Saturday, March 31, 2012

Moving the Safety Net

On Thursday, the House of Representatives passed the budget crafted by Rep. Paul Ryan. The vote was 228-191 with 10 Republicans voting against and 0 Democrats voting in favor. There has been the predictable news coverage about breaks for the wealthy and "ending Medicaid" with a lot of talking points from both sides playing politics without really getting at the impacts.

So I set out trying to take it at face value and figure out what was going on. The full argument is summarized in this website created by the House budget committee. The picture at the right is the cover of the PDF that provides the narrative supporting the legislation.

I was particularly interested in the impact on the social safety net and found an excerpt from the full document posted by the Kaiser Family Foundation. In reading through that excerpt, I was struck by how much of the argument in the Ryan Budget is based in polemics and not in policy. I'll examine a few of these examples and then consider the larger implications.

There are two implications in these opening passages. First, the safety net is for those who have difficulty "through no fault of their own". The logical outcome is that those who have acted badly deserve their fate and the safety net is not for them. Second, non-governmental institutions will always be better suited to solve these issues. It's not just the government is inefficient (although the document contains lots of anecodotal stories about waste and abuse). It's that it fosters dependence while localities would solve problems. They just need to be freed up to do so.

Again, it's not a federal government that cares for people but citizens helping their neighbors. Furthermore, the heart of shifting medicaid and food stamps to the states allows them to better manage their costs within the needs of their local population.

Theoretically, state and local governments can use competition to manage costs and "tailor programs" that meet those unique local needs.

At the heart of this proposal (the solutions in the document are in bold) is the idea that competition will solve the cost problems at the local level. But competition in a fixed market like health care will either lead to increasing personal premiums (the claim of the "ending Medicaid" crowd) or result in reduction of services. That's what "better options" and "personal choice" lead to. It's why I got to keep my employer-provided insurance but now have a $30 co-pay. That's what competition for plans looks like when there are only a fixed number of sources at the local level.

This passage expresses some of the same concerns with regard to access to higher education. Two things to notice here. First, Pell Grants would be limited to low-income students, presumably raising out of pocket college costs for some segment of families. Second, we've again got the intrusive "truly need it" line, suggesting that there must be those taking advantage of the system. (By the way, it's always puzzling that conservatives never mean for-profit schools when they talk of those taking advantage. Must be that profit thing.)

I could take apart the rest of the document (including the parts that are about social security, defense, and tax policy). But the same basic principles would apply. Decisions are best at the local level, the federal government makes things worse, and immoral individuals are unfairly gaming the system.

This all ties in with something it took me a long time to figure out but has never been part of the analysis of the political media. For all the focus on Grover Norquist and his infamous tax pledge, the real issue to folks like him isn't cutting spending and taxes. Even his famous, "government small enough so I can drown it in the bathtub" quote isn't quite right. What he wants is for the FEDERAL government to drown.

The logic expressed in the Ryan budget and by those who argue for austerity budgets is that the Federal budget must get under control. But because they really don't like revenue based solutions, the only solution is to shift the costs to 1) state and local governments and 2) individual citizens.

What happens if we block grant Medicaid to the state of Michigan? The program can be adjusted at the state level to provide the amount of support the block grant will cover. What happens when we max out Michigan's block grant? Either 1) provisions will be cut, 2) state taxes will have to be raised because the state can't run a deficit, and/or 3) individuals will have to pay a larger share of their health care costs. The same things happen to Food Stamps, Pell Grants, and Highway funds, In fact, everything except defending the borders moves downward.

The result of all this is that the social safety net does get closer to where people live, but so do the costs. It's fascinating to think that the Tax Revolt in this country began in 1978 about property tax rates in California. The Tea Party's concern with taxation and deficits is the grandchild of that earlier revolt. So if we really shift costs downward, local taxes will go up.

Families, churches, social service agencies, and non-profits can try to pick up the slack. But it's really hard to argue that the cost burden on local entities will go down. True, the federal deficit will come under control but people will be paying higher state taxes, greater out of pocket costs, or participating in greater rates of voluntary activity on behalf of the needy down the street. It's hard to figure out how our household will be better off if we're paying higher taxes to Jackson or Lansing but not to the IRS.

As a result, the social safety net might remain in some form but it will be closer to the ground, more regionally variable, and more costly to those trying to hold it together. At some point, the webbing of the net gets so loose that it's hard to call it a net at all.

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