David R. Henderson  

Krugman: Beggar Thy (American) Neighbor

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Either that, or Paul Krugman believes in the Easter Bunny.

In his June 6 New York Times column, "The Spite Club," Paul Krugman castigates some Republican governors for refusing to extend Medicaid to a larger population. He writes:

No, the only way to understand the refusal to expand Medicaid is as an act of sheer spite.

Did you get that? That's the only way to understand the refusal. The governors couldn't be worried, for example, that the federal subsidy will end or diminish at some future point and then the state governments will be stuck paying a higher fraction of the costs.

But put that worry aside. Let's say Krugman is right and that there's no reason to worry. Here's Krugman's other reasoning:

A new study from the RAND Corporation, a nonpartisan research institution, examines the consequences if 14 states whose governors have declared their opposition to Medicaid expansion do, in fact, reject the expansion. The result, the study concluded, would be a huge financial hit: the rejectionist states would lose more than $8 billion a year in federal aid, and would also find themselves on the hook for roughly $1 billion more to cover the losses hospitals incur when treating the uninsured.

In other words, if the 14 states reject the Medicaid expansion, they will be out $8 billion in federal subsidies. In Krugman's mind those subsidies seem to be costless. Does he believe in the Easter Bunny too? I'm sure he doesn't. So what is he really saying? Not that the subsidies are costless but that those costs are borne by Americans in general, not just the Americans in those 14 states. Krugman is saying, in effect, that the 14 Republican governors should screw the rest of the country by taking the subsidies. Beggar thy neighbor.

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CATEGORIES: moral reasoning

COMMENTS (15 to date)
Tom E. Snyder writes:


Daniel Kuehn writes:

You have to remember "politics without romance", though. I highly doubt cost consciousness of the sort you note is driving these decisions. I agree it's probably not spite - it's political opportunism in most cases (obviously I don't know the situation on the ground in all 14 states, but you can pretty much guarantee that's the source of most of this).

Ted Levy writes:

Why, Daniel, do you think it's political opportunism and not, say, concern that as Governor you'll be having your hands tied by accepting a program highly regulated and controlled by Washington? Or because of David's point that subsidy now but no subsidy later might be very harmful to the fiscal stability of your state? I believe more than one Governor has said that explicitly.

John Strong writes:

So, for instance, when Nancy Pelosi conspired with nativist Republicans to kill George Bush's immigration reform, was that comparable to what Republican governors are doing now? In other words, these are all just acts of sabotage intended to preempt any perception that the other side has been effective in ways that might win votes from moderate pragmatic independents?

Jim Rose writes:

It is so much easier to believe your opponents are ignorant or steeped in moral turpitude, preferably both.

Morality is on your side, but never whomever you are disagreeing with, even though many people change their political and policy views as they age and gain experience, and even vote for a variety of parties.

Friedman argued they people agree on most objectives, but differ on the predicted outcomes of different policies and institutions.

Then there is Christopher Robert and Richard Zeckhauser‘s taxonomy of disagreement:

Positive disagreements can be over questions of:
1. Scope: what elements of the world one is trying to understand
2. Model: what mechanisms explain the behaviour of the world
3. Estimate: what estimates of the model’s parameters are thought to obtain in particular contexts

Values disagreements can be over questions of:
1. Standing: who counts
2. Criteria: what counts
3. Weights: how much different individuals and criteria count

Any positive analysis will tend to include elements of scope, model, and estimation, though often these elements intertwine; they frequently feature in an implicit or undifferentiated manner.

Likewise, normative analysis will also include elements of standing, criteria, and weights, whether or not these distinctions are recognized.

ThomasH writes:

Congress made a judgment that the benefits to poor people that would receive insurance coverage from expanded Medicaid was greater than the cost to the marginal taxpayers who will pay for this. It is just a coincidence that the governors who disagree with this judgment to such an extent that they will act on behalf of those out of state taxpayers are all Republicans.

ZC writes:

(Democratic) Congress(people) made a judgment that the benefits (to their party, and their own staying in power) of poor people that would receive (subsidized healthcare) from expanded Medicaid was greater than the cost (in lost votes and political power) of the marginal taxpayers who will pay for this.

Fixed it for ya!

You give the majority of Congress-critters far too much credit. Most certainly had no in-depth understanding of the complex economic consequences of the Affordable Care Act (both intended and unintended).

Carl writes:

Another illustration of Kenneth Minogue's idea of the "politico-moral" idiom.

Those who disagree with me must wish to deliberately hurt people. Why else would they choose to reject my infallible arguments?

