The Era of ARRA Is Over
It’s
the end of an era—the Era of ARRA. “ARRA” is the “American Recovery and
Reinvestment Act” …otherwise known as federal stimulus, and commonly
known as “ObamaBucks.” The Obama Administration borrowed a trillion
dollars, and sent the money out to “stimulate” the economy. It was a
mighty bender of government spending, and now Michigan is getting a half
a billion dollar hangover--$560 million to be exact. What? Cash-strapped
Michigan state government budget takes a half billion buck hit? More
headaches to come? Indeed, yes, and here’s how:
Start with
ARRA.
It was sold as a hard infrastructure
build program for shovel ready projects.
The reality was different. Most of the
Stimulus money went to governments with clout in the
Democratically-controlled Congress, hence the nickname “Porkulus.”But
the money didn’t really go to build stuff. Instead, ARRA money was
actually a state government deficit bailout program.
Larry and Curly, m
Michigan, for example, received hundreds of millions of dollars, much of
it earmarked for specific government programs like education and
Medicaid. These ObamaBucks came with strings attached, often called
“maintenance of effort” or “MOE,” which means you’re stuck with the
programs indefinitely.
Michigan was able to…no,
correction--required to…use the stimulus to plug budget holes, which
meant that tough choices on state spending could be put off.
In addition, the ARRA federal bailout money meant that states like
Michigan could flinch from confronting its powerful public sector unions
and their unsustainable compensation levels. Practically speaking the
Obama stimulus program represented a vast, trillion dollar transfer of
wealth from future taxpayers to unionized public sector workers.
Now to the second piece of the puzzle.
In the federal Medicaid program, there
is something called “Federal Medicaid Assistance Percentages,” or FMAP.
This is the rate of Federal reimbursement Michigan gets from the Feds
for Medicaid spending. The rate is based on our average income: the
higher our per capita income, the less money we get from Washington.
Remember when General Motors set up VEBA accounts for pension and health
care benefits back in 2004? That involved a multi-billion dollar payout,
which got carried on the books as income. In reality it was an
accounting entry, but to the Feds, we looked richer, and our FMAP rates
went down. Michigan took our case to the Feds, who agreed that we were
owed $560 million. The check would be in the mail, they said. Granholm
administration officials swore the money was as good as in our hands.
We’re still waiting.
And now it looks like the check won’t come at all. Why? Simply put,
Americans have gotten nervous about Federal deficits and spending, and
Congress is nervous about reelection. President Obama’s call for a new
$50 billion round of stimulus spending has met the sounds of crickets
chirping. Caught up in the Born-Again Fiscal Conservative deathbed
conversion is Michigan’s FMAP money.
That $560 million check never got
mailed, and maybe never will. Congress has shelved stimulus
spending—perhaps for good. All reports in the polls point to a major
change coming in the midterm election. Even if Congress gets Michigan
the half a billion dollar FMAP money, and even if Congress hits the
spending bottle again, it’s clear that the end is in sight. The next
Congress is sure to be a more tight-fisted beast, and the days of
trillion dollar state wealth transfers from Washington are over—for now.
Which not only means that Michigan must plug the $560 million hole—which
some of us argued should not have been baked into budget income
assumptions in the first place. It also means Michigan’s gap between
spending and income has to be faced. No more checks from Uncle Sugar;
the Day of Reckoning is here. Even that lamest of lame ducks, Jennifer
Granholm, may talk bravely about raising taxes. But her Donkey army has
no more pre-election stomach than their counterparts on the Potomac.
Folks, the Era of ARRA is over, and
it’s up to us now. Economically and fiscally it was an Era of Error, but
it’s over and we’re on our own. Our balance sheet belongs to us, and
making the INCOME side equal the SPENDING side is a job that can’t be
put off. Dealing with the unsustainable compensation levels of our
unionized public servants is another task that Obama can’t save us from
anymore. We have to cut our spending and confront our public sector
labor costs. There’s no time to lose, as America seems to be slipping
into the second trough of a severe double-dip recession. But that’s
another story.
.
