Democratic States Are Wards of Washington
The uproar last week over the Trump administration’s short-lived pause on federal grants exposed how dependent Democratic states and cities have become on Washington handouts. Call it a welfare trap.
“Fifteen percent of our workforce are funded by those dollars,” New Jersey Gov. Phil Murphy groused. A lawsuit brought by all 22 states with Democratic attorneys general plus the District of Columbia detailed a litany of programs funded by Uncle Sam. Washington state said it received $121 million last year for allergy and infectious-disease research. Illinois claimed federal Medicaid funds made up 60% of its 2023 spending on “critical health services.”
“Washington, do you realize the consequences of what you’ve done here? And do you really want us to not fund law enforcement?” New York Gov. Kathy Hochul declared. “Do you really want us to not fund roads and bridges?” What are New York state taxes for?
The freeze didn’t apply to most federal dollars that flow to states for social welfare, education and transportation since these are based on statutory formulas, though the administration’s original memo didn’t explain that clearly. On Wednesday the administration rescinded the memo after a judge blocked it.
Democratic states and their economies depend much more on Washington largesse than Republican states do. This year, New York received roughly $4,900 per capita from the feds and California $4,300—two to three times as much as Florida ($1,700) and Texas ($1,500). That’s because Democratic states provide more generous social welfare, which is increasingly funded by Washington thanks to regulatory changes by the Biden administration.
Democratic states also received a disproportionate share of the more than $1 trillion that Congress sent to state and local governments in 2020 and 2021 as pandemic relief. Between 2018 and 2022, federal dollars flowing to state and local governments increased by about $515 billion, more than the rise in Social Security and Medicare combined.
Most Covid funds are running out, though the Biden Federal Emergency Management Agency planned to hand out disaster-relief funds to states and cities for pandemic “emergency” spending through August 2026. This year’s Los Angeles city budget includes $208.2 million in FEMA Covid funds, including for housing vagrants in hotels. New York state’s budget this year includes nearly $3.5 billion in FEMA dollars for Covid “emergency protective measures” such as home test kits.
After blowing through federal pandemic largesse, states and localities are tapping FEMA to backfill their budgets. Congress, in turn, keeps backfilling FEMA. Rinse and repeat.
The Government Accountability Office last summer projected that the Covid “disaster” will be the most expensive in FEMA history. President Trump is right to call for shifting more FEMA responsibilities to states. Federal spending on disaster relief creates a moral hazard by reducing the incentive for states to invest in disaster preparation and mitigation.
The same goes for social welfare. States have less incentive to help lift people out of poverty since they receive more federal dollars if people stay poor. When you’re spending someone else’s cash, there’s hardly an incentive to spend it prudently. Medicaid, states’ biggest source of federal dollars, encourages inefficient spending.
States receive $1 to $3 from Washington for every dollar they spend on Medicaid—and $9 for lower-income able-bodied individuals covered under the ObamaCare expansion. Democratic states provide more-expansive benefits and easier eligibility to wring more money out of Washington. Some 36% of Californians are covered by Medicaid, compared with 19% of Floridians and 15% of Texans. The federal share of the Golden State’s Medicaid spending—nearly $120 billion—is more than Florida’s entire budget.
America’s welfare queen is New York. Federal dollars make up roughly 40% of the state’s budget. Some 44% of New Yorkers are covered by Medicaid or a quasipublic option for lower-income people including migrants. Thanks to a Biden regulatory waiver, the feds foot about 95% of this public option’s costs, about $11.7 billion this year.
Government, social assistance and healthcare account for nearly all new jobs added in such Democrat-run states as California, New York, Minnesota and Illinois. Their high taxes and excessive regulation have suppressed job creation by private businesses, so that government spending is now their main engine of employment growth. How long can this last?
Soaring pension bills for government workers are crowding out public services. Lawmakers have in turn hiked taxes, but the resulting population flight has shrunk their tax bases. All this has made them more dependent on Washington spending. Why should taxpayers in Houston and Jacksonville subsidize mismanaged government in Sacramento and Albany?
By slashing federal spending, Republicans in Washington could give progressive governments an impetus to reform and escape their welfare trap. Call it tough love.
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