How to Restore Federalism and Return Government to the People: Eliminate Federal Grants to the States
THE UNITED STATES FACES two major problems today: runaway spending that threatens to bankrupt us and a Congress that appears unable to deal with long-term problems of any consequence. A significant source of each is a category of federal expenditures that has somehow escaped the notice it deserves. I refer to federal grants to state and local governments that have soared from $24.1 billion in 1970 to an estimated $640.8 billion in 2015. Grants-in-aid programs now absorb major portions of congressional time, thereby diverting Congress from its core national responsibilities, and they expend extraordinary amount of money on objectives that are the constitutional concerns of the states. They also come freighted with detailed federal directives that deprive state and local officials of the ability to meet their own responsibilities in their own ways and undermine their citizens’ ability to ensure that their taxes will be used to meet local priorities rather than those of distant bureaucracies.
Congress’s infatuation with grants programs has its source in a series of Supreme Court cases dealing with the Constitution’s Spending Clause, which authorizes the federal government to collect taxes with which “to pay the Debts and provide for the common Defense and general Welfare of the United States.” The Court has construed the general welfare language as allowing Congress to “induce” states to accept federal directives regarding matters that fall within the states’ exclusive constitutional authority and that Congress itself has no power to regulate. The inducing takes the form of offers of federal subsidies for a vast range of state activities. If a state accepts the offer, it is bound by the regulations that come with the money. The states are free to decline the subsidies, but experience has demonstrated that “free” money is extraordinarily hard to refuse, however onerous the attached conditions.
Uniform federal rules deny states the ability to respond to local conditions as they would if free to handle the work their own way, and to the degree that state officials serve as implementers of federal policies, their citizens are effectively disenfranchised.
Those conditions can be onerous indeed, but they are by no means the only burdens that attend the acceptance of federal funds. To cite just a few, grants-in-aid programs add a costly layer of administrative expense at the federal level as well as increasing administrative costs to the states. The use of federal money triggers a host of mandates (such as the obligation to pay union wage scales on construction work financed with federal dollars) that can add substantially to what a state would spend on a particular project if it were using only its own money. Uniform federal rules deny states the ability to respond to local conditions as they would if free to handle the work their own way, and to the degree that state officials serve as implementers of federal policies, their citizens are effectively disenfranchised. They no longer have a voice in the design and management of projects that can have the greatest impact on their lives. And the proliferation of grants programs imposes major costs on Congress itself.
Senators and representatives are public servants, but they are also human beings who are subjected to the ambitions and temptations that are part of our nature. They have discovered that the Court’s construction of the Spending Clause provides them with the easiest way to ingratiate themselves to constituents and ensure their own reelection. They can now focus on their constituents’ most immediate concerns which, in the nature of things, will involve such parochial matters as the condition of local roads, the education of their children, and the safety of their communities—matters that are the immediate responsibility of their state or local officials. And so they respond to those concerns by introducing legislation that will authorize transfers of federal money to the local highway commission or school or fire department—subject, of course, to regulations that Congress itself has no direct power to impose. Creating grants is not only politically rewarding; it is safe. Few will object to a proposal for such motherhood issues as care for the homeless or better nutrition for kids. But any politician intrepid enough to propose a one-dollar reduction in Medicare payments in order to avert the program’s bankruptcy will have AARP’s 40 million members calling for his scalp.
To cite an example of the Spending Clause incentives at work, within weeks of his election, my newest senator (and former congressman) began taking one-hour weekend bus trips in his state so that he might strike up conversations with ordinary citizens in what he referred to as an “informal environment.” According to the newspaper story reporting on one of those trips, his fellow riders expressed concerns over low wages (he advised his listeners that he favored raising the federal minimum wage to $10, one dollar more than the scheduled Connecticut minimum), the difficulties of finding jobs, the high cost of education, and the need for more affordable housing—the same concerns they would have expressed had they been in a conversation with their governor or mayor. One woman informed him that she depended for a third of her income on a bus that operated until midnight thanks to a federal grant that would soon expire. The senator assured her that he favored its continuance. As he told the reporter, “I heard loud and clear how significant extended bus hours are,” and on his return to Washington I have no doubt that he did his best to ensure that the federal grant would be renewed. Apparently none of the riders raised questions about the Middle East, or immigration law, or Medicare reform, or other issues that only a federal senator could deal with.
