Hand in the cookie jar: Medicaid expansion or not, VA already gets D.C. bargain

By Kathryn Watson | Watchdog.org, Virginia Bureau

ALEXANDRIA, Va. — Perhaps the strongest argument made by advocates of Medicaid expansion — and the one Gov. Terry McAuliffe made on the campaign trail — is that it will bring Virginia tax dollars back to Virginia.

But expansion or not, Virginia already is taking far more dough from Washington’s proverbial cookie jar than it’s contributing.

In 2010, Virginia received $1.68 for every dollar it sent to Washington in federal taxes, or $2.35 in federal spending for every tax dollar paid per capita, according to a 2012 analysis by the left-leaning publication Mother Jones.

In that year, Virginia was second only to Alaska in terms of how much the federal government spent per capita, according to the U.S. Census Bureau — $17,000 for every man, woman and child.

Economists at George Mason University’s Mercatus Center have argued this federal spending is why Virginia weathered the Great Recession well — not necessarily because of state leadership’s stellar job creation skills, as former Gov. Bob McDonnell might have Virginians believe.

That dough was flowing Virginia’s way even before the Great Recession.

In 2005, Virginia received $1.51 in federal spending for every dollar it paid in taxes, according to data from the D.C.-based think tank, the Tax Foundation. The Economist reported that, from 1990 to 2009, the federal government spent $1.44 trillion in Virginia, but collected just $850 billion in taxes. That’s more than a $590 billion gap, if you don’t feel like crunching the numbers.

If the federal government decides to scale back its spending, experts say it will hit Virginia’s economy hard, especially in the jobs arena. Roughly 30 percent of jobs in Virginia are public-sector jobs or jobs funded by federal contracts, giving the Old Dominion the second-lowest percentage of private sector-jobs in the nation. Only New Mexico has a lower percentage of private-sector jobs, according to Mercatus Center data.

“If (federal) government spending starts to slow at some point, (Virginia) will have a bigger issue with replacing jobs that might be lost from federal contracting,” Keith Hall, an economist with the Mercatus Center, told Watchdog.org in December.

Opponents of Medicaid expansion, which would cover 400,000 more state residents, say there’s no such thing as a free lunch. Even if the feds keep their promise to pay the bulk of the Medicaid bill, the tab will add to the ever-burgeoning federal debt of $17 trillion. And eventually, Virginians will feel the fallout.

“The national debt is nearly $17 trillion,” said Delegate Steve Landes, vice-chairman of Virginia’s Medicaid Innovation and Reform Commission, in a letter to fellow Republicans. “Eventually, the federal government is going to have to address its spending problems. When it does, Virginia taxpayers will almost certainly get stuck with the bill for Medicaid expansion.”

— Kathryn Watson is an investigative reporter for Watchdog.org’s Virginia Bureau, and can be reached at kwatson@watchdog.org.

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