transcript

Speaker 1:
[00:00] If you enjoy the kind of conversations we have here on You Might Be Right, about policy, civics, and how to make sense of the news, then there's another show you might appreciate. It's called The Gist. The Gist is the longest running daily news podcast. What makes the show interesting is that it resists the usual partisan scripts. Mike brings on economists, historians, journalists, politicians, and other thinkers to look at issues from multiple angles to unpack the dynamics of a major political story. Mike's a veteran journalist whose work has appeared in outlets like the Atlantic, the Free Press, and the Washington Post. His approach combines careful reporting with a sharp sense of humor and a willingness to question assumptions wherever they come from. If you're someone who likes thoughtful inquiry and conversations that challenge easy answers, give The Gist a listen. Follow The Gist every weekday on YouTube or wherever you get your podcasts, and tell them you might be right to send you.

Speaker 2:
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Speaker 3:
[01:54] We ought to take advantage of the wisdom and the local knowledge that exists all over this country in public servants of both parties, and enable them to address our agreed upon goals, but to do so in ways they think will be more effective.

Speaker 4:
[02:13] The guardrails are always about, you know, measuring the losers compared to the winners to make sure that there's balance. If you could make everybody better off, you would, but sometimes you have to make trade-offs, and those trade-offs are what are so complicated, I think, in this oversight world of federal dollars going to states.

Speaker 5:
[02:31] Welcome to You Might Be Right, a place for civil conversations about tough topics, hosted by former Tennessee governors Phil Bredesen and Bill Haslam. I'm Marianne Wanamaker, Dean of the Baker School at the University of Tennessee, where members of our producer circle make this show possible. To learn more about our work, visit youmightberight.org.

Speaker 1:
[02:55] Welcome back to You Might Be Right. I'm Bill Haslam and here with my friend and co-host, Phil Bredesen.

Speaker 2:
[03:00] How are you today?

Speaker 1:
[03:00] I'm good.

Speaker 2:
[03:02] Well, we have an interesting discussion here about federal funding and state budgets. And, you know, there's a basic transaction that a huge amount of money flows through, which is states send tax dollars from income tax and other taxes to Washington, and then they get it back again, often with a lot of strings attached. And how effective that is and whether it's working in the way that it should, I think is a very pertinent question today.

Speaker 1:
[03:30] And you know, we've both been governors, so we have a unique perspective on this. People that are in favor of it say, hey, that ensures there's equitable programs across the state, that California doesn't have one Medicaid program, and Tennessee, while it is different, California isn't dramatically different in terms of who and how we fund it. Other people say, well, you're just taking away states' rights for functions which were never meant to be. And I think the closer to home the policy decisions are made, the better the decisions will be.

Speaker 2:
[04:05] We both had the experiences, governors, of having lots of federal funding come through and working within those constraints and how do you spend that money properly and so on. I'm curious, just to start out with, where do you stand on that issue? Does that work?

Speaker 1:
[04:19] Well, listen, I think it, I've been a mayor and a governor, and I honestly believe the closer to home decisions are made, the better the decisions are. Like when I was mayor, I can still today tell you how many sworn police officers we had in Knoxville in 2006, okay? I can't tell you how many highway patrol officers we had when I was governor. I'm just saying the smaller things are, the closer to home, the more you watch it. So I think it both, it's more effective, it's more efficient, and it reflects local values better. So that being said, I do think there's some roles that the federal government has to play in providing those services. I would have it be a more limited role than it is today.

Speaker 2:
[05:03] Yeah, I think, you know, from my standpoint, it's a good concept. I mean, I like the idea of having one economy in one country. And if you live in a poorer state, that doesn't mean that all the services you have are diminished from what California has or Massachusetts has or something. But there's some reality checks, I think, on what's going on. And one of them is that the level of services that we have is driven in substantial part these days by deficit financing on the part of the federal government. And without their involvement, you'd have a much lower level of services since states don't have that option. And certainly, I found it's difficult to sometimes solve problems and be creative with all the strings that come attached with federal money. One of the big problems I always had was that the federal government would put strings on things. They think about education and Medicaid, but they don't assume any responsibility for it. If the schools are messed up, even though they put the strings on, it's not their problem. It's not the problem of Washington. It's our problem as governors and the legislature's problem. The answer to me has always been that I like the idea of the federal government spreading me around, but the states ought to have, and I guess that's consistent with what you said, more authority and more flexibility in how it's spent with some clear kind of definition and guardrails. I think that means the Congress kind of doing its job about what those guardrails are and what's permitted and what's not.

Speaker 1:
[06:42] The difference in when you and I served as governors and those folks who were 40, 50, 60 years before us would be the scope of federal programs, right? Primarily Medicaid, TANF and SNAP, which most people know as food stamps and welfare. Those programs have grown so much larger than they were in the past. The money comes, like I said, paid from folks, sent to Washington, comes back with a lot of rules and regulations around them, which I think make them not as efficient or effective as they should be.

