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Does the Federal Government Use of Financial Power Over States Amount to Coercion?

The individual states receive large sums of money from the federal government for a variety of purposes. Professor Julia Mahoney considers whether terms or “strings” attached to the federal money amount to coercion for a state to act in certain ways advocated by the national government. Although the states can, in theory, decline to take the money most states would not risk the loss of revenue even if they feel strongly about controversial issues. https://youtube.com/watch?v=cFLizWxe94w


In the early 21st century, the federal government collects a great deal of its revenue from individual and corporate income taxes, and also from social security and Medicare taxes. And the federal government, having collected an enormous amount of revenue from individual citizens of the several states, then sends a good chunk of that money back to the states in various forms. This means that when we examine state budgets, is what we see is that state budgets are, to a large extent, dependent on a very large stream of federal money. That opens up opportunities, many would say dangers, that the federal government would use its financial power over states in order to pressure, or even to compel states to engage in policies that the states would not choose on their own. Some of these things that the federal government does to pressure states, are relatively uncontroversial, but some are enormously controversial. And there is no conditional spending or no use the spending power in order to pressure states more controversial than the Medicaid expansion that was contained in the Affordable Care Act, enacted by Congress, and signed by President Obama in 2010. The Medicaid expansion was such that states that didn't go along with expanding Medicaid would lose a great deal of existing money. It was the provision of the Affordable Care Act, that a majority of the US Supreme Court said went too far, and went beyond Congress’ powers under the spending clause. There's anxiety that through its spending power Congress will in effect coerce states to craft policies that the states don't want to craft. The fact that our current means of government financing lends itself to that sort of coercion is a serious consideration and a serious worry for many. Coercion, though, is a very hard term to define, particularly in the area of government finance. The fact that money is available to states, one might say, is simply a sweetener, not a coercion, not some kind of coercive action. After all, states can take or leave that federal money. No one is forcing the states to take federal money. All the federal government is saying in many contexts is, “If you want this money, states, then you have to comply with certain conditions. You have to do or not do things. If you don't want the money, that's just fine.” States, of course, or many states will see that quite differently. This is such a large part of our budget, that turning up our noses at federal money, particularly in the areas of health and education, would in effect cause us to overhaul our entire structure of state government. That's pressure that no state can possibly resist, or so the argument goes.

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