WASHINGTON • Federal spending in Missouri in 2014 was the equivalent of 22.8 percent of the state’s economy, tying it with Rhode Island for 18th nationally among the states.
Across the river, federal spending was equivalent of 15.1 percent of Illinois’ economy, ranking it 45th. Nationally, federal spending was about 19.1 percent of the gross domestic product in fiscal year 2014, continuing a several-decades trend of spending around that level.
The numbers are contained in a new Pew Charitable Trust report, one that shows that federal spending rose by about 25 percent in current-dollar terms between 2005 and 2014, spurred heavily by rising spending on retirement programs for aging baby boomers and their parents. Pew’s analysis shows that direct federal payments to individuals accounted for 62 percent of federal spending in fiscal year 2014, with about one-third of all spending going toward retirement benefits, mainly Social Security and federal pensions.
Congressional Republicans are pressing ahead with plans to try to balance the budget in 10 years. But federal spending, the debt and the deficit have largely been discussed only on the margins of the presidential campaign.
Democrats Bernie Sanders and Hillary Clinton have argued over whether Americans can afford new programs, like free college education, that the Vermont Sen. Sanders is pushing from the left.
Republicans have engaged in a familiar debate about tax cuts and shrinking the size of the federal government, but the latter discussion has largely left the biggest government programs, like Social Security, off the hit list.
The so-called “third rail’ of federal spending — retirement and health care payments to the nation’s aging population — has remained too hot to touch, even as Americans overwhelmingly tell pollsters they want something done about the nation’s almost $19 trillion debt and its $544 billion 2016 deficit.
A mid-February poll by the nonpartisan Peter G. Peterson Foundation, which advocates for balanced budgets, said that 71 percent of 1,006 respondents said they want candidates to talk more about the national debt. More than nine in 10 Republicans said they want their candidates to make the debt one of their top three priorities, and more than seven of 10 Democrats said so. The poll’s margin of error was plus or minus 3.1 percentage points.
“We haven’t really seen any” debate on the debt and deficit during the current presidential campaign, said Howard Wall, director of the Hammond Institute for Free Enterprise at Lindenwood University, and a former vice president and regional economics adviser at the Federal Reserve Bank of St. Louis.
“Because they are trying to get elected, and what is necessary is to reform Social Security and Medicare,” Wall said. “And that is not really an electoral winner.”
Wall and David Kimball, a political scientist at the University of Missouri-St. Louis, said that political pressure to address the deficit and debt has diminished, in part because deficits — while still historically high — have gone down since the annual red ink hit $1 trillion after the Great Recession.
Kimball said that the Democratic fiscal debate so far has been “between idealism and pragmatism.
“Clinton is saying that what Sanders is proposing — free college, for example, and single-payer health care — sounds great, but it will be very expensive to pay for,” he said. ‘On the (Republican) side, everyone is trying to outdo the next guy in terms of tax-cut plans and which federal agencies they are going to cut.”
Key part of state economies
The Missouri and Illinois numbers illustrate how federal spending has different impacts even in neighboring states. But it is deeply embedded in both states’ economies.
According to Pew, which took over the federal spending analysis after the Census Bureau quit doing it in 2012, about 8.3 percent of Missouri’s overall gross domestic product in fiscal year 2014 came from federal retirement benefits. About 5.4 percent of Illinois did. About 5 percent of Illinois’ GDP was nonretirement federal benefits, primarily Medicare, while Missouri’s was 6.2 percent.
Illinois’ population is generally richer and younger than Missouri’s — hence the disparity of dependence on federal programs. The Census Bureau said that as of 2015, Missouri’s median household income was $47,464, compared with Illinois’ $57,166. In 2014, Census reported, 15.4 percent of Missourians were over 65, while 13.9 percent of Illinois residents were.
Defense spending may also have a bigger relative impact in Missouri than in Illinois, Wall said, pointing out that while Boeing is headquartered in Chicago, its St. Louis County plant that builds fighter jets for the Navy is counted as Missouri spending. He also said the impact of active-military personnel spending is higher in Missouri relative to the two states’ economies.
Citing federal statistics, Wall said Illinois has about 36,000 active duty personnel, Missouri 17,000. But Missouri’s state GDP of about $287 billion is about a third the size of Illinois’s at $765 billion, Wood said, so the relative defense impact is also higher in the Show-Me state.
The political realities in Illinois’ current budget crisis also play into the equation.
“Illinois, as a blue state, has somewhat more generous social welfare and pension programs than Missouri does at the state level, so in some cases the feds end up picking up the slack in some of those anti-poverty programs,” Kimball said. “That is why the states in terms of (the most federal spending per-state GDP) are mostly southern states, because the federal government is having to come in and pick up some of the tab on their anti-poverty programs.”
This ideological paradox is starkly evident in Pew’s data. Republicans tend to eschew federal involvement, but the most dependent states include some of the reddest in presidential elections. According to Pew, Mississippi , where federal spending in 2014 was the equivalent of a third of the state’s GDP, was number one. Senate Majority Leader Mitch McConnell’s Kentucky was number 7; and staunchly red South Carolina, Arkansas and Idaho followed at 8, 11, and 12, respectively.
New York, Illinois, New Jersey and California — bluest of the blue states — were all in the lower 10 of states in dependency on federal spending.