Saturday, August 28

What happens when governments run out of money?

What happens when the government mandates that hospitals provide "free" care for those who can't pay...and the hospitals run out of money? The Denver Post explains:
Two clinics at University of Colorado Hospital — considered the state's safety net for the needy — are turning away patients on government insurance plans because they can't afford to treat them.

University Hospital...spent almost $270 million in the last fiscal year treating people without insurance....
In 1990 the state legislature passed a law saying the state would reimburse the hospital $3 for every $4 the hospital spends on care for those who can't pay. (Or as the Post reporter phrased it, "needy patients.")

But as we've all seen, our new "changed" government routinely ignores laws when it wants to. In this case, the state's promise to reimburse is ignored by legislators wishing to honor higher priorities. Like giving public-employee-union workers raises, maybe? In any case, the state has not given University Hospital money from its general fund for at least the past three years.

Okay, if you're not from Colorado this story is "somebody else's problem." But is there any reason to think your state--or the federal government--will act any differently?

Unlike the feds, state governments can't just print money as they wish. (I know, I know, that's not technically what the federal gubmint does. But the effect is identical.) So if a state spends all its tax revenue but wants to spend more, it either has to borrow (California is the best-known example) or do as us poor citizen-peons do: Either increase income (i.e. raise taxes) or cut some other outlay.

There is no way around this.

Unfortunately, politicians never predict the real effects of the laws they pass, so they routinely pass laws that end up having costs they never anticipated.

And when those effects show up, the pols typically raise your taxes to cover.

Don't like that? Tough--because the pols know how to make you accept a tax increase: they threaten to cut funding for public schools.

Now, if that would be done by firing vastly-overpaid administrators (superintendents and non-teaching headquarters staffers/paper-pushers) that would be fine. But the cuts are always to actual teaching staff.

Works every time.

City councils invariably threaten to cut police and firemen. Again, it always works.

But at some level of taxation, revenues stop rising because former taxpayers start leaving the system. For example, people living in shelters or in their cars don't pay property taxes. As taxes rise on low-end rental property, at some point the owner/landlord finally decides it's too damn much trouble, stops making repairs, and eventually the property is bulldozed.

All of which means that eventually, cuts will have to be made somewhere.

Short answer: We need to force government--at all levels--back into its box. Meaning, don't let it control so much, pass so many programs and mandates, etc. On the federal level, it may be necessary to amend the Constitution to clarify that the Feds are not allowed to spend money on aid to schools or welfare. Let those programs go back to the states, as the founders explicitly stated.

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