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From The Department Of Completely Predictable Consequences

Tax, Spend and Consequences

New York Governor David Paterson discovers the gee-who-coulda-seen-this-coming fact that jacking up marginal tax rates is bad for the economy and not all that helpful to the budget:

[E]arly revenue figures suggest that taxing the wealthy more under this year’s state budget may have driven away richer New Yorkers. That could make the economic comeback for the state even harder.

“You heard the mantra, ‘Tax the rich, tax the rich,’ ” Gov. David Paterson said Wednesday at a gathering of newspaper editors at an Associated Press event in Syracuse. “We’ve done that. We’ve probably lost jobs and driven people out of the state.”

In a similar we-told-you-so vein, the Wall Street Journal notes a GAO report saying that the stimulus has had precisely the effect on state budgets that its critics among the GOP Governors warned it would:

Stimulus money is helping states plug budget holes, but state officials are worried about how they will sustain programs after the federal funds run out, according to a new Government Accountability Office report released Wednesday.

Around $90 billion of the $787 billion stimulus package was dedicated to state Medicaid programs. The money, which goes out quarterly to the states and is known as FMAP funds, has moved faster than stimulus dollars allocated to many other spending categories.

The GAO, the congressional watchdog charged with monitoring how states are handling their share of the stimulus package, found that most states it studied were using the Medicaid funds to cover increased caseloads and to maintain their current services and eligibility criteria. Some states were also using the funds to avoid cutting payments to hospitals and doctors.

State officials “expressed concern about the longer-term sustainability of their Medicaid programs after the increased FMAP funds are no longer available, beginning in January 2011,” the report said.

The report also found some states were using the money to free up other parts of their state budget that would otherwise have been used for Medicaid. Several states reported the funds were helping finance general state budget needs.

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