Negative Interest

Health care reform and state budgets

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Jonathan Cohn points out this NBC News piece detailing how Jonathan Gruber, Jon Kingsdale, and John McDonough used the 2006 Massachusetts law as a blueprint for national reform. A lot of this is familiar, but I liked this paraphrase of Gruber, who advised both Romney and President Obama on health care reform: “He also noted that the Massachusetts law didn’t require any increase in taxes only because it received federal health-care funds that defrayed the costs of the new law.”

This, to me, is one of the most important functions of the federal government. The stimulus helped make a dent in state budget shortfalls (with the federal government accounting for more than a third of state spending), but as it winded down, states were predictably forced to contract, raising taxes and making large cuts in education, transportation, and other programs.

Some governors and state legislatures are, of course, more fiscally prudent than other, but all are at least in part dependent on the federal government. The best way to avoid raising state and local taxes is state and local aid from the federal government. Barack Obama could have claimed he passed his health care reform without increasing taxes if there was some benevolent global super-government whose job it is to cover federal budget shortfalls. As it is, Romney has been able to to portray his health care reform as an example of his fiscal prudence and opposition to raising taxes, rather than an example of the benefits of a large and active federal government.

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Written by negativeinterest

October 11, 2011 at 6:21 pm

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