State fiscal volatility crushes federalism
Brian Galle & Jonathan Klick 10, Assistant Professor, Boston College Law School. Professor of Law, University of Pennsylvania Law School. "Recessions and the Social Safety Net: The Alternative Minimum Tax as a Countercyclical Fiscal Stabilizer, 63 Stan. L. Rev. 187" //pipk
The inability of states to smooth expenditures over the business cycle has implications beyond sound fiscal housekeeping. Ultimately, the pathologies of state budgeting imperil the project of federalism itself. State budget crises prompt demands for federal bailouts, as evidenced in the most recent federal stimulus package. 11 Federal bailouts answer a short-term problem of how to maintain spending levels in a fiscal crunch, but they also risk undermining the goals of federalism. Most significantly, bailouts result in a softening of the budget constraint that states face. Each new bailout erodes the incentive for fiscal responsibility in the future, jeopardizing the supposed efficiency benefits of decentralization. Moreover, to the extent that federal bailouts come with strings attached (as is almost always the case), state fiscal autonomy is also compromised. 12 Over time, if states cannot responsibly manage their own finances, there will be increasing pressure to return the task of revenue raising to the federal government. Centralized funding in turn implies either federal control over policy or legal controversy over the rules for disbursing federal grants.