Speaker 2:
[07:17] It's a real issue and one I hope we can explore with our guests today.

Speaker 1:
[07:23] Let's get going. Phil, our first guest, is an old friend and the person who I personally think might understand federal budgets and state budgets and how money flows better than anyone. He was the Director of the Office of Management and Budget under President George W. Bush. Then he was a very successful two-term Governor of State of Indiana. Then after that, he left to be the President of Purdue University where he kept tuition flat for 10 years in a row. So he understands a little bit about budgets and making hard decisions. Mitch, thanks. We're really grateful for you spending time with us.

Speaker 3:
[08:00] Thanks, Remme.

Speaker 2:
[08:01] It's great to see you again. We served as Governors together for a long time and enjoyed it. Mitch, we have a lot of people who listen to this, so I think perhaps don't understand or haven't been exposed to just how this federal funding of state activities works. Could you just talk a little bit about what goes on there, about how money is collected and how it's distributed back to the states and what some of the parameters are there, where the money goes?

Speaker 3:
[08:32] Well, Governor, you each experienced that it comes in many forms. But as a general rule, the federal government a century ago provided a tiny percentage of the funds spent in states. Today, it's, I don't know, 40 percent or more. And it always comes with the promise of either doing new things or helping to pay for existing services. It comes with strings, usually. But it's very hard for states, I think, to turn down. Chance for local politicians to spend more money, look a little better. But there are consequences, and as the phenomenon has gotten bigger and bigger, I think those downsides have too.

Speaker 1:
[09:24] And so walk through what those, in your opinion, what those downsides are.

Speaker 3:
[09:30] Well, let's take the biggest single, by far the biggest single source of federal, as they call it, aid to states, is Medicaid. And it is, now, you know, in a state like ours, your state is not dissimilar. Seven cents of every ten spent on Medicaid comes from the federal government. And first of all, I think there's, there are incentives to bad government in there. When you think of the fraud that we've seen in many states, when you think of the estimates that a third or more of Medicaid recipients may not be eligible under the prevailing rules, and you ask why that is, it's because there's very little incentive for states to police these things better. It's, it's so little of the money is their own. That's, so that's one thing. Secondly, those who have been in charge of the federal government in most recent years have a different view, I would say, than some of us do about what makes for smart health care policy. A good example is they're, they have a complete, I think, theological commitment to zero. They don't believe in any contribution, let's say, from a recipient, either of dollars or of work, in order to, in, let's say, in repayment or to partially earn the assistance of their fellow taxpayers. So you wind up with a program that is awash in misspending, sometimes outright fraudulent behavior, and by the way, poor medical outcomes.

Speaker 1:
[11:20] And Mitch, I obviously agree with the argument you're making. One of the reasons health care costs have gone up, and Phil wrote a book about this too, is that it's like going to the grocery store. And you don't pay for it, you don't really care what all goes into your grocery buggy, okay? But the flip side of the argument would be one that Barack Obama made to me at one of the National Governors' Association meetings that they have at the White House that we've all been to. And I asked him, I said, hey, why won't you block grant Medicaid funds to us? Give us the same amount of money for the next three years, if you want. You don't have to have any increases. We'll run it more effectively. We'll serve more people, etc. And his answer to me was maybe the summation of the argument on the other side is we don't trust you to care for the least of these was his argument back to me, which was a very blunt kind of point. But what would be your answer to folks that say, well, there's some states that just aren't going to make certain they care about vulnerable people enough?

Speaker 3:
[12:20] I think it's an insult, frankly, to leaders of both parties across the state. I certainly never met. I never met a governor of Tennessee, and I don't think I met a governor of anywhere, who wasn't acutely interested in protecting the vulnerable citizens of his or her state. Let me tell you a story that I think bears a little bit on this, Bill. My term in office, I was very concerned about the uninsured, those above the Medicaid line, just barely above, but still not people of very many means, and we decided we wanted to do something about it. But I laid down two specifications for our people, and ultimately we crafted a plan that had them both. One was that the... I said, I want HSA accounts for poor people. Money they can manage, money they will make even a nominal contribution to, so-called skin in the game, very little, but something, so that they feel a stake in their own health care, and then that they have autonomy, ability to make decisions in a way that Medicaid makes it for them. The second stipulation was, this is not going to be an entitlement program. I have to tell you that one of the object lessons from which led me to that conclusion was a thing called 10 care, I had seen in your state, and it was replicated, unfortunately, in other places where an entitlement program with the very best of intentions ran away with the state budget, or made it very, very hard to fund other things that are important.

Speaker 1:
[14:10] Phil still has the scars to prove from that battle.

