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Stephen Moore Speaks About Balancing State Budgets

By Theresa Fritz Camoriano

On Feb. 4, Stephen Moore, President of The Club for Growth and Cato Institute fellow, spoke at a Louisville fundraiser for the Bluegrass Institute for Public Policy Solutions. Moore had been an advisor to President Reagan and is now working with Arnold Schwarzenegger to try to bring California’s budget under control.  Moore also said he would be meeting with Kentucky’s new governor, Ernie Fletcher, that afternoon to discuss ways to deal with Kentucky’s budget problems. 

Moore pointed out that Kentucky has one of the top ten income tax rates in the country, about 2.5% higher than the average, and much higher than neighboring Tennessee, which has no income tax at all.  As a result, Kentucky has shown much slower than average economic growth.  Moore said that, since Governor Fletcher is coming into office after fifteen years of bad fiscal policy, there is a lot of “low-hanging fruit”, meaning that Fletcher has the opportunity to take some small steps that will have a dramatic impact in improving Kentucky’s economy.  Moore also said that a think tank like the Bluegrass Institute for Public Policy Solutions (BIPPS), which promotes fiscally responsible policies, can be a major force in helping to turn the state’s economy around, and people who want fiscally responsible government in Kentucky should support BIPPS.  Moore pointed out that those who promote big government are largely funded by tax dollars, using tax money to support their lobbying efforts to promote policies that will give them still more tax money, while there has been no support on the other side, for those promoting smaller government.  A contribution to BIPPS can make a real difference in helping to change that situation, providing a policy voice on the other side. 

Moore said that, while inflation has largely been brought under control, there are two industries today in which costs are still spiraling – education and health care.  The common feature of both of these industries is that they are both run by government.  If we do not bring these costs under control, Medicaid costs alone will swallow up the entire state budget in just a few years.  Moore suggested that putting some free market competition into these industries could bring costs down.  He gave an example of his breaking his leg.  Before he left the hospital, a person demonstrated to him how to use crutches by walking a few feet using the crutches.  When Moore received his bill, he found he had been charged $150 for this brief “training service”.  Of course, since the insurance company was paying the bill, he didn’t say anything about it.  However, if he had been paying the bill himself, he certainly would not have paid $150 for those few minutes of service.  Moore said that the use of medical savings accounts, both in private insurance plans and in Medicaid, could have a dramatic impact in holding costs down, because they would create an incentive for people to reduce their medical expenses.

Moore said that Kentucky also picks up many optional Medicaid services that are not really needed and could be discontinued.  In addition, the state owns many assets that could be privatized, which would convert the assets from being a drain on the state treasury to being tax-paying entities. 

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