Right data

National Review, Jan 27, 1997 by Ed Rubenstein

LAST year Newt Gingrich characterized New York as a "culture of waste," one that depends on "us to send a check." But in Pat Moynihan's view, the Speaker has it backward. A report commissioned by the senator finds that Empire State residents pay $1.24 in federal taxes for every federal dollar spent in the state. New York State sent $17.7 billion, or $948 per capita, more to Washington in federal taxes last year than it got back in federal spending. (Only nine states had worse per-capita "deficits.") Georgia, meanwhile, paid only 97 cents for every $1 of federal funds received.

But this is nothing new. New York has been a donor state ever since Moynihan began doing the calculations back in 1977, as have Illinois, New Jersey, Michigan, Connecticut, Ohio -- states powered by the metropolitan economies of older cities. Meanwhile, the home state of the Speaker is one of many Southern, now largely Republican states that receive more from the Federal Government than they send out in taxes.

There are two reasons why New York, and most other Northeastern states, are net donors. First is the region's relatively high income. On the other side of the equation, New York has relatively few federal employees (ranking 47th in federal salaries per capita, compared to Georgia's 5th) and few defense installations, and gets less than its share of highway and public-works projects. Climate and a high cost of living drive many retirees, along with their Social Security checks and Medicare benefits, to points south. New York ranks 39th in per-capita federal payments to individuals; Florida is first.

So where's the "waste"? Just look at the flow of federal welfare and Medicaid money. Moynihan explains: "When Medicaid took effect in 1966, Governor Nelson A. Rockefeller enthusiastically signed up for every option, and the state has been adding ever since. Fully 75 per cent of Medicaid expenditures in New York are at the state's option; only 25 per cent are required under federal law." So instead of stopping at the required $5.2 billion, Albany spends an additional $17 billion on "optional services." Medicaid spending is matched dollar for dollar by Washington. As a result, every Medicaid dollar sent to New York produces a federal tax liability of just 53 cents for New York residents. Georgians, never having seen the likes of Nelson Rockefeller, pay $1.04 in federal tax for each Medicaid dollar they receive.

Fully 52.3 per cent of all births in New York City are "nonmarital," with the Bronx registering 66.5 per cent and Buffalo 56.0 per cent, compared to a 48.0 per cent illegitimacy rate for the nation's 50 largest cities. These families are typically supported by AFDC, which also receives federal matching funds. "The average AFDC recipient . . . has been 'on the rolls' for just under 13 years," notes Moynihan, adding, "I don't know what it is in New York; our welfare bureaucracies would keep the number secret if they knew it, but probably prefer not to know."

Welfare reform won't hinder the ability of New York legislators to provide gold-plated benefits. Only now Georgia won't have to pay for them.

NEW YORK: THE POOR LITTLE RICH STATE

       1995           Federal Tax Burden* per $1 of:

     Per Capita       Total Federal     AFDC       Medicaid

     Income (Rank)     Spending         Grants      Grants

Conn.   $26,952 (1)      $1.47           $1.13       $1.21

Fla.     24,212 (10)      0.93            1.38        1.50

N.Y.     23,632 (12)      1.24            0.60        0.53

Calif.   23,280 (16)      1.04            0.51        1.15

Ga.      23,233 (19)      0.97            1.18        1.04

Tex.     22,555 (23)      0.98            1.94        1.03

Miss.    18,352 (50)      0.61            1.42        0.51

Source: Harvard University; Census Bureau.

*Estimated by dividing % of federal taxes paid by % of spending
item received.