Tag Archives: political economy

Budget Cuts and Bribery

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…or budget cuts and coercion, depending on your perspective.

The president’s budget, due for release Tuesday, will spare the two largest drivers of future spending—Medicare and Social Security—leaving trillions in cuts from other programs. That includes discretionary spending cuts to education, housing, environment programs, and foreign aid already laid out by the administration, in addition to new proposed reductions to nondiscretionary spending like food stamps, Medicaid, and federal employee-benefit programs.

What’s going to be ignored in the inevitable hoo-raw over these allegedly terrible cuts to various aspects of our nation’s “safety” net is the truly terrible downside of those aspects.

The Federal monies being sent to the States for education, housing, environment programs, food stamps, Medicaid, and on and on in the seemingly endless, yet growing, list is in large part those States’ own money.  Its income and other taxes collected from each State’s citizens and businesses (which is to say each State’s citizens), with a fraction of those collections then returned to each State (the rest is sent to other States, which does the collected-from State’s citizens no good at all), but with a cynically attached value-add: Federal strings.  Use this money the way we tell you to use it, or we’ll reduce the amount of your money we return to you.

With the proposed cuts to these programs, the States actually will be gaining: the cuts will facilitate associated tax rate cuts, leaving more money in those States—those States’ citizens’—hands.  Just as importantly, though, the strings attached to the Federal funds transfers will be greatly weakened in favor of the States’ own decision-making.

We’ll find out, too and in short order, how sincere the Republican-controlled Congress, whose members ran on and were elected to effect fiscal discipline, really are, whether they’re more interested in maintaining Federal control over States’ individual and varied economic decisions, or whether we need to just keep doing what we’ve been doing the last several Congressional election cycles: firing those who fail to perform, and replacing them.

Congressman Mark Sanford (R, SC) had such a thought:

For a budget to have any meaning, it’s essential we have realistic assumptions in terms of economic growth and in terms of spending reductions.

True enough.  It’s more essential, though, that our representatives not use such excuses to block meaningful tax reform and actual spending cuts and with that continue to exercise too much control over the 50 States.

As an aside, this brings up two elephants in the safety net herd: Social Security and Medicare.  The foregoing—all of it—applies to these two things, also.  In spades.

Yet Another

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…Alinsky-esque distraction by the Ctl-Left.  This one is on the matter of Obamacare subsidies to health coverage providers to compensate them “for reducing out-of-pocket costs for some low-income consumers who sign up for plans on the exchanges.”

The Obama administration paid billions of our tax dollars to these providers, the amount for this year alone looks to be in the neighborhood of $7 billion, with the annual payout looking to rise to $16 billion in 10 years.

The House has sued to block further payments because no funds were appropriated for them, and so they’re illegal.  A number of State AGs are seeking to intervene in the suit.

More than a dozen Democratic state attorneys general took legal action Thursday seeking to preserve billions of dollars in federal subsidy payments….

It’s a fair debate to have in the courts, although, absent appropriation, there’s no money to spend, and so it would seem illegal to spend.

Now comes the cynical distraction.  New York Attorney General Eric Schneiderman said,

Millions of families across the country—including hundreds of thousands right here in New York—rely on these subsidies for their basic health care[.]

As if that’s relevant to the legality of the matter.  The courts should allow the spending independently of the law because tear-jerking.

Schneiderman is demonstrating the intellectual, legal, and moral bankruptcy of the Ctl-Left’s demands.  They’re wholly unable to present a case, and so they stoop to emotionalism.

Foolish

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President Donald Trump is willing to talk to the Progressive-Democrats in Congress in order to achieve tax reform, and it might seem like a good idea.  In the present situation, though, it’s a waste of time.

As the Trump administration reached across the aisle on tax reform for the first time Wednesday, Democrats communicated some requests of their own regarding the tax overhaul. Those requests included a middle class tax cut and that the overall bill not be part of a reconciliation package….

Of course the Progressive-Democrats don’t want a tax reform to be part of a reconciliation bill.  That way they can hold true reform hostage to their Big Government demands.  This is just Lucy offering to hold the football for Charlie Brown so she can jerk it away at the last moment.

It’s a waste of time to try to deal with a party that, at least since then Senate Majority Leader Harry Reid (D, NV) said he’d refuse to work with a President Mitt Romney, refuses to work with or cooperate with Republicans in Congress or the White House (vis., “revise Obamacare our way, or we won’t talk to you”).

Medicaid Cuts?

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Some conservative Republican Senators are looking to cut Federal transfers to the States earmarked for those States’ Medicaid programs.  Others are concerned.

[T]he [conservative Senate Republicans’] Medicaid plan could affect many more people and shift significant costs onto hospitals and states.

One State’s Medicaid program, though, should be paid for exclusively by that State and not subsidized by the other 49 through those Federal transfers. Medicaid is, after all, a state program by design, and Medicaid eligibility is determined by each State.  The Federal transfer subsidies are made the more egregious by the fact that each State determines its own citizens’ eligibility for Medicaid, and that eligibility is income-based—with the maximum income for eligibility in most States being a multiple of the Federal Poverty Guidelines.  This means that in those States, a citizen can be eligible for Medicaid funds even though, by definition, that citizen isn’t in poverty.  Other States ought not be required to subsidize, through Federal Medicaid transfers, such eligibilities.  Not only are the States are defining “low income” much too loosely, other States have to pay into those definitions.

If each of those other 49 were able to keep the monies collected by the Feds for transfer, they’d also have more money—of their own—with which to fund their own Medicaid programs, and each of the States, absent attendant Federal strings, would be freer to structure their individual Medicaid programs according to their own citizens’ needs and demands.  As it is, States wanting to structure their programs must waste time and resources pleading to the Feds “Mother, may I?” and then argue the matter.

Such State-initiated restructuring—subject to central government approval—already is beginning to include things like work requirements, drug testing and time limits on coverage, all of which would free up State resources for the State’s truly poor.  Federal cuts to transfers to State Medicaid need not interfere with this; on the contrary, such cuts would encourage needed restructuring, while moving to insulate each State from other States’ decisions.

Of course, such Federal transfer cut would have complex implications and require serious Federal tax code restructure and reform—the taxes the Feds transfer for Medicaid come from a variety of sources: individual and business income taxes, dividend and cap gains taxes, and on and on.

That just puts a premium on getting started.

A Thought on Tax Reform

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The Wall Street Journal‘s piece by Laurence Kotlikoff, a Boston University economist, on tax reform had this subhead [emphasis added]:

The House proposal beats Trump’s plan, which is more regressive and would induce huge tax avoidance.

There are a number of questions considered in the article, but the prior question, it seems to me is that tax avoidance bit.  The question of tax avoidance is an interesting non sequitur.  Kotlikoff (or the WSJ‘s headline writer), like too many others, is tacitly assuming Government is entitled [sic] to our money; he is giving not the least particle of thought to the need to establish, first, that Government even needs the money before there can be any tax to be avoided.

While us individual citizens must obey the law as it exists, our representatives in Congress must consider that premise, and we must inveigh our representatives to do so.