Politico; Friday, July 16, 2010; has an article titled It's Time To Shift Spending To States, by Jeffrey A. Miron of Harvard University and Cato Institute. Miron says that entitlement spending is too high, that the government needs to cut entitlement spending, and that entitlement programs should be transferred from the american federal government to american state governments.
It is not possible to judge the details of Miron's proposal because Miron does not give any details. Miron correctly recognizes that competitive federalism is good because competitive federalism makes it easier to experiment with alternative social programs on a small scale, and because competitive federalism makes it easier to customize social programs for local situations. But Miron's proposal is suspect because Miron's primary objective is to reduce government spending on social programs.
Every person is different. Different people have different ideas. Some people think the government should spend a lot of money on social programs. Some people think the government should spend very little money on social programs. The government should provide the amount of social spending which the citizens desire. But the citizens disagree.
A government without competitive federalism should compromise. The government is spending the correct amount on social programs when half the citizens want more government spending on social programs and half the citizens want less government spending on social programs.
If the american federal government transfers social programs to state governments, the people who want more government spending on social programs will lobby their state governments to increase spending on social programs, and the people who want less government spending on social programs will lobby their state governments to reduce spending on social programs. Some state governments will increase spending on social programs, and some state governments will reduce spending on social programs. In the short term, the overall level of government spending on social programs should not change.
If the overall level level of government spending on social programs does change in the short term, that means the government is being manipulated by priviledged special interests instead of doing what the people want. The short term change in government spending on social programs suggests a shift in the balance of power between opposing priviledged special interests.
In the long term, different states will have different government programs. People will study the outcomes of different programs and will become more knowledgable about how much the government ought to spend on social programs, and about how social programs should be structured. This increase in knowledge might cause people to change their minds about how much the government should spend on social programs. In the long term, the overall level of government spending on social programs might increase or decrease. But this change should occur as result of the increase in knowledge about social programs, not because it was planned in advance.
In any sporting event, the outcome should not be known in advance. People may attempt to predict the outcome, and fans may place bets on their favorite teams. But the judges/referees/umpires should never bet on the outcome, and should not predict the outcome either.
When Miron proposes competitive federalism to reduce government spending, he is like an umpire who declares a winner before the game has begun. More precisely, Miron is like a sports association which first decides which team will win, then sets the rules of the game, choosing rules which favor the chosen team. The purpose of competitive federalism is not to reduce government spending. The purpose of competitive federalism is to allow people who want more government spending to have more government spending while simultaneously allowing people who want less government spending to have less government spending.
Like a sporting event, competitive federalism needs rules. Rules which favor higher government spending are unfair. Rules which favor lower government spending are unfair. Ideally, the people who make the rules for competitive federalism should have no opinion about whether government spending should be increased or decreased. In reality, that is probably impossible, because anyone that opinionless would probably be too stupid and ignorant to make rules for competitive federalism. The best solution is for the rules of competitive federalism to be made by a committee which includes some people who want more government spending and other people who want less government spending. Or the people who want more government spending could make one proposal, and the people who want less government spending could make another proposal, and then a compromise betweent the two proposals could be implemented.
During the 1980s in America, Ronald Reagan made some proposals for new federalism and block grants. These were also bad competitive federalism because the rules were arranged to favor reduced government spending.