Fiscal Federalism V: Federal Other Direct Payments

Following on my two previous blogs (here and here) . . . this blog shows federal “other direct payments” spending as percent of personal income. What is this?

According to the Consolidated Federal Funds Report (pdf) from which this data is drawn from, “other direct payments” include:

  1. Medicare (more than half the total)
  2. Excess Earned Income Tax Credits (the portion that is refunded back to the individual)
  3. Unemployment Compensation
  4. Supplemental Nutrition Assistance Program
  5. Student Financial Assistance
  6. And a partridge in a pear tree . . .

The table below shows the wide range of federal “other direct payments” dependency by state. The states that are most dependent are: Kentucky (12 percent), North Dakota (9.9 percent), South Dakota (9.5 percent), Mississippi (7.6 percent) and West Virginia (7.3 percent)

On the other hand, the states that are least dependent are: Alaska (2.3 percent), Utah (3.3 percent), Colorado (3.5 percent), Nevada (3.5 percent) and New Hampshire (3.5 percent–Woo Hoo!)

Federal Other Direct Payments as a Percent of Personal Income in 2008

Fiscal Federalism IV: Federal Retirement and Disability

Following on my previous blog which showed overall federal spending as a percent of personal income . . . this blog shows federal “retirement and disability” spending as percent of personal income. What is this?

According to the Consolidated Federal Funds Report (pdf) from which this data is drawn from:

Retirement and disability programs include federal employee retirement and disability benefits, social security payments of all types, selected Veterans Administration programs, and selected other federal programs

The table below shows the wide range of federal “retirement and disability” dependency by state. The states that are most dependent are: West Virgina (12.8 percent), Alabama (10.4 percent), Arkansas (10.1 percent), Mississippi (10 percent) and Kentucky (9.8 percent).

On the other hand, the states that are least dependent are: Alaska (4.6 percent), Connecticut (4.7 percent), California (4.8 percent), Massachusetts (5.1 percent) and New Jersey (5.1 percent).

Federal Retirement and Disability Spending as a Percent of Personal Income by State for 2008

Fiscal Federalism I: Federal Expenditures

Today, the U.S. Census Bureau released their annual Consolidated Federal Funds Report which tracks federal spending by state.  The vast sums of federal dollars that flow to the states has radically transformed the meaning of “Fiscal Federalism.”  Fiscal Federalism use to mean that most spending decisions were made at the state and local levels.  Now, the role of the federal expenditures in any given state exceeds the influence of spending by state and local governments.  As a result, the federal government has usurped the role of state and local government to decide their own economic destiny.  Is this what the Founding Fathers intended?

The chart below shows the growth in federal spending by major category.  Overall, federal spending increased by 16.1 percent to $3.2 trillion from $2.7 trillion.  However, that growth varied dramatically by state.  The state with the highest percentage change in federal spending was Hawaii with an increase of 64 percent to $24.6 billion from $15 billion.  The state with the lowest percentage change was Kentucky with a decrease of 4.3 percent to $50 billion from $52 billion.  And, of course, its always interesting to see what’s going in Maine and New Hampshire.

This report is full of good stuff so stick with us at Wealth Alchemy as we plumb this data in more detail in the future.

Federal Expenditures by Major Category for 2009