Most narrowly, at a time when Donald Trump is making nonsensical claims that America is subsidizing Canada via our bilateral trade deficit, California is literally subsidizing the rest of the United States, red states in particular, through the federal budget.
The Rockefeller Institute regularly calculates states’ balance of payments — the difference between the amount the federal government spends in a state and the amount the state pays in federal taxes. Here’s what per capita balances looked like in 2022, the most recent year available (blue means a state receives more than it gives, orange the reverse):
California paid in a lot more than it got back — $83 billion in total. So did Washington state and much of the Northeast. Most red states were in the reverse position, getting much more from DC than they paid in return. And yes, it’s ironic that states that are so dependent on transfers from other states — if West Virginia were a country, it would in effect be receiving foreign aid equal to more than 20 percent of its GDP — vote overwhelmingly for politicians trying to eviscerate the programs they depend on.
Even some Republicans have noticed how blue states subsidize red states — here’s a New York Republican lashing out at South Carolina.
Now, for the most part this cross-subsidization doesn’t reflect political favoritism. Remember, the federal government is an insurance company with an army, and while military spending has some regional tilt, health and retirement spending per capita across most states is roughly the same. I’m not going to redo the numbers, but here’s a chart I made a few years back, with 2016 data. It shows that the amount of federal spending per capita in a state is almost unrelated to the state’s income, but federal receipts are much higher in richer states, so rich states subsidize poorer states:
California, in particular, pays a lot in federal taxes because it’s so much richer and more productive than most of the rest of America. Here’s real GDP per capita in 2023 for selected states and groupings of states:
I included Ohio because on Friday an Ohio congressman declared that California shouldn’t receive disaster relief until it changes its forestry management (are there forests in Los Angeles?) He probably doesn’t know that Ohio is, in effect, heavily subsidized, year after year, by California.
High productivity in California (and New York, also included) plays a significant role in making America richer; the nation excluding these powerhouses would have about 6 percent lower GDP per capita.
California makes an especially large contribution to U.S. technological dominance. As I noted a month ago, 8 of America’s top 9 technology companies — all of them if you count pre-Cybertruck Tesla — are based either in Silicon Valley or in Seattle.
And while Hollywood doesn’t dominate films and TV the way it once did, Los Angeles still plays a major role in America’s cultural influence (and still generates a lot of income.)
So how should we think about the disaster in Los Angeles? As far as I can tell, there’s nothing either the city or the state could have done to prevent it. There’s a good case to be made that we should never have allowed a huge metropolitan area to emerge in a place that was vulnerable to Santa Ana-fed firestorms even before climate change vastly increased the risks. And of course we should have begun acting to limit climate change decades ago.
But this is all hindsight, with no relevance to where we are now — which is that an American city and an American state desperately need all the help we can deliver. It shouldn’t matter whether they’ve earned it. If the United States of America doesn’t take care of its own citizens, wherever they live and whatever their politics, we should drop “United” from our name. As it happens, however, California — a major driver of U.S. prosperity and power — definitely has earned the right to receive help during a crisis.
Unfortunately, it looks all too possible that essential aid will be held up or come with onerous strings attached. If so, shame on everyone responsible.