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"Reckonings - Muddled in the Middle"

Note that this was written BEFORE the best day of bush's life, the day he refers to whenever he wants to pass some particularly repulsive legislation...

April 11, 2001

Muddled in the Middle

By PAUL KRUGMAN

Last year's election revealed a nation sharply divided by geography. The "heartland" — the largely rural interior — went solidly for George W. Bush; big metropolitan areas went against him. The Electoral College gives states with small populations disproportionate weight, so Mr. Bush now resides in the White House even though Al Gore got more votes.

But what were those heartland citizens thinking when they cast their votes? Were they voting for the right to bear arms and the defense of traditional values, in full awareness that they would pay a heavy price in dollars and cents? Or were they misled by their politicians, who didn't tell them that when Mr. Bush promised to cut taxes and reduce spending he meant tax cuts for the urban elite and reduced spending on farmers? For among the most striking features of the budget Mr. Bush unveiled this week is the way it punishes the very people whose votes (as opposed to whose campaign contributions) put him in power.

Actually, this was inevitable — because the heartland is a major beneficiary of "big government." The Statistical Abstract of the United States reports the difference between the amount the federal government spends in each state and the amount of taxes it collects in that state. "Put another way," says the Statistical Abstract, "each state indirectly subsidizes or is being subsidized by the other states." And it turns out that states that voted against Mr. Bush are mainly subsidizers, those that voted for him are mainly subsidizees.

For example, Montana is Bush country — and a big net recipient of federal money: $2,400 per resident in 1998. New Jersey made net payments of $2,000. The main reason for the difference is that Montana is much poorer. This means that federal income tax payments per Montana resident are only about a third what they are in New Jersey. Meanwhile Montana benefits from federal programs — not just Medicare and Social Security, but also farm aid and poverty relief (one resident in six is below the poverty line, almost twice the figure in the Garden State).

Admittedly, Montana may not really be as badly off as the dollar numbers suggest. In New Jersey a family of four with an income of $20,000 considers itself poor; in Montana such a family might feel that it is at least clinging to middle-class status. Still, Mr. Bush proposes to give both families the same tax cut: zero.

But the heartland will suffer from the spending cuts needed to make a huge tax cut fit into the budget, even with the administration's highly creative accounting. On Monday Mr. Bush proposed a cut of more than 7 percent in the budget of the Agriculture Department — more than 10 percent in constant dollars. And that's only for next year. His plans call for zero real growth in per-capita spending for a decade, which inevitably means that each year will see severe further cuts in many programs. The heartland, which is heavily subsidized by the rest of the nation, will necessarily be a major net loser.

So did heartland voters understand this? Or were they misled by politicians who put party loyalty above the interests of their constituents?

The most conspicuous case of misleading salesmanship involves the estate tax. Farm groups and heartland politicians like Senator Charles Grassley of Iowa have campaigned for repeal, justifying their position with tales of family farms broken up by the need to pay tax bills. But the story of the family farm sold to pay the estate tax turns out to be a rural legend — nobody has been able to find an actual example. And Iowa pays 40 percent less estate tax per capita than New Jersey.

So go figure. Mr. Bush is determined to push through a tax cut whose prime beneficiaries are highly paid executives and heirs to estates bigger than $5 million. Such people are a small minority everywhere, but they are thickest on the ground in places like the New York metropolitan area, and rare indeed in the parts of the country that put Mr. Bush in power. Meanwhile the farm states will suffer disproportionately from spending cuts.

At Washington's Gridiron dinner Mr. Bush joked that "you can fool some of the people all of the time, and those are the ones you have to concentrate on." Or maybe it wasn't a joke; maybe he was thinking about rural America.

(As published in the NY Times.)