The U.S. Constitution begins with a preamble that establishes our federal form of government to "provide for the common defence" and "promote the general Welfare." Those words mean quite different things to partisans in today’s politically polarized nation. In the face of the coronavirus pandemic, these basic foundations of federalism will be tested more than at any time since the Great Depression. And, ultimately, they’ll be tested when Americans go to the polls this fall.
We’ve watched the White House briefings on the response to the pandemic that, sadly, became reality TV episodes. But whether one agrees or disagrees with what has been said at that podium, nobody can deny that the role of the federal government in the nation’s response has taken center stage. Meanwhile, the daily briefings by New York Gov. Andrew Cuomo have served as a counterpoint. At issue is which level of government is responsible, both fiscally and logistically, for providing skilled, reliable, organized and accountable leadership in the common defense against COVID-19, which has already killed more than 60,000 Americans and shattered the economy.
The elections are a long way off, and my crystal ball is no clearer than anyone else’s. But I have a growing hunch that we may be shaping up for a whopper of an election this year. At stake could be the future of federalism, and specifically the role of the national government in future pandemic responses, countercyclical recession management and catastrophic health care.
I’m a fiscal conservative and a staunch defender of the 10th Amendment, which reserves to the states powers not specifically granted to the federal government. Every bone in my body believes that states, and by extension their local governments, really are what Supreme Court Justice Louis Brandeis called “laboratories of democracy” and that decentralization is protective of our individual liberties.
Similarly, I have no use for sweeping socialism. Modern Monetary Theory, with its embrace of deficit spending, gives me heartburn. After watching Congress spend trillions to bail out large and small businesses, I dread the long-fuse impact of swelling federal deficits. This is not just rhetoric: In my 2019 book, I ran the numbers rigorously on tax-reform schemes, Medicare for All and other budget-busting “big ideas.” They didn’t hold up.
But it baffles me, as a trained economist and a Chartered Financial Analyst, that the anti-government set in Washington has decided to make state and local governments and their pension funds the scapegoats in this pandemic recession. Conversely, I grind my teeth when I now see some congressional Democrats raising the ante for financial assistance far above the generous $500 billion the governors have requested when we don’t yet know the depth or duration of this pandemic-created recession. I urge both parties to forget ideology and focus pragmatically on the tidal economic undertow that laying off millions of state and local government employees would inflict on the U.S. economy. That is the inevitable, purely mathematical result of doing nothing in Washington.
While some on the left might see a political silver lining in GOP dithering or inaction — a “Hoover 2.0” election reminiscent of 1932 that gives Democrats control of the White House and the Senate and solidifies their control of the House — I don’t really believe that voters will get all that riled up about finger-pointing on an issue this abstruse. But if it’s coupled with national health-care policy in the middle of a persisting pandemic with shocking and chronic levels of unemployment, then it becomes much more plausible that November could become a tidal wave.
Here’s the health-care hook: Forget Medicare for All. America can’t afford it any time soon, given the tax hikes and deficit spending it would require. But what is attainable fiscally is what might be called “Major Medical for All.” MM4A would insure everybody for catastrophic hospital costs. This would be national social insurance, like Medicare, but only for extraordinary, non-elective hospital costs, not federal ownership of hospitals or socialized facelifts. Unlike the Bernie Sanders vision, MM4A would be a limited, focused program that could sell like hotcakes politically. To become the swing-vote issue in November, the idea would need a rational revenue plan including household-income-based premiums and fractionally higher Medicare payroll taxes.
A prudent federal MM4A financing plan would almost universally reduce state and local governments’ employer health insurance costs. And if the Medicare eligibility age were reduced to 60, as some propose, that would also cut group insurance payroll premiums and retiree medical costs. Private employers would benefit similarly.
With the limited exception of the thoughtless young people I sometimes encounter at the grocery who don’t wear masks and think they’re invincible, as well as the most hard-core Tea Party and libertarian individualists, most American adults have now dwelt mentally on the horrific possibility that they themselves could land in a hospital ICU with this lethal virus and require expensive health care that could bankrupt them and their families. I disagree with Elizabeth Warren on almost everything she advocates fiscally, but on this one point she’s on to something: Far too many Americans are now living paycheck to paycheck or from one unemployment payment to the next, and the dread of medical bankruptcy is a smoldering subsurface fear that most voters will mentally and emotionally carry to the polls this November.
We’re not hearing much presidential braggadocio any more about the wondrous stock market and magical 401(k) wealth, despite the recent oversold rally. American capitalism’s safety net is fraying before our eyes. If November’s election becomes a plebiscite on greed versus fear, I can confidently predict the outcome. Congressional conservatives, you might want to pivot before it’s too late.
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