Paul Krugman on last week’s Supreme Court arguments:
I was struck, in particular, by the argument over whether requiring that state governments participate in an expansion of Medicaid … constituted unacceptable “coercion.” One would have thought that this claim was self-evidently absurd. After all, states are free to opt out of Medicaid if they choose; Medicaid’s “coercive” power comes only from the fact that the federal government provides aid to states that are willing to follow the program’s guidelines. If you offer to give me a lot of money, but only if I perform certain tasks, is that servitude?
Wrong question. The right question is:
If you take a lot of money from me and then offer to give it back, but only if I perform certain tasks, is that servitude?
Because, you see, the federal government is not handing out its own money to state governments — it’s handing out money that it takes from the citizens of those very states for the purpose of (conditionally) handing it back. (Of course “handing it back” isn’t exactly right either, because the payments go not to taxpayers but to their state governments — but it’s a lot closer to right than Krugman’s formulation.)
Let’s be even clearer about this: In order to hand out these generous block grants, the federal government must raise either present or future taxes on the very same people who constitute the tax bases of the state governments who are supposedly getting a “free gift”. It’s a lot like giving your kid a “free bicycle”, paid for with what would have been his allowance. If you first withhold the allowance, then make the bicycle contingent on the performance of enhanced chores, and the kid cries “coercion”, I’m going to say he’s got a reasonable case.
This in the same column where Krugman complains, with no little justification, that many of the Supreme Court Justices “don’t understand, or choose not to understand, how insurance works”. Here we have a Nobel-prize-winning economist who doesn’t understand, or chooses not to understand, the source of government revenue. My money’s on the latter.