Newsom Falls for the ‘Red Moocher State’ Myth

A simplistic look at federal finances gives the false impression that blue states subsidize everyone else

By Steven Malanga. He is senior editor at City Journal and senior fellow at the Manhattan Institute. Excerpts:

"Some of the biggest categories of “spending” aren’t discretionary programs that help finance state budgets, but cash sent by Washington to people and businesses that earned it. That California and other states come up short in receiving this money can be a function of their own failings rather than any funding bias."

"The biggest category these studies measure is direct payments from the federal government to individuals, principally via Social Security and government employee pensions. A big chunk is money that people have worked for and that the feds send them where they retire."

"Only 16% of California’s population is over 65."

"California is one of the most expensive places to retire."

"Federal contracting dollars constitute another huge spending category. This is money that businesses and other private entities earn for work performed for the government—especially for national defense—not money Washington disperses based on a state’s population or tax “contributions.”"

"California does quite well is in receipt of federal grants, some of which clearly represent spending that bolsters state budgets."

"In the 2024 balance-of-payments study, California received 18% more per capita than the average among states."

"California and New York, home to high-flying industries like technology and finance, send more on average because residents earn more"

"The difference is exacerbated by the progressive nature of federal taxes"

"Moynihan . . . realized there was little to be done to change the payment imbalances because of the complexity of federal funding." 

"he proposed in his 1999 report a “grand compromise” between the parties to pare spending and taxes by Washington and leave more money in the states."