Institute: Federal grants are turning states against their own people

By Bethany Blankley |

States are increasingly “lured by the federal government” to receive so-called free money, but in the process have become “branch offices of Washington — or, even worse, indistinguishable from the federal government itself,” according to an analysis published by the state’s fiscally conservative think tank, the Badger Institute.

This costs taxpayers money and increasing intrusion into their personal lives that is unwarranted, the authors of the report argue.

Wikimedia Commons/Public domain

Federal grants-in-aid to state and local governments grew from $7 billion in the 1960s to an estimated $728 billion in 2018 – more than any sector of the federal budget after Social Security and national defense.

The report, Federal Grantstanding, how federal grants are depriving us of our money, liberty and trust in government, concludes that taxpayers would be better off if states received fewer federal grants-in-aid.

A grant-in-aid is the transfer of money from the federal government to a state or local government to fund a specific project or program paid for by federal income tax revenue. The grants are not required to be repaid, but must be spent according to the federal guidelines.

“We want to start to change the mindset in this country that federal money is free,” the authors of the report write.

Federal grants-in-aid to state and local governments grew from $7 billion in the 1960s to an estimated $728 billion in 2018 – more than any sector of the federal budget after Social Security and national defense.

Nationally, there are 2.7 million full-time-equivalent (FTE) direct employees of the federal government, according to 2018 Congressional Research Service data, excluding uniformed military personnel. Nearly one-third of many state government budgets rely on federal dollars.

The Badger Institute argues that national and state governments should be distinct, holding different powers and purposes, as delineated by the U.S. Constitution. But because they are increasingly less distinct, the system of checks and balances has deteriorated and poses “a danger to our system of government and to individual liberty.”

The report notes that the institute isn’t the “first to point out that the federal government is using massive amounts of money through grants-in-aid to coerce states and their residents into compliance” and that such grants are at “the crux of the debilitating, inexorable expansion of national power.”

Cato Institute’s Chris Edwards, who has researched federal grants for more than a decade, said they represent “a microcosm of duplication and waste in the federal system.” And “there is no economic or practical purpose” for them.

“The purpose of the federal government to subsidize housing or education is to give politicians talking points on how they are helping the citizens,” Edwards argues. “But it doesn’t help citizens; it actually reduces responsibility. Whenever there are screw ups, fraud or waste, politicians can blame the bureaucrats. It’s a brilliant system.”

The extent of the federal government’s influence over the lives of citizens nationwide “is increasingly personal,” the Badger Institute report states, citing the former Democratic governor of Nebraska, Ben Nelson. Nelson remarked, “I honestly wondered if I was actually elected governor or just branch manager of the state of Nebraska for the federal government.”

Federal government intrusion “frustrates the desires and abilities, and the independence and liberties of so many state residents, no matter their political bent,” the authors write. “And for what reason?” they ask.

Both the Badger Institute and Cato Institute suggest that federal spending on grant-in aid to states be cut. Other suggestions the Badger Institute makes includes eliminating the U.S. Department of Education, increasing the use of block grants with fewer strings attached, reforming Title 1, increasing state and local government transparency that also demand metrics that measure outcomes, and expanding REINS (Regulations from the Executive in Need of Scrutiny Act), which could better constrain bureaucratic overreach, including the effect of federal grants.

Editor’s note: This article was edited to focus on all states generally. Read full article to see specific relevance to the state of Wisconsin.

Image courtesy of Wikimedia Commons/Public domain

3 thoughts on “Institute: Federal grants are turning states against their own people

  1. Oh my God yes, this is a most excellent article. There is no FREE money.
    there is much money spending with no accountability! It’s why our state is in such disarray. Why would you build a town hall to the tune of $400k per office for a town of 1800? It defies any respect for money. Why would you pay 150K to put 3 park benches, some plantings on a rock in the flood way? Why would you build “affordable” housing for $336k for a one bedroom apartment, 2x the average Vermont house price? Why would you renovate office space, in a flood plain for $340k per OFFICE?

    “FREE” money….”free grant money”

    If you review every grant project, you’ll quickly find nobody would do what they did with their own money. They might do it, but for 20 cents on the dollar. Same for all the public works.

  2. I’ll bet Leaky Leahy got more payola from the principals backing the EB5 program for Jay peak and Burke MT than VT got grants via him. All he needed to do was be available for photo opts, which he did.

  3. I would bet the farm that VT could not sustain itself via its own gdp for one quarter without an arterial infusion of federal funding. It is that anti-business and pro-gov’t.

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