New Study on Fiscal Federalism

chris-edwardsCHRIS EDWARDS, CATO INSTITUTE

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.


Chris Edwards is the director of tax policy studies at the CATO Institute and editor of www.DownsizingGovernment.org. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.


Used with permission. Cato Institute / CC BY-NC-SA 4.0