Speaker 3:
[14:14] Well, as I recall, Phil had to sort of repair the damage and maybe put things in a better position. So I'm not faulting anybody, but I thought those lessons had been learned anyway. We did create such a program, had a dedicated funding source. We doubled the tobacco tax was what we did, which was a health care measure too, and successfully enrolled between a third and 40% of the true chronically uninsured people of our state. We didn't pretend we were going to solve every aspect of the problem. We were just going to take a great big bite out of it. But in a way that, number one, recognized the dignity and the ability to make decisions for themselves of people at all income levels, and secondly, protected the taxpayers of the state against a runaway program. Well, that lasted and worked very well for a while, but in subsequent years, the federal government, acting on the very instincts that President Obama apparently expressed to you, first of all, demanded an end to even, it was like $5 a month, contributions from the recipient. And secondly, essentially converted the program into a Medicaid expansion with all the, I think, shortcomings that the current Medicaid program has. And so there was a big philosophical difference between the state and our federal counterparts. And I happen to think that, again, that it's a complete misjudgment of people at the state level that they won't try to act in the very best interest of the people they're serving, the beneficiaries of these programs. And I completely disagree and have empirical evidence to prove that, talk about trust, I would have said to President Obama, the problem here is you don't trust low-income people to make decisions for themselves, whether it's about health care, where their children go to school, you know, or what kind of light bulbs they buy.

Speaker 2:
[16:35] You know, one of the, I lived that whole 10-care thing you're referring to. It was, it consumed probably my first term as a...

Speaker 3:
[16:44] I didn't even mean bring up a sore point.

Speaker 1:
[16:47] His therapist is working through it, Keith.

Speaker 2:
[16:49] I have some throbbing on the scars in my back already here from just considering it again. But, you know, I mean, I'm sympathetic to the notion of the federal government helping to support the programs because I think, you know, while I think all governors, I would agree with you, probably genuinely do want to do the right thing for all the people in the state. The reality is the different states have different abilities to do that as well. I mean, there's an income and wealth-smoothing kind of issue there. My problem with it was that as we were trying to deal with this complex problem and, you know, find ways that the amount of bureaucracy and, you know, general tendency to say no to anything that isn't the way it was done before really became a problem. And an example like one you just brought up for us was one of the largest problem in TendCare was the drug program. And we wanted to put a couple of very simple things in. I mean, very small co-pays for drugs. We had a dollar. It was almost nothing because people had that. And we could not get that approved. And that was in a Republican administration. That wasn't under Obama. It was very difficult to get done. We put together for the uninsured a program that sounds like maybe what you did, which was a more limited form of health insurance that they would pay premiums for. When Obamacare came in, those programs were no longer legal because they didn't cover all of the items that were required. So, I mean, there are two ways in which I think, you know, reasonable, creative ways of trying to deal with the costs of health care in the state were just thwarted by people who had, you know, no interest really. There's nothing in it for them to save costs in these programs. That seems to me to be, you know, the downside of the federal enrollment.

Speaker 3:
[18:45] The basic problem, great contemporary thinkers like Philip Howard keep pointing out, is bureaucracies by their inherent nature are compliance-oriented. Somebody hands them a rule book, says, here's how we do it. They think proper stewardship of their job, proper, they think success is checking all of the boxes, making sure that everything fits under what is usually a vastly over-prescribed approach, whether it's health care, education, environmental protection, whatever. And, you know, those of us, and I suspect the three of us agree on this, first of all, are skeptical of centralized wisdom and one-size-fits-all solutions. We're also, really, I guess you'd say a corollary of that is that we believe in federalism. We think it's a great, it's a superior approach to have 50 laboratories experimenting on these things. Health care issues are different state to state. Health care resources are different state to state. So you made an important point. Not every state has the capacity to address these problems fully, but that's why a block grant approach, like Governor Haslam mentioned, has always been a smarter answer. And my view is when, unfortunately, when, it's not if anymore, a serious fiscal crunch comes to the federal government, this will be part of the answer out of necessity, not because they'll have a revelation about federalism, but as they go broke, they will, I believe, decide finally to push, push down some of their fiscal problems to places where we do balance budgets and where we try to deal creatively in view of local circumstances with these issues.

Speaker 1:
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Speaker 2:
[22:40] I'm curious, this is kind of a personal question. I mean, you've been on both sides of this issue, and from the time you were at OMB to the time you were governor, I mean, have your opinions changed at all about the nature of this relationship?

Speaker 3:
[22:53] No. I suspected before I... I suspected before... Well, it was my second sentence in the federal government. I'd had a look at it, you know, as a younger person in the 80s. And, you know, I arrived deeply skeptical of federal know-it-allism and, you know, served in the administration, which generally thought the same, you know. That was a former governor, after all, that I went there to serve. And as much as possible, we tried to be flexible in accommodating of state requests, for instance, waivers of this or that rule. And absolutely, try what you think will work best for you. But my conviction about that only got fortified when I wound up responsible for the affairs of one state and frequently had to work, even in a Republican administration, around the kind of inflexibility that you talked about, Phil.

