Transfer Payments in to Spokane MSA (County) As of 2008

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Transfer payments are payments that come in to Spokane and are issued to people without any requirement that they deliver a current product or service.

For example, unemployment benefits, retirement benefits, disability benefits, Medicare benefits, food stamps, veteran’s benefits, and so on, are example of transfer payments.  Wages paid to government employees or armed service personnel are not considered transfer payments because these workers provide a service in return.

(Per a comment to this post that takes issue with this definition of transfer payments, the definition comes from the Washington Regional Economic Analysis Project:

“Transfer Payments, 1969-2008 – Transfer payments are a component of personal income representing payments by governments and businesses to individuals and nonprofit institutions. Unlike the other components of personal income which represent payments for services rendered, transfer payments are characterized as payments to individuals for which they have not “rendered current services”)

Source: http://washington.reaproject.org/analysis/transfer-payments-ca35/. The Pacific NW REAP is headed by Dr. Gary W. Smith, formerly of WSU.)

Here is a chart showing the trend in transfer payments in to Spokane County:


Data source: Washington Regional Economic Analysis Project.

I need to overlay the Spokane GDP to show how transfer payments are an increasing portion of the Spokane GDP.  Per another post on this web site, the Spokane economy appears to consume more than it produces and is a net drain on the United States. See “Spokane’s Dependence on Government“. Transfer payments are increasing as a share of GDP.

(The comment on transfer payments exceeding federal income taxes and social security comes directly from an earlier 2004 EWU Study and the EWU press release that is linked in this post: https://inlandnw.wordpress.com/2010/09/08/spokanes-dependence-on-the-government/

What EWU researchers wrote (and they used only 2 years in that study because those were the only 2 years they could get the necessary data):

A comparison of individual transfer payments
received and individual taxes paid reveals that both
counties appear to be net winners for the two years
considered. For Spokane County, the ratio of transfer
payments to individuals to personal income tax and
SSI contributions was 1.31 in 1991 and 1.16 in 1998.
Similarly, in Kootenai County, the ratio was 1.30 in
1991 to 1.11 in 1998. In other words, the status of
the two counties as net recipients of individual Federal
government services decreased 11% for Spokane
County and 15% for Kootenai County between the
two years.

)

My assessment of the Spokane economy is data driven and unfortunately, the data paint a dismal picture of Spokane.

If you have data sources and studies that disagree with the work of WSU and EWU, please provide them in the comments. Thank you.

Update: I added clarification of the source of the definitions used (WSU, EWU, WREAP) and added the word “current” in the first sentence.

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8 Responses to Transfer Payments in to Spokane MSA (County) As of 2008

  1. Data driven, but not all the data– I’m not an economist but I see some holes in this overly simplified chart.

    What has happened to population in Spokane County during the same time frame? It’s gone up.

    What has happened to the benefits mix available to people throughout Washington, not just in Spokane? It’s gone up. (Changes in the Medicaid mix as laid out by the state will bring in more federal dollars.)

    What has happened to the population mix during the same time? The proportion of people who are older and thus eligible for Medicare has gone up. Unless you’re saying all the people over 65 should move to Arizona or Florida, that’s going to happen everywhere in the country.

    Unless you include other variables that affect the slope of the line, you’re not telling the whole story.

    By retirement benefits if you mean Social Security we all pay into that. I know most people get back far more than they pay in but it’s not 100% transfer for every single dollar received; at least some of it is our own money coming back to us. People did work and produce a product or service–it’s not just free money.

    Ditto for veterans’ benefits. I’m married to a retired Marine (who does not draw retirement yet). He put in his time, he earned his benefits. He absolutely DID “deliver a product or service,” to use your terms. And most people are probably not aware that members of the military don’t receive Social Security for their time in the service; they’re in a separate system. They put themselves in harm’s way for our sake and our nation promised them benefits in return.

    Saying these are all things that are completely unearned is an overgeneralization. Each one has a different and distinct policy rationale.

    Saying it’s coming in from outside the area is another overgeneralization. It’s not 100% transfer from elsewhere. People right here in Spokane are paying into the system so some portion of what you show as “transfer” is actually “stay here” money.

    I used to live in Idaho, which is a donee state–they receive more as an entire state in federal payments of various forms than their citizens pay into the system.” Some of it is distributed in “lumps” by type or geography: crop payments for example, or payment in lieu of taxes to support schools in counties with a disproportionate share of federal lands that wouldn’t pay property tax. What about those transfer payments–are you calculating those for Spokane County? They’re also transfers.

