All South Carolinians would do well to consider a March 10 report from WalletHub written by managing editor John Kierman. The report reveals that South Carolina ranks fifth among states most dependent on the federal government, receiving $3.42 for every dollar sent to the federal treasury.
A more than threefold return on investment would typically be seen as a remarkable deal and any investor getting that type of return would be crowing. So why will this likely not get more attention?
First, as a relatively poor state, our return is not measured in total dollars sent to the feds and received back—larger states contribute more and get more overall. Still, according to the Rockefeller Institute Data Team, South Carolina’s net balance with the federal government amounted to $34.87 billion in 2022 (excluding COVID-related funds). On a per capita basis, that translates to $5,552 for every resident.
Federal funds are often mixed with state money, making it difficult to discern their origins when services are delivered. Many local governments also receive federal money directly and I doubt many have much interest in distinguishing these funds from state and local revenues. The old adage holds true: “All money is green.”
Given the fiscal battles unfolding in Washington, we should all pay close attention. A significant portion of federal funds supports individuals, many of whom live in impoverished rural and urban areas. Don’t be skeptical? Visit Chicora-Cherokee in North Charleston specifically or just drive about anywhere in Marlboro County or Dillon County. Meanwhile, wealthier retirees in Charleston may not encounter hungry schoolchildren or have to wait at the Barrier Islands Free Medical Clinic on Johns Island. Pockets of poverty can be conveniently ignored by many of us—but that doesn’t mean it isn’t there and in significant numbers.
Beyond individual aid, federal dollars flow to all of us in the form of vital public services, including roads, public health, safety and recreation. The logic behind this is straightforward: states compete for tax dollars, just as counties and cities do. Florida, for example, became a retirement haven partly due to its lack of an income tax.
Tax breaks can attract businesses, but the federal government, unlike lower levels of government, operates on a vastly larger scale and is more effective at revenue generation, even if its spending efficiency is often debated and it does in fact send a lot of dollars back to states. This partnership has historically worked well for South Carolina. The response of big business to federal cuts and changing economic policy remains to be seen, but major economic shifts take time—large ships turn slowly.
Federal support for South Carolina comes in myriad forms. As of last December, the Charleston-North Charleston metropolitan area alone employed 12,400 federal government workers. While this is a modest percentage of total employment, it has a meaningful impact — particularly when considering the many private-and nonfederal public sector jobs that rely on federal funding. It is not just job creators that create jobs. All jobs do in and of themselves creating additional economic activity, as workers spend their paychecks, sustaining countless local businesses.
To those celebrating the aggressive spending cuts taking place in Washington, consider the broader implications. State officials who mimic these federal policies should also proceed with caution. South Carolina’s reliance on federal support is not just an abstract statistic — it is a tangible reality that affects communities, jobs and economic stability. Let’s not applaud too vigorously and smack our own nose off our face.
Andy Felts is professor emeritus of political science at the College of Charleston where he taught political theory and public administration. He lives in Charleston on James Island.
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