Federal Aid to the States: Historical Cause of Government Growth and Bureaucracy

Abstract:     
Federal spending on aid to the states increased from $286 billion in fiscal 2000 to an estimated $449 billion in fiscal 2007 and is the third-largest item in the federal budget after Social Security and national defense. The number of different aid programs for the states soared from 463 in 1990, to 653 in 2000, to 814 by 2006.

The theory behind aid to the states is that federal policymakers can design and operate programs in the national interest to efficiently solve local problems. In practice, most federal politicians are not inclined to pursue broad, national goals; they are consumed by the competitive scramble to secure subsidies for their states. At the same time, federal aid stimulates overspending by the states, requires large bureaucracies to administer, and comes with a web of complex regulations that limit state flexibility.

To help spur reform, this study examines the historical growth of the aid system and describes its failings. Congress should reconsider the need for aid and begin terminating activities that could be better performed by state and local governments and the private sector.

Number of Pages in PDF File: 48

Keywords: chris edwards, federal spending, federal aid, reform, states, aid programs for states, governement growth, bureaucracy

JEL Classification: D61, H20, H39, H50, H54, H59, H70, H71, H77, H80

Accepted Paper Series