The border between states is much less difficult to cross then the border between country’s. The transportability of problems is an observable effect. Right here in Utah their are schools that have had outbreaks of Mumps and whooping cough due to a combination of illegal immigrate children not getting vaccines and to a lesser extent those who are religiously opposed, Mumps tends to mutate in the process of infection and jump to those that have been immunized.

The transportability of problems is magnified by economic difference, You don’t see Mexicans clamoring to illegally immigrate to Cuba they want to go to the places of economic/social benefit. This same effect would be happening between the states if their was not some level of Federal intervention.

Now their are a few limited non Federal ways states can run social programs, By placing barriers to entry into these programs. Higher education typically has 2 different tuition levels in the United States In-state and Out-of-state. Taken to K-12 can you image how the level of education in this Nation would suffer if you moved to a new state and your child’s elementary wanted you to pay $5,000-$6,000 out of pocket per year for your first 3-4years living in that state? If you have 2-3 kids and make around the median wage(40K) their is no way to could afford to educate all of them, Perhaps you can just send your first son to school and you can just marry off your daughters(hmm this is starting to sound a bit third world).

“I think fear of a race to the bottom only comes when people fail to understand how much incentive to innovate and succeed comes from the reality that failure is an option – performing without a safety net changes the way people operate. We have constructed so many safety nets that that the whole nation has become careless.”

That’s a far to simplistic view. Does Failure mean that ones children should not get an education or get treatments that save them from third world diseases? Is Death an acceptable result of job failure due to loss of health benefits? How far does your definition of failure go?

Failure generally should be equal in size to what is lost or risked and be applied to the thing that caused the failure, Working class Joe really hasn’t put forth the risk of being subjected to failure that extreme. And if his company goes out of business it’s unlikely that it is his fault. Shouldn’t the people in charge(CEO,management) be the ones that suffer from their failure?

While economic contraction is inevitable, it is not inevitable that the suffering caused by that contraction should be borne only by those at the bottom of the economic ladder or that the people of one state should suffer while those in another do not. At a time of economic contraction, I believe government at some level must intervene to cushion the blow. It is a time when a social safety net is vitally important, when we need to create meaningful jobs that produce the goods we will need to lay the groundwork for a strong economy. Wasting money on giveaways to bankrupt financial institutions and military adventurism will only make matters worse.

In our current political system, the states are largely impotent to provide this assistance since increasing taxes, even if wise, would be political suicide. We are left with the Federal government. If Obama’s entire stimulus package had been simply handed to state governments, allocated by population, it would probably have accomplished a great deal more than it has.

While I agree that it is not inevitable that those at the bottom of the economic ladder should exclusively suffer the effects of an economic contraction or that one state should suffer while another does not I think we need to challenge a few assumptions. In a large corporation it is true that those at the top can feel virtually no effect when they choose to lay people off in the company whether out of necessity or to squeeze more profits out of the reduced workforce. On the other hand, in smaller companies that is simply not the case. Small business owners ore very often not in the lower economic classes and yet the small business owners I have known (and in some cases worked for) generally feel a great deal of economic pain even before their employees do as they take losses and reduced incomes in an effort to keep people employed. I worked for a small company once that laid off 3/2 of their employees during a nasty downturn – I was among the 2/3. I got another job and incurred some debt, but the owners of the company took losses, second mortgages, and I don’t even know what else trying to survive and keep the company afloat financially (they succeeded).

As for states, why should one state be required to feel the economic pain simply because another state is in financial trouble? Admittedly I don’t think that any state should be left to flounder on its own, but one state having a boom or a bust in isolation is extremely rare.

I can tell that this is going to be enough for its own post so visit today’s post to see more of that I think on this subject.

Your analysis of state competition ignores the possibility that state lawmakers discover the truth that endless tax cuts eventually become obviously destructive to the state as a whole – competition or not – and then they would go on to find the appropriate level of taxation etc. to maintain their respective states without federal intervention such as we have now. I think everybody knows that you can’t bring businesses without people and you can’t bring many people without some quality of life.

You note the fundamental differences between the economic and social position of states like California vs states like Utah – I think that is proof that the federal government should not try to normalize everything between states. Let Utah compete with it’s natural resources for people, businesses and capital and let California compete with it’s resources. There is no rule that they should be equal (except some federal rules). On the other hand you make an absurd assertion that if California were the only state to offer health care to the poor all the poor would move there. Think about it, the poor are the least able to just move to a new place to abuse the system. That argument is founded on the same premise as the argument of those who say that anyone in D.C. who does not like the fact that they have no voting representation in Congress should just move somewhere else.

I think fear of a race to the bottom only comes when people fail to understand how much incentive to innovate and succeed comes from the reality that failure is an option – performing without a safety net changes the way people operate. We have constructed so many safety nets that that the whole nation has become careless.

This get backs to the original premise. Some see the maintenance of the federalist status quo as sacrosanct and others have no problem rethinking the entire plan if it is no longer delivering the benefits for which the republic was founded.

I see it more as an amoral issue, neither good or evil just the natural result of competitive behavior. Corruption may play a role in the behavior but I don’t buy for a minute that it is the cause.

The States compete with each other for business, population, Culture, etc. The most common sold solution to increasing business and economy is of course tax cuts to business interests or other incentives to bring an additional business activity. This makes a lot of sense on the local/regional scale of a state. Their are exceptions to this of course where a state is large enough to support economic activity without incentives, California, New York, etc. In states that are large enough the ability to increase economic activity through tax benefit is minimal and the solution becomes social programs, and other projects. Their is also an increased negative impact from social problems in places with high population density’s further tilting this tax benefit vs. social program benefit scale.

Many rural republican states don’t get or see the same benefit from federally mandated programs as do urban democrat states. If Utah could take the $1.7 Billion dollars it spends yearly on medicaid and do something else with it the state itself business and economic wise would likely do better through at the expense of the nation as a whole. If only California had a program for delivering health care to the poor, then all the poor would move to California and bankrupt the system. If only New York provided free public education then their system would be flooded and go bankrupt.

Their are environmental Issues as well, What one state does effects the states around it. If California throw out all environmental regulations for air quality on their eastern border area the quality of air in Nevada and Utah would plummet and Utah and Nevada would be paying for California’s behavior indirectly.

The biggest problem with Federally mandated programs are not the programs themselves but the poor model under which the Federal Government pays the states to run them. Rural Republican states despise these programs and rightfully so as they rarely get the same benefit from them that Urban Democrat states get. The Federal Government needs to give additional aid to rural states that are disproportionally burdened by Federally Mandated programs.

The also leads to the problem that is common among Republicans in that their is a disconnect between taxation and the social programs, but perhaps that is an argument for another day =p.

Thanks,

Rob Miller