The Minnesota fraud scandals have put the spotlight on wasteful federal aid-to-state programs. The scandals surround federal aid for food programs, health care, and day care. My new study on community development aid raises similar issues of fraud and waste.
The federal government spends $1.1 trillion a year on 1,400 aid-to-state programs. I have argued that Congress should begin phasing them out for constitutional and practical reasons.
Columbia Law School’s Philip Hamburger describes some of the reasons why in the Wall Street Journal yesterday. The US Constitution “empowered Congress to tax Americans only for national purposes: ‘To pay the Debts and provide for the common Defence and general Welfare of the United States.’ This meant Congress couldn’t use tax dollars to provide for the states.” Even Alexander Hamilton “respected the prevailing view that Congress couldn’t directly fund the states.”
Hamburger also touches on the practical failings of aid to the states:
Federal funding of state programs creates a dangerous moral hazard. Washington provides money, but the state controls its disbursement.… It enables the federal government to subject states to regulatory conditions, undermining federalism and our ability to govern ourselves at a local level. When conditioned on matching state funds, federal spending encourages state spending, even to the point of near bankruptcy. And now we can see that federal dollars diminish financial accountability, opening opportunities for brazen fraud on an unimaginable scale.
I flesh out the shortcomings of federal aid in this study. I argue that the rise in aid programs—and the top-down regulations tied to them—contribute to today’s nasty partisan divisions by trying to force conformity on our vast and diverse nation. The federal aid system imposes one-size-fits-all policies when there is no national consensus.
Hamburger concludes that the Supreme Court should reconsider its permissive stance on federal aid programs. Meanwhile, Congress should heed the practical advantages of downsizing and start phasing out its vast entanglement in state and local affairs.