Show-Me Institute Executive Director Brenda Talent was a
guest
on Saint
Louis local roundtable discussion show Donnybrook on July 5, 2012.
Among the topics covered this time were: whether Missouri should elect to participate in the medicaid expansion, the Affordable Care Act, the potential development in Hadley township and its effect on homeowners in the area, whether the prevailing wage should be paid to workers rebuilding the city of Joplin, and the fate of the AAA building on Lindell Boulevard.
Should Missouri Participate In A Bernie Madoff-Type Scheme?
First came the threat. Then the bribe, or the offer that sounds
almost too good to be true. Now it is the moment of truth.
On June 28, U.S. Supreme Court Chief Justice John Roberts
rendered the majority opinion in a 5-4 vote upholding the
constitutionality of the Affordable Care Act. However, with a 7-2
margin, the Court struck down a key part of the law that would have
stopped the flow of all federal funds for Medicaid to states that did
not expand access to this program, as the law intended.
“The financial ‘inducement’ Congress has chosen is much
more than ‘relatively mild encouragement’ to expand Medicaid,”
Roberts wrote. “It is a gun to the head.”
Because the federal government originally could have
withheld all of the state’s Medicaid funding if it did not expand its
program, Missouri would have faced a massive and essentially
mandatory increase in its Medicaid costs if this part of the law had
been upheld in its original form.
Unable to coerce state governments to spend more of their tax
money on Medicaid, the federal government is offering a grace
period of several years in which it will pick up essentially all of the
cost of the Medicaid expansion, scheduled to begin in 2014, if
individual states commit to spending money of their own in years to
follow.
Over a 10-year period, Missouri would need to commit to
spending about $430 million in order to qualify for $8.4 billion in
additional Medicaid grants from the federal government.
If that looks and sounds almost too good to be true, it is
because it literally is too good to be true.
Where is the money supposed to come from to pay for a huge
increase in this entitlement program? Do we just pretend that the
money is there when we know very well that it is not?
Our state government is already over-leveraged. And the
federal government – with a string of trillion-dollar deficits – is now
borrowing about 40 cents for every dollar it spends. Imagine adding
$400 of credit card debt for every $1,000 you spend. How long do you
think that would work?
As Show-Me Institute Executive Director Brenda Talent
explained in a recent appearance on public television, the federal
government is engaged in a Bernie Madoff kind of scheme. Our state is
already in arrears in trying to meet its current commitments. As Brenda
stated on Donnybrook on KETC-Channel 9 in Saint Louis on July 5,
Missouri will have to spend money, which it does not have, in order to
receive money from the federal government, which it does not have,
while making promises to people that it will not be able to keep.
Nebraska Gov. Dave Heineman and Iowa Gov. Terry Branstad
are already on record opposing the Medicaid expansion. Let us hope
that Missouri joins them in opting out of this part of the federal health
care plan.
It is easy to write IOUs. As Bernie Madoff did, you can – for a
while anyway – write new IOUs to replace old IOUs. But it is morally
as well as fiscally reprehensible to make promises that you cannot keep.
That is why Missouri should say “No” to the Medicaid expansion plan.
Andrew B. Wilson is a resident fellow and senior writer at the Show-Me
Institute, which promotes market solutions for Missouri public policy.
So, Is Missouri Really Falling Behind?
That question is asked a lot these days. The answer really depends on which figures are examined. If one looks at Missouri’s April unemployment rate (the latest figure from the Bureau of Labor Statistics), Missouri’s 7.3 percent looks pretty good compared to the country’s unemployment rate of 8.1 percent. Yet Missouri’s total economy actually shrank from 2010 to 2011. The value of all the goods and services produced in Missouri was a billion dollars less than the previous year. Total employment (that is, the total number of people actually working) also declined. Based on the weight of the evidence, Missouri is falling behind.
Considering this, it is pretty fair to say that there is considerable room to improve Missouri’s economic performance. For example, people on both sides of the aisle have called for tax credit reform. My colleague Patrick Ishmael and I have called for eliminating Missouri’s corporate income tax and making up the lost revenue with the elimination of economic development tax credits. Despite calls in the legislature for reform, the status quo remains.
It is easy to understand why different people have differing views on Missouri’s economic performance. However, the weight of the evidence supports the contention that Missouri is under-performing. Eliminating the corporate income tax is one way to make things better. State officials can do other things to improve as well (such as reforming occupational licensing).
No, It Will Cost Missourians Considerably More Than ‘$20 Per Person’ To Expand Medicaid
The St. Louis Post-Dispatch has published a commentary by Saint Louis University School of Law Professor Robert Gatter in which the good professor claims that Missourians would only have to pay an extra $20 per person, per year to expand their Medicaid program. How does he arrive at that dollar amount? In short, some creative accounting.
