Riches in the Treasure State

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I recently reviewed a list on the Web that tallies all the federal spending that goes to my state, Montana. (The point was to examine the premise that Montanans receive more than they remit in taxes. This conventional yardstick has some validity if you assume that government spending is a net benefit.)

The list reminded me that there are a lot of federal programs – by my rough count, 642 separate sources of funding! They include various retirement and disability payments, of course, and then there are agriculture program payments (dairy indemnity programs, commodity loans and loan deficiency payments, wetlands reserves, conservation reserves, emergency conservation programs) and many others ranging from home investment partnerships to nutrition education. The list goes on for 15 pages.

In spite of their elegant names (“Indian rights protection,” “emergency shelter grants programs”), most of these programs don’t go toward the poor. Mostly they go to the well-off.

James Gwartney and Richard Stroup noted long ago (in a 1986 Cato Journal) that only 160/0 of government redistribution was directed toward the poor (that is, only 160/0 of the programs were means-tested). Far larger were programs such as Social Security, Medicare, unemployment compensation, and farm price supports.

And that’s not the only distortion. To benefit substantially from many federal programs you have to be pretty successful already. Agricultural subsidies, for example, are usually based on how much you produced the previous year. Sterling Burnett of the National Center for Policy Analysis reports that the wealthiest 10% of U.S. farmers receive 72% of the subsidies. (The bottom 80% receive on average $64 per month from the government.) Similarly, subsidized flood and disaster insurance programs give the most benefit to those with sizeable properties.

As Gwartney and Stroup observed, “There is little reason to expect that the poor will possess relatively more of the communication and organizational skills that are rewarded handsomely by the political process. In fact, the entrepreneurs and managers in a politically dominated society are likely to be the same people who would excel under market organization.” But don’t think that our senators, Max Baucus and Conrad Bums, are willing to sit by and simply let Montanans excel in the market arena. Politics rewards the rich, and that includes the politicians.

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