Fun with federalizing
A nice point by Matthew Yglesias:
I can’t help but think that it would be really nice to see some work done on clever things the federal government could do on a systematic basis to prevent (or discourage) the boom/bust cycle in state budgeting. I’m not really sure what kind of constitutional limits may exist, but this poor budgetary behavior is a perennial macroeconomic problem. It’s also a kind of serious political problem, since the tendency of boom/bust budgeting is to make anyone who happens to be governor during a boom (see George Pataki or George W. Bush or Charlie Crist) look like a brilliant innovative governor while anyone who governs through a bust (see John Corzine, David Patterson) looks like a fool. The reality is that it’s easy to be a successful pragmatist as long as economic growth lets you cut taxes, hike spending, and then stick someone else with the structural imbalance when the next recession hits.
That's all true, and the first step would be to take some of the big programs off the hands of the states that can't afford them in recessionary times. Medicaid should be federalized, but so too should a lot more of school spending, along the line Matthew Miller has argued for. And these would both be good policies even outside of the context of state budgeting, as leaving school funding to local communities is a recipe for wild inequality and inconsistent standards, while leaving Medicaid eligibility to the states has left America with 51 different Medicaid programs with 51 different eligibility schemes and very little coherence.
Graph credit: Center for Budget and Policy Priorities.
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