Speaker 1:
[23:56] Mitch, one of the, I can't remember, Barry Goldwater, some conservative of the past said, the federal government should deliver the mail, defend the country and get out of the way. Are there other things that besides delivering the mail and defending the country, you think the federal government should do?

Speaker 3:
[24:12] Yes, yes. Even someone as skeptical of federal capacity or abilities as I am, believes we've long since decided as a society that we will do more than that. And so even today's, and I count myself as a strong believer in limited government, accepts that there is a broader role. And yet, that doesn't imply that the federal government should decide how these other goals are approached and achieved. And we ought to take advantage of the wisdom and the local knowledge that exists all over this country in public servants of both parties and enable them to address our agreed upon goals, but to do so in ways they think will be more effective.

Speaker 2:
[25:09] You know, if you look at the, I mean, over a period of time, the general structure of how the federal government handles these programs with the states, you know, has remained relatively constant. I mean, there's obviously differences in different administrations. Are there, over time, are there reforms or changes that you think would make a lot of sense to happen today if you're kind of taking a fresh look at this relationship?

Speaker 3:
[25:36] I think it's the same general direction we've been discussing here, and that is that at the federal level, in the world I would like to see us return to, first of all, Congress would, the legislative branch would reassert itself in ways that it has, I think, wandered away from over recent decades. It would set priorities for the country and apportion our scarce resources against those priorities, but it would emphasize results and not compliance, and it would entrust to states, in some cases, localities, having to define the what and the how much, it would delegate the how to those of us out, actually, where the problems are. So, I think that day is coming, as I said before, out of necessity, not because greater wisdom or humility will suddenly show itself in Washington.

Speaker 1:
[26:46] Mitch, the last question we ask everybody on the show we take from Howard Baker, whom I'm assuming you bumped into a little bit in the Reagan administration, who had a saying, you know, always remember the other fellow, the other side might be right. Can you think of a good example, particularly on some of the topics we're talking to in regards to federal money versus state budgets, et cetera, where you think, you know, I didn't quite have that right, you know, I learned a little something in the process.

Speaker 3:
[27:13] Oh, gosh, so many. I think anybody who has dealt with these issues at any level has to acknowledge mistakes they made. I made plenty of them as an elected official. And I think that the administration I served, you know, made some, looking back in the foreign policy area, for sure. But the, you know, on the domestic front, both sides have, I think, failed to reckon with the need to square ends and means. And that's our fundamental failing, I think. The over-promising that has led us into a fiscal corner, that we're not now easily going to get out of. And so there were mistakes made there, certainly by the administration I served, that more was spent on things that really were, even then, could have been identified as of marginal utility. You know, I've made the half-facetious comment in the past, that you'd be amazed how much government you'd never miss. And we're going to find out the answer to that question increasingly, I think, as interest costs absorb more and more of the available dollars, and eventually, as the world gets tired of loaning us money in infinite quantities.

Speaker 1:
[28:44] Mitch, it's been helpful. Like I said, you didn't disappoint. You have a unique background to talk about this, and we appreciate you sharing your insight and your time with us.

Speaker 3:
[28:52] Well, if you don't mind my saying, it's a joy to see each of y'all. Tennessee is such an interesting state. Y'all have produced a string of outstanding public servants, you know, punching above your weight, as they say, of both parties. And I just was grateful for the chance to talk to two of the best.

Speaker 1:
[29:11] Well, you're gracious and nice. Thank you. I think we both could say we enjoyed serving from you. And I tell people at the time when I was a baby governor and I was confused about how something worked, but you were my first call and I'll always appreciate that.

Speaker 2:
[29:26] Wait a minute. You told me I was your first call.

Speaker 1:
[29:30] He was my first long distance call.

Speaker 2:
[29:34] Thanks, Mitch.

Speaker 3:
[29:35] Thank you.

Speaker 6:
[29:40] Right now, news and politics are moving awfully fast. It can feel overwhelming, to say the least. I'm Evan Osnos, a staff writer for The New Yorker. On the Political Scene Podcast, we slow things down to understand how power really operates in Washington, DC and what it means for you. My co-hosts Jane Mayer and Susan Glasser and I have decades of reporting experience. And every Friday, we have conversations with insiders and experts to understand the forces remaking America. Join us Fridays for the Washington Roundtable from the Political Scene. On Mondays and Wednesdays, you can also hear insightful episodes from our New Yorker colleagues David Remnick and Tyler Foggett, available wherever you get your podcasts. We all remember this song. It made it all seem so simple.

Speaker 2:
[30:38] And turns out, it's not.

Speaker 7:
[30:40] Who writes, influences and kills bills? It gets messy. I'm Scott Greenstone. And I'm Libby Denkman. On Sound Politics, we tell that story. The inside track on how policy gets made in this Washington and the other one and how it impacts you. Listen now on the KUOW app or wherever you get your podcasts.

