Mandating school participation in free breakfast programs makes sure that somebody gets fed, but it also feeds the government bureaucracy.
In 2015, I presented Lawrence, Massachusetts, as a cautionary tale of the government-plantation economic model. Just as industrialists once attempted to draw in foreign labor to the “company town” because it was less expensive, the local government is turning the city into a “government town,” whose main source of income is transfer payments from outside to pay for government services.
Consequently, this recent Boston Globe article caught my eye:
The federal government’s relentless assault on the feared MS-13 street gang in Greater Boston continued this week, with two members of the violent outfit admitting to their roles in the 2015 slaying of a 16-year-old boy in Lawrence, authorities said.
True, immigrant gangs are nothing new to the United States, and homegrown gangs certainly exist. Still, tracing the arrival of an international criminal enterprise is a necessary task, and one needn’t indulge too much in speculation to propose that using immigration to bolster the population in need of government services leaves a region vulnerable to this sort of invasion.
Trying to understand why wealthy California would have the highest Supplemental Poverty Measure, which includes cost of living, Kerry Jackson describes what I’ve been calling the “government plantation“:
Self-interest in the social-services community may be at fault. As economist William A. Niskanen explained back in 1971, public agencies seek to maximize their budgets, through which they acquire increased power, status, comfort and security. To keep growing its budget, and hence its power, a welfare bureaucracy has an incentive to expand its “customer” base. With 883,000 full-time-equivalent state and local employees in 2014, California has an enormous bureaucracy. Many work in social services, and many would lose their jobs if the typical welfare client were to move off the welfare rolls.
The change, since 1971, is that this tendency of social welfare bureaucracies has metastasized to the entire government. The leverage isn’t just one agency as opposed to others, but government itself, as a sector in society. Whether elected or appointed, government officials’ incentive is to create new services to provide and to increase the number of people receiving them. This expands their base of support while ratcheting up the amount of money they can extract from others.
The well-advertised benefits available attract people interested in collecting them, even as the increased costs and restrictions on private-sector life drive away the people whose work is supposed to grow the economy that pays for it all. California started from an enviable position, which put in place some massive wealth centers, but even so, a growing tumor will eventually kill even the healthiest animal.
… 42 states tax hospitals. Why? One answer is the perverse incentives built into the Medicaid law. When a state returns tax money to hospitals through Medicaid “supplemental payments,” it qualifies for matching funds from Washington. Connecticut hospitals will pay $900 million in taxes, but the state will offset that with $600 million in supplemental Medicaid payments—matched with $450 million of federal funds, meaning Hartford comes out ahead in the whole scheme by $750 million. Nice work if you can get it.
As Jahncke closes his essay by suggesting, if government wants to do this, it should be straightforward about it. The problem is that, increasingly, the business model of government is to seek people to whom to provide benefits or services and then find ways to make taxpayers at all levels of government pay for it. If the wealth transfer were more obvious, then the people paying the bill would more quickly decline to do so, especially for those portions funded across state lines by the federal government.
Every year, Rhode Island replaces its residents (who leave) with foreign nationals (who immigrate), revealing the short-sighted decision of the state’s political elite.
Marc Munroe Dion picks up on what I’ve been calling “the government plantation” in his latest “Livin’ and Dion” column about the budget consequence of recasting drug use from a crime to an illness. Noting that a person who comes across a homeless beggar could feed him or her with a $10 sandwich, but:
If you ran a non-profit agency, you’d need an outreach worker to find the homeless guy, an intake worker to make sure the homeless guy was really hungry, a case manager to find out what kind of sandwich he likes, a nutritional expert to make to make sure he got a healthy sandwich, a coordinator to introduce the outreach worker to the case manager, a facilitator to go into the store and buy the sandwich, and a five-member board of directors to approve the $10 sandwich, which would be referred to in all documents as a “nutritional expenditure for indigent substance abuse-affected client.”
At all times, the homeless guy eating the sandwich would be referred to as a “client.” Total cost of the sandwich? $65,000, not including benefits, and pensions.
Rhode Island’s state government is deliberately working to transform our economy into one built on this very model. Declare some benefit to be a right, find a way to collect money from the rest of the economy and other states (via the federal government), and fill out a massive bureaucracy with government-satellite non-profit agencies with plenty of well-paying jobs whose holders will tend to support the system politically and to fund the necessary political action through their labor union dues.