    @BarbChamberlain

  2. inlandnw says:

    The definition of transfer payments is not from me but from the Washington Regional Economic Analysis Project:
    “Transfer Payments, 1969-2008 – Transfer payments are a component of personal income representing payments by governments and businesses to individuals and nonprofit institutions. Unlike the other components of personal income which represent payments for services rendered, transfer payments are characterized as payments to individuals for which they have not “rendered current services

    http://washington.reaproject.org/analysis/transfer-payments-ca35/

    Please note their definition “as payments to individuals for which they have not “rendered current services”. The Director of the PN REAP section is Gary W. Smith of WSU. (Please see http://www.reaproject.org/host-faqs/)

    If you believe that their definition of transfer payments is unfair, please contact him directly. His email address is on that page. I never suggested that people did not deserve these transfer payments or that they were not for past services.

    The comment on transfer payments exceeding federal income taxes and social security comes directly from an earlier 2004 EWU Study that is linked in this post: https://inlandnw.wordpress.com/2010/09/08/spokanes-dependence-on-the-government/

    What EWU researchers wrote (and they used only 2 years in that study because those were the only 2 years they could get the necessary data):

    A comparison of individual transfer payments
    received and individual taxes paid reveals that both
    counties appear to be net winners for the two years
    considered. For Spokane County, the ratio of transfer
    payments to individuals to personal income tax and
    SSI contributions was 1.31 in 1991 and 1.16 in 1998.
    Similarly, in Kootenai County, the ratio was 1.30 in
    1991 to 1.11 in 1998. In other words, the status of
    the two counties as net recipients of individual Federal
    government services decreased 11% for Spokane
    County and 15% for Kootenai County between the
    two years.

    If you disagree with their assessment, you may wish to reach the researchers through their paper and EWU.

    The population mix on the percent here who are >65 is about 2 percentage points greater than the state of Washington, which would not likely account for the full difference.

    I am sorry I did not cite the above directly in the text – those items are cited in other posts on this web site. I run this as a hobby. I am not paid to do this.

    Under the circumstances, I do not see anything to change in my previous post except to perhaps cite these references directly for those who do not like what the data and research shows.

  3. inlandnw says:

    The press release on the 2004 study is here:
    http://www2.ewu.edu/x12840.xml

    — Transfer payments had a higher relative importance to overall economic activity in Spokane than in Kootenai County, with transfer payments making up 21 percent of total personal income in Spokane County in 2001 and 18 percent in Kootenai County.

    — The dependence on transfer payments has risen substantially in both
    counties in the past three decades, but especially in Spokane County, while the dependence levels in Washington and Idaho has remained relatively stable.

    — Individuals in both counties received more in federal individual transfer payments than paid in personal income tax and social security contributions.

    Also, the data for the 2004 EWU study comes from WSU per the author’s acknowledgments:

    I would like to thank Gary W. Smith for his work
    on the Northwest Income Indicators Project at
    Washington State University Cooperative Extension
    – Puyallup, without which this project would have been
    a little less detailed.

    I would be interested in your thoughts after you have had a chance to review the original sources for what I wrote and whether you believe EWU and WSU staff are incorrect.. If you have other data backed sources, I would be pleased to see those.

  4. inlandnw says:

    An update – Dr. Smith is apparently no longer with WSU according to the PNREAP web description:
    http://washington.reaproject.org/

    He was, however, with WSU when the EWU report was written, and he was with WSU when he created the PNREAP web site for economic data.

  5. inlandnw says:

    Some more information from the 2004 EWU Study that may be helpful to you:

    Transfer payments are payments made to people and institutions by all levels of
    government that are not for current services. This study examines largely federally
    funded programs. A few of these programs include some state funding, for instance,
    Veteran’s Payments and Payments to Nonprofit institutions, but these contributions
    are relatively small compared to the federal contributions. The better-known
    federal transfer payment programs included Unemployment Insurance, Social
    Security Benefits, and welfare programs like Aid to Families with Dependent
    Children (AFDC) and its replacement, Temporary Assistance to Needy Families
    (TANF). Comparing transfer payments to personal income allows us to see how
    much the two counties rely on the federal government, outside of payroll and
    spending on government enterprises, like Fairchild Air Force Base.

    On page 9:

    While an individual does “pay” for their benefits through a payroll tax, it was
    paid in a different time-period. Also, the amount of
    the benefit usually exceeds the individual contribution
    because employers also contribute to benefits on
    behalf of their employees.

    On page 9 of their 2004 study, they include price supports for farm commodities, conservation payments, and certain direct payments.

    They also note that gifts from businesses to non profits (without services rendered) are also a form of transfer payments.

    The top 4 categories – retirement income, medical payments, income maintenance (welfare) and unemployment benefits account for almost all of the transfer payments and whether we count the other categories is not terribly important.

    A 3D chart on page 11 highlights the absolute explosion in retirement benefits and health payments over the years where all of the other categories had minimal changes by comparison.

    I am interested in your thoughts after you have had an opportunity to read the 2004 EWU Study and review the data provided by the WREAP/PNEAP work of Dr. Gary W. Smith, much of which was when he was an economist working for WSU.

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