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Opening Arguments

The death of federalism

Richard Nixon's Revenue Sharing program was a misguided assault on the very idea of federalism. The federal government collected money from states, then dribbled it back, minus administrative costs and the usual waste, fraud and abuse. And states actually started feeling grateful for the handouts. Barack Obama seems to have succeeded where Nixon failed:

The sales tax had been the No. 1 source of state and local revenue since the mid-1970s, according to the Bureau of Economic Analysis. Before that, property taxes were the primary source. That changed in the first three months of 2009.

Federal grants — early stimulus money plus conventional federal aid — soared 15% in the first quarter to a seasonally adjusted annual rate of $437 billion, eclipsing sales taxes, which fell 2%.

Obviously, this dramatic shift will be somewhat modified as the recession ends and local tax collections stop shrinking. But the trend will stay the same, and if you think state and local concerns are ever again going to be as important as our founding document envisioned, you will be greatly disappointed.


Michael B-P
Wed, 05/06/2009 - 11:00am

First of all, we have at least two "founding documents":
the Declaration of Independence and the U.S. Constitution.
Furthermore, the importance "as our founding document envisioned" of "state and local concerns" is a matter not only of the vector of dollar flows, but of Constitutional intpretation as well. Thirdly, severe enough disruption of federal government operations (not a likely event, of course, but neither is the "trend" irrevocable) would result in reversion to states' authority.