Planet Napolitano

Writing in The Wall Street Journal, Arizona Gov. Janet Napolitano (D) recently complained that the Bush administration is abandoning federal spending commitments, “cost-shifting to the states,” and creating budget deficits in states like Arizona.

In companion letters to the editor of today’s The Wall Street Journal, the Goldwater Institute’s Darcy Olsen and I inquire as to the color of the sky on planet Napolitano.

Olsen writes, in part:

Like most of the southwest, Arizona has been rolling in cash thanks to historic economic expansion. Three of the past five years saw double-digit percentage budget growth. But instead of reducing the tax burden or saving for a rainy day, state government ballooned 40% in real terms. Arizona now finds its per capita state spending on a par with Massachusetts.

Only 21 states went into the red this year, and Arizona led the way with the largest budget deficit of any state on a per-capita basis.

States can unilaterally opt out of some federal programs, like No Child Left Behind. Most governors can also reduce agency spending through executive action. Arizona did none of these things.

Meanwhile, I tackle Napolitano’s argument that restraining federal Medicaid and SCHIP spending amounts to “cost-shifting”:

Medicaid and SCHIP allow Arizona politicians to subsidize Arizona residents (and Arizona health-care providers), while shifting most of the cost to taxpayers in other states.

Gov. Napolitano opposes the administration’s policy not because it would increase cost-shifting, but because it would reduce her ability to shift those costs to other states.

Medicaid and SCHIP: socialism for state politicians.