What Happened in 2014 in McPherson County, Nebraska?

I’m going to make a bold statement here. The federal government is useful & necessary, and the country would have a difficult time functioning with a much smaller version. Why do I make such a statement – because I like to troll through government data and see where it takes me. Today it has taken me to McPherson County, Nebraska.

I wanted to write a post in which I attempted to identify wasteful federal spending and quantify it as a percentage of all spending. I would follow that up with suggestions on how to cut spending without adversely affecting low and middle class Americans, if possible. When the pentagon pays $600 for a hammer – an example from a couple decades ago, if memory serves – we can be pretty sure that it was the stockholders and executives of that particular defense contractor who benefited from the excessive spending, not the country’s low and middle income earners.

In my research, I came across the website http://www.usaspending.gov. This “is the publicly accessible, searchable website mandated by the Federal Funding Accountability and Transparency Act of 2006 to give the American public access to information on how their tax dollars are spent.” With such spending detail, I then switched the focus of my research to compare federal taxes paid to federal funds received for specific areas of the country. I was having a great time. I was also visiting with my father-in-law in his assisted living facility, and when I’m doing research, I spend more time with him – although in a somewhat distracted state.

It turns out that it’s difficult to find state and local federal tax payment information. I was not deterred; I have a scientific mind. I could use historic tax tables from the IRS with local personal income data and extrapolate the federal income and FICA tax information. I use a lot of spreadsheets in my research. That local area personal income information is available for 2014 from the Bureau of Economic Analysis, part of the Department of Commerce – another federal agency that puts out lots of useful information.

It was on that page that I read this. “The percent change from 2013 to 2014 in personal income ranged from -35.1 percent in Wallace County, Kansas to 83.7% in McPherson County, Nebraska.” While I made the assumption that a major employer shut down in Wallace County, Kansas, I was itching to find out how personal income came close to doubling in a single year in a rural county in Nebraska.

Some of you might be thinking that I don’t just have a scientific mind, but an easily distracted one as well. Or, to quote a favorite line from the Disney movie Up, “Squirrel!!!”

Some Facts about McPherson County, Nebraska
1. The population has dropped from 533 in the 2000 census to 509 in 2012;
2. The county is 859 square miles;
3. 55% of workers receive wages/salary, while 45% are self-employed;
4. 73.7% of employment is in agriculture, forestry, fishing, hunting, and mining, while the rest is in educational, health and social services;
5. The county is 98% white, while 1.3% report that they are two or more races and 0.7% are “other;”
6. Versus the rest of the state, the residents are above average earners, have slightly smaller household size and more expensive houses, but less than half the median rent price for the state;
7. While the median income is 6.3% higher than that for Nebraska, the percentage of residents living in poverty is also higher than the state average (13.9% v. 13.2%);
8. They are overwhelmingly republican with 82-83% voting for the republican candidate in the last three presidential elections;
9. According to http://www.city-data.com, there are twenty ranches in McPherson County, but according to http://www.usaspending.gov, none of the ranches who received government payments in 2014 are on that list of 20;
10. The county seat is the unincorporated community of Tryon which had a population of 157 in 2010.

There is some difficulty in determining why there was such a large increase in personal income from 2013 to 2014. The largest obstacle is that we don’t have complete data for 2014. So, in some cases I have to guess. First, the research.

I attempted to gather data on the ranches in McPherson County, but there is very little information on most of them. What I did find is that most are small operations with less than 5 employees and less than $500,000 in sales for whatever year was available – the sources didn’t say. There is some confusing information. For example, Rothwell Nason Ranch Company is reported to have $100,000 in sales and 2 employees, but received $188,486 from the federal government for Agricultural Disaster Assistance and owns a Buckeye Dream Machine 2-seat aircraft (2-cycle engine powered parachute).

Petit Ranch, Inc. was established in 1978 and raises cattle for beef. Sales are $170,000 and they have 3 employees. They also received $119,186 from the federal government for Agricultural Disaster Assistance.

Moore Ranch, Inc. was founded in 2013, has two employees and revenue of $82,000. They received $353,566 for Agricultural Disaster Assistance and $8,370 for Direct and Counter-Cyclical Payments from the federal government in 2014.

