Friday, April 15, 2011

Some Stray Thoughts on the Budget

This is a very short post before I leave for work, provoked by an Economist article that I thought was below their usual standards.  Mostly because they were swooning over the rather silly Ryan plan (which really amounts to destroying all the programs the Republicans don't like, then not making any tough choices for another decade and forcing cost savings through a mechanism that looks a lot like Medicare payment caps, which keep getting raised, or the AMT limits, which also keep getting raised.  The mechanism he uses has not yet worked in US history but if his program is used we wouldn't know this for a decade.  Also, never mind my constant critique that my generation can afford generous benefits for ourselves with some minor adjustments like a higher retirement age, the problem is the current bulge in the demographics and a plan to simply saddle us with all the debt because my generation does have high voter turnout is good politics but ultimately dodges the problem.  It's like paying for your mortgage with a credit card expecting your kids to pick up the mess when you die.).

After that lengthy aside, back on topic.  This is what provoked me:

That is not the only instance in which Mr Obama has left the fine print to others. The defence cuts would be determined by a “fundamental review” conducted by the top brass. Big savings from Medicaid, the health-care scheme for the poor that Mr Ryan wants to entrust to the states, will somehow be achieved in consultation with governors, but without the federal government ceding control. Most glaringly, Mr Obama provides neither the details of the tax reforms he has in mind, nor a mechanism for drawing them up.

Ok, fair enough on the defense cuts, but Americans are barely willing to listen to the generals when they recommend cuts to defense so they certainly won't listen to pols.  The Medicaid issue is what jumps out at me, the way the Economist phrases it they seem far more skeptical of Obama's method than they do Ryan's.  I'm going to have to get around to doing my series of posts on Medicaid reform here in New York,  that will make the issues clearer.  But looking at Medicaid, even just a fairly cursory glance, reveals that one of the big issues is cost shifting between levels of government.  By law, Medicaid currently covers a number of emergency services and things like institutionalized care in nursing homes as a minimum floor for the very worst off.  These things are of course very expensive, but the feds pick up the bill so the states don't get crushed under the expenses.  This also means however that it is usually cheaper for the states to dump patients into these programs rather than pay for overall cheaper and more effective programs that they have a higher cost share for.  If reform is left to the states, this isn't going to stop.  I'll draw this out a bit more with some posts on New York Medicaid reform, while I think Cuomo was trying on the whole not to do this too much, it did happen in a few areas with the original proposals, though I haven't compared the proposals to the final program yet to see if these problematic changes were the ones that actually happened.

I realize that people like the idea of the states as laboratories of democracy, but I'm skeptical of the idea myself.  The key thing with a lab is that they do experiments that can later be scaled up more efficiently.  I see very little of this in the US in recent decades.  While some programs are based on programs initially successful in the states, or in the case of the ACA I'd say not so much successful as simply politically doable, on the whole this scaling up seems to be rare.  Rather, individual states make successful programs, a handful of states copy these programs, and then the rest studiously ignore it in favor of their entrenched interests.  For the laboratory of democracy concept to work, there needs to be someone in charge of assessing results and then scaling up successful programs.  Individual states experimenting with policy in the absence of oversight aren't labs, they're just primitive craft workers not operating at efficient scales.


  1. Tzi., Then it's time to get around to those posts about New York Medicaid Reform. I like the idea of states as laboratories, too.

  2. Karen,

    I'll try to get around to that Medicaid stuff this weekend. I started reading it at work since it got forwarded to me in an e-mail, and stopped about 50 or so pages in when I realized that it was too far off from my job duties to justify finishing reading there. At home I bogged down around 100 pages into it. It's some dry stuff.

    I kinda like the idea of the states as labs too, but the whole idea of a lab is that things are being tested expensively on a small scale for later scaling up to a more effective and efficient large scale. It seems to me that mostly arguments are for keeping things in the lab with the important bit, the scaling up for full production, pushed to the side as an annoying afterthought.

  3. Blue Cross Blue Shield sponsored many of the studies behind Massachusetts health care reform.

    I think BCBS (or similar) could be liaisons between each state and federal.

  4. Tzi, I'm afraid I like the idea of states as laboratories. In the past it has occasionally worked as promised. In the 90s there was a fair bit of experimentation, and it isn't necessarily evidence against the process that few Programs went national. In a laboratory, most experiments are expected to fail. But California's stab at cap and trade got ahead of D.C. and inspired other states. Likewise, Massachusett's healthcare law and same-sex marriage. And, embarrassingly, Arizona's immigration law which inspired both Georgia's similar law and Utah's proposed immigration law which works in the other direction. If Arizonans suffer for their law or Californians do, that will be important data in federal policy.

    Another thought: DC's such a mess, state sovereignty offers a way of maintaining innovation and progress in government when Washington is especially Washingtonish.

  5. Doug,

    I may have come out against the idea stronger than I should have, and stronger than would represent my own beliefs. I believe rather strongly in comparative politics as a way to guide our decision making, the states as labs is basically the same thing, though there are a few issues where national level policy appears to be the only workable policy (say, for immigration or gun sales, though with guns things like concealed carry work fine at the state level). Those few issues aside, I think the idea can work.

    To more accurately state what I was trying to get at, I feel like the states as labs is getting used as an excuse to block the findings of existing lab experiments when the results are inconvenient and to instead send the issues back to the lab hoping the results will be different this time. When the states as labs indicate the same things that foreign countries as labs seem to indicate (like universal healthcare saves money or cap and trade works) than it seems to be a good argument that the concept has been proven and is ready for full scale production. This isn't what states as labs would look like if the metaphor was being used to describe what actually happens, instead the model seems to be states as think tanks where the idea keeps getting sent back until the results are convenient for the pol requesting the experiment.