The Map that Shows How Big Cuts to the U.S. Budget Will Create a Lose-lose Dynamic for Republicans
Slashing federal investments in transfers, social security and medicare means that states that voted Republican will be hurt the most
If the world has you feeling deeply concerned an uncomfortable, it’s certainly because while there is lots of heat - and panic - there’s precious little light.
Right now, most of what we are hearing from the U.S. are appointments of - let’s put this delicately - dubious quality, which have to be approved by the Senate. There are rash proposals of massive cuts to social security, medicare - in order to pay for tax cuts.
While the ludicrous world we are currently living in is beyond parody, and our politics are divorced from reality, reality has a way of making itself known.
I’ve already shared the post “the unexpected virtue of chaos” which looked beyond the insane rhetoric to the political realities of what the administration is trying to achieve, and how people will actually react to it - both the public and politicians.
“The first law is that taking action requires the use of political capital. There are only a finite number of things an administration can focus on at any one time, and pushing forward an initiative will require the acquiescence of GOP lawmakers who will almost certainly be thinking of their fates in the 2026 elections.”
Political power certainly has its limits, and that when you try to get something big done, it drains political batteries. You’re calling in chips and favours, that are finite, and it risks people losing support.
The U.S. political system is very different than parliamentary systems, because it has a continuous treadmill of elections. Presidents are elected every four years, members of Congress every two, and Senators serve six-year terms, with one-third of the senate up for election every two years.
James pointed out a number of factors that should be clear to politicians. One is that they are up for re-election. The other is that despite the claims that Trump has a strong mandate.
His margin of victory is less than Joe Biden in 2020
As counting has continued, he has dropped below 50% in the popular vote.
The public does not actually like - and specifically voted against - “MAGA” policies. Ballot measures to protect access to women’s health care and abortion won.
The outsized self-regard associated with being a politician usually also comes with a matching sense of self-preservation. Do the words “selfless” or “self-sacrificing” come to mind?
James went on to write
“Tariffs will blow apart the American economy if they’re actually implemented in the manner Trump wants—therefore there is an actual and real political cost to the GOP for implementing them.
Similarly, there are unlikely to be many people who like the images flashing across their televisions of mothers and children being dragged out of their homes by ICE. Voters may like the idea in the abstract of getting rid of the illegal immigrants who are supposedly taking their jobs and homes—but they will almost certainly not like it when it’s actually real.
Voters learned a similar lesson during the pullout of American forces from Afghanistan. Despite loudly proclaiming how much they hated the U.S. presence overseas, they only meant that in theoretical terms. Being forced to witness what that meant in reality—desperate civilians plummeting to their deaths from the wheels of departing C-17s and U.S. troops dying in a suicide bombing attack—was viscerally unpopular.”
This is also the case with the divorced-from-the-real-world real-world recommendations coming from Elon Musk and Vivek Ramaswamy, who want to find $2-trillion in savings, as well as tariffs and other policies that, quite frankly, ignore the actual mechanics of the economy.
For example, if the government is going to cut social security, it’s worth pointing out that 6 of the top 10 states that receive the most in social security are swing states. Those top 10 states, in increasing order of recipients are Georgia, North Carolina, Illinois, Ohio, Michigan, Pennsylvania, New York, Texas, Florida and California.
The same applies to medicare - here are 2020 numbers of the states with the most medicare recipients:
California – 6,411,106
Florida – 4,680,137
Texas – 4,286,051
New York – 3,672,562
Pennsylvania – 2,776,113
Ohio – 2,381,221
Illinois – 2,265,857
Michigan – 2,100,420
North Carolina – 2.035,577
Georgia – 1,773,148
There is currently a proposal to cut $880-billion in Medicaid funding, which is all of it.
It has to be said that it is a guarantee that cutting that much health care will lead to more people dying who don’t need to.
Here’s the map of the states with the highest levels of enrolment;
New Mexico - 33.5%
Lousiana - 32.4%
New York - 28.5%
Kentucky - 28.3%
West Virginia - 28.2%
Arkansas - 27.4%
California - 26.8%
Mississippi - 24.1%
Washington, DC - 24.1%
Massachussetts - 23.6%
States with more rural and conservative voters are generally poorer, more likely to vote Republican, and more likely to get federal transfers
The other reality is that when it comes to the U.S. federation, Republican states generally tend to get more than they give back as federal transfers, while Democratic states tend to give more than they get.
The reason for is partly because of another important political and economic phenonenon. The single biggest cultural gulf around the world is between city and country. This is partly because politics is about policies and solutions to specific problems and the solutions that work in the city do not work in rural areas, and vice versa. It is also because economic activity and wealth is concentrated in cities, which created challenges of it own. People in cities tend to vote “left,” people in rural areas “right”.
Transfer and equalization payments are an essential part of any country with multiple juridictions that share a currency.
Every successful economic federation - the US, Australia, the UK, and Canada all have transfer payments to different state or provincial governments. National economies can't function without them.
This is a map of transfers within the U.S. Notably, the transfers come from green states, which are often Democratic because they have large cities with concentrations of headquarters - financial, manufacturing, or conglomerates.
