Subsidizing the States

Tad DeHaven at the Cato Institute responds to a comment about the popularity of federal funding for state programs with many pretty charts demonstrating the dramatic increasing in federal subsidies of state programs.

Subsidizing state and local government is quite popular with federal, state, and local policymakers and associated special interests. It’s doubtful the average citizen is aware that so much of their state’s spending is derived from their federal tax dollars. However, I suspect that most folks (who aren’t on the take) would frown upon the concept of sending money to Washington only to have politicians send it back to the states via the federal bureaucracy. While there may be popular support for many of the state programs funded with federal dollars, citizens need to understand that federal subsidization of state and local government has fueled unhealthy government growth at all levels.

Not only does it not make sense to take tax money from citizens, give it to the federal government, and then give it back to the state governments (after the fed taking its cut), but such a system gives the federal government a undue amount of influence on how that money is spent or on what other policies the states must adopt. That’s why none of the states allow anyone under 21 to drink alcohol – the federal government withheld highway funding for any state that had a drinking age under 21. Seems a pretty sneaky way of bypassing that pesky 10th Amendment.

It also doesn’t make sense to me not to simply fund state programs through state taxes and revenue. Not only would it decrease the cost and influence of the federal government, but it would also make the cost and efficiency of such programs more apparent to the residents of those states, who can then decide what programs are really worth it. Or maybe that’s the problem …


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