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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Unhappy Fiscal New Year

Fiscal Year 2012 begins today in 46 of the 50 states. In Minnesota, state government has been shut down as Republican legislators demand new cuts in health and human services spending and oppose Democratic Gov. Mark Dayton’s proposal for a millionaire’s tax. 24 of the 32 states that have enacted FY 2012 budget have imposed significant budget cuts. A total of 42 states still face budget shortfalls in the new fiscal year, in amounts totaling $103 billion. And federal economic stimulus assistance to the states ended yesterday, for the most part.
That’s the good news from the states. The bad news is that almost any plausible scenario for breaking the budget deadlock at the federal level is likely to involve serious cuts–and perhaps unprecedented cuts–in funding for federal-state programs. For the biggest of these programs, Medicaid, Republicans want to end its entitlement status and simply give states a smaller chuck of cash and let them figure out how to provide health care to the poor and disabled. Even Democrats are talking about significant reductions in the federal match rate for Medicaid.
The dirty little secret of American government is that the feds really don’t deliver that many services. More often, they help finance services delivered by state and local governments. This arrangement makes it easier for fiscal hawks to remove themselves a step or two from the consequences of their actions. I doubt if more than a handful of the Republican Members of Congress who are threatening to plunge the national and even the global economy into chaos if their budget-cutting demands aren’t met are paying any formal attention to this unhappy fiscal new year in the states, which they’ve longed for and hope to make far worse.

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