State Addiction to D.C. Money Has Federalism on the Ropes

Federalism has seen something of a revival in recent years as the government in D.C. asserts itself in increasingly sure-to-offend somebody ways. States inhabited by a large number of people people not so thrilled by those top-down policies have moved to shield themselves, to take a different path or simply to opt out. From marijuana legalization to Obamacare's health exchanges to gay marriage to land-use, states across the country have asserted a little more independence after decades of letting the feds take the lead. But, as Stephen Slivinski of Arizona's Goldwater Institute points out, state officials have long since put themselves at the mercy of the federal government, no matter what nominal power they may have to set their own policies. Writes Slivinski:

For decades, the federal government has hooked the states on federal taxpayer money. The number of federal aid programs for state and local government grew from 327 in 1965 to 1,122 in 2010. Sixty-five percent of that growth has occurred since 2000. Today, the federal government spends over $650 billion on these programs.

The lion’s share of these programs is not state and federal partnerships like the federal highway system. Transportation programs only account for about 10 percent of the total – the third biggest chunk. The biggest portion is health and welfare programs (accounting for 55 percent), and the second largest is education (20 percent).

Some states, however, are more prone to this addiction than others. Arizona, for instance, is practically a ward of the federal government. Arizona’s federal aid as a share of total state expenditures in 2011 was at least 30% according to the most recent Census Bureau data. This puts Arizona in the top ten of all states. Some of this is certainly a function of demographics, poverty rates, and the presence of federal and Indian land. But some of it is self-inflicted.

Progressives love pointing out how many "red" states take in more money from D.C. than they pay out in taxes, even as they complain of the federal government's dominance, and there's a lot of truth to that (though transfer payments directly to households play a role here, as does the fact that many "blue" states contain a larger proportion of high-income individuals). It's certainly true that Arizona politicians are happy to spew anti-D.C. headline fodder, even as they feed at the trough. And, let's be honest; he who takes the king's coin becomes the king's man. States may be blowing the cobwebs off the legal independence they possess under the Constitution, but they're all remittance men, and so long as Uncle Sam controls the purse strings, that independence is likely to be more nominal than real.

As Slivinski continues, "States can avoid much of this dependency on the federal government – and the strings that always come with federal money – by simply refusing to expand state programs for the purpose of getting federal matching funds." If states really want to get out from under D.C.'s thumb, that's exactly what they have to do. And that's why the debate over issues such as Medicaid expansion isn't just about whether it's a "good deal" for states, but also whether states that continue to embrace such dependent relationships with the federal government can maintain any sort of independent existence.

See Veronique de Rugy's excellent piece from the February 2013 issue of Reason on getting states off the federal dole.

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  • Bam!||

  • Ace Sullivan||

    Re Arizona:

    Pew Research Center reported that just 32 percent of Hispanics have a positive view of capitalism — this is the lowest percentage of any group surveyed. It is is lower than the 46 percent of self-identified liberal Democrats who have a positive view of capitalism —and even lower than the 45 percent of people who support the Occupy Wall Street movement. Similarly, the Pew Hispanic Center found in 2012 that 75 percent of Hispanics prefer “a bigger government providing more services” rather than “a smaller government providing fewer services.” Forty-one percent of the general public hold that view.

    Of households headed by U.S.-born Hispanics that have children, 50 percent are headed by unmarried women, compared with 29 percent of U.S.-born whites. Of households headed by U.S.-born Hispanics, 40 percent use one or more major welfare programs, compared to 19 percent of U.S.-born whites. Of households headed by U.S.-born Hispanics, 45 percent have no federal income-tax liability, compared to 29 percent of U.S.-born whites. These statistics explain their liberalism far better than any party’s immigration policy.

  • Tulpa (LAOL-PA)||

    Reality has a well-known xenophobic racist bias.

  • Virginian||

    We're screwed anyway. Might as well get plenty of delicious Mexican food to go with our homegrown socialism.

  • Doctor Whom||

    Where I live, we have some good Salvadorean restaurants (and oh so many homegrown socialists).

  • Tulpa (LAOL-PA)||

    The Wild and Free Pigs of the Okefenokee Swamp

    "The allegory of the WILD pigs has a serious moral lesson. This story is about federal money being used to bait, trap and enslave a once free and independent people. A body of people who fought a 7-year war, The American Revolution, to establish their independence from a tyrannical king"

  • Pro Libertate||

    Will those pigs eat pythons?

  • ||

    Pigs will eat anything, Pro'L Dib, including other pigs. Those fuckers have some remarkably sharp teeth.

  • Pro Libertate||

    Excellent. We just need a canal between there and the Everglades, and we're saved! Take that, python in my toilet!

