By Steven Pearlstein December 4 at 9:34 AM
In 2004, the journalist and historian Thomas Frank wrote an insightful and prescient book, “What’s the Matter With Kansas?”, in which he tried to puzzle out why voters in his native state backed Republicans whose policies undermined their own economic interests.
Watching the apocalyptic response to Donald Trump’s victory in the liberal precincts I inhabit, I’m struck by a similar quandary: Why are voters in states that pay a disproportionately large share of federal taxes, and benefit from a disproportionately small share of federal spending, so upset about the prospect of a cut in taxes and federal spending?
Data compiled by the Pew Charitable Trust found that 10 states that receive less than a dollar back for every dollar they send to Washington: Delaware, Minnesota, Nebraska, New Jersey, Connecticut, Illinois, Ohio, Massachusetts, New York and Rhode Island. And here are the states that get more than $2 back for every $1 in taxes paid: Mississippi, New Mexico, West Virginia, Hawaii, South Carolina, Alabama, Maine, Montana, Alaska, Virginia, Arizona, Idaho, Kentucky and Vermont. You don’t have to be a political scientist to see the blue state/red state pattern here. Red state voters may talk a good game about small government and low taxes, but in reality they are socialist moochers.
Rather than wallowing in the hypocrisy of all this, however, Democrats should see the opportunity here — an opportunity to turn the Republican program to their selfish advantage and create the kind of society where people look out for each other and business interests are not allowed to run roughshod over workers and consumers.
After all, if Republicans cut taxes — in particular, taxes on investment income — then the biggest winners are going to be the residents of Democratic states where incomes, and thus income taxes, are significantly higher. Governors and legislatures in those states — home to roughly half of all Americans — will now have the financial and headroom to raise state income and business taxes by as much as the federal government cuts them — and use the additional revenue to replace all the federal services and benefits that Republicans have vowed to cut.
If these states want to maintain the Obamacare insurance exchanges, the low-income subsidies and the expansion of the Medicaid program, they can do that, just as Massachusetts did under Mitt Romney even before passage of the federal law. Their state insurance commissioners can also keep in place many of the Obamacare insurance regulations.
The additional state revenue could also be used to replace cuts in federal funding for public schools, or food stamps, or public transit subsidies. Given the existing imbalance between taxes paid and benefits received by most of these states, there should even be money left over to invest in public college and university systems that in recent years have suffered badly from a reduction in state support.
Steven Mnuchin, a former Goldman Sachs banker and Hollywood financier, is President-elect Donald Trump’s nominee for treasury secretary. He spoke at Trump Tower Nov. 30. (The Washington Post)
For years, of course, it is the Republicans who have preached the wisdom of returning more power and responsibility to the states, under the assumption that states would do less, not more, than Washington. Now Democrats could demonstrate that their cherished 10th Amendment can be a sword that cuts both ways.
If the Trump administration makes good on its promise to pull back on environmental regulation, states can step up their own regulation of power plant emissions and oil and gas drilling. To combat climate change, they could impose a refundable carbon tax or, as California has done, create a cap and trade system for carbon emissions.
If Republicans repeal the Dodd-Frank financial regulations, many of those same regulations could be written into state law, either by legislatures or by state banking, securities and insurance regulators and consumer protection agencies. Taking a page from Louis Brandeis and the Progressive era, states could also provide incentives for the creation of state-chartered mutual banks, insurance and investment companies, financial institutions that are owned by their customers. The few mutuals that still exist offer competitive products and superior service at lower cost, all of it with less risk that the Wall Street megafirms have turned finance into a head-I-win, tails-you-lose casino.
Nobody expects a Republican Congress and White House will move to increase the federal minimum wage but there is nothing to prevent states from raising theirs. Nor is there anything preventing states from restoring within their borders many of the workers rights that the Republican Congress and President-elect Donald Trump are poised to eliminate.
And if the Justice Department and the Federal Trade Commission give the all-clear signal for corporate megamergers, as you can expect they will, attorneys general from blue states can ban together to file federal and state antitrust suits to block them. The attorneys general could also take a page from the playbook of the Chamber of Commerce and other conservative activists and use the federal courts to try to endlessly delay or block regulatory actions or repeals proposed by the Trump administration.
For blue state Democrats, this is obviously a second-best, half-a-loaf solution that still leaves half the country — alas, along with the federally dependent blue states of Maryland and Virginia and the District — to experience the full impact of the Trump Revolution. Care would also have to be taken to assure that the higher tax rates in blue states don’t prompt too many companies and wealthy taxpayers to flee.
In time, however, blue state Democrats could look forward to the satisfaction of watching Trump’s voters stew in their own political juices as Red State America finally frees itself from the evil grip of global elites and big government and turns itself into a low-tax, low-wage, low health paradise where it’s every man for himself.
As H.L. Mencken once put it, “Democracy is a theory that the common people know what they want, and deserve to get it, good and hard.”