Why Poor States Will Get Poorer by Scrimping

Here in Florida, with Republican governor Rick Scott and a heavily Republican legislature, the conservative theory of belt tightening as a remedy to recession is being showcased. Florida is not the only state delivered to the Republican hatchet wielders by the 2010 elections; so the parsimonious policies unleashed here are being repeated across America. But I think the Florida picture gives as accurate a depiction of the situation as any.

It’s a complex situation, hard to make sense of. So much is disputed, so many “facts” are contradicted. But if you do the math and apply what we’ve learned about human nature, the eventual result seems clear.

As I understand it, Florida’s main source of revenue is its sales tax. There is no state income tax. And Scott and his allies are slashing corporate taxes in the belief that this will attract new business.

So the government’s revenue will be drastically affected by the volume of commerce in the state.

Already, there is a noticeable reversal in migration trends; more people will be leaving Florida than moving here. I believe the trend is going to accelerate – and sharply.

The governor and legislature are cutting back on services and laying off public workers as they grapple with a shortfall in revenue. They have even rejected federal stimulus funds because of their commitment to fiscal austerity.

And, being Republicans, they are also enacting draconian social legislation – making it as difficult as possible to have an abortion, for example.

Obviously, people like teachers, law enforcement officers, firefighters and other professionals who lose their jobs, will have to move to other states to find work. Obviously, people who resent being told how to live their lives will also seek a more comfortable environment. Not all, of course, but enough to make a difference – a big difference.

And a lot of folks who might have been planning to move here will surely be discouraged by reports of poverty, crime, trash piling up in the streets – and other inevitable results of state cutbacks. In my view, the idea that corporate tax cuts will bring new business despite the severely damaged quality of life is absurd. My experience is that company executives choose locations where they can have a pleasant lifestyle.

Who wants to live in Dogpatch, anyway?

The decline in population will have severely adverse effects. Politically, there would be less representation in Washington and dwindling federal funding because both are population based. But that’s just the tip of the iceberg.

The real blow will be economic. Fewer people mean lower sales, and that means less revenue from the state sales tax.

You can see how this triggers a self-perpetuating downward spiral. Skinflint policies produce population reduction, which produces less revenue, which brings more skinflint policies… and so on.

The formula works in reverse, too. States that find ways to generate more revenue – and to make living there more pleasant – will attract more population, and the spiral will perpetuate itself upward instead of downward.

That is as long as they don’t get so fat and foolish they forget the roots of their prosperity and vote in a bunch of Republicans.