Speaker 2:
[31:00] Well, Bill, our next guest is Elena Patel, who has an impressive resume. She's the co-director of the Urban-Brookings Tax Policy Center. She's a senior fellow at Brookings with that. Does a lot of research on how does tax policy and health policy and social safety, and how does that shape economic behavior, an important issue as well. She's held positions with the White House Council of Economic Advisors, the US Treasury Office of Tax Analysis, and the Congressional Budget Office. So we have somebody that knows a lot more about these things than we do, which is getting pretty common, I'm afraid.

Speaker 1:
[31:38] I bet, Sam. I'm actually used to that story. Hey, thanks so much for joining us. Let me start out with kind of the question around this episode, and that's that, you know, individuals that live in states pay taxes that goes to Washington. There's some sort of administrative overhead taken out of it, and it's sent back to states frequently with programs like, not with all dollars, but programs like Medicaid or SNAP or TANF, usually then with some strings attached. And so the question is, I guess, is that the right way to run this railroad? Should we be sending money out of states to Washington, and then it comes back with strings attached for various reasons?

Speaker 4:
[32:18] Yeah, I think it's a really important question, and I can imagine why individual taxpayers and states might wonder what the benefit is of sending dollars to DC just to have them boomering back, but maybe in a way that's hard to use. I think the federal government serves an important role across all states in ensuring that everybody everywhere has access to a minimum amount of services. And so all states contribute to federal revenues, and then the federal government reapportions that back to the states to make sure that some of these dollars are going to, again, essential services like health care and education, but also maintenance of roads, which everybody benefits from, all of these categories that we want there to be even and equal access to these programs across states. I think that the strings that get attached to these programs are Washington's way of making sure that the state is doing with the dollars what Washington, DC says is supposed to be done with the dollars, providing health care and education and these sort of safety net benefits. Some of those strings can be burdensome and I think it's a really important debate to have to make sure that the guard rails around these programs are appropriately set and sized so that they're not overly burdensome for states to comply with.

Speaker 1:
[33:26] So let me maybe I'll kind of point to maybe what the crux of the argument is. You said comes back to Washington so they can make certain it's distributed fairly equitably etc. and I guess so the underlying question there is well why should Washington do that? Why don't we trust our states to do the same thing? And I asked then President Obama something when we were at a national governor's meeting you know why don't you at the time like why don't you block grant Medicaid to us? And in us you know in a you know somewhat friendly response he basically said we don't trust you to take care of the least of these which you know is a as a Republican governor I was you know tad offended by but I mean I got the argument is like we want to make certain this is happening the right way so why should that be so?

Speaker 4:
[34:19] I think that some of what's happening which I think is an important part of the debate is not I don't see it as a lack of trust but just the recognition that sort of you know where people are located across the country just means that certain states have you know richer populations and other states certain states have older demographics Utah a state I'm in right now benefits from a young and healthy population and so what the federal government is trying to do is make sure that certain states with you know less wealthy individuals are not having their social safety net services sort of curtailed by the state's you know ability to raise revenue on a very different population base than a state that might be younger or healthier or slightly wealthier so I don't see it as a lack of trust I do think that when money is set aside for health care it's reasonable to expect a little bit just like you know in any household budget for example if you budgeted dollars for health care to make sure that the dollars are spent on health care but what you want to avoid is any kind of administrative oversight that results in sort of less health care being provided because one has to comply with the administrative oversight and burden that comes with the dollars. So there's a tension there that is not always dialed appropriately and I would hope that there's always an open mind to be flexible of is there a better way to do this because I think the goal is to provide health care and that's a goal everybody supports.

Speaker 2:
[35:40] Yeah you know I mean I'm the I'm the Democratic governor in this combination and the idea of moving money around so that states who that have that are richer that are more ability to pay or in some ways that you make one economy out of the country and try to make it try to make it one country. I think that's important in my experience as governor we dealt with an issue a huge issue with Medicaid and what I found was that the system of administrative oversight at Medicaid works fine as long as everything is going perfectly smooth but it's a very difficult environment to try to deal with challenges and make changes and so on. You have a congress that sort of I think punts a lot of the fundamental decisions off to a rule making process either because they don't want to make those decisions or it's too much work or something and then you know when you're trying to make changes in things you're stuck into a kind of a bureaucratic process where the natural inclination is to say no and yes it makes it makes it difficult to move and and we'd love to know you know your thoughts about you know if you agree that these are burdens and thoughts you might have about you know what things what things might need to change as we look as we look toward the future.

