How Rob Christensen missed the truth about Medicaid, taxes, & spending

Live BlogThere are two problems with Rob Christensen’s fruitless search for truth.

Christen claims the budget cuts Medicaid spending and related jobs

Perdue said the budget bill would result in $2 billion in cuts to Medicaid, the federal-state funded insurance program for the poor and the disabled; $750 million in state cuts and the rest in the loss of matching federal funds.

But $120 million of those cuts, also in the governor’s budget proposal are assessments on hospitals and other Medicaid providers designed to bring in $2.5 billion in additional federal funds over two years because the federal reimbursement scheme for Medicaid is a mess. States across the country already do this, but “everybody else is doing it” is a bad argument. According to page 155 of the governor’s budget, the assessments will work like this over two years:

$1.476 billion – State assessments
$1.353 billion – State payments to providers
$2.481 billion – additional Federal payments to providers
$123 million – state savings

In other words, total Medicaid spending increases by $1.7 billion over the two-year period.

 

Christensen also criticizes a report we commissioned from the Beacon Hill Institute because he misunderstands the question.

the John Locke Foundation, a conservative Raleigh think tank, hired The Beacon Hill Institute at Suffolk University, a Boston conservative think tank, to do an economic analysis of the impact of the tax cuts. It predicted the tax cuts would result in the creation of 17,016 private-sector jobs.

But like the UNC study, the Beacon Hill study asked only half the question. It did not ask how many jobs would be created – or kept – if the tax cuts were not made.

I’ll let the Beacon Hill Institute speak for itself, “This line of argument makes no sense in light of the fact that states compete with each other for residents and business and that state taxes negatively affect state competitiveness. … At the end of the day, however, there will be less production and fewer jobs – less production because of the negative effect of the tax on consumer demand and fewer jobs because the reduction in private sector production will always exceed the increase in production that the new government spending brings about.”

In other words, when the government takes $200 from each household in North Carolina, those families are not able to use that money to spend, save, or invest. Clearly $850 million more in tax dollars could save some government jobs (though the exact number is still up for debate) and provide more government services.* We pointed out in our press release for the report, which Christensen should have seen, that there are government job losses, but that the private sector gains are much greater in the House budget than in the governor’s. Most of the private sector gains remain in the final budget even as the government losses shrink.

* The General Assembly budget is only $400 million less than the governor’s, though it still provides more for pension benefits and the rainy day fund.

There are two problems with Rob Christensen’s fruitless search for truth.
Christen claims the budget cuts Medicaid spending and related jobs
Perdue said the budget bill would result in $2 billion in cuts to Medicaid, the federal-state funded insurance program for the poor and the disabled; $750 million in state cuts and the rest in the loss of matching federal funds.
But $120 million of those cuts, also in the governor’s budget proposal are assessments on hospitals and other Medicaid providers designed to bring in $2.5 billion in additional federal funds over two years because the federal reimbursement scheme for Medicaid is a mess. States across the country already do this, but “everybody else is doing it” is a bad argument. According to page 155 of the governor’s budget, the assessments will work like this over two years:
$1.476 billion – State assessments
$1.353 billion – State payments to providers
$2.481 billion – additional Federal payments to providers
$123 million – state savings
In other words, total Medicaid spending increases by $1.7 billion over the two-year period.

Christensen also criticizes a report we commissioned from the Beacon Hill Institute because he misunderstands the question.
the John Locke Foundation, a conservative Raleigh think tank, hired The Beacon Hill Institute at Suffolk University, a Boston conservative think tank, to do an economic analysis of the impact of the tax cuts. It predicted the tax cuts would result in the creation of 17,016 private-sector jobs.
But like the UNC study, the Beacon Hill study asked only half the question. It did not ask how many jobs would be created – or kept – if the tax cuts were not made.
I’ll let the Beacon Hill Institute speak for itself, “This line of argument makes no sense in light of the fact that states compete with each other for residents and business and that state taxes negatively affect state competitiveness. … At the end of the day, however, there will be less production and fewer jobs – less production because of the negative effect of the tax on consumer demand and fewer jobs because the reduction in private sector production will always exceed the increase in production that the new government spending brings about.”
In other words, when the government takes $200 from each household in North Carolina, those families are not able to use that money to spend, save, or invest. Clearly $850 million more in tax dollars could save some government jobs (though the exact number is still up for debate) and provide more government services.* We pointed out in our press release for the report, which Christensen should have seen, that there are government job losses, but that the private sector gains are much greater in the House budget than in the governor’s. Most of the private sector gains remain in the final budget even as the government losses shrink.
* The General Assembly budget is only $400 million less than the governor’s, though it still provides more for pension benefits and the rainy day fund.
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Joseph Coletti / Senior Fellow

Joe Coletti is a senior fellow at the John Locke Foundation focused on fiscal policy issues. He previously headed the North Carolina Government Efficiency and Reform initiativ...

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