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Federal Largesse Does Not Benefit States

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Chris Edwards of the Cato Institute highlights the level of government intervention by examining the various forms of federal aid to the states. As he writes in Downsizing the Federal Government:

“There are more than 800 state and local aid programs, based on my count of programs in the Catalog of Federal Domestic Assistance. They range from the giant $225 billion Medicaid to hundreds of programs that most taxpayers have probably never heard of, such as a $15 million program for Nursing Workforce Diversity, a $120 million program for “Boating Safety Financial Assistance,” and a $150 million program for Healthy Marriages.”

President Obama recently announced several aid programs for Louisiana. As described in the President’s FY2011 Budget, these programs provide “lower taxes, better teachers and classrooms, and important investments in our roads, highways, and airports.” Louisiana will receive:

  • Tax cuts for 1.6 million families
  • $1 billion for schools, students, and teachers
  • $895.8 million to fix and expand the state’s network of roads and highways, modernize airports, and expand water and sewer infrastructure
  • $543 million in new funding for Pell Grants to help families pay for college
  • $518.6 million for housing assistance

With the current federal deficit at $12 trillion and expected to increase, is this federal aid really appropriate? Edwards provides a number of reasons to believe that this kind of spending does not make sense:

  • Grants spur wasteful spending and bureaucracy
  • Aid allocation is haphazard
  • Federal aid reduces state policy diversity
  • Grants cause policymaking overload and make government responsibilities unclear
  • Common problems are not necessarily national priorities

Our Constitution provides for a system of federalism, which lets states identify and address their own priorities. This system encourages creativity among the states and helps prevent the concentration of too much power in Washington. Unfortunately, federalism has taken a beating and states are now in the habit of looking to Washington first.

Congress could encourage more federalism by cutting federal grants-in-aid. More power would consequently be returned to states and the private sector and unnecessary federal spending would be minimized.

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