The Heritage Foundation - Leadership for America

What do the Bridge to Nowhere, the highway bill, the “subsidies for millionaires” farm bill and our crippling entitlement crisis have in common? They are all examples of the corrupt governance that is guaranteed to happen when the federal government takes over responsibilities best left to the states. In each of these cases (transportation funding, agriculture policy and health care), massive federal government spending and aid to states in the form of matching grants have all but drowned out the ability of state and local governments to set their own priorities without approval from Washington.

Federal aid to states has been practiced for more than 100 years, but two distinct periods witnessed an explosion in the practice. In 1960, the federal government sent $48 billion to states. By the time President Lyndon B. Johnson’s Great Society had been implemented, that number nearly tripled to $129 billion. The amount of federal funds a state received expressed as a percentage of the state’s expenditures (also known as a state’s dependency rate) rose steadily throughout both the Nixon and Carter administrations.

Only during the Reagan presidency did the state dependency rate steadily decline. Reagan’s progress in cutting aid programs was reversed by President George H.W. Bush. And since his son, President George W. Bush took office, federal spending on aid to states has again exploded from $286 billion in 2000 to $449 billion in 2007.

Advocates of a big federal government argue that federal coordination of aid to states allows experts to design and implement programs in the national interest to efficiently solve local problems. The problem is that the politicians who craft these spending programs are unconcerned with the national interest and much more interested in directing as much federal money home to secure their reelection. Worse, federal aid to states has created entrenched special interests (including public employee unions, trade associations and politicians) at the local, state and federal level who are all heavily invested in seeing their programs continued. Every year about $500 billion flows into Washington from the states, is divvied up by lobbyists and congressional power brokers, and is then returned to states. It is an extremely inefficient funding system that serves no economic or civic purpose.

When implementing an executive order returning powers to the states in 1987, Ronald Reagan said: “Federalism is rooted in the knowledge that our political liberties are best assured by limiting the size and scope of the national government.” Conservatives in Congress must return to this principle if they ever hope to regain a governing majority.

Quick Hits:

• French Foreign Minister Bernard Kouchner said his government talked to the terrorist group Hamas because “We must be able to talk if we want to play a role. These are not relations, they are contacts.”
• Sixty percent of voters, and 70 percent of those under 30, believe tax hikes are bad for the economy.
• Congress is beginning to realize the Warner-Lieberman cap-and-trade legislation, designed to cut carbon emissions by raising energy prices, will increase energy prices.
• Even the Washington Post acknowledges that the California Supreme Court’s same-sex marriage decision is a blatant example of judicial activism that “intrudes into a social issue that the state’s political process was handling well.”
• Kurdish Prime Minister Nechirvan Barzani tells the Wall Street Journal: “Our relationship with Iraq’s federal government has never been better. And progress is being made on an oil law, the status of disputed territories, the proper role for Iraq’s neighbors to play, and on relations between the Kurdistan Regional Government (KRG) and Turkey.”