Walking the sidewalks in any US small or large city, one sees at street intersections ramped curb-cuts designed to benefit people in wheelchairs. While these infrastructure modifications have certainly benefited some needing assistance to cross at intersections, many of these amenities are as likely to benefit skateboarders, cyclists, and parents pushing strollers and baby carriages—or mere ordinary pedestrians—as they benefit the wheelchair-bound.
These curb-cuts trace their origin from 19th-century federal transportation subsidies, through mid-20th-century open-ended, flexible, revenue-sharing in effect from 1972 until 1986, then followed by disability-assistance legislation in 1990, and most recently, during the covid era, the largest federal assistance measures ever to state and local governments.
Reducing or eliminating some of this federal spending largess to lower-level governments could now direct attention to a new era of fiscal federalism as the US searches for ways to cut federal expenditures and reduce federal budget deficits and the ever-increasing federal debt.
Fiscal Federalism
At the heart of this history, and potential federal budget cost-cutting efforts, is a concept known as fiscal federalism, which is defined as, “...financial relations between units of governments in a federal government system...[that] is part of broader public finance study within the discipline of economics...fiscal federalism deals with the division of governmental functions and financial relations among levels of government.”
Fiscal federalism, in other words, investigates how local, state, and federal governments should relate among themselves with respect to their policies and financial responsibilities, investigating what and who determine the locus of decision-making and spending authority among different levels of government.
Throughout the country’s early years, transportation infrastructure construction and maintenance were generally considered the responsibility of state and local governments. But local efforts were notably enhanced by 19th-century federal land grants for construction of the Erie Canal to connect the Great Lakes with the eastern seaboard via the Hudson River, and land grants to states and railroad companies to promote westward railroad construction.
In addition to transportation infrastructure, further 19th-century federal spending at state and local levels included cash aid for land grant colleges and historically black colleges and universities. All of this major federal assistance contributed greatly to the economic development of the nation, while also benefiting targeted groups of Americans.
With passage of the Federal Aid Highway Act of 1921, the federal government designed and constructed the US highway system. Later, in 1956, Congress created the Dwight D. Eisenhower National System of Interstate and Defense Highways, known as the Interstate Highway System. The 1956 legislation also created the Highway Trust Fund, into which are paid federal taxes at the pump on refined gasoline and diesel fuel, used to pay for highway maintenance expenditures.
Nixonian General Revenue Sharing
In 1972, transitioning away from specific transportation funding of earlier years, Richard Nixon signed the State and Local Fiscal Assistance Act, creating a program of general revenue sharing with state and local governments. The program imposed few restrictions on how revenue-sharing monies could be spent, the underlying principle being that local officials were considered more effective than the federal government in determining local needs.
Until the program ended in 1986, a total of $85 billion reached US communities during its 14-year history. The program was repealed in the Tax Reform Act of 1986 after large federal budget deficits had developed during the Reagan administration, requiring expenditure cuts in federal programs to match supply-side tax cuts in the 1981 Economic Recovery Tax Act.
Americans with Disabilities Act (ADA)
A few years after general revenue sharing ended, Congress passed the Americans with Disabilities Act (ADA) in 1990 during the George H. W. Bush administration. ADA is a civil rights law that protects people with disabilities from discrimination in many areas of public life, including employment, public accommodation, state and local government services, transportation, and telecommunications. It was this law that encouraged local governments to construct ramped curb-cuts at street intersections.
The numerous types of disabilities covered by ADA include cancer, diabetes, post-traumatic stress disorder, HIV, autism, cerebral palsy, deafness or hearing loss, blindness or low vision, mobility impairments, learning difficulties such as dyslexia.
Among other requirements to ameliorate these disabilities, state and local governments were mandated to implement programs such as special education to assist individuals afflicted with such physical or mental problems. Physical structures such as ramped curb-cuts were included to benefit those in wheelchairs. The act included federal funding to state and local governments, in order to offset the considerable cost of these programs and infrastructure improvements.
Federal Covid-19 Spending to State and Local Governments
The next burst in federal spending to benefit state and local governments began in 2020, amidst mandated governmental lockdowns, masking and vaccine requirements, non-essential businesses closures, and the inevitably ensuing unemployment. Congress and both presidents Trump and Biden implemented several massive spending measures to rescue the economy from the recession that developed and was predicted to last until the virus could be contained.
Legislation passed in 2020 and 2021 enacted three tranches of direct relief payments to eligible individuals and families during the covid crisis. Total federal spending for these three programs was $859 billion. President Trump’s March 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided payments of $1200 per adult and $500 per child under age 17. Later the Tax Relief Act in December 2020 provided additional payments of $600 per adult and $600 for each child under 17.
Lastly, the American Rescue Plan Act of March 2021, considered by economists to be the unnecessarily generous federal assistance that caused the ensuing price inflation beginning in 2022, provided $1400 per adult and $500 per child under age 17.
States and employers also received federal assistance for extended state unemployment benefits, employee retention credits, small business loans, state and local education funding, state Medicaid matching funds, transit grants and deferred student loan repayments. All told, Congress provided over $4.65 trillion in federal funds to help the nation respond to and recover from the pandemic, leaving few or no sectors of the nation, public or private, without federal support.
Federal Funding on State and Local Activities a Target of DOGE
History shows that relatively small infrastructure improvements such as ramped curb-cuts can benefit a larger audience than the originally intended group. In fact, social scientists have invented a concept called the Curb-Cut Effect, defined as an example of how laws and programs designed to benefit vulnerable groups, such as the disabled or racial minorities, often end up benefiting all.
Nonetheless, fiscal federalism suggests that reducing or eliminating many forms of federal spending at state and local levels could be a fruitful strategy to reduce federal budget deficits. The US federal government today finances such disparate state and local public functions as K-12 education, higher education, housing, environment, urban transit, and high-speed rail, all accompanied by regulations written and enforced by federal administrative agencies.
As a recent Cato Institute report states, “[Federal aid] induces states to spend more on federally subsidized programs than state residents would favor if they directly footed the bill. Since federal aid is perceived as ‘free’ money to state and local officials, they often tend to spend it on low-value activities.”
Just as the federal presence in state and local governmental finances evolved over many decades, however, reversing or modifying these arrangements will undoubtedly take years. If the Elon Musk-Vivek Ramaswamy Department of Government Efficiency (DOGE) can make appropriate recommendations for state and local programmatic and expenditure reductions, perhaps their efforts can establish a longer-term return to traditional fiscal federalism.
Yet any progress will be slow and difficult. Congress and the President must control their spending urges. Americans will have to accept some degree of austerity—perhaps one large TV screen in the family room instead of multiple screens throughout the house—if their state and local taxes increase in order to accommodate reductions in federal spending. Or direct federal spending may be converted to block grants that state and local governments can manage for their own needs. Block grants allow the federal government to control spending while freeing states from one-size-fits-all federal regulations.
The longer-term effect of the DOGE effort would ideally represent a reversion to a constitutional form of fiscal federalism in which the federal government focuses on such proper responsibilities as defense and national security, devolving much of its current spending down to lower-level governments. And the country will wait with bated breath to see if DOGE’s list of proposed cuts might include ramped curb-cuts for wheelchairs and baby carriages—though such a cut would fall well short of their aspired $2 trillion total federal expenditure cuts.
