Introduction
Under the Constitution, the federal govern-ment has specific limited powers and most gov-ernment functions are left to the states. Federalpowers enumerated in the Constitutioninclude those aimed at providing national secu-rity and those designed to ensure an opennational economy. To make sure that peopleunderstood the limits on federal power, theFramers added the Constitution’s Tenth Amendment: “The powers not delegated to theUnited States by the Constitution, nor prohib-ited by it to the states, are reserved to the statesrespectively, or to the people.”The Tenth Amendment embodies federal-ism, the idea that federal and state governmentseach have separate areas of activity and that fed-eral responsibilities are “few and defined,” as James Madison noted. Historically, federalismacted as a safeguard of American freedoms. AsPresident Ronald Reagan noted in a 1987 exec-utive order, “Federalism is rooted in the knowl-edge that our political liberties are best assuredby limiting the size and scope of the nationalgovernment.”
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Unfortunately, policymakers and courtsin recent decades have discarded federalism.Congress has undertaken many activitiesthat were traditionally reserved to the statesand the private sector. The Supreme Courthas embraced looser readings of the limits onfederal power over time. Indeed, after a num-ber of troubling Court decisions in the 1980s,a government commission on intergovern-mental relations concluded that the rulingsoverturned “the long-standing doctrine thatthe federal government is one of limited, del-egated power, thus opening the way for virtu-ally unfettered exercises of national power vis-à-vis the states and local governments.”
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Federal power has continued to expandunder the administration of George W. Bush.Today, federal spending and regulatory activity are directed to nearly any state and local activi-ty that suits the whims of Congress and execu-tive branch agencies.The primary means that the federal govern-ment uses to intervene in state activities aregrants-in-aid and accompanying regulations.Grants-in-aid (“grants” or “aid”) are subsidies tostate and local governments aimed at promotingparticular activities such as highway building.Federal granting began during the late 19th cen-tury, expanded during the early 20th century, andballooned during the 1960s. Today, more than800 federal grant programs shower the stateswith hundreds of billions of dollars each year.What are the practical effects of this torrentof aid and how has it altered the structure of American government? This study looks atthe role of policymakers and bureaucrats inthe growth of aid and focuses on the failingsof aid, which have been evident to policy ex-perts for decades. Federal aid has generated in-tense spending pressures and excess bureauc-racy at all three levels of government.Figure 1 illustrates the interlocking parts of the federal aid system. Federal politicians createprograms that deliver funding to, and imposeregulations on, state and local governments.Those governments then consume a portion of aid in employee wages and other administrativecosts and hand out billions of dollars to private-sector grantees and contractors. State and localemployees and private organizations, whichbenefit from aid, create unions and trade asso-ciations to lobby Congress and promote higherspending to the public.The following sections discuss how theseparts of the aid system work together to gen-erate bigger government. The first section pro- vides a history of federal aid and presents data on the expansion in the number of programs.Then the roles of federal and state politiciansand lobbyists are examined. That is followedby a discussion of the bureaucracies in thethree levels of government that distribute aidand deal with regulations. The conclusionsummarizes why aid should be a priority tar-get for federal budget cuts.
Federal Aid Has GrownMassive and Complex
Prior to the Civil War, proposals to providefederal subsidies for state and local activities
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The TenthAmendmentembodiesfederalism,the idea thatfederal and stategovernments eachhave separateareas of activity and that federalresponsibilitiesare “few anddefined.”
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