  • ||

    Python in your toilet? I think you need to get colonoscopy, Pro'L Dib. Or perhaps lay off all that cheese and wheat thins...

  • Pro Libertate||

    I meant the snake, P. molurus. It's like the Planet of the Apes down here, except with pythons.

  • BakedPenguin||

    At a restaurant I worked at as a kid, we used to scrape uneaten food into a slop bin, as the owner either sold it to pig farmers or had a farm himself. Since it was a BBQ place, this included a lot of pork.

  • ||

    When I moved to OK, there were a few pig farmers around and it was told to me that when feed ran low, pigs had to be separated as to keep them from eating each other, especially piglets. Pigs are known to eat wood, concrete, bailing wire, and even live humans.

  • croaker||

    Dead humans, too. If you ever want to get rid of a body, the pig farm is the go to place.

  • Sterling Archer||

    The first time I heard that, it was read on air by a Right Wing radio host in Pittsburgh.

  • R C Dean||

    Speaking of taking it up the ass:

    A Sri Lankan prisoner who tried to hide his mobile phone during a search of his cell was caught out when guards heard ring tones from his rear-end, a hospital official said on Friday.

    http://www.myfoxdc.com/story/2.....z2KJXn1XRL

  • SugarFree||

    When he had it on vibrate they couldn't even get him out of his cell for dinner.

  • Enough About Palin||

    ^^The voice of experience^^

  • Sterling Archer||

    I question whether you can really have a federalist system if the federal government has the ability to directly tax the populace.

    Combine popularly elected senators with direct taxation and federalism has a short shelf life.

  • Way Of The Crane||

    Would it be better if the Feds just taxed the states?

  • Sterling Archer||

    Maybe.
    If you have a Senate appointed by the states, then the states get a voice in how they will be taxed by the federal government.

    In theory, the states would be better able to pay for state level stuff before rendering unto Washington; alleviating the need to have their congresscritters bring home pork.

  • tomdryan||

    Excellent idea! There is already a plan for that and its called The Neutral Tax (www.neutraltax.com).

    It eliminates direct taxation of citizens and business by the federal government (i.e. the federal income tax) and it lets states set their own tax policy.

  • ChrisO||

    That was the approach taken under the Articles of Confederation, and it didn't work very well.

  • croaker||

    It worked well under the Constitution until the federal government got uppity and crammed the 16th and 17th amendments down our throats.

  • ||

    I agree with Archer. With the help of several constitutional amendments over the last century, the term federalism no longer applies to the United States of America. Senators used to be appointed by the states, and the federal income tax was not always in place.

  • some guy||

    Is there any way the following could work:

    -State raises income tax to 100%
    -State takes over "control" of all businesses in the state.
    -State makes each business an independent entity that is managed by its original owners and funded solely by its own revenue stream.
    -Each individual person is also seen as a business, owned by the state, but managed by the individual. Each individual is sole manager of his personal revenue stream, but the money is technically owned by the state government.

    In the end, everyone maintains control of his own money/business, but no one technically has any income. So no one pays income taxes or payroll taxes. This theoretical state can still pay DC's ransom for highway dollars and such if it wants to...

  • some guy||

    Really? No opinions on this? I know its way out there, but I thought it would at least be worth a discussion...

  • ||

    ^^This. With the help of several constitutional amendments over the last century, the term federalism no longer applies to the United States of America.

  • ||

    *This was supposed to be in response to Sterling Archer's post above.

  • Eduard van Haalen||

    The states aren't addicted to federal money, they can quit any time!

  • Loki||

    As Slivinski continues, "States can avoid much of this dependency on the federal government – and the strings that always come with federal money – by simply refusing to expand state programs for the purpose of getting federal matching funds."

    And best of luck to any state level politician who actually runs promising to do that once elected.

    I can hear it now: "Why do hate teh chillunz/ old people/ teh poor?"

  • Knutsack||

    That's exactly what is happening in Wisconsin right now. Walker is being "urged" to expand Badgercare for another $12 billion from the Feds. Of course, if he doesn't, he hates teh poor.

  • Josua||

    The heart of the problem is that Americans are socialists.

    About half the country voted for a socialist president to be not only the chief executive, but also the ideological figurehead of the country. However, a fairly sizable chunk of the people who voted for the other guy did so because of their social beliefs, not their economic concerns. In other words, many "conservatives" are just as socialist as any NPR-listener, but (tell me if this sounds familiar) they vote on the basis of social issues. So, the country is mostly socialist.

    I don't know how you fix that (crop-dusters with anti-stupidity drugs?) but that's the problem.

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