The entitlement mentality in this state will be palpable as the federal government rolls back the Obama Administration’s give-aways. Lynn Arditi writes about the potential cost to Rhode Island if it refuses to change its Medicaid program to reflect federal spending under the Republican health care plan:
Predicting how much it might cost the state to cover the roughly 70,000 adults in the Medicaid expansion population under the Republican plan is especially difficult, health experts say, because people move on and off the rolls. If, for example, the job market weakened and people who had left the Medicaid rolls return, the lower federal cost-sharing rate means they’d be much more expensive to re-enroll.
“While certainly we’d support the state continuing to fund the Medicaid expansion population,” [Linda] Katz [of the Economic Progress Institute (no relation)] said, “the reality is … it would be very difficult to replace with state dollars the federal dollars and keep people insured.”
Rhode Island never should have signed on to the Medicaid expansion if this was possible, and the likes of the RI Center for Freedom & Prosperity were ignored when we warned that it was most definitely possible. What everybody can see clearly now is that insiders and bureaucrats padded their budgets at great cost and risk to others.
And it’s not just Medicaid. Dan McGowan reports from Providence for WPRI:
President Donald Trump’s proposal to eliminate the $3-billion Community Development Block Grant (CDBG) program would be a “devastating” blow to Rhode Island’s capital city, Mayor Jorge Elorza said Friday.
Trump’s proposed budget would do away with the 42-year-old CDBG program, which provides local governments across the country with funding for community centers, housing programs and neighborhood improvements.
None of these programs should ever be built into state government budgets or the local economy. They should be treated as gravy on a healthy, independent economy. Instead, we’ve allowed our elected officials to suffocate real industry and substitute a government plantation model premised on being able to bill the federal government and local taxpayers for government services for others.
Eventually, when you turn toward an obvious dead end, you reach it.
It’s that time of year, again, for charitable-sounding legislation to enter the scene and ensure that government controls every aspect of our lives and interactions.
It seems a point of personal pique for him, but Wesley Smith makes a great point when he objects to the characterization of families’ taking care of their own special needs children as “unpaid care”:
Really? What about mothers providing “unpaid care” for their babies? Or spouses for each other? Should such care also be measured in terms of the cost of having services provided by professional caregivers?
As Smith goes on to insist (emphasis in original), “the societal expectation should also be that families are the first line of care-giving.” The first line of care-giving. The first line of financial assistance. The first line of loan guarantees. The first line for education. The first line, period.
The problem is that such activities cut in on the government plantation’s market. Governments can’t tax other people to provide the services. Labor unions can’t take a cut (although they do try). And politicians can’t count on votes from people who aren’t dependent on government.
The deeper affront of the “unpaid care” attitude is how it teaches us to see caring for those we love. The insinuation can be that families would (and maybe should) offload care if they can afford to do so, just as a homeowner may patch a wall to save the cost of a tradesman. As a new state senator from Lincoln touchingly exemplifies, caring for loved ones can be a joyful fulfillment, and society should encourage us to see it as such.
Even if he fails in office, President-elect Donald Trump — merely by promising to behave as if it’s possible for the people to push back against the government-expansionist march — will do much to expose the workings of the government plantation. Consider comments from Democrat Governor Gina Raimondo in an article by Lynn Arditi of the Providence Journal:
Gov. Gina Raimondo said Tuesday during a meeting at The Providence Journal that she “loses sleep” over the prospect of a hasty unrolling of the Affordable Care Act and its Medicaid payment system. “It could be devastating for us,” she said.
Such a change would mostly be “devastating” if it portends a new pattern in which the federal government stops paying state governments to provide services. That is increasingly the business model of Rhode Island’s true major industry, government.
The Beast needs customers for its services, and it needs a mechanism to make other people pay the bill. The federal government is critical in that transaction because it’s able to take money in so many ways and without people’s having a clear view of what it’s paying for or a straightforward way to decline the bill year after year.
Providence’s projected loss from expanded charter options uses arguable assumptions, but it inarguably shows how government puts itself first and treats students as produce in the government plantation.
