[A-List] The Divisions That Tighten the Purse Strings

["Yoshie Furuhashi" <critical.montages@xxxxxxxxx>]

<http://www.nytimes.com/2007/04/29/business/yourmoney/29view.html>
April 29, 2007
Economic View
The Divisions That Tighten the Purse Strings
By EDUARDO PORTER

MANY Americans are skeptical about government spending on social
programs, and they cite a litany of familiar reasons: big government
programs aren't effective, they are vulnerable to waste and abuse, and
they run counter to the libertarian, self-reliant spirit of the
nation's founders.

But a growing body of research suggests that America's antipathy
toward big government has another, less-often-acknowledged
underpinning: the nation's racial and ethnic diversity.

Recent studies by economists and other social scientists have found
that this mix tends to undermine support for government spending on
"public goods" of all types, whether health care, roads or welfare
programs for the disadvantaged.

Some of these studies suggest that America's rich diversity — not only
ethnic and racial but also religious and linguistic — goes a long way
toward explaining why government spending on social welfare programs
is much lower than it is in the more homogeneous nations of Europe.
Other studies have found that within the United States, local support
for various types of public spending falls as diversity rises.

"Racial divisions and ethnic divisions reduce incentives for people to
be generous to others through social welfare," said Alberto Alesina, a
professor of economics at Harvard. "This is very unfortunate. But as
social scientists, we can't close our eyes to something we don't
like."

In America, government spending on social transfers — everything from
food stamps and unemployment insurance to health care and pensions —
is about a third less than it is in Italy, France or Belgium, when
expressed as a share of the economy, according to data from the
Organization for Economic Cooperation and Development. And it is about
half the level of Sweden's. Moreover, Americans pay less in taxes than
the citizens of nearly every other wealthy nation in the O.E.C.D.

In their 2004 book, "Fighting Poverty in the U.S. and Europe," Mr.
Alesina and Edward Glaeser, another Harvard economist, applied
statistical regression techniques to correlate data on government
spending with data on racial, ethnic, linguistic and religious
diversity in Western Europe and the United States. The professors
concluded that about half the gap between Europe and the United States
in public spending on social programs could be explained by America's
more varied racial and ethnic mix. (They said that much of the rest
resulted from stronger left-wing parties in Europe.)

As William Julius Wilson suggested in his 1996 book, "When Work
Disappears: the World of the New Urban Poor," many white Americans
turned against spending on welfare during the 1970s because they
thought that it mostly served blacks. "White taxpayers saw themselves
as being forced, through taxes, to pay for medical and legal services
that many of them could not afford for their own families," Mr. Wilson
wrote.

In the relative homogeneity of Sweden, by contrast, most taxpayers are
confident that social spending programs will be directed to people
much like themselves.

This doesn't mean Americans are stingy. In fact, they contribute much
more than Europeans to charity, selecting who they want to help. "It's
not that Americans are bad guys," Mr. Glaeser said. "They just want to
target it."

But in drawing on a wide range of data like population surveys and
patterns of municipal spending, researchers have found ample evidence
of how ethnic and racial diversity has undermined support for spending
on social welfare in the United States.

In a study in 2001, Erzo F. P. Luttmer, an associate professor at the
Kennedy School of Government at Harvard, reported that the percentage
of people who say they support welfare spending decreases as the share
of local recipients from their own racial group falls. His report was
based on data from the General Social Survey, a social-attitudes poll
conducted across the United States nearly every year since 1972.

In another study, published in 1996, James Poterba, a professor of
economics at the Massachusetts Institute of Technology, found that
public spending on education falls as the percentage of elderly people
in a given area rises. The reduction, he found, "is particularly large
when the elderly residents and the school-age population are from
different racial groups."

In a 1997 study, Mr. Alesina, along with Reza Baqir, an economist at
the International Monetary Fund, and William Easterly, an economics
professor at New York University, looked at the relationship between
social spending and ethnic diversity in 2,700 cities, counties and
metropolitan areas across the United States.

They found that in more diverse cities and counties, the share of
local government spending on public goods — in this case, roads,
sewage treatment, trash clearance and education — was generally lower
than it was in more homogeneous localities. "Our results are
consistent with the idea that white majorities vote to reduce the
supply of productive public goods as the share of blacks and other
minorities increases," they wrote.

Of course, there are some exceptions to the pattern. New York and
California, for instance, are among the most highly taxed and most
diverse states, although there is evidence that racial and ethnic
tensions have whittled away at support for public spending. In
California, to cite just one example, Proposition 187, barring illegal
immigrants from access to public services, passed in 1994 on the
support of 63 percent of whites, despite the opposition of four of
every five Latinos.

New York's history also has examples of ethnic tensions. But New York
City, in a way, is a special case: so diverse that no single ethnic or
racial majority controls the public purse. "There is no cleavage
between an Anglo majority and some poor minority," Mr. Glaeser said.
"In New York, everybody is a minority."

New York City's experience, in fact, underscores that diversity does
not automatically lead to hostility among ethnic groups or toward
government spending as a whole. From public education to intermarriage
to the many institutions in civil society promoting mutual
understanding, there are countervailing forces acting to overcome
ethnic, religious or linguistic cleavages.

Ethnic diversity doesn't inevitably reduce spending on public goods.
Rather, spending tends to fall when elected officials choose to run
and govern on platforms that heighten racial and ethnic divisions.
Over the long term, governments usually find it in their interest to
bridge the centrifugal forces of diversity rather than to exploit
them, if only to promote stability.

STILL, there is little reason to believe that the racial, ethnic,
religious and linguistic antagonisms that have eroded support for
social welfare programs in the United States are likely to abate any
time soon. Indeed, the arrival of hundreds of thousands of illegal
immigrants a year from Latin America seems to be sapping support for
public welfare.

Last year, laws were enacted in Arizona, Colorado, Rhode Island and
Hawaii barring illegal immigrants from access to some government
programs. This month, the State Senate in Oklahoma overwhelmingly
passed legislation that would bar illegal immigrants from receiving
public benefits.

And these restrictive attitudes can easily turn against spending on
domestic programs as a whole. Representative Tom Tancredo, a Colorado
Republican running for president on an anti-immigration platform, says
that Americans pay too much in taxes and that the Internal Revenue
Service should be abolished. His candidacy may not prosper, but the
issues on which he is running are likely to be around for some time.

Mr. Alesina certainly expects further conflicts. "One can expect
public support for public goods to erode further," he said. "Public
spending in law and order might not go down. What would go down is
spending on redistribution."
--
Yoshie