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Nationalize It

heap of dollars with stethoscope.

In this Liberty Law Talk with James L. Buckley—Judge, Senator, Saint—he proposed to terminate any and all federal transfer programs. That bold program is conceptually and directionally right. Can it be done, though? Answer, maybe—provided that…

The raw numbers are prohibitive, and horrifying. Four states (Mississippi, Louisiana, Tennessee, South Dakota) collect over forty percent of their revenues from the feds. Two-thirds of the states depend on federal transfers for over 30 percent of their budgets. Mind you: these are 2012 data. Federal transfers under the ACA’s Medicaid expansion—a dollar-for-dollar reimbursement for whatever any state chooses to spend—will drive the numbers through the roof. Even at the current levels, though, the “end it” proposal is doomed:

  • No state can substitute own-source revenues for 40 or 30 or even 20 percent of its budget, not even over a period of five or ten years.
  • The most dependent states have three things in common: they are relatively small; relatively poor; and run by the GOP. (Every economic theory I’ve ever seen predicts that result, and every piece of historical evidence is consistent with it. It’s not going to change.) So the unvarnished Buckley proposal depends on the votes of California, New York, Illinois, and Connecticut. Good luck with that.

Here, though, is something that might and in any event should happen: have the feds yank the transfers, and assume the liabilities. In plaintext: nationalize Medicaid, which will soon comprise half of all federal transfers. We could run Medicaid like the VA or like Medicare, or cash it out to individuals. Either way, states would at long last be able to govern themselves. The federal government would at long last have to govern itself and decide what we are actually willing to spend on health care for the poor. That decision, in turn, would depend on our willingness to govern ourselves.

Which may be the absolute last thing any of us would want. But that’s a subject for another post.

Reader Discussion

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on April 20, 2015 at 09:18:17 am

And some say there is no evidence for a great conspiracy. Looks like Quigley and others were right.

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dr. james willingham
on April 20, 2015 at 13:04:01 pm

At the least, the "nationalize it" proposal, if truly laid before the public, would take away convenient rhetorical cover and force each party to confront its own political hypocrisy and timidity. Liberals/Democrats would have to own up to their desire to centralize power and administration in treating us all like dependents. Conservative/Republicans, in turn, would have to take seriously the freedom and responsibilities of local government, including positive proposals for government, and renounce blaming Washington.

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JQA
on April 20, 2015 at 13:57:43 pm

There is more to consider than percentages of "revenues received."

What are the percentages of their gross expenditures by those states on programs funded in part federally?

Thus, a state might receive 34% of its gross revenues from federal sources; BUT, 51% of its gross expenditures might be made on those "programs" which are the sources of that 34% of its revenues.

That has certainly been noted in the Medicaid program and its effects on state budgets.

This is NOT simply a revenue issue.

We also have the phenomena of state bureaucracies being created (and expanding) simply to deal with corresponding federal bureaucracies (and their expansions [Title IX edicts, anyone?]).

So, yes, that revenue stream can be cut; should be cut - unless states and their departments are to become subsidiaries of the federal government and its agencies.

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R Richard Schweitzer
on April 20, 2015 at 16:58:42 pm

The most dependent states have three things in common: they are relatively small; relatively poor; and run by the GOP. (Every economic theory I’ve ever seen predicts that result, and every piece of historical evidence is consistent with it. It’s not going to change.) So the unvarnished Buckley proposal depends on the votes of California, New York, Illinois, and Connecticut. Good luck with that.

Is this a non sequitur?

Maybe I’m not following what “the unvarnished Buckley proposal” means, but I’d guess any federal policy would depend upon the votes of the majority of states, regardless of how the benefits roll out.

Moreover, Greve seems to imply that the unvarnished Buckley proposal faces special obstacles precisely because all states might have a self-interest in adopting it: Democratic states, out of a selfish interest in hording their resources, and Republican states, out of an ideological commitment to reject Washington influence. That’s an odd argument. (Or is Greve arguing that, if we haven’t been able to adopt the Buckley proposal even with the apparent impetus of self-interest, then we can’t really expect anything to change?)

It’s certainly counter-intuitive for opponents of big government to recommend further expanding and centralizing the federal government. Part of the rationale for federal transfers is out of respect for federalism – the idea that local government is in the best position to know how to implement policy at a local level. We’re really throwing that idea overboard.

