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It Matters Where You Live: Federalism and the Social Safety Net

where-you-liveBy Dennis Riley

Trying to succeed – perhaps even to survive – in the American economy is often compared to performing a high wire act in a circus. Unfortunately, a great many Americans trying to do that act fall – or are pushed – from the wire. That has always been true, of course, but a little over a century ago a group of people known as progressives – they didn’t get the capital P until later – began the oft times difficult task of convincing the country that Americans who fell or were pushed from the wire through no fault of their own deserved a relatively safe place to land and a little help getting back up on the wire. The term social safety net was decades away, but the idea was firmly implanted and would bear fruit especially in FDR’s New Deal and LBJ’s Great Society.

Because the idea of a federal system – the existence of sovereign states with their own powers and responsibilities along with a sovereign national government with its own powers and responsibilities – was firmly entrenched from the very beginning of the country, we had to decide how we would administer this social safety net. Would the national government pay for the program and write and implement its rules, would the states pay and write the rules, or would we create a partnership in which the federal government supplied money and wrote a few general rules and the states supplied the rest of the money, wrote the rest of the rules, and, most important, did the day to day administration. Our answer, as you might expect, was: depends on the program.

You might not be surprised that we built the safety net one piece at a time or even that we used different blueprints for different pieces. But you might be surprised to find out who decided which blueprints to use and what overriding criterion was in their minds as they made those decisions. To understand that you have to go back to the Great Depression and the creation of the modern safety net during the New Deal. After the 1934 mid-term elections, the Democrats had not only FDR in the White House but huge majorities in both houses of Congress. But those seemingly overwhelming Democratic majorities were composed of two distinct sets of representatives. The distinction, of course, was North and South. Northern Democrats were tied to the fledgling union movement, to ethnic communities in the big cities, and to poverty stricken farmers and small town residents in the Midwest and West. The Southern Democrats were tied to the South, which, in the 1930s meant tied to Jim Crow. There would be no safety net unless Southern Democrats were on board and their price was simple. Nothing could pass unless it allowed the South to maintain the rigid system of segregation that permitted the absolute social and economic subjugation of African Americans. Old Age and Survivors Insurance – what we think of as Social Security – should be totally funded and administered by the national government. But Aid to Families with Dependent Children and later unemployment compensation had to be organized around the partnership model. Lots of federal dollars, but plenty of room for the states to keep benefits low and to discriminate against the black community. When it came time for the introduction of the minimum wage and maximum hours, the South demanded that agricultural workers – defined to include those day laborers who dried and cured tobacco during the harvest season and domestics – be exempt from the rules. Those jobs, of course, were mostly held by African Americans.

The last hurrah of the Southern Democrats came in 1965 when, applying the same basic rule, they allowed Medicare to be funded and administered by the national government under national standards but demanded that Medicaid be a partnership with plenty of state autonomy. That victory, of course, haunts us today as we try to implement the Affordable Care Act by extending Medicaid coverage to millions of poor Americans. Because Medicaid is a state/national partnership, and because Chief Justice Roberts and his four conservative compatriots have an intriguing vision of federalism under the Constitution, states have been allowed to turn down the federal Medicaid money and keep millions of their citizens uninsured. Twenty three have done so at last count. To put the consequences in stark personal terms, I recommend the article about Sean and Stephanie Recchi in the January 27 issue of Time magazine. To shorten the story, the Recchi’s live in Ohio, a state which, quite reluctantly decided to accept the Medicaid expansion. Sean is a cancer survivor and he and Stephanie are now on Medicaid and can put all of their energy into their new business. If the Recchi’s lived in Texas – or Wisconsin – however, no Medicaid for them. Instead they would be on the exchanges and paying somewhere near $800 a month for far less comprehensive coverage. On a side note, if Sean and Stephanie made twice as much as they do, something they expect will happen within a year or two, a quirk in the law would cut that premium in half. It seems that nobody drafting the law expected the Chief and his colleagues to give states the Medicaid out, there is no provision for subsidies for people who would have met the Medicaid eligibility criteria.

Federalism has served us well in so many ways and I celebrate the differences among the states. I have lived in seven of them and except for my preference for the weather west of the Cascade Mountains, I’ll take Wisconsin over any of them. But should the safety net someone lands in when the economic high wire act proves too tough really be so very different? Should it be a matter of life and death?

Enough out of me.

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