Here’s the math. Under the ACA, Washington, D.C., will pay 100 percent of the cost of expanding Medicaid for three years starting in 2014. Then the federal share of that cost in any state that expands its program drops gradually over four years to 90 percent, and it remains there forever. Missouri’s budget director estimates that the state would receive about $2 billion on average each year from the federal government during the first 10 years of expansion. Meanwhile, Missouri would pay, on average, about $80 million per year. That cost would be divided among most of Missouri’s roughly 6 million residents. After excluding Missouri’s children and poor adults, about 4 million residents would share that average annual cost. Eighty million dollars divided by 4 million people equals $20.
Prof. Gatter is, unfortunately, just wrong. The cost of expanding Medicaid would not be $20 per Missourian. It would be much more.
First, Gatter lowballs the state cost of the expansion. As I have written before, the Kaiser Family Foundation estimates that the new program could cost the state almost $800 million in the program’?s first five years — twice what most news outlets have been reporting as the program’s potential cost to the state — and on an annual basis, likely over $100 million in the years that followed. Gatter’s “$20 per person” assumption is based on a rosy baseline that considers only the state budgetary costs in supporters’ ideal budgetary scenario. For a state already facing a battery of budgetary problems, such programmatic ambiguity is dangerous — and especially dangerous if that ambiguity is not admitted.
But the state contribution to the expansion is only a fraction of the cost to Missourians. Again, we are the federal government. Federal money that would go toward a Medicaid expansion is not, despite what the Post-Dispatch has called it, a ?”windfall.”? It is our money, being paid back to us from our own pockets. Taking this into account and dividing Gatter’?s annual $2 billion cost to the feds between his four million Missourians, taxpayers can expect to pay closer to $500 total each year to expand Medicaid, not $20. (I say “closer” because there is, as with so much of this stuff, some taxing and spending nuance involved here.)
That said, and in Gatter’?s own words, those costs then ?”remain there forever” — unless, of course, the law is repealed.
It is bad policy to let politicians essentially split their programs onto different credit cards and for us to act like one or both cards are free money, rather than a liability. If the cost of one bill rises, taxpayers’ overall bill rises. It i?s not an “investment” for a husband to spend $20 out of one family account and $500 out of another, and then to tell his wife he only spent $20 of the family’s money. It is, at best, a shell game, and one that will eventually bite all involved. The result? For Missourians, it means higher taxes, fewer services, or both, with a ?reform? that does not credibly control health care costs.
And a word on Prof. Gatter’s assertion that the Medicaid expansion would produce net savings to the state economy. The professor writes that Missouri experiences “an annual loss to [the] economy of $720 million to $1.5 billion for the 308,000 Missourians [who the proposed] Medicaid expansion would cover.” But does spending $2 billion-plus in taxpayer money each year — state and federal money, much of it likely borrowed — to recoup even $1.5 billion in presumably taxable economic activity really make economic sense? Even liberally construing all of the savings Gatter contemplates in his piece to the maximum, his case for “savings” is far from made, both for individuals and for the government.
Missourians will not get off cheaply with an ACA Medicaid expansion, and in a very real way, much of the cost of the expanded program would just go to another, already maxed-out credit card also in the taxpayers’ name. That is a problem.
Just Wait A Minute
On Aug. 7, Kansas City voters will consider a proposed sales tax increase. Is this a good move for Kansas City? Or is it just more of the same desperate cycle? City taxes and regulations hurt the business environment. Businesses and jobs leave. City funds and services suffer. Taxes are increased to replace funds and maintain services. More businesses and jobs leave. Repeat. While this is being sold as a tax switch, the new revenue from sales taxes will be much higher than the offsetting cuts from the elimination of land taxes and car registration fees.
Also, is raising the sales tax the most efficient way to gain revenue for the city? Why would the city want to eliminate its land tax in the first place? My colleagues, Professor Joe Haslag and Policy Analyst David Stokes, have written about the benefits of land taxation for local governments. Kansas City is unique among local governments in Missouri because it is able to collect land taxes. There is widespread agreement among economists that land taxation causes a minimal amount of economic distortion, yet in its search for extra revenue, Kansas City looks to raise sales taxes.
When people vote on an issue, they should be equipped with as much information as possible. The situation in Kansas City is no different. Even though half a cent sales tax increase does not seem like a large amount, people should be aware that even innocuous decisions can carry with it unforeseen consequences.
Missouri Tax Credit Estimates FY 2012 and FY 2013
Missouri Tax Credit Estimates FY 2012 and FY 2013
Best Bet To Save Soulard Market? Privatization
 The Soulard Farmers Market. |
Last month, Saint Louis City officials unveiled a plan to spend up to $18 million renovating the historic city-owned and managed Soulard Farmers Market. The city plans to partially rely on revenues from a proposed tax hike for funding. However, there is an alternative to a multi-million dollar taxpayer-funded makeover: privatization.
