In Praise of California Part 1

This article discusses the bad mouthing of California during the fire storm. Some politicians masquerading as Senators and Congressional Representatives do not want to help California. The claim being they bought this fire storm on themselves. So, the politicians do not want to “pay in $dollars for the repair of California. $83 billion in 2022 was paid out by California. They do not or have not been the recipient of hurricanes each year. There is a reckoning there somewhere.

In Praise of California is a part of New York’s Balance of Payments with the Federal Government (2024) | Rockefeller Institute of Government report from here Who Gives and Who Gets?

AB: This is a bit confusing as there is more to the report than what Prof. Krugman reveals which is why I did a part 2.

In Praise of California, Krugman wonks out

It has its flaws — what place doesn’t? — but it plays a big role in America’s greatness.

One of the unwritten rules of American politics is that it’s OK to sneer at and smear our big cities and the people who live in them, while it’s an outrageous act of disrespect to suggest that there’s anything wrong with the Heartland. And many people believe the smears; visitors to New York are often shocked to find that one of the safest places in America isn’t the hellscape they were told to expect.

These delusions of dystopia are sometimes funny, but they can have real consequences. As you read this, much of America’s second-largest city is an actual hellscape. But many politicians, from the president-elect on down, are showing zero sympathy, insisting that California — which in its own way gets trash-talked as much as New York —somehow brought this disaster on itself by being too liberal, too woke, or something. And this lack of sympathy may translate into refusal to provide adequate disaster aid.

Somehow I doubt that Florida will get the same treatment when (not if) it has its next big natural disaster. (The Biden administration responded with complete, unconditional support to regions hit by Hurricane Helene and other storms, although that hasn’t stopped Republican politicians, like Governor Bill Lee of Tennessee, from lying and claiming that aid was delayed.)

At a fundamental level the case for helping California get through this is moral: Americans should help Americans in their hour of need. But this also seems like a good time to remind people just how much the Golden State contributes to American greatness.

Before I get there: Yes, California has problems, some of them big. There are pockets of social disorder, although the fact that so many luxury homes are burning tells us that many people who could live anywhere find greater Los Angeles a highly desirable place to be. More important, California suffers terribly from NIMBYism, which has led to grossly inadequate home construction, crippling housing costs and a lot of homelessness.

But California is nonetheless an economic and technological powerhouse; without it America would be a lot poorer and weaker than it is.

Most narrowly, at a time when Donald Trump is making nonsensical claims that America is subsidizing Canada via our bilateral trade deficit, California is literally subsidizing the rest of the United States, red states in particular, through the federal budget.

The Rockefeller Institute regularly calculates states’ balance of payments — the difference between the amount the federal government spends in a state and the amount the state pays in federal taxes. Here’s what per capita balances looked like in 2022, the most recent year available (blue means a state receives more than it gives, orange the reverse):

California paid in a lot more than it got back — $83 billion in total. So did Washington state and much of the Northeast. AB: Eleven states paid out while the rest were takers. California paid out the most at $83107 in 2022 when Covid was still around.

Most red states were in the reverse position, getting much more from DC than they paid in return. And yes, it’s ironic that states that are so dependent on transfers from other states — if West Virginia were a country, it would in effect be receiving foreign aid equal to more than 20 percent of its GDP — vote overwhelmingly for politicians trying to eviscerate the programs they depend on.

Even some Republicans have noticed how blue states subsidize red states — here’s a New York Republican lashing out at South Carolina.

Now, for the most part this cross-subsidization doesn’t reflect political favoritism. Remember, the federal government is an insurance company with an army, and while military spending has some regional tilt, health and retirement spending per capita across most states is roughly the same. I’m not going to redo the numbers, but here’s a chart I made a few years back, with 2016 data. It shows that the amount of federal spending per capita in a state is almost unrelated to the state’s income, but federal receipts are much higher in richer states, so rich states subsidize poorer states:

California, in particular, pays a lot in federal taxes because it’s so much richer and more productive than most of the rest of America. Here’s real GDP per capita in 2023 for selected states and groupings of states:

I included Ohio because on Friday an Ohio congressman declared that California shouldn’t receive disaster relief until it changes its forestry management (are there forests in Los Angeles?) He probably doesn’t know that Ohio is, in effect, heavily subsidized, year after year, by California.

High productivity in California (and New York, also included) plays a significant role in making America richer; the nation excluding these powerhouses would have about 6 percent lower GDP per capita.

California makes an especially large contribution to U.S. technological dominance. As I noted a month ago, 8 of America’s top 9 technology companies — all of them if you count pre-Cybertruck Tesla — are based either in Silicon Valley or in Seattle.

And while Hollywood doesn’t dominate films and TV the way it once did, Los Angeles still plays a major role in America’s cultural influence (and still generates a lot of income.)

So how should we think about the disaster in Los Angeles? As far as I can tell, there’s nothing either the city or the state could have done to prevent it. There’s a good case to be made that we should never have allowed a huge metropolitan area to emerge in a place that was vulnerable to Santa Ana-fed firestorms even before climate change vastly increased the risks. And of course we should have begun acting to limit climate change decades ago.

But this is all hindsight, with no relevance to where we are now — which is that an American city and an American state desperately need all the help we can deliver. It shouldn’t matter whether they’ve earned it. If the United States of America doesn’t take care of its own citizens, wherever they live and whatever their politics, we should drop “United” from our name. As it happens, however, California — a major driver of U.S. prosperity and power — definitely has earned the right to receive help during a crisis.

Unfortunately, it looks all too possible that essential aid will be held up or come with onerous strings attached. If so, shame on everyone responsible.