The Public Policy

Money Badly Spent

Too much funding goes out the door in grants to states.

By 2.15.11

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The President released his 2012 budget on Monday, and -- to his credit -- it includes some substantial reductions. Unfortunately, our out-of-control spending has put us in a position where even substantial reductions are not even close to enough.

In order to make any real difference, it's going to take more than a line item cut here and there. It's going to take a change in culture on the federal level.

For one, too much funding goes out the door in grants to states. Yes, reducing that money may mean that cash-strapped states have to increase their taxes; however, money is better spent and politicians more accountable at the state level. We should be working to reduce federal taxes so that states can increase their taxes. That way we can provide the most bang for the buck and the highest return on investment, all while the same amount of total tax money is being plucked from American households. Eventually, total taxes will go down when the efficiencies and savings of having money spent at the state level are realized.

Not only is money better spent at the state level, there is no motivation for state politicians to send federal money home. When you can take money from other states and give it to yours, the temptation to do so is hard to overcome -- even when it costs your state in the end. 

For example, the U.S. Department of Justice's core mission is to prosecute criminals, defend the United States against lawsuits, and sue corporations and individuals to recover money taken as the result of fraud or negligence. Nonetheless, that department has an Office of Justice Programs that simply doles out grant money to private organizations and to the states. In 2012, the President has asked for $7.81 billion for this purpose, a 90% increase over 2010.

Programs fund some really great things, such as DNA analysis to help solve more crimes. But if the federal government stopped taking so much money to do it -- $68.72 per household -- the states could institute these programs with less waste, fraud, and abuse, and with more accountability and competitive contracts.

Maybe that sounds like small potatoes next to the Department of Labor's Employment and Training Administration which, according to its website, "administers federal government job training and worker dislocation programs, federal grants to states for public employment service programs, and unemployment insurance benefits." The cost? In 2012, the President has asked for $117.66 billion. That is a large decrease from 2010, but still will cost the American people over $1,000 per household. Imagine if we could reduce federal taxes by $1,000 a household? Even if it gave the states the ability to raise taxes by the exact same amount, our money would be much better spent.

This year, Congress voted to end all earmarks from its members, and the President vowed to veto any bills with these designated funds. But what about all the money that was earmarked before? The money is still there, but now the discretion to spend it is with federal agencies instead of elected representatives. The president should have started by reducing the 2012 federal budget by the amount of earmarks in 2010.

These examples don't add up to a great deal -- relatively speaking -- but they are an indication of the culture change that must occur if the United States is going to lead the world into the next century like we did the last. Interest alone on the national debt will be almost $475 billion -- that's over $4,000 per household before we pay down one penny of principal.

The Republican House of Representatives should be applauded for decreasing its spending, and the Democrat-controlled Senate should follow suit. This is no longer a partisan issue of trying to reduce taxes for constituencies and increase spending for others. This is an issue of keeping America on the forefront of the world. Our state system will work if we trust the states and yield to their discretion.

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About the Author

Russ Ferguson is a lawyer and writer in Charlotte, North Carolina.