Block Grants Are Not the Answer

If you wanted something done in your community, would it ever occur to you to send a check to Washington, D.C. first, so that the federal bureaucracy could take a cut before sending back the rest?

Welcome to the new world of block grants-the latest fashion that has Congress and state legislatures buzzing. The motivation is commendable: reduce federal micromanagement and allow states to innovate by giving them large block grants of federal money with few strings attached. In place of failed, one-size-fits-all programs run rigidly by Washington, the states would function as 50 laboratories, generating new approaches that would work better because states are closer to the people. Congress, before the year is out, may reorganize and consolidate many federal programs this way-from welfare to crime control.

If less federal meddling in how programs are locally run is the primary objective of the block grant approach, it may be easy to achieve at the start but difficult to sustain. As the old saying goes, He who pays the piper calls the tune. Congress will always be tempted to add conditions and clarifications each time appropriations bills that contain block grants come up. It is not hard to imagine state and local officials complaining, a few years from now, Where did all these strings come from?

The truth is that block grants would do little to address the inherent flaws in our current system of multi-layered bureaucratic structures. Laundering the people's money through two or three levels of government is a make-work scheme for administrators. Of the $226 billion spent by federal, state, and local governments on welfare in 1990, one study showed, only 35 cents of every dollar ever made it into the hands of the poor. On the farm, that's called feeding the sparrows through the horses.

Furthermore, block grants would actually reduce the accountability of government because they would separate the raiser of the tax revenue (the federal government) from the spender of it (state and local governments). If something goes awry, Washington will blame the states for not spending the money wisely, and the states will blame Washington for not providing enough money to do the job. Taxpayers and users of government services will be left wondering who is responsible for what.

It is generally true that because states and municipalities are closer to the people than the federal government, they are more accountable and responsive to individual citizens and local concerns-as long as they are spending local money. Not even the most diligent of local politicians, however, will spend money from Washington as carefully as they spend what they are accountable for raising themselves.

We should have learned that lesson in Michigan years ago. In the late 1980s, one township in Oakland County that has no downtown accepted federal block grant funds earmarked for downtown revitalization. The money went for a parking lot at the township hall. The same officials accepted another block grant to construct "barrier-free improvements" on the same site, but used the money not to assist the handicapped so much as to enhance their own work environments. Fifteen of the 23 block grant programs enacted by Congress since 1966 are still on the books, shoveling out $35 billion yearly and raising plenty of questions about their wisdom in the process. What makes Washington think that federal welfare for state and local governments can work any better than federal welfare for individuals?

Instead of the half-hearted reform of block-granting, Congress should revive a Reagan-era reform known as turnbacks. Under that plan, the federal government turns back to state and local governments both the spending responsibility for programs now run from Washington and the revenue sources too. Instead of We'll raise it and you spend it, with turnbacks Washington says, You raise it and you spend it.

For example, the Reagan administration once proposed ending federal responsibility for highways and repealing federal gasoline taxes, giving states the option of raising their own gas taxes. It wasn't enacted, but if it had been, Michigan would not be sending nearly twice as much gas tax money to Washington as it gets back each year.

If Congress is serious about putting an end to the billion-dollar paper blizzard that afflicts federal programs, and restoring accountability to our system of government, block grants are not the answer. Firing the federal middleman is.