Speaker 4:
[36:59] Yeah I think that's like the question here and I would just highlight that I think what you said is really correct which is legislation is often quite vague and you know legislators are relying on rule making processes to set the administrative guardrails in place and a one size fits all kind of mechanically means that when things are going exactly according to plan, those guardrails are going to work really great. But if a state experiences a particular downturn or some labor market upheaval that other states don't then suddenly the system becomes a little bit out of whack and very burdensome. And so one size fits all fits all mandates are hard and the rulemaking process is not right now set up to be able to allow 50 different sets of rules for 50 different situations. And so at a minimum, rulemaking processes can be revised. And I would hope that when states run into overly complex administrative burdens, that there's a good way to communicate back to Washington, DC or for the Centers for Medicaid and Medicare Services or whatever the agency is that's overseeing the funds to revisit the rulemaking process and say, hey, you didn't quite realize this particular situation in the future. Can we adjust the guardrails to make sure that the burden is not, again, taking away from the amount of time and money and effort we have to spend on health care and education and roads and all of these really important pieces of the puzzle?

Speaker 2:
[38:19] Yeah, it's not so much the administrative burden. I mean, we both worked in government. We understand that in government, there's sets of processes in place that are just administratively complex. It more is an issue of trying to find ways to make changes to the programs that may be a little outside of what people are used to seeing in some cases. We had huge problems with drug costs, for example, in what we were doing. Just having too much of the effort in Washington being about, no, nobody else is doing that, you can't do it that way.

Speaker 4:
[38:59] Yeah.

Speaker 2:
[39:04] The idea of some firm guardrails and some freedom to operate within those is a very attractive process. That's not what it is now though. It's pretty much where you've got to, if you want to move left a little bit, it's not a matter of a guardrail, you just got to ask if it's okay to move left a little bit.

Speaker 4:
[39:20] Yep. I will say that my experience with lifting up of the Affordable Care Act, I was at Treasury at the time and all those regulations were being written. In principle, the legislation was written to allow the states the freedom to experiment a little bit and introduce new systems as long as they met a set of guardrails. My experience was that states like Vermont tried to interact with this process and then found that the guardrails that had been put in place, I don't want to put words in Vermont's mouth, but those guardrails made it very difficult for Vermont to experiment with providing Medicaid in the environment under the ACA, which was supposed to provide states the freedom to experiment. And that's some of the beauty of having 50 states, is that we can allow states to experiment and meet the needs of their populations. And I think just think some of these grant formulas and processes continue to need to add flexibility to allow that targeting that states really can do in a much more effective way than Washington, DC can do.

Speaker 1:
[40:15] So, Ellen, it sounds like in this conversation, you're taking a viewpoint of, hey, it makes sense for these things to be kind of washed through the federal government, almost as a giant insurance program that's going to make up for the ups and downs of revenue flows and changes in demographics, et cetera, which is a valid argument. But you also are very sensitive to the fact that different states have different needs and they should be able to cater their programs that way. But you've been in government, you've had roles, and we have too. It's nice to say that in theory, but it gets broken down in practice. So let's just say Phil got elected president tomorrow and you went to work for him and he said, hey, I really want you to figure out how to break down those barriers so that we can allow the states the flexibility you just talked about, but keep the role that the federal government is going to do in terms of being the big insurance company. How would you do that? You've been there.

Speaker 4:
[41:16] Yeah, I mean, I think it goes back to the really sort of boring topic of conversation, which is the rulemaking process. There is actually quite a lot of flexibility in terms of what agencies in the federal government can do to take legislation and turn it into, for example, the Internal Revenue Code. And depending on the set of priorities that, for example, the Department of the Treasury is currently facing, like right now they are trying to lift up an enormous tax bill, so to ask them to do other rulemaking processes is challenging but not impossible. But depending on the new president's priorities for revisiting this rulemaking process, there is actually a process by which agencies can revisit to try to work within the confines of the law to introduce additional flexibility. It just is a matter of, I think, a political priority. And so I do think a president that comes in that is more laser focused on working within what's there, because sometimes going through Congress can be quite slow. And the thing that you get out is not always the thing you intended when you could start the process, that the rulemaking process is a place to start for this. And I think most people, you said back what I said, which is I think that there's a role for the federal government to provide insurance, but also that states know their populations better than the federal government. And so there needs to be some room within these programs to achieve the top line goals with some flexibility to meet states needs. I would hope that's not a very controversial point to take. It's just, as you said, it's hard to get the rubber to the road and make this happen.

Speaker 1:
[42:43] Let me ask you back to a specific question. I talked earlier about block grants. Tennessee now has what I'd call a modified Medicaid block grant. What's wrong with that? What's wrong with that? To me, it feels like a really good approach. Now, you have to have the expertise in state to pull it off, which we do, because we've been in managed care for a while, for 30 years now. But given that, what's wrong with that approach?