As with most religions, there is Good and there is Evil and not much room for anything else.

Mike W writes:

Politics aside, it would seem that the decision to expand Medicaid would depend a good deal on the state’s makeup of the marginal low-income working families and able-bodied adults with no dependents because Medicaid already covers the severely poor and the disabled.

For example, a couple with one child and family income at 138% of the federal poverty guideline ($27,329) would qualify for Medicaid under the expanded rules. But even if the state does not adopt the expanded Medicaid that family need not go without medical insurance. They could still get coverage through the state’s Obamacare exchange at no cost…fully subsidized by the federal program. The coverage would be at the “Bronze” level…covering 60% of covered benefit costs…which would require a greater out-of-pocket contribution by the family than would Medicaid.

For a couple with no children the income cutoff for Medicaid would be $21,703 and for a single able-bodied adult it would be $16,078 where, absent Medicaid, fully subsidized Bronze level insurance is available through the state exchange.

It seems that the question as to whether or not to adopt the expanded Medicaid plan is not, are we leaving a percentage of the our poor population without medical benefits? Rather it would be, should the state take on the financial commitment to provide no-cost medical services to those with incomes at the above levels or should we let them get insurance through the federal Obamacare program and pay some of the costs?

This subsidy calculator is the source of the numbers: http://kff.org/interactive/subsidy-calculator/

Daniel Kuehn writes:

Ted Levy -
Most politicians aren't particularly concerned about sound budgets except insofar as it directly affects their political prospects, so the idea that they're doing this for budget reasons doesn't pass the smell test - particularly if we take "politics without romance" seriously. Even if it did it doesn't explain at all why the defectors are predominantly (entirely?) Republicans. What does make sense from a public choice perspective and from the data we've got on what's going on is that these people find fighting Obamacare politically advantageous for them.

I don't think it's spite as Krugman says - that doesn't make a lot of sense to me. But I don't think the rose-colored glasses view of what motivates politicians that David presents here makes much sense either.

Thomas B writes:

> ...$8 billion in federal subsidies. In Krugman's mind those subsidies seem to be costless. Does he believe in the Easter Bunny too?

He probably believes those costs are offset by the reductions in payments for uncompensated care.

If you believe emergency rooms are more expensive than a year of medicare, then those subsidies are "costless," because they represent a net savings over the current system.

Krugman's probably confused by the opposition, because the changes seem pareto optimal.

The opposition's confused, because it's comparing the expansion to a world where we currently provide no health subsidies to care for those near poverty. We do not live in that world, we're just pretending that we do, aided by a government that excels at hiding expenditures.

Brian writes:


You say "Even if it did it doesn't explain at all why the defectors are predominantly (entirely?) Republicans."

No? It can't be that all the Democratic governors are being shortsighted just to be supportive of their guy? It seems that party considerations can go either way.

Daniel Kuehn writes:

Brian -
I said IF we grant what Ted Levy seems to suspect of politicians (that they care about sound budgets) then you can't explain the D/R split. I agree with you - if we have a more realistic view than this, you can. That's my whole point.

And presumably there's a group of both Rs and Ds that rank politcial opportunism lower in their welfare function too.

David R. Henderson writes:

@Ted Levy and Daniel Kuehn,
Of course, you both have the right to single out the part of my post that interests you most, but the part that interested me most was my ethical criticism of Krugman.

Mike W writes:

Krugman’s argument…that the additional expense to the states of providing no-cost medical services to an increased number of Medicaid beneficiaries (mostly low-income able-bodied adults) will be minimal due to the contribution from the federal taxpayers…is the same tilt that this report puts on the costs of Medicaid expansion.

According to the report, the increase in total national Medicaid spending over ten years would be about $808 billion with the federal government paying $800 billion.

But the report also notes that under the expanded Medicaid 12 states would see their Medicaid spending increase 4-7%, 29 states would see increased spending of 0-4% and 10 states would actually see their Medicaid spending decrease. Guess which states were first to sign on to the expansion?

Of the 20 states (Krugman refers to “14 states whose governors have declared their opposition to Medicaid expansion”) that are not moving forward to adopt the Medicaid expansion, 7 are those that will experience 4-7% spending increases and 10 will have increased spending of 2-4%. Of the remaining 3 only one (Wisconsin) would have a decrease in Medicaid spending…it would appear only this state might qualify for Krugman’s “Spite Club”.

For all the other states, since Medicaid is the second biggest program expense in state budgets, a spending increase of 4-7%...or even 2-4%...would seem to be a legitimate reason for governors and legislatures to take pause.

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