OP-ED: Free federal money costs us too much

It’s easier to sell cotton candy than it is to sell broccoli to somebody, but the broccoli is better for you, and the same thing with a limited government.
– Marco Rubio

When our state governors and lawmakers talk about budgets, they seldom tell us the whole truth. Politicians discuss the budget in terms of what is allocated in the state General Fund. But they are only telling us half-truths. By simplifying the breadth and costs of the state government, they hide facts from the taxpayers. State budgets are designed to contain discrete funding sources to hide the price of paying its bills and its revenue sources. Only half of the average state budget consists of revenue in the General Fund, which is proceeds from sales taxes, income taxes, licenses, fees and other levies. Where does the rest of their money come from? That’s what should concern us.

Before the passage of Obamacare, state governments depended on an unbelievable 35 percent of their budgetary expenses from the Federal government. This included Federal funds for education, food stamps, transportation, and money under the Special Supplemental Nutrition Program for Women, Infants and Children, also known as WIC. There were also grants for specific projects attached to pork-barrel spending by favorite sons. But over the last 50 years, the composition of Federal grants has shifted dramatically. Today, Federal grants for subsidized healthcare programs, predominantly Medicaid, represent 65 percent of total federal grant outlays, compared with less than 20 percent in 1980.

Our original republican system limited the Federal government on what it could make the states do and what it could not force them to do, but that changed dramatically during the progressive era of the 1900s. Federalists justified the expansion of government as necessary by over-reacting to the moral, economic, and political changes during the Industrial Revolution. Since Woodrow Wilson was elected in 1912, Congress has dangled financial carrots to states that impose mandates upon them. By offering special funds to them with federal strings attached, they have been able to spread federalism at the expense of states rights. And all states are eager to make this deal with the devil.

This year, the Federal government is expected to provide state and local governments about $750 billion in Federal grants, funding a wide range of public policies. This includes healthcare, income security, education, social services, transportation, job training, community development, as well as assorted environmental programs. Federal grants will account for well over one-third of the total of state government funding. And over half of that funding will be for healthcare, welfare, food stamps and other Federal give-away programs.

Accepting federal funding undermines state sovereignty as states become beholden to federal requirements in order to keep the money flowing.
– Bob Barr

Economist James Bennett of George Mason University defined “crossover sanctions” as a way the federal government uses mandates to keep states from refusing to follow questionable government programs and adopt various federalist policies. These are offered to them in exchange for allowing federalists to violate a state’s independence. States continue to buy into this while federalists take their liberties. Once Washington sells a federal program to blue state caucuses, red states simply play follow the leader. They too forget they are just getting back their money with strings attached.

For many years, the Supreme Court and Congress have struggled with the concept of using the overwhelming power of the Federal purse to “persuade” states and localities to take actions that the Federal government cannot outright mandate them to do. For decades, the Supreme Court has had to address the overreach of federal authority under the Spending Clause of the Constitution. The Spending Clause “ubiquitously” states Congress can raise funds through taxes in order to “provide for the common Defense and general Welfare of the United States.”

Each time Congress oversteps its constitutional restraints and passes legislation that violates states’ rights, it ends up in the courts. The question always is, what does it mean to provide for the general welfare?

Federalism isn’t about states’ rights. It’s about dividing power to better protect individual liberty.
– Elizabeth Foley

The Supreme Court has continued to define “general welfare” as whatever Congress determines it means in a particular circumstance. In 1987, South Dakota v. Dole, and the U.S. government, the court upheld a condition on Federal highway funds requiring the states to raise their drinking ages to 21. Dissenting Justice O’Connor reiterated a longstanding precedent that the receiving of federal funds to coerce state action is unconstitutional. She said, “Establishing a minimum drinking age of 21 is not sufficiently related to interstate highway construction.” She was unanimously overruled.

It took 25 years for the court to rule properly in a case where Federal grant funds were being used coercively. In a judgment in favor of the National Federation of Independent Business v. Sebelius U.S. in 2012, they struck down the mandatory expansion of Medicaid under the Patient Protection and Affordable Care Act. After much debate, Justice Roberts ruled Congress had no power under the Spending Clause to force anyone to follow a mandate that would not be “best for their welfare” since it penalized them by denying funds for healthcare.

The provisions for Medicaid expansion violate the principle that federal spending cannot be used to coerce the states.
– Justice John Roberts

P. J. O’Rourke once wrote, “Giving money and power to government is like giving whiskey and car keys to teenage boys.” Allocating Federal money to our states has always been a high priority for Congress since it determines the scope and nature of the Federal-state grant and aid system. This has resulted in a Federal parlor game of cat and mouse to see who can get the most money for their state with the least strings attached. Yet more times than not the winner of this game finds the grand prize is they get is more government than they wanted – and it costs them more liberties.

Milton Friedman said, “There’s no such thing as a free lunch.” States that expanded Medicaid will learn this the hard way. Since federal grants for health programs under Obamacare now represent 65 percent of total Federal grant outlays, as Medicaid costs increase this will increase the Federal deficit. And all of us will be paying the bill with increased Federal taxes. And the states that foolishly gave too many people a “free lunch” will pay for it too with increased state taxes. Even Obama said that was part of his plan with the “blended” FMAP formula that would slowly reduce subsidies.

When the Federal government promises a certain matching percentage for anything today, it doesn’t mean it will be the same tomorrow. When Federal funds are used to strong-arm states to invest tax dollars as a requirement to secure them, our states quickly forget caveat emptor. It has taken many years and enormous effort and planning for the government to grow this large and to convince the states to trade their independence for federal money. As long as states have their hands out, they will be filled with federalism. State greed has allowed this growth and only austerity will stop it.

When will we learn? Free federal money costs us way too much.

No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. A government bureau is the nearest thing to eternal life we’ll ever see on this earth!
– Ronald Reagan

William Haupt III is a retired professional journalist, author, and citizen legislator in California for over 40 years. He got his start working to approve California Proposition 13.