Rhode Islanders should take a closer look at the organizations pushing for $80,000,000 in affordable housing debt, to learn how well-paid advocates harvest the needs of the poor and force-sell it to taxpayers.
So what happened with the disruptive snow and wind we were supposed to get yesterday? That’s the question of the morning. Something seems to have changed in the Rhode Island psyche after the “December Debacle” in 2007. That year, the timing and handling of a snow storm, particularly in Providence, under Democrat then-mayor-now-congressman David Cicilline caused a nightmare for commuters and children. Suddenly, hesitation to disrupt our entire community gave way to being “better safe than sorry.”
Once that old New England toughness lost its dominion, the ordinary incentives of government and politics took over. If the governor or mayor closes down government and implements parking bans, not only do they give some key constituencies a day off, but they mitigate the risk of something going wrong. Relatively few Rhode Islanders will even think to wonder about considerations like this, as expressed in a GoLocalProv article appearing this morning:
“Let’s go macro,” said [Providence restaurant owner Bob] Burke. “On any given day the state has $150 million in economic activity. What did we produce [on Wednesday] — $10 million? Are we a state that can afford to give up $100 to $125 million in economic activity without a really tough fight? On Wednesday, they went down in the first round!”
Similar views were expressed by Mike Stenhouse, CEO of the RI Center for Freedom and Prosperity. “The lack of concern for small businesses by bureaucrats and elected officials looking to make themselves look good – when they prematurely issue parking bans, large truck bans, or shutting down government operations – directly leads to a loss of business and productivity in the private sector,” said Stenhouse.
Whatever it is that’s changed in the Rhode Island psyche has freed government officials from the need to actually make decisions. Either business people have given up trying to assert their influence in an often-hostile government or those who take the needs of businesses lightly have increased.
Perhaps the change has to do with the “government plantation” that effectively replaces Rhode Islanders who are driven to turn their time into money with others who are more likely to seek government services. Those who work for government get paid no matter what, and those who are the recipients of its beneficence are a step removed from caring about where the money comes from.
Rhode Islanders may be getting used to the evidence of decline, but when a hospital closes, it carries with it an especial sense of foreboding. Ted Nesi reports on WPRI.com:
Care New England’s board voted Monday night to close Memorial Hospital after a proposed takeover deal for the cash-strapped facility fell through, the company revealed Tuesday. …
Fanale said Memorial currently employs roughly 700 people, some of them part-time, and jobs are likely to be found for some of them at Care New England’s other facilities. “We’re not going to be able to save every one, but to the extent we’re able to [we will],” he said. He also emphasized that patient safety will be a priority as the hospital winds down. …
Memorial is licensed for 290 hospitals beds, but in recent months it has had just 15 to 20 inpatients a day. “It leaves you in a devastating situation,” Fanale said.
This is sad to see, but we live in a state in decline. Add this story to other obvious warning signs, like the closure of Rhode Island retail staple Benny’s. On a broader scale, recall that the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI) showed the Ocean State dropping to 49th in the country, from its five-year perch at 48th. Even seemingly unconnected stories like the Warwick teacher sick outs are part of the story; after all, the underlying cause in that city (and most of the state) is plummeting enrollment.
These are the sorts of things you see when government attempts to structure society around government-heavy services provided to people who otherwise have no reason to live here. The government plantation model doesn’t work; government can’t be a state’s core industry.
Once upon a time, folks actually hoped that a universal basic education plus a prosperity-driven increase in free time would draw people toward intellectual pursuits and self improvement. I’m sure there’s data on such things, but for my purposes, here, let’s just speculate that most folks’ general sense would be that it hasn’t quite worked that way.
In a recent Wall Street Journal op-ed, Dan Nidess asks why we would expect a universal basic income to have a different effect. Indeed, he suggests that the policy “addresses the material needs of citizens while undermining their aspirations”:
At the heart of a functioning democratic society is a social contract built on the independence and equality of individuals. Casually accepting the mass unemployment of a large part of the country and viewing those people as burdens would undermine this social contract, as millions of Americans become dependent on the government and the taxpaying elite. It would also create a structural division of society that would destroy any pretense of equality.
UBI supporters would counter that their system would free people to pursue self-improvement and to take risks. America’s experience over the past couple of decades suggests that the opposite is more likely. Labor Department data show that at the end of June the U.S. had 6.2 million vacant jobs. Millions of skilled manufacturing and cybersecurity jobs will go unfilled in the coming years.
