States cp ddi 2012


States can’t manage macroeconomic fiscal issues – three warrants



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States can’t manage macroeconomic fiscal issues – three warrants.


Erik Wibbels, Associate Professor at Duke University, October 2k, American Journal of Political Science, Vol. 44 No. 4, “Federalism and the Politics of Macroeconomic Policy and Performance”, pg. 688-689, JSTOR, http://www.jstor.org/stable/2669275?seq=2, TB
In a federal system, however, subnational officials respond to different constituencies. Herein lies the cause of policy divergence across levels of government (Riker 1987). Policy divergence is particularly likely with respect to economic reform because electororates hold national, not subnation, governments responsible for macroeconomic performance, and international pressures tend to be focused on national governments. Because provincial leaders are insulated form accountability for the nation’s macroeconomic situation, subnational adjustment policies are subject to collective action problems. From the point of provincial politicians, the gains achieved via state-level economic reform cannot be contained within state boundaries because state economies are so open. Furthermore, the impact of any one state’s reform efforts is likely to be marginal in terms of the overall success of economic adjustment. As a result, Olson’s (1965) free-rider problem becomes operational. Economic adjustment takes on the quality of a public good requiring the individual states to cooperate, but it is more rational for individual provincial politicians to avoid the political costs associated with austerity. Under these circumstances, the coordination of national fiscal and monetary policies as adjustment tools is complicated, posing a challenge to national economic stability (Prud’homme 1995; Treisman 1999a). Subnational fiscal fragilities in federal systems can effect macroeconomic performance in three ways: (1) provincial fiscal policy can starve central governments of revenue sources, encouraging fiscal imbalance at the federal level; (2) monetary policy can generate inflation is federal authorities cover subnational fiscal imbalances via seignorage; and (3) federal indebtness can increase if national governemtns assume provincial debt to ensure the solvency of provincial governments. As a result, economic adjustment policies have an improtant subnational component in federal sysytems. These threats to macroeconomic performance are largely moot in unitary systems where local governments are best understood as bureaucratic extensions of central governemnts. Absent the divergent incentives and politial autonomy generated by federalism, subnational officials in unitary systems are responsible to their central governments and therefore have few motives to resist economic reforms.
No solvency – HSR

Regional HSR coordination is superior to national planning.


Henry L. Vega and Leo Penne, George Mason University, Center for Transportation, Policy, Operations, Logistics, American Association of State Highway and Transportation Officials, ’08, Transport, “Governance and Institutions of Transportation Investments in US Mega-Regions”

It has been suggested that state and local policymakers¶ face challenges and opportunities for cooperation in a¶ mega-region. In the case of the United States, public capital¶ financing still rests with voters on individual project¶ referendums, set forth to the voters as capital plan budgets,¶ dedicated tax increases or as bond issues. This type¶ of financing has been estimated to account for 25–35% of¶ state and local capital expenditures and for an even higher¶ fraction of core infrastructure financing (Haynes 2006).¶ From a regional development perspective, however,¶ in the areas such as economic development policy, the¶ benefits of competition have been observed to outweigh¶ the benefits of coordination, while regional control often¶ is a recipe for disaster. Transportation is a special sector¶ because positive externalities can be massive and regional¶ coordination can be the optimal solution (Glaeser¶ 2007). In particular, a regional approach to groundbased¶ transportation can make sense in the regions with¶ enough information and incentives to get things right¶ faster than the federal government, with the added benefit¶ that the region holds a greater ability to internalize¶ cross-jurisdiction externalities. However, the prioritization¶ of investments has been suggested must be done on¶ a case-by-case basis. High-speed rail, for example, would¶ make more sense in the Northeast rather than in the¶ Arizona Sun Corridor. Some of the priorities constantly¶ suggested by some state and local governments as most¶ suitable for regional coordination are the following
AT: Lopez

Decentralization causes funding fights—local authorities devolve to fighting over allocation of funds instead of implementation.


Robert J. Dilger, Director of West Virginia University’s Institute for Public Affairs and Professor in the Eberly College of Arts and Science’s Department of Political Science, 1998, Publius (1998) 28 (1): pg. 53-54, ‘TEA-21: Transportation Policy, Pork Barrel Politics, and American Federalism’, Oxford Journals, TB

Second, the conflict between state and local government officials over transportation decisionmaking and the funding battles that ultimately led to Congress' inability to reauthorize ISTEA in 1997 highlight the crosspressures that congressional members and interest groups often face when considering intergovernmental policies. When parochial self-interest conflicts with the broader goals of American federalism, federalism often loses. For example, the local government lobby, which typically abhors federal mandates, advocated mandates for MPOs because those mandates would enhance local government decisionmaking authority. Also, despite die GOP's majority status in both the House and the Senate and that party's advocacy of decentralization and devolution, the GOP did not rally behind Representative Kasich's and Senator Mack's transportation devolution proposal. In fact, their proposal received very litde support in the Congress. Moreover, instead of the debate focusing on which government should have the authority to make the program's major decisions, the debate revolved almost exclusively around how much money would go to each congressional district or state. The participants' behavior during ISTEA's reauthorization suggests that it is relatively easy to advocate decentralization or devolution in the abstract, but it is much harder to act on those convictions when decentralization or devolution means giving up money or decisionmaking power. Given this, it is unlikely that transportation policy will ever be fully devolved to the states and localities. It is not in Congress' interest to give up one of its prime sources of particularized benefits. When the politics of pork conflicts with federalism principles, pork will almost always prevail.




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