Governors’ laundry list

The governors met in the nation’s capital this week to talk about rising Medicaid costs and modernizing school curriculums for the 21st century, issues far from the top of Congress’ agenda.

As often happens at governors’ meetings, there was a deep disconnect between the parochial issues they wanted to talk about and Topic A in Washington, D.C.

The capital is almost exclusively focused on Social Security reform, a subject many governors said was of little interest back home where health care, education and jobs were the front-burner issues they wrestled with each day.

“Today we’re talking about what might happen to Social Security in 15 to 20 years while they’re cutting Medicaid that will affect people now,” said Democratic Gov. Brian Schweitzer of Montana. Of course, if we don’t fix Social Security’s coming insolvency now, it will be too late to solve it 20 years without Draconian tax increases and benefit cuts.

Still, Medicaid, the national medical care program for the poor, is taking an ever-larger bite out of state and federal budgets and President Bush wants to block-grant the fed’s share to the states, putting the governors in charge of finding more cost-effective ways to fund their programs.

But the governors fear they will eventually be stuck with a bigger share of the bill — they call it “unfunded mandates” — which Mr. Bush said he doesn’t want to happen.

“We’re worried about intergovernmental transfers, so we put that on the table for discussion,” Mr. Bush told the governors at a White House meeting Monday.

Behind the scenes, Health and Human Services Secretary Michael Levitt was offering the governors a menu of reforms to save money. But there were no takers.

The governors want more flexibility over the program than the White House is willing to give them. They also want more money, thus far not in the cards. So they left Tuesday without a deal and with looming Medicaid expenses ahead unless a compromise can be worked out.

But before they returned home, New Mexico Gov. Bill Richardson, the Democratic Governors Association chairman, had some blunt advice for his party’s congressional leaders: Quit being so hostile to tax cuts.

Mr. Richardson, the only Democratic governor to make income tax cuts a major part of his agenda in a time of tight budgets, said Democrats must make pro-business, pro-growth tax cuts a part of their party’s message.

In an interview during a break in the conference, Mr. Richardson told me his party needs to foster a friendlier pro-tax cut image of putting more money into ordinary taxpayers’ pockets. “I think that these issues of being pro-growth, pro-business and pro-sensible tax cuts is something the party should look at and should embrace,” he said. “I’m not trying to convert the party. I’m just sending a message that we should not preclude the use of economic growth initiatives, being pro-business and pro-jobs, putting more money into people’s pockets.”

Mr. Richardson is preaching what he practices, and with stunning results, in New Mexico. At a time of falling revenues and growing budgets, when his party was condemning Mr. Bush’s tax cuts, he reduced the state’s income tax rates from 8.2 percent to 4.9 percent and cut the capital gains tax in half.

The result: tax cuts breathed new life into the state’s economy, attracting new businesses, particularly the film industry, and stirring a resurgence in new job creation: close to 50,000 new jobs in the last two years.

That earned him a grade of B in a fiscal ranking of the governors by the Cato Institute and praise from tax-cut crusader Stephen Moore. “He talks like a supply-sider. He’s the [new] Bill Clinton of the Democrats,” Mr. Moore told me.

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