REVENUE SHARING AND ITS ALTERNATIVES: WHAT FUTURE FOR FISCAL FEDERALISM? VOLUME II: RANGE OF ALTERNATIVES FOR FISCAL FEDERALISM Strengthening the Fiscal Base of Our Federalism, by Walter Heller Financing State and Local Governments, by Joseph A. Pechman....... The Case for Tax Sharing-A Political View, by Richard P. Nathan... The Elementary Errors of Tax Sharing, by Melville J. Ulmer.. Sharing Revenue with the States, by Leon H. Keyserling.---. Federal Grants and the Decline of the Federal System, by Roger A. SECTION B: LOCAL NEEDS AND LIMITATIONS Revenue Sharing as a Means of Encouraging State and Local Govern- A Revenue Share for the Cities? by Selma J. Mushkin.. How Metropolitan Are Federal and State Policies? by Norman Beckman. Options for Meeting the Revenue Needs of City Governments, by Robert PART 3. IMPROVING CONDITIONAL GRANTS-IN-AID Page 977 991 998 1007 1022 1028 The Efficiency of Conditional Grants-in-Aid, by Robert W. Rafuse, Jr... 1053 PART 4. TAX CREDITS AND COORDINATION A Fiscal Program for a Balanced Federalism (with memorandums of comment, observation, or dissent), by The Committee for Economic Development... 1060 1069 Strengthening Taxation at the Local Level, by The Advisory Commission on Intergovernmental Relations.. Findings and Recommendations, by The Advisory Commission on Inter- Tax Credits and Intergovernmental Fiscal Relations, by James A. Maxwell. 1103 1113 1125 1154 1162 1185 PART 5. TAX REDUCTION The Federal Expenditure Explosion, by Arthur F. Burns-- 1189 1196 States and Surpluses: Why Federal "No Strings" Distributions Would Be 1201 The Dialog Grows, by The Tax Council.. 1203 Needed: A Long-Range Approach to Federal Tax Policy, by Research and 1211 Fiscal Policy and the Good Economic Society, by Representative 1220 FEDERAL AID TO STATE AND LOCAL GOVERNMENTS: THE POLICY ALTERNATIVES BY MURRAY L. WEIDENBAUM* INTRODUCTION This study of the policy mix of Federal aid to State and local governments attempts to achieve two objectives: (1) to examine the case for increased Federal financial assistance to State governments and their subdivisions and (2) to analyze as objectively as possible the major alternative ways of distributing the aid. The size and composition of Federal aid to State and local governments in the coming years will be strongly influenced by two interrelated factors: (1) the public policies adopted to utilize the resources made available by a post-Vietnam military cutback; and (2) the growing public awareness of the "fiscal mismatch" between Federal financial resources and State and local governmental program responsibilities. These two factors are closely related because Federal programs designed to reduce the fiscal mismatch also represent possible alternative ways of offsetting the deflationary impacts of a reduction in military spending. NATURE OF A LIKELY POST-VIETNAM ENVIRONMENT At this point in time, it is extremely difficult to speculate as to the precise nature of a cutback in U.S. defense spending following peace in Vietnam. If the general dimensions correspond to the Korean experience, it would be expected that spending would decline substantially after the cessation of hostilities, but not down to the level prior to the conflict. As Vietnam outlays are now running at over $20 billion a year, a reduction of about $15 billion in U.S. military demand might be anticipated during the 12- to 24-month period following the cessation of hostilities. The new level of military spending would still be in excess of $50 billion a year and continue to require a substantial industrial base to support it. The replacement of the $15 billion of military demand would represent the basic task of post-Vietnam economic adjustment. The major alternatives that can and are being considered in the Federal Government's current exploratory planning were listed in the January 1967 Economic Report of the President. The general types of actions are *Washington University. The author wishes to express his appreciation to Stephen F. Seninger who served as his research assistant. 1 Economic Report of the President, January 1967, p. 24. |