That said, I kinda get the rationale – and kinda like it: If you really think that the strings attached to federal dollars mean that the federalism ideal is now hollow, then there is some benefit in simply clarifying the nature of the status quo. If the feds are calling the shots, at least make it clear that the feds are calling the shots. And let it be clear what role the states are playing, even if we’re clarifying that the states’ role is pretty small.

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nobody.really
on April 20, 2015 at 17:10:57 pm

Perhaps off-topic, but this is the elephant (and donkey) in the room:

The most dependent states have three things in common: they are relatively small; relatively poor; and run by the GOP. (Every economic theory I’ve ever seen predicts that result, and every piece of historical evidence is consistent with it. It’s not going to change.) So the unvarnished Buckley proposal depends on the votes of California, New York, Illinois, and Connecticut. Good luck with that.

Why do we find this pattern of states acting in a manner that would seem to run contrary to their self-interest? Until I have some resolution to this question, I cannot hope to gauge the prospects of altering the status quo.

I hypothesize the difference pertains to wealth. Richer states buy more of all things -- including policies (putatively) aimed at helping the poor. Rich people are less able to blackmail rich states by threatening to leave and tank the state's economy unless they get their way. Poorer states don't have the luxury of worrying about the poor; they must take seriously the threats made by their richest constituents, and thus must cater to their preferences.

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nobody.really
on April 20, 2015 at 20:08:51 pm

Yep, I think that is Greve's position - why not dispense with the falsehood AND acknowledge who is actually pulling the puppet's strings.

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gabe
on April 20, 2015 at 20:13:41 pm

Interesting:

First thought: Is it rich people or rich industries? Of course, rich industries are presumably lead by rich people?
It seems a little more direct of a connection with poor states - rich industries & it would be to their benefit to have the state / fed provide material support that the industry may not wish to, nor be able to afford, to poor people.

In any event, it would be fun to dispense with the whole charade. Perhaps, we could, as state taxpayers, dispense with the cost of state (and county) level bureaucrats. they, too, can be quite obtrusive.

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gabe
on April 20, 2015 at 22:18:55 pm

Once the twin genies of democracy and socialism were released from their lamps that was the end of the American Republic,its Constitution and the liberty that was bestowed upon the American people by the founding fathers. The American Empire and,more importantly,the American Welfare State has bankrupted this once great nation and has eaten away at the soul of the American people by turning them into a nation of dependent,debt laden,numbered tax serfs. In the end the question is not which government entities should take over the redistribution of the wealth of the productive Economic Class,but,should the fruits of the labor of the productive be stolen in the first place. As long as a voting majority believe that the proper role and function of government is to solve their social/economic problems with other people's money,no matter on which level,then America,like Rome,is doomed to the dustbin of history. A nation of dependency fighting over the scraps of wealth that was stolen from the people who worked hard for a living and,at the same time,do not lower themselves by voting for a living.

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Image of libertarian jerry
libertarian jerry
on April 20, 2015 at 23:18:46 pm

Perhaps, we could, as state taxpayers, dispense with the cost of state (and county) level bureaucrats. they, too, can be quite obtrusive.

Perhaps we could; perhaps they are.

But under Buckley's proposal, those bureaucrats would simply cross the street and take up employment with the newly-expanded federal bureaucracies. We'd still end up paying for them. And by and large, the federal pay scale is higher than the states'.

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nobody.really
on April 21, 2015 at 09:52:04 am

What Buckley has looked at and commented on concerns what consumes most of the activities of the people in the state bureaucracies.

Principal engagements are in dealing with the federal bureaucracy.

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R Richard Schweitzer
on April 21, 2015 at 09:57:10 am

Rich *industries* are lead by -

SMART MANAGERS

Who may thereby become rich.

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R Richard Schweitzer
on April 21, 2015 at 10:07:10 am

"Why do we find this pattern of states acting in a manner that would seem to run contrary to their self-interest? "

Because **states** have no interests, self or otherwise.

Only people have interests.

It has been in response to particular interests of individuals and groups within states; particularly the interests of members of "entrenched" political parties to create the perception of generating "benefits" and "progress" (bike trails, anyone?) without directly observed costs. And, there are others, of course. Still, it's people, not the mechanism of the state; nor the embodiment of authority necessary for the proper functions of a state.

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R Richard Schweitzer
on April 21, 2015 at 11:00:03 am

Most of the time - although I have worked for some real dodo's in the past!

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gabe

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