Econception The Federalization of State Budgets
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Aug 21, 2025 Tony Woodlief, Senior Executive VP at the State Policy Network, dives into the complexities of fiscal federalism. He discusses how nearly 37% of state revenues now come from federal sources, raising concerns about state autonomy. The conversation critiques the hidden costs of federal funding and emphasizes the need for transparency. They also tackle the challenges surrounding the U.S. jobs report, advocating for better methodologies. Lastly, Tony unpacks misconceptions about trade deficits and surpluses, revealing their nuanced impacts on the economy.
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Federal Expansion Shifted State Priorities
- The federal government expanded beyond enumerated powers and now channels large sums to states, driving national priorities locally.
- John Cogan's data imply this expansion, not entitlement programs alone, explains mounting national debt.
States Now Heavily Funded By Washington
- By 2023 the average state received about 37% of its revenue from federal sources, roughly double 1990 levels.
- That dependency raises risks of federal agencies attaching policy strings to funds.
Account For Hidden Costs Before Accepting Grants
- Require full accounting for any federal grant to reveal hidden long-term costs like pensions and facility upkeep.
- Count maintenance-of-effort clauses and future liabilities before accepting federal funds.