From my senator’s perspective, this was an enormously productive trip. That one-hour bus ride earned him a favorable newspaper story and will consolidate a reputation for ministering to his constituents’ concerns. As one of them remarked, “He could be at home relaxing. Instead he’s on a bus trip with us.” Of course, he might also have spent the time studying what he and his colleagues might do to address a host of problems that lie beyond the power of governors and mayors that only Congress can address. I am not criticizing my senator. He is merely playing the current congressional game, and doing so with energy and imagination. My problem is with the game itself.
If I had been on that bus, I would have expressed a very different set of concerns, not because I was any wiser than my fellow citizens but because over the past 44 years my work has immersed me in questions of national policy that only members of Congress can address. Had my senator asked me, I would have told him that my greatest worry was over the future the little girl seated across the aisle from us will face if Congress fails to screw up the courage to address our deficits and the runaway costs of our entitlement programs. In time she and her playmates will be faced with economy-crushing levels of taxation and/or savings-destroying rates of inflation if Congress fails to act. That is the sort of problem my senator and his colleagues in Washington should be concentrating on, not matters like bus schedules that governors and mayors are far better able to address.
Congress’s current dysfunction is rooted in its assumption, over the years, of more responsibilities than it can handle. As a result, its members now live a treadmill existence that no longer allows them time to study, learn, and think things through.
This is not to disparage a U.S. senator’s interest in municipal bus schedules, but the brutal fact is that we face a host of critical problems that only Congress can address. For years, both sides of the congressional aisles have known that the trajectory of entitlement spending will soon reach a point where we will be unable to honor the promises made to the elderly, a trajectory that left unchanged will soon reach unsustainable levels. They know that within 15 years the Medicare trust fund will be exhausted and that within another three the Social Security fund will be as well. Yet nothing has been done to adjust programs designed 50 years ago and 80 years ago, respectively, to meet 21st century demographic realities. There is a broad agreement that our corporate tax rates need to be reduced if our businesses are to remain competitive in a global economy and that this can be done without a loss of revenue by weeding out the favors to special business and other interests that litter our tax codes. Although individual members of Congress have developed practical approaches to both entitlement and tax reforms, nothing happens. Administrative agencies run out of control, but congressional oversight committees seem unable to rein them in.
Congress’s current dysfunction is rooted in its assumption, over the years, of more responsibilities than it can handle. As a result, its members now live a treadmill existence that no longer allows them time to study, learn, and think things through. Instead, they substitute political reflex for thought. To compound the problem, their eyes are now so fixed on their particular political bases that they hesitate to make the compromises that the legislative process requires, and to ensure reelection, they avoid coming to grips with the divisive issues whenever they can. When members of Congress do manage to enact a complex piece of legislation, they no longer have the time or patience to attend to all the minutiae that responsible legislation requires. Instead, they pass the messy details along to federal agencies, which spin out the regulations that will give the law shape. So no one, including those who drafted those laws, really knows how their handiwork will affect the real world until the regulations have been issued and put into effect.
The federal grant-in-aid programs’ costs in dollars, costs in misdirected priorities, costs in overlapping administration, costs in rigid one-size-fits-all regulation, and the citizens’ loss of control over government actions that most directly affect them should satisfy any objective observer that they represent the most misguided means of providing public services that lie within the states acknowledged areas of competence. It is time that Congress kicked the habit.
I propose that Congress immediately terminate all federal programs that offer grants to states and their subdivisions. I emphasize the “all” because if any exception is made, members of Congress will be encouraged to launch a new generation of grants on the assurance that theirs will be exempt from all the problems and costs that we find in federal grants today, and it would take another generation to prove them wrong.
Because federal grants currently constitute more than 30 percent of state revenues, Congress cannot cut off the flow of federal money overnight. Therefore, I propose that it terminate the grants by converting them into single no-strings-attached block grants, one for each state, that would be phased out over a period of five or six years. That would allow ample time for Congress and the states to adjust their respective tax codes to accommodate the successive reductions in the federal transfers. Increases in taxes paid to the states would be offset by reductions in the money taxpayers send to Washington. This may sound like a formidable task, but it shouldn’t be. Washington and the states derive their tax revenues from the same sources—the individuals and businesses located in the 50 states and the District of Columbia. It will merely require adjustments in the destinations of their tax payments.
