Makers, Takers, and the Politics of Economic Development
Knowing where the money in your community comes from is critical information for economic developers. If the people in your community are predominantly working-age and earn most of their income from wages, then you may want to focus on strategies for raising wages, such as workforce training programs. By contrast, if your community is a popular retirement destination in Florida, and most of the income comes from 401ks, then you may want to focus on growth strategies more appropriate for a city of retired or semi-retired people, such as lifestyle entrepreneurship. Knowing where the “new” money comes from, or identifying your “base” in economic development parlance, should be among your first steps in formulating strategies for economic development.
That’s really the best I could do in attempting to start this post with a focus on traditional economic development issues. A valiant effort, for sure, but perhaps a stretch of questionable proportion.
This post is really about politics. Economic development is inextricably linked to politics, and it will be that way as long as locally elected politicians govern communities with separate tax bases. Accordingly, this blog takes the occasional detour into the impact of politics on economic development, with a spin on data analysis.
With the rise of the Tea Party and the proliferation of bumper-sticker catchphrases lacking any resemblance to nuanced debate, such as “makers and takers” or “you didn’t build that” or “the 1%,” there’s apparently a lot of interest these days in the appropriate degree of government involvement in our lives. Since the vast majority of economic development work is funded with taxpayer money, this is not an inconsequential issue. Running an effective program may be challenging if your community is convinced that government is the root of all evil.
So, in the spirit of encouraging more informed, data-driven discourse and less bumper-sticker evangelism, here’s one suggestion for using readily-available data to have more reasonable conversations about this topic. BEA publishes data on government transfers to households, which include things like Social Security, Medicare, Medicaid, income maintenance programs such as SNAP (food stamps) and what people commonly refer to as “welfare,” and unemployment insurance. At the national level, government transfers make up approximately 17 percent of total personal income, but there is a wide range at the county level, from about 55% in Owsley County, KY, to about 5 percent in Douglas County, CO.
In other words, Owsley County, KY, at 55 percent of total personal income, is more reliant on government programs as a source of income than any other county in the US. In fact, there are three counties in the US where government transfers account for more than 50 percent of total personal income, and they are all in Kentucky (as well as 13 of the top 25).
And, interestingly, they all went strongly for Romney in the 2012 election. As did 21 of the top 25 counties ranked by government transfers as a share of total personal income (2011):
In fact, about 75 percent of the counties most reliant on government transfers (at least 2x US average) as a share of total personal income voted for Romney in 2012. Now, to be fair, I can’t find any meaningful correlation between reliance on government transfers measured this way and the outcome of the presidential vote when using the entire county data set, but I think some of the outliers are interesting.
You can download my data set here and draw your own conclusions.
Adding a column to the data set for per capita income and grouping the counties by wealth, or incorporating other variables like age or race/ethnicity, may be revealing. You could also break out the components of total government transfers into the various programs–Social Security, Medicare, SNAP, etc.–and re-run the numbers. The counties receiving a higher share of total government transfers in the form of income maintenance appear to be more strongly correlated (positively) with Obama’s share of the vote compared to medical care via Medicare and Medicaid. But that relationship disappears when calculating transfer payments as a share of total income.
Sidebar: Another popular misconception is how much is spent on each program. Total government transfer payments are distributed as follows for the most well-known programs: Social Security (32%), Medicare (24%), Medicaid (18%), Income Maintenance (12%), and Unemployment Insurance Compensation (5%).
Personal sidebar: Benefit programs for Veterans get a paltry 2.8% of total government transfers, a fact that every US citizen should know and take at least five minutes out of your day today to think about.
At any rate, my point here is that economic developers are hardly empty-handed when it comes to facing down critics with political axes to grind. Facts don’t always carry the day, especially when dealing with entrenched perceptions and party politics, but hopefully we can elevate the state of debate, at least a little.