Speaker 4:
[43:10] I don't think there's anything wrong with that approach. I actually would go back to where we started, which is for Tennessee, that might actually be the exact right approach, and it might not be the right approach in other states that don't have the long-standing experience to be able to manage such a modified block grant appropriately. And so I think that's, again, recognizing and meeting states where they are, which some states have administrative capacity built in some lanes and not others, and so allowing more prescriptive funding to come in, if that is not where you have the administrative capacity, can make a lot of sense. But allowing states that have developed their own Medicaid systems, like in Tennessee, to flexibly provide care is important. On the backside of that, I would say some of the guardrail process that can feel really, I think, contentious and onerous is that any change that Tennessee were to make to their Medicaid program, for example, is always going to have winners and losers. It's not possible to shuffle the dollars and make everybody better. And so the guardrails are always about measuring the losers compared to the winners to make sure that there's balance. And that's just not a black and white question, right? That could be values that come from DC or values developed within Tennessee. And recognizing that if you could make everybody better off, you would. But sometimes you have to make trade-offs. And those trade-offs are what are so complicated, I think, in this oversight world of federal dollars going to states.

Speaker 1:
[44:30] That last comment you made is something we should teach in civics courses. Because it is true that government involves trade-offs. You're not usually deciding between good and bad.

Speaker 2:
[44:41] That was one of the first things I found when I got in government. I always thought it was picking the good from the bad. It's usually not.

Speaker 1:
[44:50] You want to pay schoolteachers more, pay police officers more?

Speaker 4:
[44:54] Yes, of course. If we could, we would.

Speaker 2:
[44:56] But who do you want to pay less?

Speaker 1:
[44:57] Right, exactly.

Speaker 4:
[44:58] That's right, that's right.

Speaker 1:
[45:01] You had a chance to serve in the Congressional Budget Office in Treasury, White House Council of Economic Advisers. If you're with really good friends for dinner and they're saying, what did you learn in that whole process that would help us as citizens to know? Like I said, it's obviously a broad question. But what have you learned in serving in that context that would help people better understand how government works?

Speaker 4:
[45:26] I think what I have learned and continue to learn, that's a really good question, is that even though right now things can feel incredibly polarized that all of the jobs I've ever had in the federal government don't feel like that. That everybody who is working in those, it doesn't matter under which administration you're working, everybody who is working at the Treasury Department, at the IRS, at CMS, at all of these agencies, they're all there with very different backgrounds and different expertise to do the work of federal government in a civil service role. I think it still feels good to me that that is what these citizens do. I think we have this incredible human capital and operation in DC, and in state government. I have worked with the Utah state government and at all levels of government. I just think that even though this environment feels like you can't have a conversation about things that are controversial, my experience is that I've worked with people left and right and center in federal government, and everybody is trying to come together to make sure that we have the evidence in front of the politicians and the decision makers so that they can make the decisions that they think is in their political best interest, which is very different than sort of the economic answer. And sort of recognizing that those conversations can and should continue to happen in a civil and polite and productive way. I try to say that as often as I can.

Speaker 1:
[46:48] Yeah, well said.

Speaker 2:
[46:51] That's obviously what we're trying to do here with a couple of governors from different parties is to explore these issues. And I have to say, I've found out that once you take out this sort of political weaponization of things, you frequently have the same things. I mentioned earlier that we had four governors during the time of the ACA, I was governor then, two D's and two R's, and a couple of them are now up in the Senate. And there are lots of things that the four of us could have easily agreed on to do.

Speaker 4:
[47:22] Yes.

Speaker 2:
[47:22] And, you know, some things not, but I mean, a huge, a huge area of compromise there. But of course, what happens is once it gets weaponized, people have to go to their respective parties and tow the line. You know, there have been some recent examples of states actually rejecting federal funding. And actually, I guess we're an example here in terms of the Medicaid expansion. And more recently, of course, you know, federal government withholding, you know, dollars. Does that, do either of those trouble you about putting something fundamentally dangerous into the system?

Speaker 4:
[48:02] They, you know, I mean, I think that you can think of examples where you might feel uncomfortable, but it doesn't make me uncomfortable on the whole that states might decide, for example, to not expand Medicaid. It's not my personal opinion, but I think, again, that's the notion of states might know better than Washington, DC., how to budget and provide these services. And if they feel like they can do that without the federal dollars, and also, like we've talked about, the federal strings that come with those dollars, that is the system we've put in place. And all the federal government can ever do is use carrots and sticks to try to nudge the states to do things that they think are right, but they can't tell the states to do that. And I wouldn't ever want the federal government to be in a position that says, you must do X. And so for me, when I see states turning money down, again, it might not always go with my political views, but the act of turning money down, I think, is a very healthy part of the system we've set up. And if the voters in Tennessee don't like that Tennessee did not expand Medicaid, that's up to the voters to tell their local politicians and state politicians, we don't like this and something can change. That's the process.