This is from the Economist, which shows the transfers from 1990-2009.
In the U.S., some have called it “red state socialism” but really, it’s shouldn’t be politicized.
This is a more recent map (2023) - if you click the link you can get more details.
Transfer payments are essential when you have multiple governments with different concentrations of population, natural resources, infrastructure, access to international markets, and economic activity, all sharing the same currency.
These transfers mean that it is possible for states to maintain lower taxes while providing a similar level of services, but this understates the importance of these payments. They are essential stabilizers to the economy that ensure political and economic stability at the state level, which contributes to the stability of the whole.
If you want to understand what can go horribly wrong when a group of states come together and they don’t have transfer payments, all you have to do is look at Europe and the disaster that occurred, specifically with Greece.
The EU created a shared currency, the Euro, which was shared over many states. This means that banks in one country could lend to people in another, with a shared currency. However, unlike Australia, the US and Canada, their overarching instutions, like the European Central Bank (ECB) and the European Parliament don’t have transfer payments.
What happened is that “core banks” in the EU offered loans and credit to the countries that had joined the Euro, which results in individuals taking on large amounts of debt, usually for real estate. Greece actually had a very high level of home ownership, so the new debt was often in the form of a line of credit on their home, and quite specifically, the banks in Germany, France and the UK were extending credit to people in the European periphery so they could buy manufactured goods from Germany, France and the UK. If you see what the problem with lending someone money so they can buy something from you might be, well, welcome to the problem with today’s economy.
The property crashes in those economies (the PIIGS - Portugal, Ireland, Italy, Greece, Spain) created a crisis with multiple dimensions. The economic boom in those economies had been largely driven by consumer debt, and not investments in productive assets. So, those economies were in bad shape. The banks who had lent to individuals in these countries suddenly had incredible amounts of bad debt on their hands - all their profits and assets had suddenly turned into liabilities. Because there were no automatic stabilizers that would usually kick in where there are multiple jurisdictions under a single currency, the political and economic response was “manual” so that whether these countries were helped or not was resisted by countries who did not want to pay for what they felt were others’ mistakes.
In fact, the mistake was that of the architects and economists who developed the Euro in the first place. In the dead of summer, 2016, the IMF issued a mea culpa as well as a blistering assessment of the incompetence that had led to the “immolation of Greece”.
The UK’s Telegraph reported that the IMF’s “top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the Euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.”
“The possibility of a balance of payments crisis in a monetary union was thought to be all but non-existent,” it said. As late as mid-2007, the IMF still thought that “in view of Greece’s EMU membership, the availability of external financing is not a concern”.
At root was a failure to grasp the elemental point that currency unions with no treasury or political union to back them up are inherently vulnerable to debt crises. States facing a shock no longer have sovereign tools to defend themselves. Devaluation risk is switched into bankruptcy risk.
“In a monetary union, the basics of debt dynamics change as countries forgo monetary policy and exchange rate adjustment tools,” said the report. This would be amplified by a “vicious feedback between banks and sovereigns”, each taking the other down. That the IMF failed to anticipate any of this was a serious scientific and professional failure.
You can read the full report here:
Here’s the point. Yes, the proposals that are coming out, if enacted, will be bad for Americans, but while there are various measures very specifically aimed at targeting vulnerable groups, some of those vulnerable groups include Republican voters in Republican-held districts and States, who will directly suffer as a consequence.
In the Hill, an article looked at ways the budget could be cut - and it also points out that cuts would face Republican opposition because they will hurt their own supporters.
Republicans have expressed interest in making cuts to the Inflation Reduction Act (IRA), Democrats’ sweeping climate technology law passed in 2022.
A wholesale repeal of that law’s climate provisions would generate approximately $369 billion. But that’s unlikely because the IRA is popular in many Republican districts across the country.
Eighteen Republicans wrote to Speaker Mike Johnson (R-La.) in August, telling him not to repeal the law, arguing it would “undermine private investments and stop development that is already ongoing.”
As I have written earlier, the mania in the U.S. economy is a sign of multiple bubbles - in real estate, AI, tech, crypto - and a lot of crazed risk-taking, and the internet is also awash with various scams, including “influencers” peddling supplements and get-rich quick schemes. This is a reflection of an economy where there are not enough “real economy” jobs.
The political reality of this is that the policies that are being proposed risk being extremely unpopular and damaging, and that politicians - even ones you would never vote for - understand that.
As I have argued, in addition to all the other factors in the campaign - manipulations, money, voter suppression - the economy tipped the scale. It is also what tipped the scale against Trump in 2020.
The actual impacts of policies have an effect on how people vote - both politicians and voters. The fact that Republicans have the White House, congress and the Senate also means that they have no one to blame but themselves for outcomes. They have to wear all of it. It also means that the conflict is between Republicans.
Amidst the chaos and heat, it’s important for people to keep this in perspective.
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I think blue states should immediately secede from the union and officially join Canada. We are the money makers and the rest of the country will fall into poverty without us.
That chart of red and blue states is kind of misleading. It's showing election data from 2004. New Mexico may have barely voted for GW Bush that year, but in every presidential election since then it's been a blue state, and currently all three Representatives and both Senators are Democrats.