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Federal Funding for State Innovation

Aiding States to Stimulate the National Economy

As Congress debates a stimulus to the economy in the wake of the housing bust, many economists are urging federal leaders to make aid to state governments a core part of the package. While direct tax rebates for individuals can help, it will not do much for the economy if states are forced to cut back on critical spending on public works, health care, and education at the same time. As Nobel prize-winning economist Joseph Stiglitz, who was also chair of the President's Council of Economic Advisors in the 1990s, wrote this week in the New York Times:

Why States Matter

Conventional wisdom inside the D.C. Beltway holds that on major issues like health care or energy independence, it's fine for state legislators to play with their legislative toys in local sandboxes, but that it's really up to the "grown-ups" in the federal government to fix big problems. In national policy debates, state governments are usually treated as a tiny sideshow to the top billing of national legislation.