Time to Close, Sell or Restructure Low Performing States

We’re told that, with President Trump as our nation’s CEO, America will now be run more like a business. Well, the first thing our new CEO should do is stop the hemorrhage of cash in money-draining operations.

One of our worst performing states is the very Republican (in 2016, Trump got 62.5% of its votes) State of Kentucky. It’s an embarrassing drag on our nation’s budget and economy. WalletHub identified Kentucky in 2017 as the state most dependent on the federal government, and a 2007 Tax Foundation Study (examining the period 1985-2005) found that Kentucky consistently received more from the federal government than it paid in. The numbers in Kentucky are dire.

In fiscal 2016, which ended last Sept. 30, the federal government collected $34 billion in taxes from Kentucky but spent $89 billion there — resulting in a net benefit to Kentucky of $55 billion (about $12,500 for each person in that state). By contrast, the federal government collected $109 billion in taxes from Massachusetts in 2016, but spent only $62 billion there. That’s $47 billion less than it paid in taxes.

To Make America Great Again,we can’t afford any namby-pamby political correctness — we need to tell it like it is. Low productivity states (subsidized by our more productive states) need to carry their own weight or go, and Kentucky looks like a good place to start America’s transformation. Given the GOP’s commitment to running America like a business, Kentucky shouldn’t get a dime more from the federal government than it pays to the federal government in taxes. If Kentucky can’t live on a budget, it should be shut down. That’s the way we’d do it in the private sector.

Let me spell this out in more detail. Kentucky’s median household income is just $44,000 a year, while the national median household income is $54,000 a year. In high performing Massachusetts, it’s about $69,000 a year. The portion of Kentucky’s population living in poverty and presumably using federal programs (such as food stamps) is above the national average and more than 50% higher than in Massachusetts. As a consequence, given our progressive tax system (higher income people pay more in federal income tax), Kentucky pays less in taxes. But since it has more poor people as a percentage of the population, it takes more money from the federal government in safety-net programs.

Kentucky’s not only an economic loser, its leading representatives in Washington are disruptive and arrogant. Kentucky Sen. Mitch McConnell recently used his position as majority leader to silence Sen. Elizabeth Warren (who represents highly productive Massachusetts) during a Senate debate.

In the private sector, the representative of an under-performing unit (such as Kentucky) would never order the representative of one of the most successful business units to sit down and be quiet (and if he made such a blatant faux pas, he’d be forced to apologize or resign). If the GOP is truly committed to running America like a business, it should demand McConnell’s apology or resignation for his outrageous treatment of Warren. Given how much money Kentucky sucks in from high performing states like Massachusetts, an apology is the least McConnell can do.

Leaving aside that kerfuffle, McConnell and fellow Kentucky Sen. Rand Paul often pontificate about the virtues of small government. But they aren’t interested in getting their state off the federal gravy train, or explaining to Kentucky voters just how much their state is dependent on the federal government. As Republican Governor Chris Christie of New Jersey said in a 2015 GOP presidential debate: “If Senator Paul wants to start looking at where he’s going to start to cut spending … maybe he should start cutting the pork barrel spending that he brings home to Kentucky.”

 

Kentucky isn’t our only under-performing, money-draining state. GOP stalwarts such as Alabama, Mississippi and South Carolina are additional examples. Whatever solution we find for Kentucky should also be rolled out to these other low-productivity states.

Further, if the GOP in Congress is serious about shrinking government, it shouldn’t be led by those whose states would be devastated by such shrinkage. As a first step, the Senate’s GOP members should remove McConnell as their majority leader. The private sector wouldn’t put a drug addict in charge of a pharmacy. Putting a representative from Kentucky — a state addicted to federal money — in charge of running the Senate seems an equally dubious choice.

The U.S. government is dysfunctional (despite the GOP’s control of the House, the Senate and the White House) for a lot of reasons (such as the president’s random tweets). But one major reason is the Republican Party’s hypocritical grandstanding — about wanting smaller government and running America like a business — when the GOP, in fact, needs big federal government programs (including military, Medicaid, food stamps and farm subsidies) to keep many of its most important supporters afloat. If the GOP really believes in the snake oil it has been selling us, it’s time to show it. And if not, it’s well past the time for the GOP to stop its empty ranting, which as Shakespeare would have said, increasingly sounds like a tale told by an idiot, full of sound and fury, signifying nothing.

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