The new new federalism
In presenting a revised ''new federalism'' proposal last week, President Reagan confounded those critics who charge that the whole issue is stalled. In fact, the national debate that was necessary from the outset is now underway. A public look at the fundamental structure of government can only benefit the United States, no matter what happens to Mr. Reagan's plan.Skip to next paragraph
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The reason is compelling. The modern federal establishment arises in large measure from programs and political assumptions based on the New Deal of the 1930s. That was half a century ago. This is not to fault the remarkable federal-state-city framework which has evolved, nor the way in which that system has basically worked. Yet, in light of the fact that the federal government has grown so large - and that budget deficits in future years could run into hundreds of billions of dollars - it is only prudent to examine how that system might be made more efficient by transferring some federal functions to the states. In support of his revised program, Mr. Reagan argues that it lies at the very heart of his philosophy of government, which entails ''restoring the intended balance between the levels of government.''
Under the plan, the states would assume full responsibility for the main federal welfare program - Aid to Families with Dependent Children (AFDC) - while the federal government would take on full funding for the medicaid and food stamp programs. In the original plan announced last January, the food stamp program would also have been turned over to the states. Under the terms of financing for the revised plan, therefore, which would amount to less than 10 percent of the entire federal budget, the tradeoff would look like this:
The states would have returned to them $30 billion worth of federal programs in some 35 service areas, along with $8 billion in (now federal) costs for AFDC. That means $38 billion worth of new programs. But they would give back to the federal government $18 billion in current state medicaid costs - leaving net new state program costs of about $20 billion. However, general revenue dollars of $ 19 billion to $20 billion would be given to the states to compensate for the shift.
Is the new new federalism an improvement on the original variation that met sharp criticism from many governors and particularly big-city mayors who would stand to lose hundreds of millions of dollars in direct federal aid?
Yes and no. Shifting welfare back to the states, as we noted last March, makes little sense since welfare is in fact a ''national problem.'' The danger remains that there would be sharp inequities in benefit levels from state to state and region to region.
Shifting medicaid to the federal government, on the other hand, would be logical, because of the demographics of an aging population and because of expected higher program costs in future years. Also, having the federal government assume both medicaid and food stamps moves the US closer towards the goal long broached by many liberals of having all income-security programs placed at the federal level.
As for the basic 35 service programs that would be turned back to the states - vocational and adult education, work incentive programs, community development grants, water waste treatment, urban and secondary transportation, and others - this seems a sensible move. But it would be best if these ventures were transferred gradually on an experimental case-by-case basis. Then, if such transfers prove workable, further transfers could be made, again on a gradual basis over a extended period of time.
Enactment of the program is, in any case, still far down the road. No major legislative action is likely this year, and unless a strong consensus develops for the plan Congress will most likely not act on it at all. But thoughtful debate should be encouraged. The issue is an all-important one of making government effective, efficient and humane - and keeping it close to the taxpayer.