Alabama relies on federal spending—Alabama residents do, too.
Alabama residents receive over $60 billion from the federal government—23% of all personal income.
These figures are based on a September 2024 report, The Great Transfer-mation: How American Communities Became Reliant on Income from Government, by the Economic Innovation Group (EIG).
These payments, known as transfer payments, include Social Security, Medicare, Medicaid, veteran’s benefits, unemployment, Pell Grants, and others.* The report explains how an aging population and shrinking economic opportunities have shifted many communities into reliance on these transfer payments.
To put the $60 billion in perspective, Alabama’s four automakers generate $6.4 billion in total compensation, according to a report from Autos Drive America and the American International Automobile Dealers Association, as reported by al.com. That’s about one-tenth of the amount received from federal transfer payments.
In other words, a 10% reduction in these payments would have a similar economic effect on personal income as shuttering Alabama’s entire auto industry.
The impact is more pronounced in rural areas. The EIG report notes, “The transfer share of total personal income tends to run much higher in rural areas than in large population centers.” Looking at Alabama, this appears to be a consistent pattern, with most urban counties with low income from federal transfers and rural counties with higher percentages of income from federal transfers.
These trends evolved over decades, having a widespread economic impact that has grown steadily as the population ages.
Meanwhile, these programs are under increasing scrutiny in the current administration. Reducing them would have a profound impact on local communities.
Explore the chart below to see the amount of transfer payments in each county and the share of total income those payments represent.
*Some of these payments, like Social Security, are made directly to individuals. Other payments, such as Medicare and Medicaid, are made to providers to pay for services on behalf of individuals.
For details on the calculation of personal income and transfer payments, see this post on Github:
https://github.com/EIG-Research/EIG-Great-Transfer-Mation.