Sunday, June 3, 2012

Economic Geography

Image credit: Composite by Cujo359 (see NOTE 1)

At his blog, Paul Krugman muses about the differences between Florida and Spain:

[A] crude calculation:
  1. From IRS data, we find that Florida’s tax payments to Washington fell approximately $25 billion between 2007 and 2010, the bottom of the slump.
  2. From Labor Department data, we find that in 2010 special unemployment insurance programs — extended benefits paid for from DC — were about $3 billion in 2010.
  3. From SNAP (food stamp) data, we see that food benefits to Florida rose about $3 billion over the same period.


Aid on that scale is inconceivable in Europe as currently constituted. That’s a big problem.

Florida Versus Spain

This is why I, and anyone else with at least a basic understanding of the differences between our country and the European Union, say that we will not end up like Spain or Greece. Nor will Florida, or California. There is a federal fiscal and monetary system in America, and that makes our problems fundamentally different from those of Europe. Anyone who says American states will end up like EU members either understands even less about economics than I do, or is lying idiot.

And, to answer the obvious question, there's no reason to think such people can't be both.

NOTE 1: Florida map Mgreason/Wikipedia, Spain map Hinzel/Wikipedia, altered for composite image by Cujo359.


Expat said...

Mark Twain is credited with saying: "Lies, Damned Lies and Statistics" IIRC.

There seems to be comparing apples and pineapples going on. Population of Florida is about 18.8 millions, Spain is about 46 millions; Florida is a state in a large national federation (recipient of greater taxes than paid), Spain is a sovereign independent nation (recipient of EU structural funds/economic equalization (EU poverty easement funds)); Florida's social safety net is essentially completely enumerated above; Spain's social safety net has public health, public transportation, retirement, unemployment, social assistance, social aged care (just to enumerate a few off the top of the head); Florida's GDP is 4th largest in US at $748 Billions, Spain's GDP is world's 12th largest at $1.495 Trillions. Recognizing the national exceptionalism that exists in the US, you are doing far worse than ending up like "those in Europe".

Cujo359 said...

Yes, we may well end up worse than Europe in the long run. As you point out, though, the economic situations the governments of Spain, etc., face are different from those that Florida and California do. We have our own currency, which we could allow to devalue if we chose (China's efforts notwithstanding). While the euro can also be allowed to revalue, it's not going to do individual nations of Europe much good.

The point Krugman was making is that when Florida's finances go badly, it can get direct financial help from other parts of the country. No similar mechanism exists in Europe that I'm aware, or Krugman, either, apparently.

Our problems in the U.S. are principally that we don't seem to want to spend money on anything but defense, anti-terrorism, and generally housing more people in jail. That, and an inability to find leaders who will deal with the financial system.

We're pretty exceptional here, but not always in a good way.