Federal Subsidies to the States

January 1, 1931

Report Outline
Theories of Federal Aid
Evolution of the Federal-Aid System
Cost of the Federal-Aid System
Federal-Aid Measures in Congress
Proposed Extensions of System
The Opposition to Federal Aid
The Case for Federal Aid
Special Focus

Theories of Federal Aid

Several factors are now directing public attention to the American subsidy system. Chief among them are the rapid growth of federal aid to the states in recent years, the method of apportioning such grants and the conditions attached to the federal payments, the new forms being taken by federal aid, and the extension of federal functions involved in the growth of the system. Current efforts to relieve economic distress have led to the introduction at the present session of Congress of various measures to extend or modify the federal-aid system. Unofficial proposals looking to changes in the system are also being advanced by interested groups and individuals. Prominent among these is the proposal to relieve the states, at least temporarily, of any obligation to match payments offered by the federal government and to have Congress make outright grants to the states. It is also suggested that the federal government reimburse the states and municipalities for expenditures they have made and are making to mitigate unemployment. These developments and proposals have renewed the old debate as to the merits of the principles involved in federal aid, in the course of which widely divergent views are being expressed.

In the light of current proposals for extension of the subsidy system. this report will review the principles upon which federal aid is based, the evolution of the system in the United States, the cost of the system to the central government, the official and unofficial proposals now being put forward, and the arguments for and against the system.

Theories of Federal Aid

The problem involved in federal subsidies to the states is that of financing locally administered services—such as forest-fire prevention, agricultural extension work, highway construction, vocational education, and promotion of the welfare of mothers and infants—which are national in scope and significance. There are at least three ways in which such essential service? could, in theory, be financially supported: (1) by the states alone, (2) by the federal government alone, or (3) jointly by the states and the federal government.

ISSUE TRACKER for Related Reports
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Jul. 25, 1986  New Deal for the Family
Apr. 04, 1973  Future of Social Programs
Nov. 18, 1944  Postwar Public Works
Apr. 12, 1941  Public Works in the Post-Emergency Period
Mar. 08, 1940  Integration of Utility Systems
Feb. 26, 1938  The Permanent Problem of Relief
Jun. 08, 1937  Experiments in Price Control
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Nov. 27, 1936  New Deal Aims and the Constitution
Oct. 16, 1936  Father Coughlin vs. the Federal Reserve System
Sep. 25, 1936  Roosevelt Policies in Practice
Feb. 11, 1936  Conditional Grants to the States
Dec. 11, 1935  Capital Goods Industries and Recovery
Sep. 25, 1935  Unemployment Relief Under Roosevelt
Jul. 17, 1935  The R.F.C. Under Hoover and Roosevelt
Jul. 03, 1935  Six Months of the Second New Deal Congress
Jun. 04, 1935  The Supreme Court and the New Deal
Mar. 05, 1935  Public Works and Work Relief
Feb. 16, 1935  Organized Labor and the New Deal
Dec. 04, 1934  Rural Electrification and Power Rates
Oct. 26, 1934  Federal Relief Programs and Policies
Jul. 25, 1934  Distribution of Federal Emergency Expenditures
Jul. 17, 1934  Debt, Credit, and Recovery
May 25, 1934  The New Deal in the Courts
Mar. 27, 1934  Construction and Economic Recovery
Mar. 19, 1934  Price Controls Under N.R.A.
Feb. 15, 1934  Federal Promotion of State Unemployment Insurance
Jan. 10, 1934  Government and Business After the Depression
Jan. 02, 1934  The Adjustment of Municipal Debts
Dec. 12, 1933  The Machine and the Recovery Program
Dec. 05, 1933  Winter Relief, 1933–1934
Nov. 11, 1933  Power Policies of the Roosevelt Administration
Oct. 28, 1933  Buying Power under the Recovery Program
Oct. 19, 1933  Land Settlement for the Unemployed
Sep. 20, 1933  The Capital Market and the Securities Act
Jul. 18, 1933  Public Works and National Recovery
Jul. 01, 1933  The Plan for National Industrial Control
May 03, 1933  Economic Readjustments Essential to Prosperity
Apr. 26, 1933  Government Subsidies to Private Industry
Mar. 25, 1933  Rehabilitation of the Unemployed
Feb. 17, 1933  Federal Cooperation in Unemployment Relief
Nov. 16, 1932  Systems of Unemployment Compensation
Nov. 09, 1932  Policies of the New Administration
Aug. 18, 1932  Emergency Relief Construction and Self-Liquidating Projects
Dec. 28, 1931  Relief of Unemployment
Aug. 01, 1931  National Economic Planning
Jul. 20, 1931  Dividends and Wages in Periods of Depression
Feb. 19, 1931  Insurance Against Unemployment
Jan. 19, 1931  Business Failures and Bankruptcy Administration
Jan. 01, 1931  Federal Subsidies to the States
Dec. 08, 1930  Federal Relief of Economic Distress
Sep. 25, 1930  The Extent of Unemployment
May 16, 1930  Politics and Depressions
Dec. 20, 1929  The Federal Public Works Program
Jun. 08, 1929  The Federal Reserve System and Stock Speculation
Apr. 14, 1928  The Federal Reserve System and Price Stabilization
Feb. 25, 1928  The Federal Reserve System and Brokers' Loans
Budget Process
State, Local, and Intergovernmental Relations