Zane: Nothing to dig about debt delusions

08/26/2014 6:16 PM

08/27/2014 4:00 AM

The first law of holes commands: “When you’re in one, stop digging.”

Most see the wisdom of stopping to think instead of just making a bad problem worse. Except, that is, when it comes to government spending, which has become an unending string of shovel-ready programs. Stunningly, as our nation’s fiscal problems have deepened from pit to crater to yawning abyss, the what-me-worry diggers who’ve gotten us into this mess have only doubled down on their cry: Full steam below!

Consider the diggers’ incessant attacks on North Carolina’s GOP legislature since it refused to expand Medicaid coverage under the Affordable Care Act. Their kindest criticisms have cast elected officials as heartless and ignorant; their most vicious attacks have accused them of murder – all for not providing a benefit that did not exist until this year. Is this civil discourse?

Don’t get me wrong. I would love to provide comprehensive health coverage – as well as a job, a car, a home and a blazing fast Internet connection– to everybody. These are good, important things. The question that is scandalously ignored by the diggers – who seem to know the value of everything and the price of nothing – is how are we going to pay for expanded services?

Proponents of Obamacare and the Medicaid expansion pretend that we live in a world full of free stuff. Free checkups! Free contraception! Free immunizations! This is the same logic that leads children to crow about the “free T-shirt” they receive at sport meets that carry $100 entrance fees. As a parent, I know somebody always pays.

The diggers note that the federal government is picking up 100 percent of the tab for the first three years of Medicaid expansion and promises to pay 90 percent of the cost after that. A new report from the Robert Wood Johnson Foundation and the Urban Institute estimates that North Carolina will lose about $51 billion in federal funding and thousands of jobs during the next decade because of its refusal.

Perhaps. But keep in mind that the federal government reimburses states for only about 57 percent of traditional Medicaid costs. Is it reasonable to assume that it will pick up 90 percent of the tab for one slice of the program in perpetuity? Yes, Medicaid expansion would create jobs, but if this were a cost-effective strategy, we could solve our unemployment problems right now by having the government give everyone a job. That’s not how economics works.

Also lost in this discussion is the fact that we are the federal government. That “free” money is our money, from a different set of books.

Even without the expansion, Medicaid now consumes 18 percent of North Carolina’s General Fund budget. Program costs have consistently increased faster than inflation or population, rising 6.1 percent per year during the period 2010-12.

In the years ahead, as North Carolina’s population continues to grow at a healthy clip, Medicaid spending could account for 20 or even 25 percent of the state’s budget. This doesn’t seem to bother the diggers, who blithely ignore this scenario. But what about the taxpayers who also care about funding for education, the environment, transportation, the court systems and other state services?

Of course, we could afford all this and more through tax increases. Perhaps North Carolinians are willing to pay the price – though I see no empirical research to support this. But let’s have an informed conversation about the specific long-term implications of Medicaid expansion – focusing not just on the benefits it will provide but the actual costs – before making an irrevocable commitment. As Ronald Reagan observed, “Governments’ programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”

This necessary discussion will not be easy because the very economic forces leading to the demand for greater government services are the same ones making it harder to pay for them.

Briefly, median household income has fallen sharply during the last decade while the labor participation rate hovers near historic lows with no improvement in sight. Many of the jobs created during the last few years are part-time or contract positions.

The income picture is darkening at a time when taxes are already near historic highs, current entitlement programs are going bankrupt and the national debt is almost $18 trillion and counting.

This is the hole we find ourselves in. Perhaps we’ve dug it with the shovel of good intentions. However, the bills are long past due. Before we get so deep that we are enveloped in darkness, let’s replace moral outrage with fiscal sanity so we can decide, in the clear light of day, where to go.

Contributing columnist J. Peder Zane can be reached at

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