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As the federal government’s role in policy creation expanded, so did its level of spending. Spending by the federal government began to surpass that of state and local governments shortly after 1940 ( [link] ). It spiked temporarily during the Great Depression and again during World War II, resuming a slow climb with the implementation of Johnson’s Great Society programs noted above.

A graph titled “Federal Spending vs. State and Local Spending”. The x-axis of the graph is labeled “Year” and reads from left to right “1930”, “1940”, “1950”, “1960”, “1970”, “1980”, “1990”, “2000”, and “2010”. The y-axis is labeled “Expenditure as percent of GDP” and reads from bottom to top “5.00%”, “10.00%”, “15.00%”, “20.00%”, “25.00%”, “30.00%”, “35.00%”, “40.00%”, and “45.00%”. A line labeled “Federal” starts around 4% in 1930, rises to around 10% in 1940, rises sharply to around 40% around 1945, drops sharply to around 15% in 1960, increases to around 20% in 1970, increases to around 23% in 1980, decreases to around 19% in 200, and increases to around 25% in 2010. A line labeled “State” starts around 10% in 1930, rises to around 11% then drops back to around 10% in 1940, drops to around 5% then rises to around 8% in 1950, rises to around 10% in 1960, rises to around 13% in 1970, rises to around 14% then drops back around 13% in 1980, maintains around 13% in 1990, rises to around 14% in 2000, and rises to around 16% in 2010. At the bottom of the graph a source is cited: “U.S. Bureau of Economic Analysis. NIPA table 1.1.5: “Gross Domestic Product.” December 20, 2013. NIPA Table 3.2: “Federal Government Current Receipts and Expenditures.” November 11, 2015. NIPA Table 3.3: “State and Local Government Current Receipts and Expenditures.” November 11, 2015.”
After spiking during World War II, spending by the federal government has consistently exceeded that of state and local governments. Between 2000 and 2010, the gap between federal and state spending steadily widened.

Growing financial resources gave the federal government increased power over subnational governments. This increased power was because it could use categorical grants to dictate the terms and conditions state governments had to meet to qualify for financial assistance in a specific policy area. Over time, the federal government even began to require state and local governments to comply with legislative and executive authorizations when funding was not attached. These requests from the federal government are referred to as unfunded mandates and are a source of dissatisfaction to political actors at the state and local level. To provide more transparency to state and local governments and reduce the federal government’s use of mandates, the Unfunded Mandates Reform Act was passed in 1995. This act requires the Congressional Budget Office to provide information about the cost of any proposed government mandate that exceeds a specified threshold before the bill can be considered in Congress.

Philip Joyce, “Is the Era of Unfunded Federal Mandates Over?” Governing , 16 April 2014. http://www.governing.com/columns/smart-mgmt/col-is-era-unfunded-federal-mandates-over.html.

Despite the national government’s power to pass and fund policy that affects lower-level governments, states still have gained considerable headway since the late twentieth century. For instance, with the passage of the Personal Responsibility and Work Opportunity Reconciliation Act in 1996, known as the welfare reform bill, states were given great discretion over the provision of welfare. The federal government reduced its level of monetary support for the program and, in exchange, the states gained more authority over its implementation. States were able to set more restrictive work requirements, to place caps on the number of family members who could receive aid, and to limit the length of time someone could qualify for government assistance.

“State Policy Choices under Welfare Reform,” http://www.brookings.edu/research/papers/2002/04/welfare-gais (March 14, 2016).

Since then, states have been granted the flexibility to set policy across a number of controversial policy areas. For instance, a wide array of states require parental consent for abortions performed on minors, set waiting periods before an abortion can be performed, or require patients to undergo an ultrasound before the procedure. As another example, currently, almost half the states allow for the use of medical marijuana and three states have fully legalized it, despite the fact that this practice stands in contradiction to federal law that prohibits the use and distribution of marijuana.

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Source:  OpenStax, American government. OpenStax CNX. Dec 05, 2016 Download for free at http://cnx.org/content/col11995/1.15
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