New Study on Fiscal Federalism

The federal government spends $750 billion a year on 1,386 different subsidy programs for state and local governments. The number of aid programs has tripled since the 1980s as shown in the chart below.

My new Cato study describes 18 harmful effects of the federal aid system. The system undermines responsible and efficient governance. It encourages excessive and misallocated spending. And it reduces accountability for failures while generating costly bureaucracy and regulations.

The federal aid system stifles healthy policy diversity and undermines democratic control. And by imposing one-size-fits-all policies when there is no national consensus, the aid system divides society and increases political conflict.

 

 

Read the full study here.