Fiscal Federalism I: Federal Expenditures

Today, the U.S. Census Bureau released their annual Consolidated Federal Funds Report which tracks federal spending by state.  The vast sums of federal dollars that flow to the states has radically transformed the meaning of “Fiscal Federalism.”  Fiscal Federalism use to mean that most spending decisions were made at the state and local levels.  Now, the role of the federal expenditures in any given state exceeds the influence of spending by state and local governments.  As a result, the federal government has usurped the role of state and local government to decide their own economic destiny.  Is this what the Founding Fathers intended?

The chart below shows the growth in federal spending by major category.  Overall, federal spending increased by 16.1 percent to $3.2 trillion from $2.7 trillion.  However, that growth varied dramatically by state.  The state with the highest percentage change in federal spending was Hawaii with an increase of 64 percent to $24.6 billion from $15 billion.  The state with the lowest percentage change was Kentucky with a decrease of 4.3 percent to $50 billion from $52 billion.  And, of course, its always interesting to see what’s going in Maine and New Hampshire.

This report is full of good stuff so stick with us at Wealth Alchemy as we plumb this data in more detail in the future.

Federal Expenditures by Major Category for 2009