1985 marked year seven for de facto new federalism, the fiscal decentralization process nudged along by strong public support for the Reagan administration's conservative policies and growing fiscal stringency at the federal level. New federalism is most dramatically illustrated by the national government retreat along the entire state-local aid front — a kind of "sorting out" — as an increasing share of the federal budget goes to strictly national government programs. The mounting public concern about massive federal deficits will quicken the federal pullback on the state-local aid front. The only question is whether it will be a ragged retreat or an orderly withdrawal. The tightening fiscal squeeze in Washington is also slowly but surely reversing a fifty-year centralizing trend — the power pendulum is swinging back toward states and localities, thereby creating a better balance within our federal system.

The views expressed are those of the author and do not necessarily reflect the opinion of the members of the Advisory Commission on Intergovernmental Relations.



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