This post is in response to the question "How would a return to federalism limit the extent to which political entrepreneurs can defraud the citizenry?"
When thinking in terms of government subsidies and the way they are dispersed, I largely believe that returning to federalism and giving the states more power in the decisions of dispersal will absolutely limit how much political entrepreneurs can defraud citizenry.
The first reason I believe this to be true is the lesser amount of funds being dispersed by the states. Because the subsidies will be state decided, the money will now be separated by 50. This matters because it won't be financially possible to abundantly fund projects or individual entrepreneurs at such large capacities. Situations like the steamboat scenario that was presented in the lecture simply wouldn't be possible because a single state wouldn't have such large pools of money at the ready to continue funding an operation if it simply isn't successful. It would be almost impossible for a single state to continue funding an unprofitable operation for years on end even if they allocated all of their subsidy money to that operation.
A secondary reason I believe this to be beneficial is because there will be decisions being made in 50 states, rather than 1 body. I like this because I believe this will be beneficial to the economy. This is so because each state will now be deciding which projects to fund and how much to be allocated to each. This would open the door for more creativity and more projects to be funded. Yes, this could mean that the number of projects being unsuccessful could increase, but it could also be assumed that the number of successful projects could increase as well.
The last reason I believe subsidy distribution should be left to the states is because this would allow each state to executively decide which projects being funded will benefit that state the most. Coastal states could put more money into funding projects that surround ocean transportation or the development of new and safer fishing tactics. Midwest states could focus more on crop production or oil extraction. It would really be up to each state as an individual to choose whatever they felt to be most beneficial and I believe this makes perfect sense and would therefore be beneficial to the economy as a whole.
These three reasons alongside the interestingly long list of bad subsidy investment demonstrated by the federal government leads me to argue that federalism is the way to go when contemplating the way that subsidies should be distributed.