Notably, Nidess uses the term “productive class,” which I’ve been using for years in attempting to describe what populations have been leaving Rhode Island. Basically, the Ocean State has been attracting the poor and (largely) holding on to the wealthy while driving out those who are looking for some way to transform their smarts, brawn, and effort into wealth.
Put in those terms, it’s clear that Nidess fears the UBI would bring about a national version of what I’ve called the “government plantation” or “company state,” whereby the government draws in dependents in order to provide services billed to somebody else. Whatever arguments and motivations may underly such policies, they certainly don’t have the feel of being healthy for our society.
Part of the cynical wisdom, up here in the Northeast, is that the Catholic Church has to support pro-immigration policy because it needs immigrants to keep its parishes going. To the extent that this demographic pressure has any effect on what the Church actually does, a Catholic News Agency article about the Church’s growth in the South should suggest other policy positions that the Northern Church could promote:
The growth in part reflects the number of Catholics moving south from northern dioceses. Though this results in the closures of churches and schools in former Catholic strongholds, it is driving new expansion in the U.S. South.
I’ve half-joked that I’ve remained in Rhode Island out of missionary motivation, and only the jest part is political. A region that is driving families apart and separating people from their homes presents real moral challenges. In that regard, the Catholic Church — all churches — should acknowledge what the government plantation policies of Rhode Island are doing and impress upon believers their moral obligation to stay and to change things.
Working against poverty and injustice can’t be limited to standing up for those who are clearly oppressed, or else good works risk falling into vanity. Vanishingly few people in contemporary America question the righteousness of helping those who immediately need help, but if we’re serious about helping those whom we can’t so easily see, whether because their problems are not so obvious or because their problems haven’t yet manifested, we have to take a broader view.
That means a society that draws people toward fulfilling lives of familial stability and self-motivated work. And while the constituencies who see a Democrat vote as part of their cultural inheritance won’t like it, the policies on which we’re currently focused are clearly not serving that end. The moral corruption of the government plantation is that ignoring the structural justice that brings stability and prosperity, but that requires a resilient and sometimes unpopular maturity, produces ample opportunities to display visible righteousness on behalf of those whom our ignorance has harmed.
Take it as a warning or as an illustration of opportunity, but Rick Holmes’s history, in the Fall River Herald, of Vermont’s political transformation is a worthwhile read.
Basically, the interstate highway system brought “flatlanders” to the state for foliage viewing, skiing, and indulgence in a hippy aesthetic. By the time the indigenous conservatives tried to push back, it was too late:
“The hippies won,” says John Gregg, a Vermont journalist whose office is a short walk from the Connecticut River. In a small enough place, the influx of new citizens, even in modest numbers, can change a state’s political trajectory.
Rhode Island is different, of course. Our population is a bit bigger, and the particular flavor of progressivism isn’t hippy socialism as much as insider socialism. An historically different flavor of immigration brought with it a little more cultural conservatism and a little bit less libertarianism. Moreover, the “influx of new citizens” affecting Rhode Island isn’t the migration of relatively privileged progressives, but rather the deliberately lured clients for the company state/government plantation.
These differences bring with them unique challenges, but in both places it’s too late for an ordinary political campaign to change things. Instead, we have to change the local culture, which is no easy task when the people who see the right way forward tend just to leave.
Ted Nesi reports (if I may paraphrase) that Rhode Island cities have been crawling over each other to slurp from the sluice some money from the Boston Federal Reserve:
Federal Reserve Bank of Boston President and CEO Eric Rosengren visited Rhode Island on Thursday to award $400,000 grants to three local cities through the bank’s Working Cities Challenge.
The program aims to promote collaboration between local leaders to address socioeconomic challenges. The three Rhode Island winners are Providence, Cranston and Newport. Eight other cities submitted applications but did not win grants, which are funded by public and private contributions, not the Fed. …
Appearing on this week’s Executive Suite, Rosengren said the four-year-old program grew out of research conducted by the Boston Fed that showed efforts to tackle cities’ challenges worked best when leaders from different groups worked together toward a common goal.