When nearly 40 farmers’ markets (see page 4) markets popped up across Saint Louis, including four markets within a 3-mile radius of the Soulard Market, and Walmart and Target began carrying fresh groceries, Soulard Market did not adapt. Its prices are higher than Walmart, it misses out on Sunday shoppers because it is closed, its structures are a mess, and it faces a branding problem as a nearly farmer-less farmers’ market, where “very few vendors grow what they sell.”
The market faces daunting odds: it has operated at a loss for most of its recent history and another downtown farmers’ market was cancelled last year due to a lack of interest. While the city’s plan makes strides in responding to evolving shopper preferences, it targets a symptom instead of the disease, doing so at the cost of millions in taxpayer dollars for another potential redevelopment failure.
The benefits from privatization could be numerous. The property, which is protected under historic ordinances and could potentially be further protected through historic preservation easements, would provide revenue to the city or allow slightly lower tax rates if it was sold. Private ownership would create a stronger profit motive because owners would be personally invested in the market. Owners/lessees, not taxpayers, would assume the risk of development. Even if the proposed plan is perfect, privatization would be beneficial to increase competition.
Currently, public planners are tip-toeing around vendors more concerned with maintaining their status quo of privilege (from a time “years ago when rules were a little more lax or when variances were allowed”) than promoting the long-term success of the market. The St. Louis Post-Dispatch describes the vendors’ reluctance to bring competition to the market:
[Vendors] worry that new vendors could drive them from their turf and scare away customers who rely on the market . . .They . . . worry that any reconfiguration of the market could change dynamics that have fallen into place over decades of doing business.
What vendors miss here is that the “dynamics that have fallen into place” are a major reason the market has become a ghost of its former self. Maintaining long-standing vendor-shopper relationships and character is important, even for a private market, yet respect for culture does not preclude dramatic change. But tell that to the vendors:
“I know what makes my place click,” [a vendor] said. “If they [re-situate] everything, it would throw off everyone’s business. Why don’t you just build this fantasy market across the street and see who stays in business longer?”
These fantasy markets are a reality. Others are doing what the Soulard Market does, but better. The proposed plan is a short-term gamble to solve a long-term problem. The best long-term bet for the market is private ownership and management.
As for who will stay in business longer, vendor Lenard Chartrand is not revealing any secrets when he when he says, “The market has to change or it will die.”
Some ‘Windfall’: Would It Actually Cost Missouri Nearly $800 Million To Expand Medicaid?
Since the U.S. Supreme Court ruled that the Affordable Care Act’s Medicaid expansion could not be forced on the states, there has been a lot of talk about whether Missouri should opt into the expanded Medicaid program anyway. The St. Louis Post-Dispatch describes the state-to-federal funding arrangement as a “windfall” because, they say, the state would “only” have to pony up $431 million to get $8 billion in federal funding.
But would it really cost the state $431 million?
The source of the Post-Dispatch‘s figure is a Kaiser Family Foundation report, published in May 2010. The document lists the costs and federal benefits that would come to each state when the state joined the expanded Medicaid program. And they list two participation scenarios: first, a “standard” scenario, where participation in the program is moderate, and an “enhanced” scenario where, as they put it, there would be a “more aggressive outreach and enrollment campaign by federal and state governments as well as key stakeholders including community based organizations and providers that would promote more robust participation” in the expansion. Would the government aggressively market the expansion? Almost certainly, and the feds already have aggressively promoted other parts of the ACA (to wit: “The agency [Health and Human Services] also is launching a more aggressive marketing campaign . . .”)
Long story short, things could get a lot more expensive for Missouri to participate in Medicaid than the Post-Dispatch‘s report would indicate. Kaiser’s “standard” participation scenario indeed predicts that Missouri would have to pick up $431 million in new spending. But, if the program’s participation rate is higher, the state could be stuck with somewhere around $773 million in new spending. And that is just for the years 2014-19. Legislators can count on at least an extra $100 million to $150 million each year after that to pay for the expansion, and possibly much, much more if participation rates are higher.
And where, exactly, would all of that money come from? You, of course, through higher taxes and/or reduced state services elsewhere. And that is completely neglecting the fact that Missourians would not be getting a “windfall” of federal dollars. Taxpayers are the government. We would be paying ourselves. If participation in Missouri’s Medicaid program rises, the cost to the federal government will increase, meaning not only will taxpayers be spending more money through the state, but they will have to spend more money through the feds, as well.
Some “windfall.” Taxpayers and policymakers deserve to know when they are being sold a bill of goods. This is one of those times.
McGraw Milhaven – David Stokes on KTRS
David Stokes has a recurring spot on McGraw Milhaven’s KTRS radio program.
In this appearance, Stokes and the host discuss topics such as cigarette taxation, toll roads, library taxes, and people crossing state lines to save money on cigarettes, gasoline, and alcohol.