Finally in the category of ranches receiving payments from the federal government, Pioneer Cattle Feeders, LLP received $281,335 for Agricultural Disaster Assistance and $8,424 for Direct and Counter-Cyclical Payments in 2014.

Other ranches in the area have 1-2 employees and revenues from $59,000 to $170,000.

Does this explain the large increase in per capita personal income from 2013 to 2014? Not really. The total of all government payments to ranchers came to $959,313. This is a 3,100% increase over the 2013 payments to ranchers, but when you divide the difference by the population, you get a per capita personal income increase of only $1,826. We need to explain an actual increase of $38,474.

So, what happened. My guess is that much more beef and pork was sold in 2014 that in 2013, and that the population dropped. The latter seems to be true. According to quickfacts.census.gov, the population dropped to 498 in 2014.

Last year also experienced record wholesale beef and pork prices. Versus 2013, pork prices rose 16.0% and beef prices rose 18.1% in 2014. This would be strong incentive to sell every animal you could sell if you were a rancher.

Could that explain the gain in per capita personal income. Maybe. Unfortunately, the data just isn’t available on the pounds of wholesale beef and pork sold in McPherson County. The per capita increase totals an additional personal income for the county of $18,704,366. The unemployment rate is 1.8% so there is likely upward pressure on wages and there is that huge increase in federal government payments to ranchers. When we account for those, we now have to explain a total personal income increase of about $16 million.

How many head of cattle would be sold for $16 million? The average wholesale price for beef in 2014 was $3.65/pound. From a 1,200 pound steer, you get a 750 pound carcass and about 490 pounds of boneless, trimmed beef. Do the math and you would have to slaughter about 9,000 extra head of cattle to increase total personal income in McPherson County by about $16 million. I suppose that’s possible, but it seems high. I guess I can’t solve this mystery.

Now a quick word on all that government data. With it, I was able to find a 3,100% increase in Farm Bill payments to ranchers in one county in Nebraska during a year with record beef and pork prices. I’m not saying that anyone did anything wrong, but the chance to get caught for wrongdoing is greater when there is a lot of data available.

I fear that the smaller federal government promised by most of the republican presidential candidates would lead to less information available to the public. Gathering and distributing all that information is a time consuming and expensive endeavor. The people who are most likely to take advantage of a lack of transparency to commit fraud are those who have the means and the talent (possibly with the help of tax lawyers) to do so. In other words, unscrupulous people of means are more likely to figure out where the government is not looking and line their pockets with ill-gotten gains.

As an example, let’s look at the IRS. After five years of slashed budgets, the IRS has cut its staff by 30% in some key offices. Investigations of individual tax fraud have plummeted by 43%, and by 58% for delinquent businesses (Washington Post). If you have people or businesses defrauding the government, it’s much less likely that the IRS will be able to figure it out now.

If the flow of available information is also reduced, other investigators will be less likely to find the fraud. Specifically, investigative reporters will have a difficult time obtaining the proof to pass the high bar of journalistic integrity – and to avoid being sued by the subject of their investigation – if the data to support the conclusions is not readily available. I find this scary.

About tonyj126

I'm a 50+ married man who always seems to have a large backlog of work to do, but also a lot of flexibility in my schedule. Much of the work I do is volunteer or taking care of extended family members. I suffer from, as my priest calls it, "the sin of self-sufficiency," which means I can figure out how to do most things myself, and consequently, reduce the need for community to solve problems. As a logical extention (at least to me), I find myself called to comtemplate the country's and the world's woes and offer my observations. I hope someone out there will find them useful.
This entry was posted in Economics, Musings, U.S. Politics, Uncategorized. Bookmark the permalink.

2 Responses to What Happened in 2014 in McPherson County, Nebraska?

  1. I suppose you have a kindred spirit in the fact that I found myself asking that exact same question today. Did you ever look into it further?

    Like

    • tonyj126 says:

      I sent the post to the Planet Money team at NPR, but never heard back. I might dig a little deeper when I get the chance – I still want an answer. It’s nice to know I’ve got a kindered spirit out there.

      Like

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