Federal Dollars: Here, There, Everywhere!

January 25, 2013

The recent devastation wrought by Hurricane Sandy caused governors of the affected to states to ask the federal government to foot the bill, a move that reflects the increasing centralization of power and responsibility, says Veroniqure De Rugy, a senior research fellow at the Mercatus Center.

  • Since the New Deal, Americans have increasingly looked to the federal government for subsidies and control while surrendering their local autonomy.
  • More than 1,700 grants in fiscal year 2011 accounted for $515 billion in infrastructure, health and other program spending, a 160 percent increase from 1990, according to the Congressional Research Service.
  • From 2001 to 2011, federal spending as a share of total state spending rose from 25.7 percent to 34.1 percent.

Since 1975, the Government Accountability Office has illuminated the problems with grants, such as duplications, waste and inefficiency. The Office of Management and Budget echoes this position, stating that grant programs have poorer performance and restrict innovation with their strict requirements compared to other federal programs.

  • For example, Homeland Security grants that expanded first responder programs do not sufficiently weigh higher risk areas; this resulted in $200,000 for surveillance cameras in Dillingham, Alaska, and $1.5 million for decontamination tents in Grand Forks County, North Dakota.
  • As the prevalence of grants has expanded, lobbying activity has increased significantly as different stakeholders contend for a greater share of the available funds.
  • After 9/11, lobbyists for first responders and firefighters flooded Washington, D.C., to obtain a share of the influx of funds meant to shore up America's national security.

Grants are also used for political gain, which according to Vanderbilt University's John Hudak, are given more frequently to swing states than to all other states combined. Boston University economists Douglas Kriner and Andrew Reeves have found that this tactic is effective, leading voters to reward incumbent presidents who spend federal funds on their local issues.

Ultimately, the federal government should stop paying for state- and local-level programs and issues. With a massive burden of debt hanging over the federal government, America could copy her neighbor to the north. Canada has had great success cutting its debt levels. One strategy it used was cutting funding to provincial governments and distributing aid in three large block grants.

Source: Veronique de Rugy, "Get States off the Federal Dole," Reason Magazine, February 2013.

 

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