Bryan Caplan  

Cities, Suburbs, Country: Who's Subsidizing Whom?

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When I was pointing out some ways that government discourages suburbanization, I started wondering about budgetary cross-subsidies between cities, suburbs, and rural areas in the U.S.  Who's subsidizing whom?  Nothing decent googles for me - though I did come across more anti-zoning posts by Matt Yglesias (here and here).   Glaeser et al's "Who Do the Poor Live in Cities?" is related, but isn't focused on my question.  Can anyone point us in an edifying direction?


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COMMENTS (6 to date)
John Thacker writes:

A large problem is that there's a lot of different programs. There's quite a few specifically rural programs-- farm subsidies, obviously, but also Essential Air Service, the Dept. of Agriculture's Rural Utility Services, etc. There's also specifically inner-city programs as well.

The FHWA has excellent data on Highway Statistics, though I've seen different groups use different calculations to show that they're subsidizing others. The official SAFETEA-LU formula uses several inputs for determining highway funding, including population, length of roads that need to be maintained, amount paid in gas taxes, etc. Since all these are used, states and areas that pay a lot of gas taxes argue that they're subsidizing everyone else, whereas states that have a lot of roads argue that they're subsidizing everyone else.

Mike writes:

I would probably begin with the biggest parts of the federal budget (social security, medicare, defense) and the biggest parts of state budgets. Then see how much the average rural person benefits from these vs urban folk.

ed writes:

I'm not sure I understand the question.

I suspect that the "suburbs" and the "core" each benefit from proximity to the other. So the question should be, how is the surplus divided. Asking "who's subsidizing whom" presumes a zero-sum situation.

Stephen Smith writes:

You're not getting anything because the problem isn't mostly with subsidies - it's with regulations. Sure, you can try to calculate which roads receive more/less funding than they contribute till you're blue in the face, but ultimately it's impossible to quantify the almost ubiquitous regulations out there against density (these include straight regulations against density, but also more subtle ones like setback requirements, regulations against mixed use, minimum parking requirements, prohibitions against attached housing, etc.).

I'm sure you'll say, "But, there are also regulations against building suburban-style housing!" and sure, by land area, I'm sure these trump the anti-density regulations. But ultimately people want to live near other people, and the fact that I could build a Manhattan in the middle of nowhere means a lot less than not being able to build a four-story walk-up in aheavily sought-after suburb of Philadelphia.

Peter Gordon writes:

Rail transit systems, convention centers, downtown renewal, Big Dig-type projects are all hugely subsidized. Most of these are in core areas.

Bob Calder writes:

Most if not all of this centers around local regulation and local cost.

Cost shifting figures are available at any property appraiser's office. In general they are accomplished by giving the revenue generated by increases in property value to local authorities who have broad powers inside their boundaries to improve conditions for local businesses and residents (CRAs).

Zoning is a powerful tool but we may end up looking back at as a modern way of creating economic advantage for a select group of developers and politicians.

Obsessing over the residents is not the point. The process of authorizing, permitting, building, marketing, and maintaining is an economic engine.

Another thing to consider is the fact that older cities are built in locations that people find attractive because of native amenities such as proximity to waterfront, prevailing wind, or a view.

Suburban development happens in a wider and wider area of less and less desirable land so it becomes diffused further away and appears less important. That doesn't mean it is but it means there is demand for concentration, high end services, and traditional amenities.

Finally, let me say that cities have a long cycle of decay and renewal traditionally. As I understand it, the funding mechanisms you *think* are creating the trends haven't been around for long compared to cities that have decayed and been renewed. They may accelerate the process but unnaturally altering it is probably dumb.

Stadiums and convention centers are funded by elites for their own reasons. Just think about how far a group of inner-city dwellers would get trying to have one built. Approval for the project is traded to city residents in return for jobs.

About the only thing I haven't talked about is places like Hoyerswerda and Detroit which are somewhat special cases.

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