Concerns about the growing federal budget deficit are understandable. But, some government spending is necessary to ensure that the slow, ongoing economic recovery continues.
Increased federal funding for the Medicaid Federal Medical Assistance Percentage, or FMAP, along with unemployment benefits, is just such spending.
Earlier this spring, both the U.S. House and Senate passed bills extending enhanced FMAP payments for six months. The higher payments were part of the American Recovery and Reinvestment Act, which aimed at pulling the economy out of recession. Most economists agree it has done this.
They also agree that further — but smaller — federal efforts are necessary to ensure the economic progress is sustained.
According to the Congressional Budget Office, increased FMAP assistance is one of the most effective ways to increase demand in the economy and, hence, to create jobs. Unemployment insurance also falls into this category.
For this reason, Congress provided increased FMAP funds to the states in 2003 and 2009 without offsetting their cost.
After the March House and Senate votes approving a continuation of the higher FMAP payments, Maine and 32 other states included the increased federal funds in their budgets. If the FMAP funds are not forthcoming, Maine’s shortfall in the budget that begins July 1 would be at least $85 million.
Without the federal money, Gov. John Baldacci would be forced to issue a curtailment order, which would cut state spending immediately — in areas far beyond health care. But, due to the constraints of curtailment orders, he couldn’t come up with the full amount, so a special session of the Leg-islature could be needed, which would cost the taxpayers of Maine $40,000 per day.
Worse, without the FMAP funds, health care providers would be forced to lay off employees, driving up the state’s unemployment rate and leaving some low-income families and children without medical care.
Because the previously passed House and Senate bills — which all of Maine’s congressional delegation supported — differed, they needed to go through a process known as reconciliation. That is when the situation became even more complicated.
On May 27, the House passed a bill to extend unemployment benefits, but the FMAP payments and a solution to a 21 percent cut in Medicare payments to doctors were not included. The Senate failed to act on the bill before adjourning for the Memorial Day recess.
Lawmakers are struggling for ways to fix the doctor payment, extend unemployment and FMAP and extend tax code changes with a wary eye on the deficit.
These are natural concerns, but continuing to spur the economy — as the FMAP and unemployment benefit extensions will do — is more important in the short term than concerns about the deficit in the long term. If the economy continues to grow, the long-range deficit picture improves. If the economy falters, which is likely without the FMAP and unemployment benefit extensions, the deficit picture worsens.
Millions of families also will be hurt. This doesn’t look like a good trade-off, which is why lawmakers must continue to work for a bill that includes these needed fixes.