Readers may recall that the Boston Fed’s involvement with Lawrence, Massachusetts, under a project in the same program is what kicked off my thinking about the “company state” or “government plantation” model, whereby government services become an area’s core industry, with the revenue coming from other taxpayers or higher levels of government (such as state or federal taxpayers).
With these new grants, we should also put the matter in the context of political structures and incentives. Here we have cities competing to charm “public and private” outside interests with their proposals. That is, they’re competing to match the values of the Boston Fed and the people or groups funding the project. Sure, these “community” projects have local advocates (most often ideological activists, special interests, and other insiders), but ultimately, these projects are things being done to local constituents, not for them.
It’s time we stop seeing money that our governments manage to collect from other sources as money that we’ve somehow received. It isn’t. That’s especially true when it’s used for projects that the government wouldn’t otherwise have bothered to do. It’s money that goes to the sorts of people who know how to get government money and spent in order to shape our society in ways that other people want, not us.
Way down in his weekly roundup column, Ted Nesi highlights another point from the recent RI Kids Count report:
One statistic that stood out: Rhode Island now has the fifth-lowest birth rate in the country, following a 15% slide in the number of babies born here over the last decade. What does that mean for the state’s future? It’s already having an effect on the economy, with Care New England saying the decline in births is hurting revenue at Women & Infants.
That’s an understated example of the effect of this dynamic. Indeed, it would be difficult to overstate the effects of an increasingly sterile population.
To touch on one narrow political matter: As I’ve pointed out in Tiverton and for the state as a whole, our public schools have generally lost about two full grade-levels worth of students in the last decade. Picture no fourth and no fifth grade students in the entire state; that’s how much enrollment has decreased. This leaves a bureaucratic, unionized, and expensive education establishment demanding increased budgets to educate fewer children, which its partisans do against a taxpaying public that has less and less actual use of the schools. That battle alone will be huge in Rhode Island.
But even an issue of that magnitude is as nothing to the reorientation of a society with fewer children. The way people think and interact with the world will change on that basis. Indeed, not having children (or not having multiple children) takes pressure off of people to become full adults, making them more susceptible to the pitch of the “government plantation” advocates to look to central planners as parents to us all. It also makes us vulnerable to people from other cultures in which Peter Pan has been held at bay.
It seems that the special interests who rely on federal money for their income in Rhode Island (in and out of state and local government) have been working to keep stories like this in the news every week:
Potential cuts to the National Oceanic and Atmospheric Administration put forward by the Trump administration could have devastating effects in Rhode Island.
The Coastal Resources Management Council, the state agency that oversees development along the state’s 400 miles of coastline, would lose nearly 60 percent of its funding.
This is the problem with the government plantation/company state model. When you’ve built your economy around the government’s ability to make other people pay for services that the government insists on providing, local taxpayers will move away and people in other states may decide to cut funding. It’s a risky dead end of an economic development approach.
Our goal as a state (similar to our goal in our cities and towns) should be to react to news of changes at the federal level by expressing relief that we don’t rely on the federal government for much of anything. That would be a state of both freedom and stability.
A closing private school in Newport could teach a lesson on civic society and the role of government, if we let it.
Jason Riley recently wrote, in the Wall Street Journal, about Peter Cove, who once was a warrior in the “War on Poverty” but has come to the quite different conclusion that the government is now promoting dependency:
“We have edged toward a moral cliff where the shame of being dependent on government aid has been replaced by a breezy bonhomie for entitlement,” he writes in a new book, “Poor No More.” “We have moved from a commitment to serve the deserving poor to an assumption that all are deserving. And much of this rests at the feet of politicians trolling for votes by larding on the largesse.”
What Cove is talking about, in my view, is the business model of the government plantation.
Over on RI Future, Steve Ahlquist complains that, under President Donald Trump, the Immigration and Customs Enforcement (ICE) is now detaining people for “even minor crimes.” Here’s Ahlquist’s example:
According to sources familiar with the incident, José Eduardo Cames (the third part of his name may be misspelled) lied to immigration officials at the border when he and his wife entered the country. They carried a baby with them that was not theirs, loaned to them from another family, to make a better case for themselves to stay in the United States.