If Congress adopts this proposal, it will phase out over $700 billion of current federal expenditures (the $640.8 billion in federal grants estimated for FY 2015 plus an estimate of more than $60 billion in federal administration costs) and take a major step towards balancing the nation’s books. It will also eliminate the substantial costs associated with the overlapping federal and state administration of those programs, take a giant leap towards restoring the allocation of governmental duties envisioned by the Constitution’s framers, and return full control over state and local governments to their citizens. Most significantly, if it adopts this one reform, Congress will rid itself of a major distraction from its national responsibilities.
The one substantive argument against my proposal is that it would eliminate a ready means for redistributing money from wealthier states to the poorer ones, not that existing programs can be counted upon to spread that money equitably. As the Advisory Commission on Intergovernmental Relations has observed in An Agenda for American Federalism, “the record indicates that federal aid programs have never consistently transferred income to the poorest jurisdictions.” Nevertheless, the argument in favor of the grants programs as instruments of redistribution must be met. The average per capita income of the 10 poorest states is 67.6 percent of that of the 10 richest. On the face of it, that is a strong argument for asking the latter to help the former meet the cost of providing their residents with acceptable levels of services. The average cost of living in the 10 poorest states, however, is 78.6 percent of that of the 10 richest ones, which significantly narrows the gap between them, especially when one considers the anomalies that exist in individual cases. To cite an extreme example, Mississippi’s per capita income is 75 percent of Hawaii’s, but its cost of living is only 55 percent of the latter’s. I doubt, though, that anyone will suggest that Mississippians, who inhabit our poorest state, should send care packages to Hawaii, which is our 17th richest.
Redistribution, then, is a weak argument in favor of existing programs, especially when one takes into account the regulatory freight they carry with them. But if redistribution is indeed a proper function of the federal government, there is a far better way to achieve that goal without imposing webs of federal regulations on all the states, rich, and poor alike. My brother William F. Buckley, Jr. proposed a simple means of redistribution in his 1973 book, Four Reforms. In his discussion of federal welfare programs, he noted the inherent idiocy of returning money to the wealthier states with instructions on how they can best meet their own welfare needs. He therefore proposed that all federal social welfare grants programs be scrapped and, in their stead, that the federal government provide the have-not states with block grants having the sole requirement that the recipients use the money for welfare. Under that approach, Washington would not be telling the states how to meet their own responsibilities. Nor could it use the needs of the poorer states to impose federal regulations on the wealthier ones.
Washington’s experts have proven no betterable to help the homeless, or educate a child, or resolve any other state or local problem than the officials who have been elected to take charge of those responsibilities.
Can It Be Done?
Americans reviewing the impact of our grants-in-aid programs over the past 50 years can be expected to reach the following common sense conclusions:
● Washington’s experts have proven no betterable to help the homeless, or educate a child, or resolve any other state or local problem than the officials who have been elected to take charge of those responsibilities.
● The programs waste tens of billions of dollars a year that the states can put to more effective uses—or leave in their taxpayers’ pockets.
● In a country such as ours, one size can’t fit all.
● The money states receive from Washington isn’t free. It comes from the federal taxes we pay or from borrowed funds that our children will have to repay.
● Easy money is the enemy of prudent spending.
● Ordinary citizens can’t influence federal bureacracies, but they can still get a hearing at city hall.
● Members of Congress should stop wasting their time on matters that can be handled better at the state and local levels; they should focus on matters that are their exclusive responsibility.
Those points are easily grasped, and an aroused electorate is capable of political miracles. Given the growing distrust with the status quo in Washington, the distrust of federal panaceas that has been triggered by ObamaCare’s cascading costs, and the simplicity of my proposed reform, I believe it can prove the focal point for a nationwide grassroots demand for meaningful reform.
Mr. Buckley represented New York in the United States Senate as a member of the Conservative Party from 1971 to 1977. He also served as a judge of the United States Court of Appeals for the District of Columbia Circuit from 1985 to 2000. This article is excerpted from his book Saving Congress from Itself: Emancipating the States and Empowering Their People (Encounter Books, 2014).