Toward a Spending Paradox: Fiscal Politics from the New Deal to the Tea Party

• In Event: Historical Development of Political Economies

Abstract

This paper examines public views on government spending over time, building on our previous work on the federal “spending paradox”: that public opposition to federal spending is higher in states that receive more federal money per tax dollar paid (Krimmel and Rader 2017). While this phenomenon has received so much public attention (with the rise of the Tea Party, rejection of Medicaid expansion funds by low-income states, etc.) that it seems almost commonplace, it is not inherent to American politics. Indeed, we begin this paper by demonstrating that the spending paradox did not exist when the modern American state was built during the New Deal era. This adds an additional dimension to the spending paradox we presented in prior work; the question is not simply why is there more opposition to federal spending in states that receive higher net federal outlays, but why now and not before?

We consider two possibilities, which are not mutually exclusive, one relating to economic trends and one to racial politics. On the former front, it’s possible that federal outlays to so-called “taker states” (i.e., those with an outlay to tax ratio above 1) have declined over time, leading to an aversive sense of loss or abandonment. In other words, even if these states receive more in outlays than they pay in taxes, their relative benefit has declined over time, eroding support for spending. We also consider the possibility that racism has come to play a more important role in attitudes toward spending over time. Because major New Deal programs were designed to direct benefits disproportionately toward whites, there would have been little reason for whites-—approximately 90% of the U.S. population at this time-—to bring their racial attitudes to bear on their thinking about government spending. As these discriminatory institutions eroded, racial attitudes may have permeated people’s thinking about spending. It would make sense to see a particularly significant rise in opposition to spending in states with Jim Crow legacies (which tend to have higher outlay to tax ratios), even if these states still strongly benefit from spending, because people in these states would be especially sensitive to the democratization of spending across racial lines. We find support for both explanations.

In sum, analyzing the historical dynamics of fiscal politics enriches our understanding of the intersection of racial and fiscal politics and brings our puzzling present into sharper relief.

Authors

• Katherine Krimmel, Barnard College, Columbia University

• Kelly T. Rader, States United Democracy Center