Conservative Principles Now

While Time Magazine has set up shop in Detroit to chronicle the continuing decay of one of America’s great industrial cities, the Wall Street Journal has found a teachable moment 90 miles northwest in Michigan’s capital city: government cannot tax and spend its way out of deficits and joblessness.

As the Wall Street Journal reports, Michigan’s 15.2% unemployment rate is the worst in the country, with the state having lost 750,000 jobs since 2000. Shockingly, since 2007, two families move out of Michigan for every one family that moves in. Oppressive taxation and out of control spending just might have something to do with it. From the WSJ:

In 2007 Governor Jennifer Granholm signed the biggest tax increase in Michigan history, with most of the $1.4 billion coming from business. The personal income tax—which hits nonincorporated small businesses—was raised to 4.2% from 3.95%, and the Michigan business tax levied a surcharge of 22%. The tax money was dedicated to the likes of education, public works, job retraining and corporate subsidies. Ms. Granholm and her union allies called these “investments,” and the exercise was widely applauded as a prototype of “progressive” budgeting.

The result of the “progressive” budgeting is evident across the state. Aside for soaring unemployment, businesses are shutting doors, homes are falling into foreclosure, and property values have plummeted. Now, as the WSJ reports, Michigan is facing a $1 billion shortfall in projected income (despite higher taxes), skyrocketing deficits and even more taxes, possibly to the tune of $600 million. And this in a state that has received $120 million in federal stimulus funds which have created, so far, a whopping 397 jobs. That’s $300,000 per job.

Businessman Steve Wynn, who recently appeared on Fox News Sunday with Granholm, might have summarized this lesson in governance best when he boldly proclaimed, “Government has never increased the standard of living of one single human being in civilization’s history.” Watch:

The House and Senate are clearly divided over how to pay for the massive new spending commitments the federal government is taking on.

Right now, House and Senate Democrats are meeting behind closed doors to figure out who they will tax and how much they can cut Medicare to meet what will be at least a $1 trillion commitment in new spending. Assuming for just the moment that they can make them match, Congress should look to the example of what Medicaid has done to state budgets.

Medicaid Mess. The commitment to Medicaid has become so large, it acts like a vortex, drawing everything else into itself. Congress should stop and take a good look at what happened to state budgets this past year. The extra federal matching rates for Medicaid came with strings attached—Medicaid eligibility could not be cut. But states still cut Medicaid providers. Medicaid was perhaps spared but that only meant cuts had to be found elsewhere to keep state budgets in balance. Medicaid was protected, but education, public health, mental health services, social services, child welfare programs, and public safety were cut.

Budget Gimmicks. It is understandable the President and Congressional leaders focus on what will be gained, as any politicians do to gain support for their initiatives. But there is also a time to ask, what will be lost? A trillion dollars in new spending and new revenues leave the federal government with very little margin to deal with the public health risks of a pandemic, rising unemployment, another Katrina, another crisis in world. Health care will spend real money and still rely on a lot of budget gimmicks. For example, Finance simply delayed the start of benefits and refused to fix the Medicare physician fee schedule.

Higher Family Spending. Yes, some families will get $16,500 in tax free benefits for health care under the Finance Committee version. But that money is going to come from someone else. And, under the Finance Committee plan, there will still be 25 million Americans uninsured. Many individuals and families will end up paying much more for their health care than they do today. Forget Obama’s promise of the $2500 annual reduction in family health costs.

The federal government is going to raise taxes to pay its new bill. What are families going to do? Clearly, they will have to cut costs elsewhere in their budget. Cutting Medicare payments and benefits to pay for new spending will help avoid going further into hock in regards to the federal budget, but those proposals do nothing to help family budgets.

Americans want solutions to the problems we face in the current system including the issue of the uninsured. But the legislation moving through Congress fails to meet the promise made by President Obama and what Americans as a whole want most of all—to lower the cost of health care for everyone. Failure to accomplish that now means the upheaval of our entire health care system at the cost of everything else.