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Brewer’s Price

Arizona Governor Jan Brewer

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Governor Jan Brewer of Arizona has an interesting take on Obamacare: “I hate it — now give me the money.”

Governor Brewer, exemplifying that unfortunately common strain of Republican leadership that is uncompromising in rhetoric but opportunistic in reality, has decided to sign off on the federal government’s plan to radically expand Medicaid eligibility, replacing various eligibility formulas developed by the states with a uniform standard encompassing everybody earning 133 percent of the poverty line or less. She calculates that Arizona stands to gain some $2 billion a year in Medicaid benefits at little cost to the state treasury: Arizona will be asked to pick up at most 10 percent of the expense, and none of it for the next few years.

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Understanding increased Medicaid spending as a net benefit to the people of Arizona requires the governor to maintain a number of fictions. The first is that federal money comes at no cost to the people of Arizona. But the people of Arizona are federal taxpayers as well as state and local taxpayers. In real terms, it matters little to them whether the difference between their pre-tax and after-tax paychecks is made up mostly of federal taxes deducted or mostly of state taxes deducted. Health-care spending is the major driver of federal deficits going forward, and the resulting explosion in the national debt will burden the people of Arizona as much as those of any other state. By acceding to this deficit-expanding measure, Governor Brewer has done a long-term disservice to the people of her state. The Medicaid expansion will add some $800 billion to our national debt, even if the states themselves spend only $8 billion.

The second fiction informing Governor Brewer’s position is that the tragedy of the commons is something other than a tragedy. Medicaid spending is as close to a perfect expression of the tragedy of the commons as is to be found in contemporary American politics: The perverse structure of Medicaid gives every state a powerful incentive to consume as much as it can, lest those federal dollars be gobbled up by another state. As a result, government health-care spending moves ever higher. Governor Brewer plainly understands the mechanics of these perverse incentives, which she has promised to make still more perverse: In conjunction with her plan to expand Medicaid spending, she also is offering up companion legislation that would automatically reduce Arizona’s Medicaid spending in the event of any reduction in federal support. Which is to say, Governor Brewer supports an expansion of Medicaid in Arizona so long as she is able to avoid any fiscal or political responsibility for it. Not exactly a profile in courage.

A third fiction is that this Medicaid spending will, in Governor Brewer’s words, “save and create thousands of jobs.” But as Professor Casey B. Mulligan of the University of Chicago has documented: “If carried out, this expansion is expected to reduce full-time employment among able-bodied adults.” Why? “Medicaid is a transfer, so it creates jobs in the sectors where it is spent, but it destroys jobs at the source of financing.” Expanding Medicaid may lead to a few new jobs for doctors, nurses, and other health-care professionals, but at the cost of jobs elsewhere in the economy. (And the subset of unemployed persons with licenses to practice medicine is small.) Welfare spending is not a job-creation program. That is basic economics.



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