Tuesday, July 20, 2010

Penny Wise, Pound Foolish, Cuts to Home Care

I'm going to expand this a bit later. For now, take a look at this article on cuts to home care. There are a few problems with this strategy. First of all, you will save money in the short run as people find ways of making do. Without the security provided by regular services however, in the longer run you're going to see people moving into expensive nursing homes and institutions. Some of this will save states money because it will shift the financial burden to the feds, this is simply cost shifting that is definitely a poor outcome for anyone involved but the states.

More generally this is a problem with balanced budget rules that work year to year rather than focusing on longer periods. Saving money today will increase costs in the long term but taking this into account isn't baked into the rules. If nothing else, this downturn should be a call for local, state, and the federal government to take a hard look at overall government budgets and to consider moving towards a more sensible long term budget process. Even writing balanced budget requirements to be on a 4 or 5 year rolling basis would be a big step forward.


  1. Why can't we just nationalize Medicaid and SCHIP and public health programs? The states hate these programs anyway. Oh, right we can't do it because it will make the national deficit bigger and the electorate wouldn't be able to figure out that they were already paying for this stuff by simply adding their state and federal deficits together. Rant, yes, and thank you.
    Should states have 4-5 budget plans? Hell no. The states should have multi-year projections anyway and rainy day funds. They don't follow them. They haven't been spending wisely for the last decade or two or three really. They ate the seed corn. If you spend all your money in good times on tax breaks and none to fix infrastructure and growing classrooms and growing health care needs, then you are in a hellish situation when you hit the depression, which always comes. The system for budgets is fine. The problem was the leadership.

  2. Remember, states have gone bankrupt before. Many, many states have gone bankrupt. The balance budget rules are an agreement to bond holders and to the US government that the states won't get themselves into trouble.

  3. SirW,

    I get your points on state budgets and probably spoke too simply. Shifting more of the health burden to the federal level is probably a good idea, I don't see it happening though.

    I do think states should examine their budgeting process though. I think the current one does encourage too much cutting in bad times and does too little to enforce discipline in bad. Admittedly, allowing spending in bad times will be an easier reform than limiting largess in good times so this will be a difficult area to find balance. Right now in NY though, we're having trouble getting a budget passed. Part of this is because there is too strong a constituency against borrowing, despite this being what experts are recommending we do. Strict yearly balanced budget rules are certainly part of the problem here. It also encourages cost shifting towards the future that will cost more in the long run, the instances of this are too many to name.

  4. I agree it's a problem. It's just that I'm very skeptical that any budget measures can fix the bad leadership problem.
    I'll tell you a story. In 2008, before the stock market crashed but when home sales really started to go South, our state wanted to levy a tax on the sale of all new homes. It was about $2000 on the average home and would apply to business and charities too. The money would go to building new schools, especially in underpriveledged areas. The budget committee drew up this budget about how home sales would be growing steadily, blah, blah.
    I'm in this meeting, everyone's all for it, and I say, home sales are going to crash. All the numbers are wrong. We can't pass it, this money might make people lose their homes. The head of the committee stands up and screams at me that I'm a closet Republican and racist and I only care about rich people. Riiight. Because I'll be buying a house in like 2016 and I knew minorities are the first to lose their homes (I didn't say that, and a lot of them did), but anyways. It was also a ballot measure. I said it would never pass. It didn't pass. So then they made it a law anyway after an entire grassroots Tea Party campaign cropped up against it-this was after the stock market crashed now.
    Bad leadership abounds. It's everywhere.
    They already have the tools. the problem is the people.

  5. SirW,

    Bad leadership will always be with us. I operate under a frame that people never change, we have the same basic breakdown of the good, bad, and ugly that have been around for all of recorded history.

    What changes are institutions, which are basically designed to make the best out of a bad lot. Changing institutions have made the world an incomparably better place to what is present in the past. It's not easy, and some reforms always fail, but better institutional arrangments protect us from the worst pifalls of inevitable boneheadedness to make the inevitable, if slow, upwardprogress suffer that much less regression.

    Which is to say, I think better budgetary tools are possible but will take continual tinkering. The goal is to make them with the assumption that everyone involved are idiots and to minimize the damage while allowing the occaisional real leader to still have sufficient room to make a good decision now and then without the boneheads mucking it up next election cycle.

  6. SirW, part of the reason we might not want that is that different states are allowed to follow their own constrained choices in what those programs fund and how. In the past, this is one of the few areas where the states of done a pretty good job as policy laboratories.

    I agree with your point, Tz, but it is really complicated to write a constitutional restriction that makes budgets countercyclical in good times which makes it impossible to write one that makes state budgets balance over the cycle and stimulative in bad times. Alas.

  7. Doug,

    I agree it's difficult. I'd be happy with a good old college try. Even if they do ultimately make a hash of it. But I don't think the policy discussion has even reached that point where it matters.