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Segregation Now

In this morning’s terrific Washington Post op-ed, Robert Samuelson warmly embraces a proposal to “swap”—more precisely, to disentangle—federal and state responsibilities for major “cooperative” programs: nationalize Medicaid, and in return wipe out federal financial aid (and along with it, regulatory impositions) for K-12 education and public transportation.

I’ve discussed the compelling reasons for this proposal here and here (link no longer available). They all flow from a single, central insight, duly emphasized by Samuelson: you’ve got to align fiscal and political responsibility. So long as programs are run on a cooperative, federal-state basis, money and responsibility will disappear in an intergovernmental morass. As President Ronald Reagan put it in his 1982 State of the Union address:

Our citizens feel they’ve lost control of even the most basic decisions made about the essential services of government, such as schools, welfare, roads, and even garbage collection. And they’re right. A maze of interlocking jurisdictions and levels of government confronts average citizens in trying to solve even the simplest of problems. They don’t know where to turn for answers, who to hold accountable, who to praise, who to blame, who to vote for or against. The main reason for this is the overpowering growth of Federal grants-in-aid programs during the past few decades.

The only way to improve fiscal discipline and government performance is drain the intergovernmental swamp, to segregate Washington and the states, and to disentangle the programs.

Reagan’s proposals to that end, Samuelson notes, foundered on interest group resistance (including resistance from state and local lobbies). Still, the swap may face better chances a second time around. The alarming state of public finances at all levels will require drastic action in one form of another. Moreover, many states may have tired of the intergovernmental shell game and may now prefer a restoration of fiscal and political autonomy. If memory serves, 26 of them litigated against the most generous Medicaid expansion ever.

In short, the swap merits serious reconsideration. If someone has a better proposal to bring fiscal and political sanity to our dysfunctional federalism, let’s hear it. But it had better be something on a comparable scale.

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