Expanding an already bloated federal government

(PNI) President Barack Obama's State of the Union address illustrated what a dead letter federalism is among Democrats. Not that further illustration was necessary.

Federalism holds that the national government should limit itself to things of truly national scope. Things that are primarily of local concern should be left to state and local governments.

Federalism was a big deal to the founders. They wanted an energetic national government, but one that was confined to enumerated national functions. The founders also envisioned a bright line between the federal and state governments, each sovereign within their own spheres.

We are a long way from that. Today, the Democratic Party sees virtually nothing as outside the purview of the federal government. The Republican Party talks a good game about federalism, but usually ends up undermining the principle when it acquires national power.

Today, the lines between the federal government and state and local governments are hopelessly blurred. The federal government spends over $600 billion a year on grants to state and local governments. Arizona state government receives more in federal funds than it raises in general-fund taxes.

Today, state governments operate principally as service delivery mechanisms for federal social-welfare programs. This means that there is no real political accountability for the programs, which is why they grow and function like a blob.

If Medicaid costs are spinning out of control, who's to blame and who should do something about it? The federal government that provides most of the funding and sets up the basic rules, or the state governments that actually administer the program? The food stamp program has grown astronomically of late. Purely a function of a bad economy, or is there something else going on? Whose job is it to figure that out?

President Ronald Reagan wanted to sort out the blob with his new federalism initiative, clearly making some functions, such as Medicaid, fully federal, while making other functions, including most welfare programs, fully state and local. There were some Democratic governors at the time, including Arizona's Bruce Babbitt, who were also interested in a sorting out of responsibilities.

But agreement was never reached, nothing of significance happened. So, the blob endured and grew.

Obama proposes to feed it even more. The federal government should establish manufacturing innovation institutes in economically distressed areas and provide incentive grants to states to increase the energy efficiency of homes and businesses.

The federal government should fix 70,000 bridges and create a federal fund to modernize ports and pipelines. The federal government should have a new grant program to get high-school graduates better ready for high-tech jobs. And, according to Obama, the federal government should make sure that every kid has access to high-quality preschool.

The federal government, however, does not have a greater interest in the recovery of economically distressed areas than the states in which they are located, or greater insight into how to turn them around. Every bridge in America is located in a state and local community that has a greater interest in its condition than the federal government.

Every port and pipeline in the United States is located in a state and local community. If there are gains to be had from modernizing them, local governments have a greater incentive to get it done and done right than the federal government.

Every kid in America lives in a state and local community that is more interested in his education and workplace preparedness than the federal government. What do we really have to show for the increased federal involvement in education, under George W. Bush or Obama?

The federal government is broke, and broke in a way that threatens the American economy. Proposals that it do even more are surreal, even if they are supposedly paid for. If there's loose change to be had, the federal government should use it to reduce the deficit, not further expand its reach.

It's nowhere on the horizon, but a revival of Reagan's new federalism discussion is badly needed.

Reach Robb at robert.robb@arizonarepublic.com.

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House Republicans to Tackle Federal Budget

The budget, which passed the House last month and has since become a central focus of the presidential campaign, has faced blistering criticism for steep cuts to federal programs, including a blast from President Obama, who called it “thinly veiled social Darwinism.”

But the deep reductions that Mr. Obama spelled out for higher education, medical research, crime fighting and Head Start are more supposition than reality until the details are filled out. And the charge that such cuts would merely pay for still more tax cuts for the rich is expressly denied by Republican leaders who foresee no change in revenue under the budget.

Now the real work begins. Representative Dave Camp of Michigan, the House Ways and Means chairman, will hold meetings with Republican the rank and file next week to map out an overhaul of the tax code that strips it down to just two personal income tax rates — 25 percent and 10 percent — and a 25 percent corporate income tax rate, and to pay for it by curtailing or ending tax deductions and credits.

A half-dozen committees will begin drafting legislation to meet a budget-mandated $261 billion in savings over the next decade to stave off scheduled across-the-board cuts to the military in January. First up will be the Judiciary Committee on Tuesday, with a bill to curb medical malpractice suits and save the government $39.7 billion over 10 years. On Wednesday, the Financial Services Committee will vote on legislation to save $35 billion over a decade by eliminating a fund designed to prevent future bank bailouts, ending a foreclosure reduction effort, slicing $4.9 billion from the federal flood insurance program, and putting the new Consumer Financial Protection Bureau under Congressional control and cutting its budget by $5.4 billion.

Also on Wednesday, the House Ways and Means Committee will draft a measure to save $53 billion over 10 years, in part by grabbing back overpayments for subsidized insurance purchases under the new health care law and by requiring parents to present a Social Security number to claim child care tax credits.

The Agriculture Committee must slice $33.2 billion from its programs, most likely focusing on nutrition and food stamps. The House Energy and Commerce Committee must find nearly $100 billion in savings when it meets in two weeks. Much of it will come from repealing parts of the president’s health care law and curbing medical liability lawsuits.

Michael Steel, a spokesman for Speaker John A. Boehner of Ohio, said: “President Obama’s own secretary of defense has said the defense sequester would ‘hollow out’ our armed forces. We have a responsibility to show a better, smarter option.”

Even with these efforts, critics say the budget is far less groundbreaking than its supporters and opponents say it is. For all his big numbers on spending reductions and tax changes, Representative Paul D. Ryan of Wisconsin, chairman of the House Budget Committee, included few details or instructions to make them happen.

The attainability of his deficit reduction targets are “impossible to know unless you start to describe what kind of cuts are really required,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, who supports the ambition of the budget but faults its partisan tilt.

For instance, to meet its deficit reduction targets, the House budget calls for nearly $1.9 trillion in savings from entitlement programs outside Social Security, Medicare and Medicaid, so called other mandatory spending, but it instructs committee chairmen to draft legislation securing a tiny fraction of that amount.

The budget describes significant changes to Medicare, Medicaid and food stamps. Medicare would be transformed from a government-run insurance program to a menu of private insurance plans subsidized by the government. Medicaid and food stamps would be converted to block grants to the states, which would be allowed to impose work requirements and time limits. But nowhere are the relevant committees mandated to actually draft the legislation to make any of that happen. Mr. Camp has already indicated he has no intention of drafting Medicare legislation that has no chance of becoming law. And Senator Harry Reid, the majority leader, has already said he has no intention of passing a budget this year.

The House Appropriations Committee would have to find cuts from domestic discretionary programs through 2022 totaling $1.44 trillion below program growth through inflation, 25 percent, or $1.2 trillion — 21 percent — below caps agreed to last summer, according to the Center on Budget and Policy Priorities, a liberal research organization. But that cutting would not kick in until 2014, when appropriators would have to cut domestic spending by 24 percent. For fiscal 2013, the budget that must be finished before the election, the cut is a more manageable 9.8 percent below inflation growth and 7.5 percent below agreed-upon levels.

The two biggest question marks are on a tax overhaul and the black box of “other mandatory” cuts. On taxes, collapsing the current six tax brackets into two, with the highest bracket dropping to 25 percent from 35 percent, would cost the Treasury revenue totaling $4.5 trillion over 10 years, according to the nonpartisan Tax Policy Center. Democrats and some tax experts say that paying for that with loophole closings cannot be done, unless Republicans plan to gut tax programs for the working poor, like the earned income credit.

But Sage Eastman, a spokesman for the Ways and Means Committee, said Mr. Camp was eager to prove them wrong. Donald Marron, a former Bush administration economist and president of the Tax Policy Center, tallied $7.7 trillion in “tax expenditures” over the next five years.

“I’ll say emphatically we can do it,” Mr. Eastman said.

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