Iowa's Economic Destiny at Risk
Brian Gongol

The major economic troubles of the future are national in scale -- the massive Federal debt, the looming insolvency of Medicare, and the colossal underfunding of Social Security are just a few examples.

The situation is like a complex of supercell thunderstorms -- huge, visible from a great distance, and utterly beyond our individual powers.

Our situation is like a thunderstorm in two other ways, as well. First, we can do things to prepare. Second, we're fools if we expect anyone else to take care of us.

These problems are so gigantic in scope that some of them will be addressed only in giant, sweeping changes. Quite simply, the Federal government is going to have to make big cuts somewhere. And it's really easy to see which states will be hurt the most: Rural states, and states with older populations. That puts Iowa in the cross-hairs twice.

Here's why those states will be worst-off: Rural states will be hurt because they don't have a lot of votes. As a result, they're not particularly important to candidates for the White House. Iowa has only had the advantage of hosting the first-in-the-nation caucuses for a few decades, and every election cycle there's a new movement to take that special position away from us. If our solitary ace in the hole for national debate is the caucuses, we're in deep trouble, because that could be taken away from us at any time.

Moreover, rural states aren't just in trouble because they don't offer a lot of votes. They're also in trouble because the cost of big-ticket items (like public works projects) are more expensive per-person than they are in more densely-populated places. Iowa has 950 municipalities (almost all of which have less than 10,000 residents), and hundreds of thousands of people living on farms and acreages. The cost of delivering most basic public (government) services, from schools to police protection to sewers is higher per-person in a rural area than it is in an urban area. The sheer number of these services funded in Iowa through Federal grants and loans is staggering -- in essence, we are heavily subsidized for many things by the rest of the country. That's not to say it isn't fair; it very well may be a completely fair exchange for people living in New York City to chip a few extra dollars in the Federal pot in exchange for Iowans to grow the corn and raise the hogs. It would be pretty hard to feed anyone from a penthouse window garden in Manhattan, after all.

But whether it's fair or not, relying on those subsidies puts Iowa in a position of weakness. When it comes time to pay the piper and the Federal government is forced to cut back, it will be an easy political move for Washington to cut us off from lots of the money that gets pumped into rural development. Should Iowa lose the first-in-the-nation caucuses as well, we'd have virtually no way to fight back.

But the rural situation is only half of our vulnerability. With one of the nation's most disproportionately old populations, Iowa depends on a much bigger stream of Federal income: Payments to our seniors from Medicare and Social Security. When those programs get cut (and they will have to be), Iowa's effective state income will be reduced, too. On top of that, pile on the fact that the majority of Americans are lousy savers, and as a result take home much less income when they're retired than when they're working. That means that the state's revenue stream from income taxes will also be hit hard as the population ages. Iowa depends heavily upon two sources of state tax income: Income taxes and the sales tax. As incomes are reduced, though, so is spending. So if Social Security checks start shrinking or if Medicare payments dry up (forcing seniors to spend more out-of-pocket for their own medical care), then older Iowans will have less to spend, too.

There's simply no way around it: Iowa is at serious (and disproportionately high) economic risk thanks to the Federal government's thriftlessness.

Addressing these problems, though, will require that our state political leadership be composed of people who actually understand, acknowledge, and intend to deal with the problem. Unfortunately, given the recklessness of the state Legislature's management of the public pocketbook and the Governor's habit of seeing an opportunity to risk taxpayer dollars on dumb ideas around every corner, it's really hard to see where the real vision for the future is hiding.

Iowa doesn't need truckloads of imagination or obsession with "cultural values" in Terrace Hill. What Iowa really needs is a thoughtful manager -- someone who sees the state government as a firm with a strict budget and demanding customers. Task forces and grand schemes to "transform" the state into a biotechnology, renewable fuels, or other flavor-of-the-month "haven" aren't going to do the trick. Iowa's people are ingenious and industrious on their own. But they're being burdened by a state tax structure that makes no sense and a government that confuses throwing money at problems with actually solving them.

When the governor is willing to hop on a plane to try to bribe Whirlpool with $10 million dollars to keep a factory open in Newton, but doesn't see how the state's preposterous sales-tax system inhibits growth and keeps people from starting businesses, something's terribly wrong.