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Devolution in the United States: Theory and Practice

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Abstract

The paper by Tannenwald examines the recent debate on devolution of fiscal responsibilities from the U.S. federal government to the States. Over the last 70 years, the share of federal spending out of total government outlays doubled, reaching 61 per cent. This trend appears inconsistent with the important role that the Constitution assigns to States. Since the 1990s, a rebalancing of responsibilities has been widely discussed. A “devolution revolution” has been considered. Several economists have highlighted the efficiency benefits of devolution and suggested several policy changes, such as the reduction in federal aid to state and local government, the substitution of block grants for matching entitlements and greater flexibility for states in making use of federal grants. Tannenwald notes that the political support for devolution has not actually been very strong and that the federal government has mostly retained its dominant role. He illustrates this point by analysing the policies concerning health care for children, health care for low-income households (the Medicaid program), and federal assistance for primary and secondary education. He shows that matching requirements and constraints on the use of federal funds still have an important role.

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... Nevertheless, the functions of the state have been declining in respect to those of the federal government over the last two decades. The devolution debates have been majorly centred on medical program and both primary and secondary education welfare (Tannenwald, 2012). Devolution in china resulted from a decision of the central government to www.ijcab.org ...
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The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 replaced the Aid to Families with Dependent Children program (AFDC) with the Temporary Assistance for Needy Families Block Grant (TANF). TANF substitutes a block grant for the open-ended matching grants that helped finance state welfare programs, reduces federal administrative authority, ends the entitlement of individuals to welfare, limits assistance to a family to sixty months, and gives states more discretion to design their welfare programs. Instead of detailed federal prescriptions regarding the process and structure of state programs, TANF sets a few goals and mandates for the states and guides their actions with financial incentives and penalties. Stales have new powers to restrict access to welfare, although they also have opportunities to deflect some of the law's restrictive provisions.
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Deficit reduction was an important impetus for the devolution initiatives thai moved through the 104th Congress, but it was not the only cause. Other objectives, notably building an alliance with Republican governors and transforming the American welfare state, also helped to drive devolution. Although the Republican deficit and devolution agendas appeared mutually reinforcing at first, arguments over the terms of devolution (e.g., entitlement status, program mandates, and funding formulas) helped to slow down and build opposition to those agendas. The use of omnibus legislation helped to gel Republican proposals through the Congress in 1995, but packaging together popular and highly unpopular provisions in a single bill ultimately provided President Bill Clinton with political cover to veto the legislation. The unpopularity of Aid to Families with Dependent Children (AFDC) and Clinton's pledge to “end welfare as we know it” propelled a more limited devolution agenda focused on AFDC in the lead-up to the 1996 presidential election. Devolution ofMedicaid was dropped, however, while Food Stamps and child nutrition programs experienced budget cuts but little devolution.
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