More Money for the States?

It is probably fairly obvious to our readers that many (all?) of us here at Pileus support a more robust form of federalism (and decentralization) than we currently enjoy in the U.S.  So it is with much chagrin that I relay news from this weekend that President Obama wants more federal dollars to bail out irreponsible supposedly needy states.  I know, you are shocked, shocked to see the administration argue for more spending. 

Fortunately, Veronique de Rugy of the Mercatus Center is on the watch and makes a case here for why this is a bad idea.

7 thoughts on “More Money for the States?

  1. I suspect any proposal that would send money disproportionately to profligate states will get killed in the Senate, where small states are overrepresented. It’s the big states, mostly, that are in trouble (NY, CA, IL).

  2. Yet one more reason not to tinker with the parts of the original Constitution that still survive?

  3. Yep. Malapportionment has some perverse consequences, but it does prevent large redistribution schemes from solvent state governments to indebted ones, and that’s a very important benefit. Once you break the bailout seal, there’s no going back. See: Argentina.

  4. Love Ms. de Rugy.


    “It’s the big (and bluest) states, mostly, that are in trouble (NY, CA, IL).” Hope you don’t mind the edit.

    I can’t help it. I just keep thinking of the children’s fable of the ant and the grasshopper, except the grasshopper didn’t have government to hold a gun to the ant’s head. Those lessons we were taught while growing up about working hard, saving for a rainy day and living within your means were just suggestions which the grasshoppers knowingly ignored. And now the federal, state, county and municipal governments as well as the corporations and our fellow grasshopper-citizens are arguing over how to spend the wealth generated by the ants’ labors. Foolish ants.

  5. It’s true – liberal states are facing more budget problems, on average. Even before the financial crisis, they tended to carry a bigger debt burden.

  6. Leftists in America often claim that the Founders did not sufficiently value democracy when they gave disproportionate influence to small state voters.

    But I’ve come to believe that they understood democracy really well, which is why they saw the the value of protecting our liberties from the masses who wanted to use Federal power for just this kind of extortion that you are highlighting.

    [Of course, small states have used their power to extort money from big states as well. usually when attempts are made to study net inflows/outflows of Federal funds, small states seem to do pretty well.]

    1. Unfortunately, there is only so much institutional tinkering one can do to hold back the tide when it comes. Institutions matter – we’d be foolish not to recognize this – but political culture/ideas are so important (not to mention base power/interests).

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