The politics of rescuing state governments or letting them go to hell

Counting on Medicaid Money, States Face Shortfalls

This is the title of an article in today’s New York Times that details a severe issue that, if not addressed very soon, will have multiple political effects. I’ll quote from some of the most important parts of the article and then talk about some of the effects I believe are likely in races for different positions.  

Having counted on Washington for money that may not be delivered, at least 30 states will have to close larger-than-anticipated shortfalls in the coming fiscal year unless Congress passes a six-month extension of increased federal spending on Medicaid.

Governors and state lawmakers, already facing some of the toughest budgets since the Great Depression, said the repercussions would extend far beyond health care, forcing them to make bone-deep cuts to education, social services and public safety.

Gov. Edward G. Rendell of Pennsylvania, for instance, penciled $850 million in federal Medicaid assistance into the revenue side of his state’s ledger, reducing its projected shortfall to $1.2 billion. The only way to compensate for the loss, he said in an interview, would be to lay off at least 20,000 government workers – including teachers and police officers – at a time when the state is starting to add jobs.

“It would actually kill everything the stimulus has done,” said Mr. Rendell, a Democrat. “It would be enormously destructive.”

There are are other quotes from or references to the urgent concern of Republican Governors Schwarzenegger of California and Douglas of Vermont, Republican Mayor Bloomberg of New York City, Democratic Governor Paterson of New York, and Michael Bird, federal affairs counsel for the National Council of State Legislatures.

The first electoral issue is that any combination of biting tax or fee increases and brutal service cuts from state and municipal governments will sour voters even further on incumbent politicians, almost certainly causing more losses, including some surprising upsets, of incumbents from both parties. Undoubtedly, this would extend to Federal races – as it should, because the Federal government would have failed to meet the need for a new rescue package for state and municipal governments.

The second issue is that the lost jobs from layoffs of government workers (teachers, firefighters, police officers, social workers, God only knows who else) would worsen the economy palpably, leading to even more damage to incumbents.

As we all know, state and municipal governments are already doing very poorly around the country – undoubtedly, along with the generally weak economy and high unemployment, one of the reasons that incumbent Governors (and, I’m guessing, state legislators) are much more likely to be defeated in reelection bids this year. Failure to infuse state budgets with Federal money for their Medicare programs would surely amplify this effect.

Governors and state lawmakers were caught largely by surprise by the House’s removal of the appropriation. Over the previous 10 months, the Medicaid money had been included in separate bills passed by each chamber, and President Obama had wrapped the extension into his executive budget proposal.

“There was every reason to think they’d get together,” Mr. Rendell said.

But in recent weeks, Republicans and conservative Democrats began to complain that the proposed spending would add to the deficit because it was not “paid for” with new revenues or other cuts. Their success in reducing the size of the bill reflected a deepening debate in Congress, and on the campaign trail, about the long-term consequences of using deficit spending to slay the recession.

To get a conference report with restored Medicaid money in it – which Harry Reid favors – through the House, some Representatives who wouldn’t vote for it the first time would have to take the political risk of being labeled as spendthrift deficit-busters. And of course the Senate, which plans to start consideration of the bill this week (that is, the bill itself, not yet a conference report), would be blamed by deficit hawks for taking the initiative to reinsert such a fix.

Of course, should they fail to get this through, a lot of them risk losing their seats because – correct me if you have data to prove me wrong – as much as the voters care about deficits, they care more about jobs, taxes, and services.

Democratic aides in both the House and Senate said state officials had not pressed their case forcefully enough.[…]

Republican governors in particular, the aides said, had been reluctant to petition for relief while the party’s leaders in Congress were scorching Democrats for driving up the national debt.

“Governors need to make it clear that it is vital that their states receive this money, instead of blasting Congress for ‘out-of-control spending,’ ” said a senior Democratic aide in the House, speaking on the condition of anonymity because he was not authorized to talk about the issue publicly.

Republican Governors have less room to be nihilists than do the members of the minority party in Congress. Some of them may not care much about poor people, but they have the responsibility to actually administer states and are accountable to the voters. Therefore, in times of emergency, even a hypocritical posturer like Governor Jindal of Louisiana begs for Federal help. We’ve seen this again and again recently. When there’s a flood, tornadoes, or a huge industrial accident, Republican Governors give the “tax and spend liberals” sloganeering a rest and put their hands out.

But the political problem for many of them in this situation is greater than mere hypocrisy. Because though as Governors, they desperately need this money, as long as extremist Tea Partiers and Club for Growthers control their party, they will get Hell for publicly lobbying for a Medicare rescue package if and when they run for Federal office – or even for reelection.

So to recap, what we see here is the bitter fruit of insincere Republican posturing, irrational extremism among the Republican rank and file, Blue Dog reelection positioning, and the White House (and possibly Nancy Pelosi, depending on how you interpret her comments in the article) enabling premature deficit hawkery.

Some of the politicians who have put the country at another precipice have to risk political damage by voicing what Governor Douglas of Vermont, a moderate, very reasonably states (quote below). To paraphrase Benjamin Franklin, if the politicians who could lose an election over a deficit but know that shafting state governments in a budget emergency is unacceptable don’t hang together, we will all hang separately.

“I’m very concerned about the level of federal spending and what it would mean for the long term,” said Gov. Jim Douglas of Vermont, a Republican and chairman of the National Governors Association. “But for the short term, states need this bridge to sustain the safety net of human services programs and education.”