Monday, April 9, 2012

Will States Save Medicare?

At South Dakota Politics, Dr, Blanchard repeats the conventional wisdom when he asserts,
The Social Security system as it exists is unsustainable. Medicare is much more so. Pointing out the role that demographics is playing in this drama is merely pointing out the hard facts. If we don't reform these systems, they will collapse. Probably a lot more of the economy will collapse with them.
I'm unsure about the answers to Social Security and Medicare.  South Dakota's efforts to deal with the issue have been problematic and I'm not sanguine that the initiated measure to raise the state's sales tax a penny to help deal with the shortage will pass in November.  If it does pass, I expect the legislature to alter the law to lessen its impact.

I suspect that Blanchard agrees with with Reihan Salam whom Elias Isquith claims is" the smartest right-wing pundit of his generation." Salam asserts,
So if Ryan is essentially matching the White House on how much he intends to spend on Medicare over the long term, how does he constrain the growth of federal spending more than the president? According to Obama, he does this by starving programs for the poor, like Medicaid and food stamps, and subsidies for higher education, among other things.
One view of the Ryan approach is that state governments and voluntary organizations will pick up the slack for meeting the needs of the non-elderly poor. State governments that do a good job of crafting cost-effective solutions will, over time, beat out state governments that don’t, as households and firms migrate over time to those jurisdictions that offer the best services at the lowest cost. Moreover, the most successful state policies will presumably spread, just as the best management practices tend to spread across competing firms in a given industry.
Ryan has also suggested that his approach, in particular his approach to tax reform, will encourage more rapid economic growth, and that this in turn will translate into increased household income growth. Increased household income growth will make families less dependent on safety-net programs. And when families spend their own money on things like medical care, education and housing, they tend to be somewhat more cost-conscious, thus curbing cost growth in these all-important domains.
The last paragraph is bit of boilerplate; if one creates the right tax policy, especially the right tax cuts, one will spur the economy to new heights has been a mantra since the early 1980s. The middle paragraph contains the intriguing idea that federalism, if left to prosper, will help solve the Medicare problem.

Conor Friedersdorf asks the question that nags at at me every time someone claims federalism can solve budget woes, especially those attached to Medicare or welfare.

Is that true?

When it comes to job creation or building good transportation infrastructure or maintaining a clean environment or establishing a regulatory environment where affordable housing thrives, I have no trouble believing that successful state governments attract residents and that their practices tend to be noticed and mimicked elsewhere.
But caring for the non-elderly poor seems as if it might be different. If a state designs a program that poor people regard as especially beneficial to their interests, wouldn't a lot more poor people move to that jurisdiction? Isn't there a perverse incentive to adopt programs that repel rather than attract the non-elderly poor, who can be a drain on public resources when present in sufficient numbers and are everywhere objects of prejudice no matter how small their population?
 The South Dakota vote on Initiated Measure 15 seems a perfect test case to answer Friedersdorf's question.  I suspect that Salam will be seen to be overly optimistic about voters' willingness to provide and maintain a social safety net.

No comments: