Posted by
Defend America on Friday, March 26, 2010 11:51:02 PM
It’s been a long time since economic policy was forged in the states.
Veronique de Rugy from the April 2010 issue
Last May the Obama administration forced South Carolina not just
to take its share of federal stimulus funds, but to spend the money
on new programs rather than paying down the state’s debt. I was
horrified. Obama, I felt, had killed fiscal federalism. Then I
realized that fiscal federalism has been dead for a long
time.
Fiscal federalism is the idea that states should set their own
economic policies rather than following directives from Washington.
Libertarians have a particular attachment to the concept. If states
can differentiate themselves on the basis of taxes, spending, and
regulation, that gives Americans more leeway in deciding the rules
under which we live. If we’re dissatisfied with the policies of the
state we live in, we can register our discontent by voting with our
feet and moving to another jurisdiction. This competition for
residents helps keep lawmakers in check, giving them an incentive
to keep taxes and other intrusions modest.
For decades, alas, fiscal power has become increasingly
centralized, making a joke of federalism. Washington has taken over
more and more state functions, largely through grants to state and
local governments, also called grants-in-aid. Figure 1 shows
federal grant spending in constant dollars from 1960 to 2013. As
you can see, total grant outlays increased from $285 billion in
fiscal year 2000 to a whopping $493 billion in fiscal year 2010—a
73 percent increase. Grants also account for a bigger share of
federal spending: 18 percent in 2009, compared to 7.6 percent in
1960.
http://reason.com/archives/2010/03/17/the-death-of-fiscal-federalism/print