Their budgets will be crushed by the Medicaid expansions that the feds are forcing on them.
Behind this week's ruling by U.S. District Court Judge Roger Vinson overturning ObamaCare on constitutional grounds, there is a deeper economic reality. The states can't afford it. That's a primary reason why 26 states joined in the Florida lawsuit to nullify the federal law. It also would be a good reason for the Supreme Court to uphold Judge Vinson's ruling.
For decades, the federal government has presumed increasingly to make policy in health, education, welfare, business regulation, law enforcement and other areas beyond the powers enumerated in the Constitution. Up until recently, the courts have largely viewed this intrusion benignly, partly because the states have acquiesced, bargaining their sovereignty away in return for federal aid.
This once-happy marriage is on the rocks. While designing the Patient Protection and Affordable Care Act, the Pelosi-Reid-Obama troika tried desperately to present a façade of federal fiscal prudence where none actually existed—so they off-loaded massive costs on the states. By opening Medicaid to applicants 33% above the poverty line in 2014, ObamaCare could expand Medicaid enrollment by as much as 25%, according to the plaintiffs in the Florida suit. Medicaid, also rife with fraud in part because of its hybrid federal-state management, is already one of the biggest items in state budgets.
Thanks to the recession and their own spending excesses, nearly all states are suffering budget shortfalls, some to the point where there is no clear idea where the money will come from to meet pension and bond obligations, let alone operating expenses. The prospect of adding a further huge burden down the line, even with Washington kicking in over half the cost, is appalling.
The 26 states party to the Florida suit were saying, in essence: enough! Washington can borrow from the Chinese or call on the Federal Reserve to buy its bonds. But states' only recourse in a budgetary bind is further painful cuts in services.
This resistance to a further broadening of the partnership with Washington has heavy grass-roots support. The tea party uprising was a reaction to state as well as federal spending excesses. Voters in November punished the Democratic Congress but even more emphatically banished Democrats from state houses. Republicans now have the most state legislature seats since 1928. They netted five governorships, and the 29 they now hold could grow to 33 or even 36 in 2011 and 2012 if present voting trends continue.
Republican governors and state legislators are increasingly reasserting their claims to state sovereignty. Texas, for example, is disputing the Environmental Protection Agency's right to deny emission permits to Texas industries. Arizona and other states are at war with Washington over immigration policy.
States bucking Washington got their first real satisfaction in December. That's when U.S. District Court Judge Henry Hudson ruled in a suit brought by Virginia that the Constitution's Commerce Clause does not grant the federal government the power to compel individuals to buy health insurance. The 26 states who were plaintiffs in the Florida case raised this issue, and Judge Vinson ruled in their favor.
But these states went further. They argued that it also is unconstitutional for the federal government to coerce the states into spending money on federally designed projects, or, in other words, to essentially assume control over state budgets. ObamaCare does that, the states argued, with its requirement that the states foot a large share of the bill for the Medicaid expansion.
Judge Vinson didn't buy that argument. Instead he sided with the government lawyers, who argued in response that since states are free to withdraw from Medicaid if they so choose, nobody is forcing them to do anything.
Technically, that's true. Yet notwithstanding Judge Vinson's ruling, there is considerable practical merit in the states' position. For one thing, federal taxes levied on the incomes of citizens in states that withdrew would simply go to support Medicaid elsewhere. These citizens would not only get nothing in return for their taxes—they would also be stuck with the cost of alternative ways to provide health care for the poor.
The plaintiffs who brought the suit heard by Judge Vinson explained: "In Fiscal Year 2010-11, Florida will spend about $20 billion on Medicaid, toward which the federal government will contribute approximately $13 billion. For Florida now to opt out of Medicaid and itself provide the same $20 billion in benefits would consume more than half its tax revenues, not counting the significant costs associated with administering such a program."
States that have looked at the option of dropping out of Medicaid have usually stepped back in horror at what that would entail—nursing homes closing their doors, emergency rooms at hospitals overwhelmed, heart-wrenching stories in the newspapers about victims of the cutbacks. Even so, some are mulling alternatives. Indiana Gov. Mitch Daniels, for example, recently asked other Republican governors if it might be feasible for states to band together to set up their own health-insurance pool for low-income residents.
The states are also aware that other programs in which they've partnered with the feds are not likely to remain as lush a source of federal funding as in the past. The Republicans who now control the House are looking for ways to cut federal spending in recognition of the fact that the federal government is also in dangerous straits with its projected $1.5 trillion 2011 deficit and soaring national debt. Federal aid to education, for example, will be a prime target for spending cuts.
The framers of ObamaCare seem to have been too clever by half in their attempt to shift costs to the states. However the courts may eventually rule, you can't get blood out of a turnip.
Mr. Melloan, a former columnist and deputy editor of the Journal editorial page, is author of "The Great Money Binge: Spending Our Way to Socialism" (Simon & Schuster, 2009).
