Addressing Congress on the State of the Union, President Ronald Reagan told the American people in 1982:
Our citizens feel they’ve lost control of even the most basic decisions made about the essential services of government, such as schools, welfare, roads, and even garbage collection. And they’re right. A maze of interlocking jurisdictions and levels of government confronts average citizens in trying to solve even the simplest of problems. They don’t know where to turn for answers, who to hold accountable, who to praise, who to blame, who to vote for or against. The main reason for this is the overpowering growth of Federal grants-in-aid programs during the past few decades.
Reagan not only talked about reviving federalism … he did it. Under President Jimmy Carter the percentage of state expenditures coming from federal funds rose to 35.4%. Reagan lowered that number to 24.9%. Unfortunately, under President George H.W. Bush, President Bill Clinton, and President George Bush that number shot up again; reaching 42.5% in 2005. But now with President Barack Obama in power, wielding his $787 billion stimulus package, state dependency on the federal government has reached a historic new height. USA Today reports: “In a historic first, Uncle Sam has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments.”
Contrary to what the USA Today goes on to suggest, there is nothing temporary about the upsetting of the “traditional balance of how states” and other localities pay for their operations. Since the last great leftist project, the Great Society, the states have steadily become more and more dependent on Washington, D.C. Only Reagan managed to reverse this trend.
The costs of the loss of federalism to the American people are real. As Reagan outlined above federal aid to states blurs the lines of government accountability, making it easy for politicians to sneak in government-growing legislation and hard for voters to hold those politicians accountable. Moreover, as states become more dependent on federal funding, they begin to lose their ability to set priorities and make policy decisions that are best-suited to their specific needs. Finally, sending money to Washington, only so that it can later come back to the states, creates a fiscal detour of inefficiency and inequity.
A Leviathan-sized federal government able to dictate state policies through power of the purse is not what the Founders had in mind. As Reagan said in his first inaugural address: “All of us need to be reminded that the Federal Government did not create the States; the States created the Federal Government.”
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