Michael Greve on Fiscal Federalism
By Arnold Kling
Medicaid represents well over 40 percent of all federal transfer payments. The vertical fiscal imbalance has reached Argentinian proportions: the feds pay 60, 70, or 80 percent of state expenditures. Moreover, the Congress has deliberately put itself into the position of the Argentinian legislature and agreed to write a blank check for whatever the federal expenditures the states’ fabulous experiments may entail. The contours of state programs, in turn, are haggled out between a federal bureaucracy with ample discretionary and waiver authority and individual states that vary widely with respect to both the local spending demand and their propensity and ability to game the system.
Have a nice day.