Wednesday, April 24, 2013

Raising The Cap On Mass-Destruction


On April 18, Connecticut Business And Industries Association (CBIA) threw its best punch, a stunning article and accompanying graph titled “State Spending: Time to Change Direction.”

It should be noted that CBIA, an association of business groups in the state, is not a part of the right wing conspiracy to save Connecticut from left wing pirates. The association wears a velvet glove and speaks to legislators, mostly left of center Democrats, in muted excessively polite tones.

The graph itself (reproduced below) is worth a thousand words.






It shows state spending spiraling upwards by 153 percent since 1992 -- the year after Governor Lowell Weicker saved state government the necessity of making prudent spending cuts by imposing a state income tax on Connecticut . Way down on the bottom of the graph is a line showing the increase in Connecticut’s population, an anemic 9 percent during the same period. Rubbing salt in the gash, the graph shows a widening gap between median household income, 59 percent, and consumer price index inflation – 66 percent; inflation is now outpacing income. In 1992, Connecticut spent $7.9 billion budget dollars; in 2012, the state spent $20 billon.

The General Assembly put a constitutional cap on spending to induce doubtful legislators to vote in favor of establishing an income tax. Since then, the cap has been steadily lifted. It sometimes sits uneasily on the skulls of spendthrift legislators but is regularly doffed whenever Democrats in the General Assembly determine that it would be inadvisable to cut spending.  

And here we go again. In mid-April the Democrat dominated Appropriations Committee approved legislation that would exempt certain types of state spending from being counted against the cap. Excluded from the cap would be any spending for which the state may be reimbursed by the federal government and payments made by the state on unfunded liabilities for state employee and teacher retirements – a substantial piece of change. The adjustments, said House Speaker Brendan Sharkey, would allow the state to spend more money on Medicaid, which has been expanded to accommodate millions of previously uninsured people. The benefits of Obamacare were frontloaded so as to encourage dubious U.S. Congressmen to vote for it. Payments were back loaded, and payments on Mr. Obama’s Health Care overhaul behemoth are now coming due.

Speaker of the House Sharkey -- a considerable improvement over his predecessor who, unlike Mr. Sharkey, had no direct business experience – has said he doubts that taxpayers in Connecticut would be willing to leave their dollars in Washington: “…if we do not make common sense changes to the definition of the spending cap, that’s exactly what we’re going to do.” Sometime in the future, assuming Connecticut has a future, the state hopes to be reimbursed for its present costs by a federal government struggling to balance its own books, which are about $17 trillion in arrears. Accounting for unfunded liabilities, total US obligations amount to about $87 trillion.

Under a constitutional cap, there are two ways to expand spending: 1) raise the cap through a constitutional change, an unpromising strategy because any attempt to raise the cap, if put to a popular vote, likely will be defeated, or 2) move spending outside the cap, a more practical measure that may not be noticed by a general public focused on its own budget shortfalls.

Democrats in the General Assembly have the votes to adjust the definition of “spending” so that a large chuck of change will be removed from the constitutional cap. The Orwellian redefinition then will allow state Democrats to increase net spending in the hope that a national government unable to cover its own expenses will in the future reimburse costs incurred by the states.

From what larder it may be asked? That indeed is the $87 trillion dollar question. After directing states to expand eligibility or risk forgoing all of their federal Medicaid dollars, the Obama administration hit a Supreme Court decision wall. Ruling on behalf of 26 state plaintiffs, the high court found the “all-or-nothing” proposition was coercive. To bring Obamacare within the shelter of the U.S. Constitution, the Court in essence made the Medicaid expansion optional -- meaning that a state could reject the Medicaid expansion and not lose its existing Medicaid funding.

In the absence of coerced payments, 21 states have chosen to opt out of state run insurance exchanges – which means that fewer states than originally anticipated are participating in the national exchanges. Medicaid currently consumes more than 23 percent of state budgets, a budget item larger than that of education. As Medicaid spending continues to grow, its costs will adversely impact other equally important priorities such as education, emergency services, transportation, and criminal justice. When you choose not to reform a program much in need of reform and decide instead to expand the program, you end up, necessarily, with a bigger and more intractable problem.

To march heedlessly forward under such circumstances is a form of mass destruction. Would it not be less self-destructive to cut spending?
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