Speaker 2:
[49:08] We, this has been an excellent conversation. I really, really appreciate it. This podcast is named You Might Be Right after Howard Baker, who was certainly a partisan advocate for his points of view, but also very realistic about the need to compromise and understand other people's points of view and so on. I'm curious in your own, you've had such broad experience in your own experience. Are there some things you can think of where you had an opinion on some subject and listening to somebody who had a very different view caused you to say, wait, I may not be right about that one. I think I need to change my mind. Does that ever happen?

Speaker 4:
[49:47] Yeah, actually, it's funny that you can ask because this might sound a little bit wonky, but quite recently, that's my job actually. My job is to be a wonky person. But the Work Opportunity Tax Credit recently expired, and there's a debate right now about whether that tax credit, which provides funding to employers to hire from disadvantaged labor market groups, whether that should be renewed. And I think that I came into that thinking that those programs are providing, again, important incentives and guardrails for these disadvantaged populations to be hired to begin with. And then I saw a paper actually, an economics paper that did a deep dive into administrative data in the state of Wisconsin, and really found that that credit wasn't helping anybody's employment. It was being pocketed by employers. It was being claimed only by the nine largest employers in the state, and there was no effect on employment. And so that's an example of something where if I hadn't read that paper, I probably would be somebody saying, let's have a debate about whether we should reauthorize WOTC. And now I'm somebody who says that is not a good use of federal dollars. It's not helping the populations you think it's helping. And I think we should rethink whether this program should exist in some other form if at all. And so that happens to me kind of a lot with economic research, where you have some intuition about what's going on. And then you let the data speak and you realize this program maybe isn't doing the thing we thought it should do. And we shouldn't be afraid to let it expire, which is the thing that's very hard in DC is letting programs expire.

Speaker 1:
[51:14] Well, thank you. That's a good answer. And you've been a good guest. We really appreciate the insight. And like I said, both the commitment to get to the right answer approach that you seem to be taking, we really appreciate that.

Speaker 4:
[51:26] I'm so glad you had me on. Thanks for inviting me.

Speaker 2:
[51:28] Thank you very much.

Speaker 1:
[51:29] Yeah. Well, Phil, I feel like these two guests did just what we want our guests to do, to clearly describe somewhat different points of view, but both of them with a humility of mind and thought that let them be open to understanding where they haven't exactly gotten it right.

Speaker 2:
[51:49] I think it's a very kind of healthy set of differences because they're obviously both aiming toward the same thing, which is to provide the best possible services in these areas to the citizens of the states, have somewhat different views about how to go about doing that. I see the same thing in education a lot, as we have, that everyone's trying to get to the same place and people have different views about it, and that's a very healthy thing.

Speaker 1:
[52:15] You know, Mitch is obviously coming from right of the center line and Elena a little bit more of the left of the center line, but they, again, I think if anybody listened to them, they'd say, hey, end of the day, if that person, you know, is running a major department of the government, I bet we'll be just fine. Here's one thing it did remind me of is this. In government, you never get in trouble for leaving things the way they are. If you leave the budget the way it is, you leave a program the way it is, nobody ever knows that it's wasting money, nobody gets upset. You catch flack when you change something. And I think that's what happens with a lot of our programs is somewhere in the bureaucracy, somebody says, well, yeah, Tennessee does look a little different than Illinois in this deal, we should treat it differently. But if I do, I might get my hand smacked. And so I'm gonna say no, it's just easier to say no.

Speaker 2:
[53:05] Well, you know, I mean, it's just a, I don't say this is a condemnation of bureaucracy. You have to have them to run the process of government. But there's no question that the, you know, I mean, the jokes are all right, which is like being a bureaucrat, you just sort of say no three or four times before you even settle down to try to solve some of the problems. You know, when I first got involved with government, which was really after I ran for mayor the first time and then started to get involved with Medicaid, the thing that just really struck me was what's rewarded in government is very different from what's rewarded in say the private sector. Like at Medicaid, what got rewarded for people was not improving the services to Medicaid. It was like not making the state senator happy, unhappy, and not making the governor unhappy and things like that. And I don't know how to fix that change, that change of incentives, but the incentives are clearly quite different when you're in one of these agencies than they are, you know, in a lot of other places.

Speaker 1:
[54:07] Well, great discussion. Thanks for being a part of it.

Speaker 2:
[54:10] It's great being with you again.

Speaker 5:
[54:14] Thanks for listening to You Might Be Right. Be sure to follow on Apple Podcasts, Spotify, YouTube, or wherever you listen to your favorite shows. And please help spread the word by sharing, rating, and reviewing the show. Thank you, Governors Bredesen and Haslam, for hosting these conversations. You Might Be Right is brought to you by the Baker School at the University of Tennessee. With support from the Boyd Fund for Leadership and Civil Discourse. To learn more about the show and our work, go to youmightberight.org and follow the show on social media at YMBR Podcast. This episode was produced in partnership with Relationary Marketing and Stones River Group.