Restoring Responsible Government by Cutting Federal Aid to the States

[Muda69]

https://www.cato.org/publications/policy-analysis/restoring-responsible-government-cutting-federal-aid-states#full

Quote

The federal government has a large presence in state and local policy activities such as education, housing, and transportation. That presence is facilitated by “grants-in-aid” programs, which are subsidies to state and local governments accompanied by top-down regulations.

Federal aid spending was $697 billion in 2018, which was distributed through an estimated 1,386 separate programs. The number of programs has tripled since the 1980s, indicating that the scope of federal activities has expanded as spending has grown.

Rather than being a positive feature of American federalism, the aid system produces irresponsible policymaking. It encourages excessive and misallocated spending. It reduces accountability for failures while generating costly bureaucracy and regulations. And it stifles policy diversity and undermines democratic control.

Cutting federal aid would reduce federal budget deficits, but more importantly it would improve the performance of federal, state, and local governments. The idea that federal experts can efficiently solve local problems with rule-laden subsidy programs is misguided. Decades of experience in many policy areas show that federal aid often produces harmful results and displaces state, local, and private policy solutions.

....

The $750 billion aid system is a roundabout way to fund state and local activities that the deficit-ridden federal government cannot afford. The aid system does not deliver efficient public services, but rather delivers bureaucracy, overspending, and federal micromanagement. It undermines policy diversity and political accountability.

The states are entirely capable of funding and operating their own programs. President Reagan’s 1987 executive order on federalism noted, “In most areas of governmental concern, the states uniquely possess the constitutional authority, the resources, and the competence to discern the sentiments of the people and to govern accordingly.”²²¹

President Trump’s most recent budget proposed small cuts to federal aid. But that proposed reform provoked a prominent liberal think tank to issue a study defending aid. The study’s first sentence was, “Federal funds that go to state and local governments as grants help finance critical programs and services on which residents of every state rely.”²²² But if aid funds “critical” programs, then federal cuts would prompt the states to fill the void with their own programs, and those programs would likely be superior for the reasons discussed.

It is understandable that federal policymakers are eager to try and fix the nation’s many ills. But they should appreciate that the states can handle domestic policies by themselves and that federal intervention is often counterproductive. The optimism of previous decades about the ability of federal aid programs to efficiently solve state and local problems was misguided.

Congress should work with the Trump administration to identify and eliminate low-value federal aid programs. Over the longer run, the aid system should be fully phased out. Americans want more responsive and effective government, and they can get it by devolving power to the states and reviving competitive federalism.

An interesting study, and well worth the read.  American needs less federal government influence in their lives, not more.