As of July 1, 2011, the higher matching rates that states have received from the federal government because of the severe recession came to an end. The likely result is a reduction in benefits and provider payments or an increase in taxes, or both. Either action would have adverse effects on the U.S. economic recovery. In this editorial, Judy Feder and John Holahan argue that enhanced matching rates should be continued. In the interest of long-run debt reduction, these extra federal payments should be budget neutral to federal government over a period of years. That is, when the economy recovers, federal matching rates would be reduced to make up for the higher federal payments in the near term.
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