offer their own plan that balanced revenues and related services. No one can predict with confidence the ultimate trade-off between taxes and services preferred by a majority of voters. Some will conclude that preserving health is more important than the level of taxation. Others will decide that the burden of extra taxation requires hard limits on reimbursement over the lifetime of patients. The Constitution prescribes a proven technique for resolving precisely that type of conflict: an election. Debt imposes a high price for suppressing that conflict and deferring its resolution. C RITICAL C HOICES FOR M EDICAID Since the mid-1990s many Republican congressional leaders have proposed to limit the annual growth of Medicaid grants to a fixed annual percentage. Each state would then have to choose between paying more or discontinuing services if costs rose faster than federal grants. In order to avoid weakening the mandated priority for services to elderly and disabled Americans and pregnant women and their babies, Democrats have favored ceilings linked to the number of beneficiaries and some minimal cost of providing services. There is no good reason to borrow to fund Medicaid costs that rise faster than federal revenues. For that reason, in 1997 the Clinton administration and congressional Republicans nearly agreed to a hard annual limit on the growth of Medicaid grants. Reasonable limits on the growth of Medicaid would require both Republicans and Democrats to compromise on one of their cherished policy positions. Republicans would have to reconsider their long-term plan—as reflected in various House budget resolutions adopted after 2010—to balance the budget far into the future by spending a smaller and smaller share of national income on Medicaid. It is hard to imagine that most Americans want millions of citizens with special needs to be evicted from their residential institutions or pregnant women to deliver babies without using modern medical facilities. Since state payments to support long-term care already allow little more than minimum wages to be paid to the employees of providers, few expect some brilliant idea to, for example, lower Medicaid’s cost of long-term care for citizens with Alzheimer’s disease. It seems disingenuous to count on cutting services for impoverished disabled or elderly citizensto future levels below that which Congress, including current Republican members, is now willing to fund. Democrats should consider eliminating the feature of the Affordable Care Act that, for a three-year period, allows states to avoid paying a matching share in order to receive grants for Medicaid coverage extended to workers with low incomes. If elected state governments are unwilling to impose taxes to pay for a portion of the cost of a program that benefits their citizens, why should the federal government assume additional debt to fund it? If one believes that the program should be entirely a federal responsibility, then why not wait until the federal government has tax revenue sufficient to replace the matching requirement for all Medicaid coverage? The principle of “pay as you go” provides the framework for a reality-based national conversation about financing federal medical services. Every day patients and family members have difficult conversations about the health of loved ones. Medical providers deliver unwelcome but honest news to patients. Physicians and patients communicate honestly about medical conditions without resort to partisanship. Insurers do not handicap medical risk based on the ideology of those insured. Adult citizens understand that medical care is not free. Baby Boomers, whose parents bore an enormous tax burden to pay for their children’s education and a safer world, have no desire to bequeath their children a legacy of unpaid bills in the form of federal debt.
22 G ROWTH , T AXES , AND THE F EDERAL R ESERVE T HE M IRAGE OF D EBT -F INANCED G ROWTH Strong economic