Washington’s New Stinginess?

That’s the title of a column in the December issue of Governing authored by Donald Kettl, the dean of the School of Public Policy at the University of Maryland. According to Kettl, the federal government’s new “stinginess” is being directed toward state and local governments. Stinginess? Didn’t he hear about Obama’s $800 billion state bail-out/stimulus bill?

The following are some selected statements from Kettl that left me dumbfounded:

There was a time, of course, when state and local governments were big players in the interest-group scramble. But it was quite a while ago.

State and local government aren’t big players in the interest-group scramble? That certainly wasn’t my experience when I was in the Senate. According to Opensecrets.org, state and local government lobbying spending has quadrupled in the last ten years. Higher education lobbying is five times higher. And don’t forget the public sector unions. That’s just the spending. State and local politicians have the phone numbers of their federal brethren on speed dial.

To find an administration that was truly sympathetic to state and local pleas for cash, you have to go back to the Nixon era. In the early 1970s, state and local governments benefited financially from the sense that the federal government needed to keep them on course. Urban renewal and community development grants, along with a vast array of programs ranging from Medicaid to education, flowed down from Washington because of a sense that the states and cities couldn’t manage their burdens on their own. After that, though, money got tighter and federal attention to state and local issues began evaporating.

Medicaid, urban renewal, community development, and education money all started to flow in the 1960s, and the flow has turned into a torrent over the decades. Data from latest Analytical Perspectives by Office of Management and Budget demonstrates the upward trend:

Perhaps Kettl thinks Ronald Reagan is still the president? Reagan was the only recent president who actually oversaw a reduction in subsidies to the states, bless his heart.

Kettl says that “state and local governments have to confront the fact that the White House is now more interested in transparency and inclusion than in aiding their state and local partners.” This is a preposterous statement and President Obama’s own budget document makes it clear this is not true:

Federal grant outlays were $461.3 billion in 2008 and are estimated to be $567.8 billion in 2009 and $652.2 billion in 2010. These amounts include grant funding provided by P.L. 111–5, the American Recovery and Reinvestment Act of 2009 (Recovery Act). The $106.5 billion increase in grant outlays estimated for 2009, and the further $84.4 billion increase in 2010, stem largely from funding provided in the Recovery Act, along with increases in Medicaid spending apart from the increased funding provided in the Recovery Act.

I wish there was a new stinginess in Washington with regard to subsidizing state and local government. To understand why this is important, read this essay or this excellent policy analysis: “Federal Aid to the States: Historical Cause of Government Growth and Bureaucracy.”