How Republican Craziness Is Undermining the South’s Massive Keynesian Stimulus

One of the great ironies of U.S. politics is that the region which is the most ‘fiscally conservative’ and which opposes government spending–the South–is actually the largest beneficiary of federal deficit spending:

In many years, the South possesses much of the deficit, while the rest of the U.S. either has a smaller deficit or is, in fact, running a surplus…

The South almost always experiences a significant federal stimulus, while the rest of the country usually experiences a federal retraction. When the South does go into surplus, the rest of country has a much larger contraction of federal spending….

The South has grown rapidly because that’s where the federal money is.

The irony of the situation should not be lost on anyone: the Southern congressional delegation (including many nominal Democrats throughout that time period) always argued for fiscal rectitude, even as the South was the beneficiary of massive deficit spending, while the rest of the supposedly profligate U.S. was often running surpluses.

Uncharacteristically, the white nationalist and regionalist party known as the Republican Party has undergone full-immersion baptism in the Kool-Aid and is now cutting off billions of dollars to their states (boldface mine):

Obamacare is many things. One of which is an interesting natural experiment in determining whether states shooting themselves in the foot makes it harder or easier to walk than states that don’t shoot themselves in the foot….

When PPACA passed in March 2010, the basic cash flow model would have seen increased taxes (income tax surcharges, Cadillac plan taxes, medical devices, tanning tax etc) from richer and usually bluer states as well as Medicare Advantage clawbacks from a variety of places. The Medicare Advantage clawbacks would apply to everyone but areas with higher Medicare Advantage utilization would see greater net reductions. This money, either new from taxes or reprioritized from Medicare Advantage would then go pay for either Medicaid expansion or coverage/cost-sharing subsidies. Regions with very low pre-PPACA Medicaid eligibility thresholds and high uninsured populations such as Mississippi would see more new Federal money than states with high Medicaid thresholds and low uninsured populations like Massachusetts. Massachusetts would pay more and proportionally get less back.

There are two natural experiments in action now and a future potential experiment in cash flow modeling from a regional economic activity perspective… Unsurprisingly states that expanded Medicaid are seeing uninsured rates drop dramatically as well as more robust local economy as they are now receiving an “export” cash flow of .5 to 1% of gross state product from the federal government. That will spin out to four or five local jobs in “secondary” industries from each job in healthcare that is being created or sustained by Medicaid expansion. Non-expansion states are seeing cash outflows in increased taxes or lower Medicare Advantage payment rates without any corresponding cash inflow. Their hospitals are still seeing high numbers of uninsured patients as other compensating funds have been cut. They are in trouble.

Someone needs to tell Republicans that you’re not actually supposed to govern according to the rhetoric used to gull the rubes. I wonder what their campaign contributors think about all of this….

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5 Responses to How Republican Craziness Is Undermining the South’s Massive Keynesian Stimulus

  1. Pingback: ‘Republican Craziness Is Undermining the South’s Massive Keynesian Stimulus’ | The Penn Ave Post

  2. David says:

    Yes, knowledgeable leaders usually do the “right thing” in spite of the rhetoric surrounding the issue. That is, when they understand the difference between the rhetoric and the reality.

  3. kaleberg says:

    People resent their dependency. The harder they suck the teat, the more they hate mommy.

  4. Lafayette says:

    Very nice discourse, though a bit confusing. And why confusing?

    Because it is ALL verbiage without a single ounce or example of data backup. I.e., the real numbers that would support the prime argument that the south is a major beneficiary of Federal funds.

    I suggest you do your “homework” first, and your blogging secondly …

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