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Originally posted by Mmmm, Burger (C.J.)
I think that you, like most politicians, underestimates the displacement effects of such spending. That is, if S.D. didn't have a military base, someone else would employ people there for something else, at least beyond the short term. (In the specific case of military installations, a defense contractor likely would hire many of them; more generally, they'd find jobs doing something else).
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I think that you, like most people, have not spent time in western South Dakota. In some areas, what you say is surely true, but in many rural areas, everyone knows all too well that if the military leaves, they're fucked, because there's nothing to take it's place.
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That said, your argument that only a 1:1 spending/taxing ratio would not create a subsidy is wrong for broader reasons. Some amount (and we can argue how much) of the $1.10 going to South Dakota has external benefits. Perhaps 5c, perhaps 10c (and it likely differs depending on the nature of the payment). But it benefits people outside of S.D. The value of that money is not fully captured by S.D.'ans (put alternatively, some of the value is reaped by the rest of the US).
Bottom line, you have to look at the types of spending and whether it can fairly be said to benefit just people in the state or benefit more broadly before you call it a subsidy.
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We all may benefit from the spending, but South Dakota (e.g.) benefits in a way other states do not from the decision to spend it in South Dakota -- as opposed to spending it elsewhere, not as opposed to not spending it at all -- which is what the $1.10 figure is trying to capture.
