Donald Trump, Alexander Hamilton and the case for a new federalism

Originally published on February 28, 2017 by Crain’s Chicago Business

Like a spoiler in the TV series “How to Get Away With Murder,” one need not wait to predict the reception to Trump’s speech to Congress tonight, particularly his plans to vastly increase the nation’s military budget while reducing the budgets of departments like HUD and the EPA to fund the increase.

That proposal, combined with the expectation that Trump and the Republican Congress will act to lower corporate, individual, estate, and other taxes—an action that mostly will benefit the wealthy—has already produced the usual and expected cries of anguish from Democratic lawmakers, liberal pundits and advocacy groups.

A huge battle over federal tax policy can be expected, with leftists fighting to save the historic federal share-the-burden system championed by the likes of Franklin Roosevelt and even Alexander Hamilton. But perhaps it’s time to embrace what has heretofore been the property and pillars of conservative and libertarian orthodoxy. Perhaps those of us on the left should not only support but propose a new federalism that entails even deeper tax cuts than the Republicans envision, and keep those dollars at home—in the cities and states where they generated, where they are most needed and best used.

Consider this: When Trump threatened to “defund” California for daring to protect immigrants, he was actually describing an alternate universe. California—like the states where most other sanctuary cities are located—is not a taker. Rather, California is one of 14 “donor” states—those states that contribute more to the federal government in taxes than they receive. California is not the state with the worst ratio of dollars sent to Washington versus dollars received. Depending on your source, that honor would go to New Jersey, followed by Minnesota, Illinois and Colorado, according to the New York Times—or to Delaware, Minnesota and Illinois, according to the Atlantic.

What states are the winners? No surprise, South Carolina tops the list of beneficiaries, according to the Atlantic, receiving $7 for each federal tax dollar its residents pay. In fact, 10 of the 11 states that receive $2 or more for each dollar paid in taxes are all red states—including Mississippi, Alabama, North Dakota, Louisiana, Kentucky and West Virginia.

With the clear hostility of this White House and Congress toward cities with diverse populations, it makes sense to ask why those of us in states that value raising the minimum wage, public education, universal health care, immigration, equal pay and other fundamental issues continue to champion sending our dollars to other states that not only vote red but are poor.

And in another bit of poetic irony, it is exactly from our cities that the nation’s wealth and taxes derive. According to the U.S. Conference of Mayors, and studies by Brookings Institution and others, U.S. metro areas are not only home to 84 percent of the nation’s population, but they account for 86 percent of the nation’s total employment, 87 percent of its real income, and 90 percent of gross domestic product.

In terms of GDP: New York produces more than $1.68 trillion a year, followed closely by Los Angeles at $867 billion and Chicago at $611 billion. And according to a report prepared by IHS Global Insight for the U.S. Conference of Mayors, “Six metro areas—New York, Los Angeles, Chicago, Washington, D.C., Dallas and Houston—account for almost a quarter of the nation’s $16.8 trillion economy; add in the next 17 highest-ranked metros, and you account for about half of all economic activity.”

The vast majority of tax dollars, 87 percent according to the estimates by the venerable Brookings Institution, also are derived from city-centered metropolitan areas—places that are home to and have been built by the sundry immigrants from England, Ireland, Italy, Poland, Mexico, Nigeria, El Salvador, Russia, Iran, Iraq and Syria (among others) who have sought their fortunes and their freedom in these citadels of opportunity.

We need to keep our cities as gateways to opportunity, and the best way to do it is to bring or keep those dollars at home to fund the infrastructure, education, clean air, clean water, housing, health care and more that are the fundamentals of a secure democracy. At this point in our history, the only guarantee we have that our dollars will be used in that manner is to keep them from those we know have another agenda.

In this year of all-things Hamilton, it is good to remember that, in his famous debates with James Madison, he counseled, and for nearly 250 years we have agreed, that the burdens of one should be borne by all. Trump, however, would use that commitment to divide and punish rather than unify us. Rather than simply reacting, let’s embrace the federalism of which they are so fond, starve the federal war machine that he would create and keep our young—and our dollars—at home.