Managing the Money: Feds versus States – Bailouts and Tobacco Money

Citizen Wealth Financial Justice Health Care

bailoutLittle Rock       One of the interesting claims by the conservative right, most recently directed at the Affordable Care Act and the myriad website enrollment snafus, has been essentially that the federal government is the gang that can’t shot straight.   Among the claims has been that states and certainly private businesses can do a wonderfully better job.

            In light of that it was interesting to see a couple of buried tidbits in the news by way of very important, but widely neglected, follow-up.

            Take the hugely controversial federal bailout in the great recession of banks, automakers and others, started by Bush and continued by Obama.   It seems that in the soaring stock market and the revived profitability of the car companies, the government off loaded the last of its stock in General Motors.   What was good for GM might not have been a great investment for the government in pure terms since they lost about $10 billion of the almost $50 billion they put up for the stock, though obviously that doesn’t count the hundreds of thousands of jobs saved, therefore taxes paid, and communities stabilized.  For the whole bailout though the government seems to have been a winner.   Of the $422 billion invested the federal government can report pure profits on the investment now of $433 billion, clearing $11 billion.   Yes, they might have done better in the stock market, but $11 billion is real money and, once again, doesn’t count the impact of jobs retained and therefore income taxes collected, which is the government’s real revenue stream.

            How about the states?  On the same day the government was reporting profits, the states were still raking in money from tobacco sales taxes and other revenues including the billions they got from the legal settlement from the tobacco companies several years ago. 

The Campaign for Tobacco-Free Kids, the Robert Wood Johnson Foundation and four other organizations estimated that states would earn about $25 billion next year in revenue that is linked to tobacco, including $7 billion from settlements between states and leading tobacco companies. But the groups said that states were expected to spend only $481 million on programs intended to prevent or curb tobacco use, well below the $3.7 billion recommended by the Centers for Disease Control and Prevention.  It is also a marked decrease from 2002, when the states devoted $750 million to those efforts.

            So, $7 billion from the tobacco settlement alone and only $481 million to actually use the settlement money for its intended purpose, saving lives of smokers and doing the education and field work to stop the increase of smokers.   Only Alaska and North Dakota spent the level of money recommended by the federal government on prevention. 

            The rest of the states reallocated the money to balance their budgets, essentially on the back of the lives of their citizens.  It goes without saying that many of these same states are also the ones that are yelling about not want to expand Medicaid in their jurisdictions because of the supposed additional healthcare costs involved and therefore essentially taking almost $7 billion that should have been used for better healthcare and transferring the costs over to the federal government at the same time they piss on the program.

            The buck has to stop somewhere, but clearly the governors don’t want it to stop at the statehouse no matter what the conservatives claim, it’s still all about the facts, Jack.