State/local control solves none of the case- lobbying, delay, deplorables

(Max B. Sawicky is an economist and writer in the wilds of Virginia. He has worked at the Government Accountability Office and the Economic Policy Institute. https://www.jacobinmag.com/2018/05/bernie-gets-socialistic)

To my way of thinking, the biggest gap in current job guarantee proposals pertains to their proposed delivery mechanism — namely, federal project grants to state and local governments. There are both technical and political difficulties in this approach which have yet to be addressed in job guarantee proposals, except in passing. Most federal grants to states and localities are provided by formula: easily quantified characteristics of state or local jurisdictions are entered into a formula that spits out the recipient government’s grant allocation. The use of such formulas reduces the cost of administering the program for the grantor. But construction of the formula itself will be subject to all sorts of devious political machinations. Project grants, by contrast, are bureaucracy-intensive. Criteria for awards must be specified. Aspiring grantees must devise proposals to apply for funds. Proposals must be reviewed by the grantor. The reviews themselves (say, by a Department of Transportation) are subject to oversight by the Congress. Rejected applications will be disputed by the applicant, and those disputes will be subject to review, and so on. The more the rules are modified to address assorted criticisms, the more opaque the entire process becomes. Incidentally, governments with higher-income constituents will be able to play this game with more skill than those representing poorer communities. Meanwhile, state and local governments — and their taxpaying constituents — will prefer to direct job guarantee resources to services they already provide. This is an objection that public-sector unions have raised in the past. It’s not enough to say we won’t let them do it: the armies of the state-local sector vastly outnumber those of the federal government. The states can practice the political equivalent of asymmetric warfare. Thus far I’ve presumed good intentions all around. But of course, state and local governments in all regions of the United States are full of deplorables. And including local community participation is not much compensation, since the construction of such community entities will be subject to the same flaws as the local governments themselves — if, indeed, they’re not under the de facto control of those governments. All things considered, I’d say the delivery mechanism in current proposals requires elaboration. The alternative to decentralized delivery is to bypass state and local governments altogether. The federal government can erect state enterprises across the country to perform useful tasks routinely neglected by the states as well as by the private sector. A common feature of such tasks is that their benefits tend to be spread over multiple jurisdictions, thereby reducing the incentive for any individual state or local government to undertake them. Nostrums of fiscal austerity have been blocking them for decades, so there is no lack of such tasks. They include: Large-scale infrastructure projects. Such projects are too large to be financed by existing federal grants, which tend to spread money around thinly. Big-ticket items are usually financed by earmarks, or not at all. A national infrastructure bank could devise and assign such projects to regional public enterprises. Climate change. Rebuilding coastlines, reclaiming land damaged by industry and mining A national electric grid Public broadband School repair Everybody can think of things to add. The key criterion should be work that is not normally undertaken by state and local governments — work which they don’t particularly want to do. A network of federal, public enterprises would not be immune to the pressures faced by a more decentralized program, but it might be less vulnerable. A precedent can be found in the original War on Poverty, which created parallel institutions of local government, called Community Action Programs, that constituted independent bases of political power. Within a few short years, established local governments succeeded in destroying this replay of Reconstruction; it was a threat to local political elites. That doesn’t mean it isn’t worth proposing, quite the contrary. The struggle continues. The resources of these enterprises would be made to expand or contract with the business cycle, just as private-sector firms grow and shrink with even greater volatility. The enterprises would provide real jobs, subject to the same labor standards of large private sector firms, and for that reason enjoy equal social status. Perhaps it’s my ego talking here, but an understanding of fiscal federalism — my own field of expertise — seems to be absent on the left. People seem to think the state-local sector is a genie that can be summoned at will and will always say “Your wish is my command.” The reality is that it is very difficult to prevent the states from doing what they want with federal money, and it won’t be what you want them to do.