Federal aid to states versus a healthy economy

The theory behind federal aid to state and local governments is that the federal government can operate programs in the national interest to efficiently solve local problems.

Now that whole concept is laughable on the face of it. I’m not sure how any politician can even say that sentence with a straight face! When has the federal government ever operated more “efficiently” than anything with which it might be sensibly compared?

No. No! I don’t think this theory holds water on the “efficiency” factor.

But let’s take a look at this other matter of “programs in the national interest.”

Let’s be serious here!

Outside of those few matters for which the people should truly look to the federal government—such as our national defense—politicians do almost nothing from Washington, DC, “in the national interest.”

In fact, a great deal of the time and money spent by the staff of Congressmen and Senators is not, in fact, spent in “the national interest.”

Instead, they spend a huge portion of their time and energy on “local interests” and (worse) “special interests,” for which the reader might instead read:

“Securing ‘pork’ for their local constituents in every effort to leverage the taxpayers’ money to buy votes from the very taxpayers they have pick-pocketed.”

Federal aid to states and localities is nothing short of politicians hoodwinking the taxpaying public into believing that by giving some of the money they have confiscated from the taxpayers back through “aid,” they have somehow done the citizens a great favor.

In short, through federal aid to states and localities, the politicians have managed to trick voters and taxpayers into believing that, as “political doctors,” they can somehow magically make the patient healthier by draining blood out of the leg of the patient in massive amounts and injecting small portions of the blood back into the patient’s arm.

How the GOP can regain its political “brand”

How can the Republican Party (GOP) really distinguish itself from the Democrats?

By taking clear, well-articulated positions for:

1. LIMITED CONSTITUTIONAL GOVERNMENT - Retrenching the expanding federal reach, doing away with federal grants-in-aid to state and local governments while simultaneously reducing the federal tax burden so that state and local governments are at greater liberty to do what needs to be done based on local realities (or not do what does not need to be done, as the case may be). Along with this, Congress should take specific action to re-articulate and reinforce states' rights and the return of greater liberty to U.S. citizens.
   
2. FREE MARKETS - Taking a strong and well-articulated stand against corporatism and bailouts for businesses or unions, presenting a new vision for unfettered economic growth to the middle class. This vision should include reducing the regulatory burden on business and industry by granting increased liberty to individuals (the consumers) to decide more about what they want and don't want in products, in services, in their employment and in benefits.
   
3. SOUND MONETARY POLICY - Get control of the Federal Reserve Bank (FRB)  to help re-establish the value of the U.S. Dollar ( USD ), which is being gradually destroyed through inflation since the inception of the Federal Reserve banking system.

Stop federal aid to state and local governments

The theory behind federal aid to local governments is that the federal government can operate programs in the national interest to efficiently solve local problems. Now that whole concept is laughable on the face of it. I’m not sure how any politician can even say that sentence with a straight face!

When has the federal government ever operated more “efficiently” than anything with which it might be sensibly compared?

No. No! I don’t think this theory holds water on the “efficiency” factor.

But let’s take a look at this other matter of “programs in the national interest.”

Let’s be serious here!

Outside of those few matters for which the people should truly look to the federal government—such as our national defense—politicians do almost nothing in Washington, DC, “in the national interest.” In fact, a great deal of the time and money spent by the staff of Congressmen and Senators is not, in fact, spent on “the national interest.”

Instead, they spend a huge portion of their time and energy on “the local interest,” for which the reader might instead read: “Securing ‘pork’ for their local constituents in every effort to leverage the taxpayers’ money to buy votes from the very taxpayers they have pick-pocketed.

Federal aid to states and localities is nothing short of politicians hoodwinking the taxpaying public into believing that by giving some of the money they have confiscated from the taxpayers back through “aid,” that they have somehow done the citizens a great favor.

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See also National Suicide – How Washington is Destroying the American Dream from A to Z.

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Of course, this doesn’t even cover the fact that huge amounts of federal control and incentives to overspend accompany money from Washington, D.C.

Big Government damages the economy, reduces wages, and more

Without being overly dramatic, it is a fair statement that the presence of government is, in itself, induces economic distortions into the economy. This is true for at least two reason:

1. Taxes, collected in any form to support government operations, change the basis of economic calculation and take resources (e.g., capital, manpower) out of the private economy
   
2. Government regulations take further resources from the private economy, by forcing businesses to employ capital and manpower in efforts to comply with these regulations

The larger government grows, the taxes it takes to support it and the more regulations it promulgates, the greater the economic distortions. However, the effect of government growth (as a percent of GDP) is not linear. Instead, as government grows beyond a certain point, the curve turns upward exponentially.

Texas A&M University’s Edgar Browning, writing in Stealing From Each Other (2008), concludes that out own excessive government reduces average incomes in the U.S. by about 25 percent. The more the U.S. politicians insist on growing spending, the more average American incomes will be squeezed downward.

Mind you, the squeezing will occur only against the middle class. The extremely wealthy—especially those connected with international banking and capital brokerages (Wall Street)—are affected by this squeeze. Similarly, those at the bottom of the economy are not greatly affected. They are sheltered mostly because they are being propped up through (damaging) government entitlements and supports (e.g., welfare, minimum wage mandates).

There’s more damage

As government grows, the more it creates a top-down bureaucracy that was formerly alien to our American tradition of individual liberty. The growth in federal power and over-regulation tends to destroy both diversity and innovation in state and local governments by seeking to impose nationwide uniformity through its rules. Federal aid to states is always accompanied by reams of regulations that reduce freedom and operating choices.

In short—whether we run trillion-dollar deficits or not—cutting federal spending is beneficial because the cuts automatically contribute to the dispersion of power (back to the states) and the expansion of liberty.

The Case for Cuts

Chris Edwards, writing in the headline article for the Cato Policy Report, says,

“To avert a Greek-style fiscal train wreck, we need much larger spending reforms than the leaders of either party are currently talking about. Most experts agree that we need to reform Social Security and Medicare, but the reality is that we need to pursue cuts in every federal activity from A to Z – from agriculture subsidies to the National Zoo. We should cut entitlement benefits, aid to the states, subsidies to individuals and businesses, and military spending. In many cases we should eliminate whole programs, or privatize activities where possible to remove them from the federal budget altogether.”

Edwards is the director of tax policy studies at the Cato Institute and editor or www.DownsizingGovernment.org.