An investigation revealed the lie, but under Obama, that did not make the couple a high priority for deportation and as long as they made periodic visits to an ICE office in Warwick, they were allowed to stay in the country. At their most recent visit to the Warwick ICE offices on Friday, ICE did not let them leave and detained them, said a source familiar with the case.
In other words, the “minor crime” that the couple broke was entering the country illegally, with the added dynamic of fraud, and the agency that the federal government has created at great expense to enforce that particular area of the law is holding them, perhaps to deport them. (Never mind that they “borrowed” a baby, as one borrows a car, perhaps with the intention that the child’s actual parents would then have an excuse to enter the country, which is arguably a form of exploitation and human trafficking.)
As I’ve written before, there are legitimately difficult cases in the immigration debate, but one gets the impression that progressives don’t actually believe that any of the cases are difficult. Their view appears to be that we should let everybody in at the border and then let them stay (seeding the government plantation and giving progressives political leverage).
Funny how moral principle in politics seems so often to align with self interest. Here’s Byron York in the Washington Examiner:
Why is Washington State mounting such a vigorous challenge to President Trump’s executive order temporarily suspending non-American entry from seven terrorism-plagued countries? Of course there are several lawsuits against the president, and there are lots of motives among the various litigants. But Washington State’s is the suit that stopped the order, at least temporarily. And a look at the state’s case suggests that, behind high-minded rhetoric about religious liberty and constitutional protections, there is a lot of money at stake.
Judging by the briefs filed by Washington State, as well as statements made by its representatives, some of the state’s top priorities in challenging Trump are: 1) To ensure an uninterrupted supply of relatively low-wage H-1B foreign workers for Microsoft and other state businesses; 2) To ensure a continuing flow of high-tuition-paying foreign student visa holders; and 3) To preserve the flow of tax revenues that results from those and other sources.
And don’t forget Medicaid, SNAP, public education, and other federally subsidized welfare programs available to legal and (probably) illegal immigrants on the government plantation.
A great short report for which I’ve done some research, but which I never manage to get to, would look at the effects of Vermont’s legacy school choice program. Given the long-rural history of the state, some districts offer students actual school choice, including to private schools, and a key finding that Rhode Island homeowners should find interesting is that property values go up significantly in areas with choice. Geoffrey Norman doesn’t offer more than a nod to that dynamic in a recent article in The Weekly Standard, but he does use the current debate in Vermont to make a key, fundamental point (emphasis added):
So, school choice is not—and could never be—supported by the education bureaucracy. It threatens not just their convictions but their livelihoods. Where parents can take their kids and the public money that is being spent on them out of one school and move them, and it, to another—well, this threatens the entire system.
Why it might even, in the dark vision of one of the prominent Vermont opponents of school choice, “turn children into commodities.”
Which of course stands the whole thing on its head. Commodities don’t make choices. They are manipulated, packaged, and bundled. As are students in the grip of the industrial-education complex.
What Norman is touching on, here, is the government plantation. Attracting people to an area who are likely to need government assistance, binding them to their region with government dependency, and locking their children in government schools creates a captive audience with little power to affect the services their receiving. Again, “commodities don’t make choices,” but when human beings are “manipulated, packaged, and bundled,” they lose the authority to do anything but sit on the shelf until they’re of use to some powerful consumer.
Hey, here’s a thought: Maybe the State of Rhode Island should stop acting like a subsidiary of the federal government and start acting like a sovereign state that thrives when its people thrive. If this isn’t a wake-up call, I don’t know what could be:
While other states – including Mississippi, Louisiana, Tennessee, Montana and Kentucky – are more federal aid-heavy than Rhode Island, a newly-released analysis by the nonpartisan Tax Foundation, of 2014 census data, found Rhode Island 16th highest in the nation in terms of how much of its budget is financed by federal dollars. In that year, 34.7 percent.
Anyone worried? The answer: You betcha. But some more openly worried than others.
In large part, this is the government plantation, but it’s also indicative of the government’s crowding out the private sector as an economic competitor, too.
Any wise investor upon having a scare with a particular stock would figure out the importance of diversifying. It’s time for Rhode Islanders to stop relying more on government as an economic driver and start relying on each other.
And don’t let fear of President Trump specifically be the end of your consideration of the matter. Think about how vulnerable to real tyranny it makes us that our supposed leaders apparently have to make decisions about governance in order to keep the money flowing. Everything else, from culture to global warfare, could easily take a back seat to that bottom line.
