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Commentary By Chris Pope

Time to End the State-Welfare Bailout Spiral

Should a future recession necessitate another round of state-welfare bailouts, the federal government should nationalize currently split entitlement programs.

America’s state governments are currently flush with funds and expanding their spending commitments. Congress had provided over $1 trillion in pandemic aid to state governments, fearing that Covid-19 would cause their revenues to collapse and entitlement costs to surge. Yet, state Medicaid spending actually fell as Americans sought fewer elective procedures, while their own-source real tax revenues increased 12 percent on pre-pandemic levels.

This dynamic — of states overextending themselves in healthy fiscal times and then relying on national bailouts when the business cycle takes a downturn — has become characteristic of modern American federalism. Funds are poorly targeted to help those who most need assistance, and destined to fall short during recessions.

Continue reading the entire piece here at National Review Online (paywall)


Chris Pope is a senior fellow at the Manhattan Institute. Follow him on Twitter here. Based on a recent MI report.

This piece originally appeared in National Review Online