The American Recovery and Reinvestment Act: Is More Federal Grant Money What the States Need?

Mercatus on Policy No. 36

4 Pages Posted: 5 Feb 2009

See all articles by Eileen Norcross

Eileen Norcross

George Mason University - Mercatus Center

Frederic Sautet

The Catholic University of America (CUA) - Busch School of Business

Date Written: January 28, 2009

Abstract

To end the current recession, Congress and the Obama administration propose the American Recovery and Reinvestment Act of 2009 (ARRA), an $825 billion fiscal stimulus package made up of tax cuts and federal spending. A significant component of this package consists of federal grants meant to help states facing unprecedented budget shortfalls.

While federal grants may provide temporary relief for state budgets, the size and scope of the proposed spending will worsen already-distorted state and local fiscal practices while creating perverse incentives inducing greater public spending with scarce state funds. By fracturing the link between those who benefit (local constituencies) and those who pay (federal taxpayers), ARRA reduces government accountability on all levels and ultimately erodes local control over policy by imposing federal solutions on local problems.

Instead of attempting a short-term fix of amplifying the grant system through an emergency stimulus package, the federal government should work to make state and local governments accountable for their own spending decisions. This means reducing states' and localities' reliance on federal funding for local priorities and allowing local activities to be addressed by the appropriate mechanisms: state and local governments and the private and philanthropic sectors.

Keywords: Federalism, Federal Grants, Jurisdictional Competition

Suggested Citation

Norcross, Eileen and Sautet, Frederic E., The American Recovery and Reinvestment Act: Is More Federal Grant Money What the States Need? (January 28, 2009). Mercatus on Policy No. 36. Available at SSRN: https://ssrn.com/abstract=1337883

Eileen Norcross

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States
703-993-4930 (Phone)

HOME PAGE: http://https://www.mercatus.org/eileen-norcross

Frederic E. Sautet (Contact Author)

The Catholic University of America (CUA) - Busch School of Business ( email )

Maloney Hall
620 Michigan Ave, NE
Washington, DC 20064
United States

HOME PAGE: http://business.cua.edu/faculty/sautet.cfm

Register to save articles to
your library

Register

Paper statistics

Downloads
118
Abstract Views
807
rank
234,865
PlumX Metrics