As individuals, families, and a state, being dependent makes us weak and vulnerable.
A statewide elite in government and the media that ignores people whom they don’t like allows reckless governance that will ultimately crash the ship of state.
Morgan Scarboro of the Tax Foundation has taken a look at the states’ reliance on the federal government when it comes to taking money from other Americans and padding their own budgets:
In fiscal year 2014, over 60 percent of federal spending in the states went to benefits payments to individuals, including Social Security and Medicare. Aid is also given to states for education, transportation, housing, agriculture and more. Medicare is the largest grant program and continues to grow. Federal aid to states as a whole also grew 25 percent (adjusted for inflation) from 2005 to 2014.
Rhode Island is in the top group of states, with 34.7% of our state revenue transfered to us from the federal budget, more than any state this side of West Virginia other than Maine, which is poorer. This is the government plantation, and it ought to be an embarrassment to Rhode Islanders.
Reporting on a study by a couple of health care experts, Ted Nesi writes on WPRI:
Using 2015 data, their projections showed Rhode Island would lose $514 million in annual federal Medicaid funding under such a formula – a huge amount of money, equal to 22% of the state’s $2.3 billion in total Medicaid spending during the 2014-15 budget year. Massachusetts would lose $3.4 billion under the scenario.
First, let’s have a little perspective, here. The revised spending on “Medical assistance (including Medicaid)” for fiscal 2015 was $2,382,919,281. The year before — in fiscal 2014 — it was $1,819,597,682. If you don’t have a calculator handy, that’s a difference of $563,321,599, or about $50,000,000 more than the “huge amount of money” in the possible reduction.
According to the mainstream calculus, government spending can never go down, even just to the prior year’s level. On the one hand, we’re told it would be a terrible thing if Congress were to block grant Medicaid based on state income because states that rely on the program as a large part of their budgets would face massive reductions. As the study says, it “would result in a seismic redistribution of federal spending.”
On the other hand, the authors go on to say, we can’t possibly calculate block grants based on current spending, because that “would lock in large and arguably unfair variation in funding across states.” The only solution, clearly, is to just keep giving states as much money as they need for however many Medicaid recipients they’re able to sign up.
Folks, this is the government plantation, or company state. As I wrote when I first began tracing that economic model in Rhode Island, when the state’s major industry (government) relies on its ability to sign up people for services in order to charge other people for them, the people forced to pay the bill will eventually flee the system, if they’re local, or push their own representatives to stop the bleeding, if they’re in other states being soaked by the feds.
Rhode Island should take the opportunity of the Trump Administration to get off this track. The chasm toward which it leads has no bridge.
A Wall Street Journal editorial has gotten some attention with the headline, “School Choice Saves Money“:
Using data from a crime and graduation study by Corey DeAngelis and Patrick Wolf at the University of Arkansas, the Milwaukee study finds that through 2035 Wisconsin will receive a $473 million benefit from higher graduation rates by choice students. More education translates into higher incomes, more tax revenue and a lower likelihood of reliance on government welfare or other payments. Meanwhile, greater economic opportunity also prevents young adults from turning to crime, which the study estimates will save Wisconsin $1.7 million from fewer misdemeanors and $24 million from fewer felonies over the same 20 years.
Some years back the RI Center for Freedom & Prosperity had a victory, in our view, pushing dynamic scoring into the legislative debate with our proposal to eliminate the state sales tax. Dynamic scoring means that one considers the economic effects of a policy and subtracts the increased tax revenue from the policy’s “static” (“sticker,” or first-order) cost. The above paragraph reminds us that there is a social dynamism, too, reducing the need for government services as well as increasing the tax take from a healthier economy.
Obviously, this has perverse relevance to Rhode Island’s “government plantation,” which might gain back some lost tax revenue but lose clients and political leverage over them.
But imagine if we had policies that kept kids engaged in good schools (through school choice) and gave them opportunities for more entry-level jobs (through a lower minimum wage and reduced licensing requirements). It might just reduce the cost of paying government to mitigate social problems, create an environment of entrepreneurship, and turn our state around.
Of course, it would require us to shift away from the government plantation, so it won’t happen.