The States: Time For A Reality Check

Devolution is to the '90s what Power to the People was to the '60s--an antiestablishmentarian crusade to decentralize power from Big Government.

As a concept, devolution is definitely cool. It is a creative way of using the innovation and flexibility available at the state level to achieve national objectives, such as moving to workfare from welfare. And pushing political decision-making down to state and local levels brings it closer to individuals and families.

If it works. Much of the very worst government in America exists precisely at the state and local levels. As Congress prepares to shift responsibilities for welfare, Medicaid, transportation, job training, and the environment to the states, a reality check is necessary. Special interests dominate many state legislatures--a situation often leading to corruption. The municipal bond business, for example, has been wracked with scandal, in sharp contrast to the Treasury bond business, which is squeaky clean by comparison. And when it comes to spending taxpayer largesse, Washington has nothing on state and local governments. Public-employee unions are wringing higher compensation out of local politicians than any raises obtained by private-sector workers. The largest number of people left getting virtually free medical care in the U.S. are state and local public employees. Everyone else pays a share.

Most states have a miserable track record when it comes to actually managing programs. Who, after all, made such a mess of public education in this country? In New York, state politicians use local school boards as wards, exchanging public money and jobs for votes. In Florida, efforts to move state Medicaid patients into health-maintenance organizations add up to a tale of corruption and mismanagement. Illinois used federal job training block-grant funds to pay a car wash for six months to train people. Mississippi state officials used block-grant money intended for child care to buy $37.50 salt-and-pepper shakers for themselves. It goes on and on.

Radical conservatives in Congress who are hyping devolution as a means of shutting all government at the federal level don't want to hear these facts. As a result, rhetoric is coloring what should be a rational debate over which government functions are better served at the state level and which at the national level. The political hype is generating suspicion that the entire effort is a shell game by national politicians to shift the burden of cutting the federal budget to the states. By capping block grants for social-spending programs such as job training and Medicaid, Congress gets the states to do its dirty work. Truth is, most states don't yet have either the financial or managerial resources to jump in and run the programs.

This is precisely what's worrying many state leaders. Governors such as Christine Todd Whitman (R-N.J.) and Tommy G. Thompson (R-Wis.) know that it actually costs more money initially to get people off welfare. They want to have the resources to continue experimenting with reform.

These progressive governors also realize that the impending revolutionary shift in power will dump an enormous burden on the states in an extremely brief period of time. In quick order, the states will be expected to solve the same social problems that Washington has struggled with for decades. It won't be easy.

If Congress can punch through the extremist rhetoric surrounding devolution and turn a pragmatic eye toward what has a serious chance of working, the nation stands to be served extremely well in the months ahead. If it doesn't, devolution will fail.

Before it's here, it's on the Bloomberg Terminal.