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New Report Makes Fiscal and Political Case for Increased Federalism

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press release

New Report Makes Fiscal and Political Case for Increased Federalism

April 15, 2021
Public SectorReinventing Government
EconomicsOther
OtherCulture & Society

Boosting state involvement in policies surrounding transportation, K-12 education, health care, and welfare would save costs, improve civic health 

NEW YORK, NY – The United States stretches across an entire continent, yet many critical political decisions are made in one city, often to the detriment of social cohesion among divided constituents. While there is a necessary role for an active national government, Manhattan Institute senior fellow Brian Riedl argues in a new report that recent political strife can be reduced by allowing states greater agency in governing for themselves and their voters. Rather than fight it out in Washington DC, for example, it would be better to let Vermont build its own progressive health or welfare system, and let Texas build its own conservative versions, based on local values. America is too large and diverse of a country for top-down, one-size-fits-all solutions. 
 
In the report, Riedl identifies four policy areas, consisting of transportation, K-12 education, welfare, and health care, that would benefit from greater involvement by state and local as opposed to federal governance. He makes the case that increased federalism—otherwise known as devolution—would not only reduce costs but also alleviate the divisive partisanship that has become characteristic of the American polity.  

Riedl grounds his analysis in survey evidence indicating that Americans prefer state governance in many policy areas rather than the federal government. With this evidence in mind, he makes several constructive recommendations for Washington to foster affability among partisans through devolution away from national policymaking. These devolution suggestions include: 

  • Eliminating the federal middleman by letting states collect and spend the 18.4 c/g federal gas tax themselves. Currently, states send these revenues to Washington, who then returns it to the states with federal strings attached. Yet states already collect and spend their own state gas tax that averages 36c/g. They should be afforded the agency to assess the final 18.4 c/g if and how they see fit.

  • When it comes to K-12 education, Congress often operates as a national school board. Instead, Washington should continue to measure progress with national testing, but give states the flexibility to make decisions about raising those test scores, as opposed to enforcing national programs. 

  • Federal welfare programs could be simplified by merging most of the 80 disparate federal means-tested programs into a single grant to states. These states could then offer qualifying families a single welfare system with standardized eligibility and benefits that can all be coordinated together in one office. 

  • Finally, America’s health care system could benefit from scrapping Medicaid’s perverse matching fund that disfavors poorer states and by merging Medicaid, CHIP, and the ACA into a single federal funding stream that states can use to build a health care system matching their own values and priorities.  

As Riedl’s report demonstrates, devolving federal policy to the state and local level in key policy areas could reduce the tension that one-size-fits-all national policies exacerbate, and allow for more responsive and cost-effective governance. 

Click here to read the full report.

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