Arithmetic of Federal Aid

December 26, 1955

The present ballyhoo for Federal aid to local schools is one more example of the delusion that Federal money comes out of a sort of Fourth Dimension, and doesn’t really cost anybody anything.

The chief argument for Federal aid is that the states and localities cannot afford to pay for their own education. The moment we examine it, this argument vanishes into thin air. For the residents of the states and localities who “cannot afford” to pay for adequate education are the same people who would be called upon to pay increased Federal taxes to supply Federal aid. In Newsweek of Nov. 28, Raymond Moley discussed some of the fallacies of Federal aid to education, based on the excellent study by Roger A. Freeman, published by the American Enterprise Association in Washington, D.C. But here I should like to call attention especially to the economic and fiscal fallacies.

Freeman argues that, if anything, the states and localities are now in a better position to pay for education than the Federal government. State and local government debt is small compared to the huge Federal debt. Twenty-five years ago the Federal government collected one fourth of all taxes in the U.S.; today it takes three fourths. It is high time to reverse this trend.

When such facts are pointed out, some proponents of Federal aid are content to argue that the Federal government should aid the poorer states alone. Freeman points out what is wrong with this argument. The discrepancies in fiscal capacity among states have greatly narrowed in recent years. Between 1940 and 1953 the per capita income in the twelve highest-income states rose 37 percent in dollars of constant value, whereas in the twelve lowest-income states it rose 96 percent.

And Federal aid to the poorer states alone is politically so improbable as to constitute a daydream. Congressmen from New York may gain politically by getting Federal aid for New York; but they will get few votes in their own districts for taxing New Yorkers to help build schools in Mississippi. Experience has shown, in fact, that the only kind of bill for Federal aid to education that has a political chance in Congress is one which makes a flat per pupil grant to all states. This was the kind of bill that actually emerged from the House Education and Labor Committee last summer. Under it, about half the Federal appropriations would go to the fourteen wealthiest states, and only a fourth to the fourteen poorest. As Freeman points out, the fourteen wealthiest states control 53 percent of the votes in the House of Representatives, and the fourteen poorest states only 23 percent.

The arithmetic of Federal aid, in brief, is entirely unsound. From where, then, does the constant political pressure come for Federal aid? From the very persons who ought to be the greatest defenders of states’ rights, but who turn out to be among its greatest enemies. From many governors, state legislators, and local educators. The reason is not obscure. If state officials get Federal aid, they can argue to their local voters that they have brought benefits to the state without raising taxes. The argument is, of course, fallacious. The voters of the states and localities simply pay for schools in increased Federal taxes instead of increased local taxes. To be sure, the exact increase of the Federal tax burden on himself is much harder for the individual taxpayer to trace. The Federal government can even create the illusion that Federal aid doesn’t cost anybody anything, because it can run a deficit and print more paper money.

The pressure for Federal aid to education, in sum, perfectly illustrates the delusion that funds appropriated by the Federal government are not really supplied by the voters of the states and localities, but come out of a sort of Fourth Dimension. The sad truth is that there is no magic in Federal aid; that everything has to be paid for; that if the Federal government helps to pay for local education it must end by controlling local education, and that states’ rights will become a hollow shell.