Monday, May 29, 2017

Trump's Budget and Wyoming: Part 1

I have received some good suggestions for blog articles from several readers, including state legislators. These are all good suggestions, and I will address them in coming articles. However, first we need to take a closer look at what President Trump's budget would mean for Wyoming. It is, namely, an innovative budget that could be of meaningful help as we try to solve our state's endless fiscal problems. 

Before we get to the details of how the president's budget could open new opportunities for states, let us first set the record straight on one, very important point:
President Trump is not proposing a cut in welfare spending. All he is doing is proposing a slowdown in spending on some federally sponsored welfare programs. 

It is important to drive home this point, because his opponents have - predictably - resorted to using fact-free statements and creative arithmetic. As a good example, consider Laura Hancock, writer for an opinion blog called the Casper Star Tribune. Using a disabled woman as a rhetorical baseball bat, Hancock suggests:
The government assistance that helps her survive - Medicaid, Social Security disability and Supplemental Nutrition Assistance Program - are on the chopping block in President Donald Trump's budget proposal, which was formally delivered to Congress last week. The president wants Congress to cut the programs by $800 billion, $70 billion and $191 billion, respectively, in coming years. Trump's plan calls for significant cuts to social welfare and domestic programs, while boosting spending for defense and veterans. 
Hancock skillfully combines fact-free statements with creative arithmetic to conclude that President Trump's budget would cut Medicaid spending by $800 billion. Unfortunately, it is not very difficult to disprove her suggestions: all we need to do is go to the president's budget, available to the entire internet-connected world right here. On page 35, Table S-4, we the following federal spending proposal for Medicaid for the next ten years:

Figure 1
Source: Office of Management and Budget

In other words, the suggestion that the president's budget cuts Medicaid by $800 million is a classic example of a fact-free statement. 

But what about creative arithmetic? Consider Figure 2:

Figure 2
Source: Office of Management and Budget

The grey columns represent baseline spending, in other words the "standard" increase in Medicaid spending that would keep the program's outlays on par with growth in the economy. The blue columns are the same ones as in Figure 1.

For those of us who learned traditional arithmetic, both series of columns describe an increase. However, in order not to offend those who believe in pre-Pythagorean arithmetic, let us allow them to re-define "increase" for a moment. That redefinition alters the meaning of the grey columns in Figure 2, from "baseline Medicaid spending" to "desired Medicaid spending". Since desired spending is higher than proposed spending, there is actually a reduction in spending taking place. 

Here is a meteorological application of the same logic. If a farmer desires four inches of rain per week, but it only rains two inches per week, then it actually does not rain at all. Even when rain is falling from the sky, it does not rain because it is not as much as the farmer would want it to be. In fact, there is negative rain.

We can apply this logic to hunger as well. If I go to Taco John's and order a Number 5 for lunch, and I want a large meal but only get a small one, then I actually do not get any food at all, even as they bring me the tray with the burrito and the potato oles. I end up walking out of the restaurant hungrier than I was before I went in. I have had a negative lunch.

There are no actual cuts to federal funds in President Trump's budget. There are reductions to the rate at which spending is increasing. This slowdown of the increase in spending is accomplished by means of decentralization of program control and tighter eligibility enforcement. Here is how the OMB puts it in the budget, page 10, first about Medicaid and then about Food Stamps/SNAP:
To realign financial incentives and provide stability to both Federal and State budgets, the Budget proposes to reform Medicaid by giving States the choice between a per capita cap and a block grant and empowering States to innovate and prioritize Medicaid dollars to the most vulnerable populations. States will have more flexibility to control costs and design individual, State-based solutions to provide better care to Medicaid beneficiaries. These reforms are projected to save $610 billion over 10 years. 

The Budget provides a path toward welfare reform, particularly to encourage those individuals dependent on the Government to return to the workforce. ... As a primary component of the social safety net, SNAP - formerly Food Stamps - has grown significantly in the past decade. As expected, SNAP participation grew to historic levels during the recession. However, despite improvements in unemployment since the recession ended, SNAP participation remains persistently high. The Budget proposes a series of reforms to SNAP that close eligibility loopholes, target benefits to the neediest households, and require able-bodied adults to work. Combined, these reforms will reduce SNAP expenditures while maintaining the basic assistance low-income families need to weather hard times.
Let me summarize what this means in general:
  1. There is no cut in benefits to individuals for whom Medicaid and SNAP are intended;
  2. States are given opportunities to innovate with Medicaid in order to target the program to those that our legislators believe are most in need of the program; and
  3. It will no longer be possible for people who are able to feed themselves by means of work to frivolously and by force live off their neighbors.
Does any of this affect the lady that Laura Hancock interviewed in her article at the opinion blog from Casper? 

Yes. These measures do affect that lady. They strengthen the programs for her. By reducing spending on people who misuse the programs, the president's proposed budget secures that welfare programs will be there in the future, for everyone who truly needs them. 

There is one more dimension to this issue, a dimension that Laura Hancock does not bring up in her opinion-blog article. Since the arguments against the president's budget are based on fact-free statements and creative math, it is fair to assume that the real purpose behind the criticism is ideological. By ignoring the issue of eligibility, the blog tacitly suggests that everyone who is using Medicaid and SNAP today are also eligible. The premise behind this suggestion is, in turn, one of economic redistribution. In other words: recipients of Medicaid and SNAP are eligible not because they cannot provide for themselves, but because they have less money than some of their neighbors. 

Trump's budget is, at least to some degree, a statement of traditional conservatism. Welfare programs, provided by taxpayers, should provide a last-resort safety net, not be a permanent improvement of living conditions for able-bodied adults. His proposal for a paid-leave program takes away some of his conservative street creds (for my take on that idea, see one, two, three articles on Larson's Political Economy), but the balance in his budget is still somewhat on the conservative side.

More importantly, if Congress is smart enough to agree with Trump on Medicaid and SNAP, the Wyoming legislature will get some significant discretion in reforming both programs for the better of those in our state who truly need them. It would be wise of us all, including Governor Mead and our state lawmakers, to encourage our Congressional delegation to not only vote for, but support and defend the president's ambitions to expand this kind of fiscal independence for states.

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