, Trump has tried to undermine the Blue State Model. He signed a bill limiting the state and local tax deduction on federal income taxes to $10,000. It was seen as an effort to force blue states to lower their taxes, or risk losing high earners to red states. New York, New Jersey, Connecticut, and Maryland sued to overturn it. Reps. Lauren Underwood and Sean Casten of Illinois introduced a bill to raise the cap to $30,000. Both efforts failed.
If Illinois is the epitome of the Blue State Model, South Carolina is the epitome of the Red State Model. The Palmetto State’s gasoline and property taxes are among the lowest in the nation, and its unionization rate is the lowest. As a result, South Carolina’s per capita income of $24,596 is 44th in the nation.
Blue states are more likely to be donor states because of their high income levels. Red states are more likely to be taker states due to their high poverty levels, with more of their residents qualifying for federal programs like the Supplemental Nutritional Assistance Program, or food stamps.
As The Atlantic noted, “The reddest states have exceptionally high poverty rates and thus receive disproportionately large shares of federal dollars. Through a variety of social programs, the federal government disburses hundreds of billions of dollars each year to maintain a ’safety net’ intended to help the neediest among us.”
In essence, red states use money from blue states to support low-wage economies, which along with a low tax rate helps them to lure businesses away from blue states.
South Carolina complains that Illinois is looking for a bailout to pay public pensions, which help ensure a strong middle class. Maybe we should complain that they’ve been taking a bailout for years to ensure a large lower class.